[Federal Register Volume 75, Number 210 (Monday, November 1, 2010)]
[Rules and Regulations]
[Pages 67170-67200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26796]



[[Page 67169]]

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Part II





Department of Education





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34 CFR Parts 600, 668, 682, et al.



Foreign Institutions--Federal Student Aid Programs; Final Rule

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

[[Page 67170]]


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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.

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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 Sec.  600.20, Sec.  600.21, and 
Sec.  600.55 become effective July 20, 2011; Sec.  600.56(a)(4) becomes 
effective July 1, 2015. For Sec.  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 Sec. Sec.  
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 Sec.  
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: 
<a href="/cdn-cgi/l/email-protection#aafdcfc4ced384e7cbc9c3cbd9eacfce84cdc5dc"><span class="__cf_email__" data-cfemail="e9be8c878d90c7a4888a80889aa98c8dc78e869f">[email protected]</span></a>.
    For information related to audited financial statements and 
compliance audits, Anthony Gargano. Telephone: (202) 502-7519, or via 
the Internet at: <a href="/cdn-cgi/l/email-protection#22634c564a4d4c5b0c65435045434c4d6247460c454d54"><span class="__cf_email__" data-cfemail="98d9f6ecf0f7f6e1b6dff9eafff9f6f7d8fdfcb6fff7ee">[email protected]</span></a>.
    For information related to the definition of a foreign institution, 
Gail McLarnon. Telephone: (202) 219-7048, or via the Internet at: 
<a href="/cdn-cgi/l/email-protection#5611373f3a781b351a372438393816333278313920"><span class="__cf_email__" data-cfemail="9cdbfdf5f0b2d1ffd0fdeef2f3f2dcf9f8b2fbf3ea">[email protected]</span></a>.
    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 <a href="/cdn-cgi/l/email-protection#a2e0d0cbc3cc8cf1cfcbd6cae2c7c68cc5cdd4"><span class="__cf_email__" data-cfemail="01437368606f2f526c6875694164652f666e77">[email protected]</span></a>.
    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:
    <bullet> Amending Sec.  668.23 to establish submission requirements 
for compliance audits and audited financial statements specific to 
foreign institutions;
    <bullet> Amending Sec. Sec.  600.51, 600.52, 600.54, 682.200, and 
682.611 to clarify and revise the definition of a foreign institution;
    <bullet> Amending Sec.  600.2 to establish a definition of 
nonprofit status specific to foreign institutions;
    <bullet> Amending Sec.  668.171 to establish a financial 
responsibility standard for foreign public institutions that is 
comparable to the financial responsibility standard for domestic public 
institutions;
    <bullet> Amending Sec.  600.54 to permit a single legal 
authorization for groups of foreign institutions under the purview of a 
single government entity;
    <bullet> Amending Sec.  600.54 to establish eligibility of training 
programs at foreign institutions;
    <bullet> Amending Sec. Sec.  600.52 and 668.13 to establish 
institutional eligibility criteria specific to foreign graduate medical 
schools;
    <bullet> Amending Sec.  600.56 to establish institutional 
eligibility criteria specific to foreign veterinary schools;
    <bullet> Amending Sec.  600.57 to establish institutional 
eligibility criteria specific to foreign nursing schools; and
    <bullet> Amending Sec. Sec.  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 Sec.  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,

[[Page 67171]]

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 agreed-upon 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 first-time FFEL Stafford loan, Direct 
Subsidized or Direct Unsubsidized borrower. These changes have been 
made to Sec.  685.301 and Sec.  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 
<a href="/cdn-cgi/l/email-protection#523421337c343d20373b353c7c21313a3d3d3e211237367c353d24"><span class="__cf_email__" data-cfemail="640217054a020b16010d030a4a17070c0b0b08172401004a030b12">[email protected]</span></a> or (202) 377-3168.

Part 600 Institutional Eligibility Under the Higher Education Act of 
1965, as Amended

Definition of a Foreign Institution (Sec. Sec.  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 Sec.  600.52, which states 
that a foreign institution cannot have written arrangements, within the 
meaning of Sec.  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 Sec.  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. Stair-casing 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 Sec.  668.5,'' a ``written arrangement'' under Sec.  
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

[[Page 67172]]

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 Sec.  668.8.
    However, these final regulations modify Sec.  668.5(a) for foreign 
institutions in that, under paragraph (1)(ii)(B) of the definition of 
foreign institution in Sec.  600.52, a foreign institution cannot have 
written arrangements, within the meaning of Sec.  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 Sec.  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 Sec.  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 Sec.  668.5(c) the Secretary considers such an 
educational program to be an eligible program in certain circumstances, 
under these final regulations, Sec.  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 Sec.  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 Sec.  600.55(h)(1), Sec.  600.56(b), Sec.  600.57(a)(2). In 
addition, and pertinent to all written arrangements under Sec.  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 Sec.  668.5(e), 
which would require an institution that enters into a written 
arrangement under Sec.  668.5 to provide the consumer information 
described in Sec.  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 Sec.  668.5(c). The Department notes that the use of 
``foreign institution'' in Sec.  668.5(b) pre-dates 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 Sec.  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 Sec.  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 stair-casing 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, Sec.  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 Sec.  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 Sec.  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

[[Page 67173]]

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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  600.4, or to 
for-profit ``proprietary institutions of higher education,'' as defined 
in Sec.  600.5, we are adding new paragraph Sec.  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 Sec.  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 Sec.  
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 Sec.  600.54(a) to specify which 
requirements in Sec.  600.4 and Sec.  600.5 foreign institutions must 
meet and which they need not. The provisions of Sec.  600.4 and Sec.  
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 (Sec.  
600.4(a)(1), and Sec.  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 Sec.  
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 (Sec.  600.4(a)(2) and Sec.  600.5(a)(3)) 
because, as reflected by Sec.  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 (Sec.  600.4 (a)(3), and Sec.  
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 Sec.  600.52 instead requires 
a foreign institution to be legally authorized by the education 
ministry, council or equivalent agency

[[Page 67174]]

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 
(Sec.  600.4(a)(4)(ii) and Sec.  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 (Sec.  600.4(a)(5), and 
Sec.  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 (Sec.  600.4(b), and Sec.  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 (Sec.  600.4(c), and Sec.  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, Sec.  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 Sec.  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 Sec.  600.54, we 
are revising paragraph (a) to specify which requirements in Sec.  600.4 
and Sec.  600.5 foreign institutions must meet and which they need not.

Foreign Graduate Medical Schools (Sec. Sec.  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 Sec.  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 Sec.  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 pre-
clinical coursework are inconsistent with section 484(o) of the HEA, 
Sec.  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

[[Page 67175]]

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 Sec.  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 long-term, 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 Sec. Sec.  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

[[Page 67176]]

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, Sec.  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 high-
quality 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

[[Page 67177]]

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 
data-sharing 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,

[[Page 67178]]

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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  600.55(f)(4), the Department uses an alternate 
methodology to compute rates for these schools. ECFMG does not use

[[Page 67179]]

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 (Sec.  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 Sec.  
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 Sec.  
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, Sec.  600.55(f)(1)(i)(A) of the proposed regulations. The 
Department is, therefore, adding to the data-submission provision in 
Sec.  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 data-submission requirements, 
the Department has also changed the phrase ``academic year,'' in Sec.  
600.55(f)(1)(i)(A), relating to citizenship rates, to ``calendar 
year.''
    Changes: The Department is adding new language in Sec.  
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 (Sec.  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.

[[Page 67180]]

medical schools, the AVMA is the accreditor for U.S. veterinary 
schools.
    Changes: We have revised Sec.  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 (Sec.  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 Sec.  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 Sec.  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 Sec.  
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

[[Page 67181]]

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 Sec.  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 Sec.  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 Sec.  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 (Sec.  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 Sec.  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

[[Page 67182]]

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 prior-year 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.

[[Page 67183]]

    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 Sec.  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 Sec.  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 for-profit (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

[[Page 67184]]

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.
---------------------------------------------------------------------------

    \1\ GAO-10-412 p. 39.
    \2\ GAO-10-412 pp 20-21.
    \3\ GAO-10-412 pp 30-31.
---------------------------------------------------------------------------

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 Sec.  600.4 and for-profit foreign institutions must meet 
the definition of proprietary institutions in Sec.  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 Sec.  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 Sec. Sec.  
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 Sec.  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

[[Page 67185]]

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 Sec.  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

[[Page 67186]]

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

[[Page 67187]]

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 Sec.  600.20(a)(3) and Sec.  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--
    <bullet> 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;
    <bullet> 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;
    <bullet> Indicate whether it offers only post-baccalaureate/
equivalent medical programs, other types of programs that lead to 
employment as a doctor of osteopathic medicine, doctor or medicine, or 
both;
    <bullet> 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 Sec.  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 Sec.  
600.20(a)(3) and Sec.  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 Sec.  600.20(b)(3) in OMB Control Number 1845-0012.

Section 600.21--Updating Application Information

    Final Sec.  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

[[Page 67188]]

more than a combined total of eight weeks. This requirement mirrors the 
requirement in Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  600.55(c)(2) in OMB Control Number 1845-
NEWA.
    Final Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
600.55(f).
    For Sec.  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 for-profit 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 Sec.  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 Sec.  600.55(d)(2) to 
replace the requirements in Sec.  600.55(d)(1)(iii). We estimate that 
institutions will require .75 hours (45 minutes) to create the report 
using data under Sec.  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 Sec.  
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 Sec.  
600.55(d)(2) and for completing the requirements of Sec.  
600.55(d)(1)(i) and (ii) will be 19 hours. Therefore, the total burden 
increase will be 84 hours associated with Sec.  600.55(d) in OMB 
Control Number 1845-NEWA.
    Final Sec.  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

[[Page 67189]]

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 Sec.  600.55(e) in OMB Control Number 1845-NEWA.
    Final Sec.  600.55(g)(1) requires a foreign graduate medical school 
to apply the existing satisfactory academic progress regulations in 
Sec.  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 Sec.  
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 Sec.  
600.55(g)(1) and (2) in OMB Control Number 1845-NEW2.
    Final Sec.  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 Sec.  600.55(g)(3) in OMB 
Control Number 1845-NEWA.
    In total, we estimate that Sec.  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 Sec.  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 Sec.  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 Sec.  600.57 that specifies 
additional Title IV, HEA program eligibility criteria for foreign 
nursing schools. These criteria include Sec.  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 
Sec.  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 Sec.  600.57(a)(6) in OMB Control Number 1845-NEWA.
    In addition, Sec.  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 Sec.  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

[[Page 67190]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 x 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 Sec.  
668.23(h)(1) in OMB Control Number 1845-0038.
    Final Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 x 40 hours). Instead, these 
350 foreign institutions will have their burden reduced to 8,750 hours 
(350 institutions x 25 hours). The final regulations realize a decrease 
of 5,250 hours of burden associated with Sec.  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 Sec.  668.23(h) in OMB Control Number 1845-
0038.

Section 668.171--General (Subpart L--Financial Responsibility)

    Final Sec.  668.171 considers a public foreign institution to be 
financially responsible if the institution: (1) Notifies the Secretary 
that it is

[[Page 67191]]

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 Sec.  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
------------------------------------------------------------------------
                                   Information
     Regulatory section            collection            Collection
------------------------------------------------------------------------
600.20--Application           This final            OMB 1845-0012. The
 procedures for                regulation change     burden will
 establishing,                 adds information      increase by 42
 reestablishing,               that must be          hours.
 maintaining, or expanding     collected to
 institutional eligibility     determine the
 and certification.            eligibility of
                               foreign graduate
                               medical,
                               veterinary, and
                               nursing schools to
                               participate in
                               Title IV programs.
600.21--Updating application  This final            OMB 1845-0012. The
 information.                  regulation            burden increases by
                               identifies when a     1 hour.
                               foreign graduate
                               medical school must
                               notify the
                               Department of
                               specific changes in
                               locations used by
                               the school.
600.54--Criteria for          This final            OMB 1845-NEWA. This
 determining whether a         regulation requires   would be a new
 foreign institution is        that the foreign      collection.
 eligible to participate in    school demonstrate    Separate 60-day and
 the Direct Loan Program.      that its academic     30-day Federal
                               work for each         Register notices
                               training program of   were published to
                               at least one-         solicit comment.
                               academic-year is      The burden
                               equivalent to an      increases by 22
                               academic year as      hours.
                               defined for
                               domestic
                               institutions.
600.55--Additional criteria   This final            OMB 1845-NEWA. This
 for determining whether a     regulation requires   would be a new
 foreign graduate medical      the schools to        collection.
 school is eligible to apply   develop and provide   Separate 60-day and
 to participate in the         a consent form        30-day Federal
 Direct Loan Program.          allowing the school   Register notices
                               to receive a copy     were published to
                               of the students'      solicit comment.
                               MCAT scores, and      The burden
                               requires a medical    increases by 381
                               school to annually    hours.
                               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.
600.55(g)(1)&(2)............  This final            OMB 1845-NEW2. This
                               regulation requires   is a new
                               that the foreign      collection.
                               graduate medical      Separate 60-day and
                               school expands the    30-day Federal
                               satisfactory          Register notices
                               academic progress     were published to
                               policy requirements   solicit comment.
                               to include foreign    The burden
                               schools; requires     increases by 178
                               calculations of       hours.
                               maximum timeframes
                               to complete the
                               program; and
                               requires the school
                               to document any
                               student remediation
                               regarding SAP.
600.57--Additional criteria   This final            OMB 1845-NEWA. This
 for determining whether a     regulation requires   would be a new
 foreign nursing school is     the schools to        collection.
 eligible to apply to          develop and provide   Separate 60-day and
 participate in the Direct     a consent form        30-day Federal
 Loan Program.                 allowing the school   Register notices
                               to receive a copy     were published to
                               of the students'      solicit comment.
                               NCLEX-RN results or   The burden
                               pass rate; requires   increases by 102
                               a nursing school to   hours.
                               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.
668.13--Certification         This final            OMB 1845-0022. We do
 procedures.                   regulation changes    not estimate an
                               the certification     increase in burden.
                               time frame for for-
                               profit schools from
                               6 to 3 years.
668.23(h)(1)(ii) &            This final            OMB 1845-0038. The
 668.23(h)(1)(iii)(B)--Compl   regulation requires   burden increases by
 iance audits and audited      the translation of    1,260 hours.
 financial statements.         certain financial
                               statements into
                               English.
668.23(h)(1)--Compliance      This final            OMB 1845-0038. The
 audits and audited            regulation changes    burden decreases by
 financial statements.         the requirements      9,100 hours.
                               for submission by
                               institutions to the
                               Department of
                               audited financial
                               statements.

[[Page 67192]]

 
668.23(h)(2)--Compliance      This final            OMB 1845-0038. The
 audits and audited            regulation changes    burden decreases by
 financial statements.         the requirements      5,250 hours.
                               for submission by
                               institutions to the
                               Department of
                               compliance audits.
668.171--General (Subpart L-- This final            OMB 1845-0022. The
 Financial Responsibility).    regulation provides   burden increases by
                               an alternate method   208 hours.
                               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.
------------------------------------------------------------------------

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.

0
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

0
1. The authority citation for part 600 continues to read as follows:

    Authority:  20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 
and 1099c, unless otherwise noted.


0
2. Section 600.2 is amended by revising paragraphs (1) and (2) of the 
definition of Nonprofit institution.
    The revision reads as follows:


Sec.  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.
* * * * *


0
3. Section 600.20 is amended by:
0
A. Revising paragraph (a).
0
B. Adding a new paragraph (b)(3).
0
C. In paragraph (c)(4), removing the word ``or''.
0
D. Redesignating paragraph (c)(5) as paragraph (c)(6).
0
E. Adding a new paragraph (c)(5).
    The revision and additions read as follows:


Sec.  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,

[[Page 67193]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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
* * * * *


0
4. Section 600.21 is amended by adding paragraph (a)(10) to read as 
follows:


Sec.  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.
* * * * *


0
5. Section 600.41 is amended by adding paragraph (e)(3) to read as 
follows:


Sec.  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 Sec.  
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 Sec.  600.55(d)(2) 
in lieu of the foreign graduate medical school providing pass rate data 
to the Secretary under Sec.  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.
* * * * *


0
6. Section 600.51 is amended by revising paragraph (c) to read as 
follows:


Sec.  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 Sec. Sec.  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 Sec. Sec.  600.51(c)(1) and 600.54(a), is 
considered a ``proprietary institution'' for purposes of title IV, HEA 
program regulations.
* * * * *


0
7. Section 600.52 is amended by:
0
A. Adding, in alphabetical order, a definition of Associate degree 
school of nursing.
0
B. Adding, in alphabetical order, a definition of Clinical training.
0
C. Adding, in alphabetical order, a definition of Collegiate school of 
nursing.
0
D. Adding, in alphabetical order, a definition of Diploma school of 
nursing.
0
E. Revising the definition of Foreign graduate medical school.
0
F. Revising the definition of Foreign institution.
0
G. Adding, in alphabetical order, a definition of Foreign nursing 
school.
0
H. Adding, in alphabetical order, a definition of Foreign veterinary 
school.

[[Page 67194]]

0
I. Adding, in alphabetical order, a definition of National Committee on 
Foreign Medical Education and Accreditation (NCFMEA).
0
J. Revising the definition of Passing score.
0
K. Adding, in alphabetical order, a definition of Post-baccalaureate/
equivalent medical program.
    The additions and revisions read as follows:

Sec.  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 two-year 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 Sec.  600.55(h)(1), Sec.  600.56(b), or Sec.  600.57(a)(2)--
    (A) Has no U.S. location;
    (B) Has no written arrangements, within the meaning of Sec.  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 Sec.  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.
* * * * *

0
8. Section 600.54 is revised to read as follows:


Sec.  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 Sec.  600.4, except Sec.  
600.4(a)(1), (a)(2), (a)(3), (a)(4)(ii),

[[Page 67195]]

(a)(5), (b), (c), and any requirements the HEA or the Secretary has 
designated as inapplicable in accordance with Sec.  600.51(c)(1).
    (3) For a for-profit foreign medical, veterinary, or nursing 
school, the school meets the requirements of Sec.  600.5, except Sec.  
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 Sec.  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 Sec.  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 Sec.  600.52 if the 
additional location is--
    (1) Located outside of the country in which the main campus is 
located, except as provided in Sec.  600.55(h)(1), Sec.  600.56(b), 
Sec.  600.57(a)(2), Sec.  600.55(h)(3), and the definition of foreign 
institution found in Sec.  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-academic-year 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 Sec.  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 Sec.  
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)


0
9. Section 600.55 is revised to read as follows:


Sec.  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 Sec.  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 Sec.  600.4(a)(5)(i).
    (c) Admission criteria. (1) A foreign graduate medical school 
having a post-baccalaureate/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;

[[Page 67196]]

    (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 Sec.  668.16(e)(2)(ii)(B), (C) and 
(D).
    (2) A foreign graduate medical school must document the educational 
remediation it provides to assist

[[Page 67197]]

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.

0
10. Section 600.56 is revised as follows:


Sec.  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 Sec.  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.)


0
11. Section 600.57 is redesignated as Sec.  600.58 and a new Sec.  
600.57 is added to read as follows:


Sec.  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 Sec.  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 
Sec.  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

[[Page 67198]]

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

0
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.


Sec.  668.2  [Amended]

0
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).
0
14. Section 668.5 is amended by revising paragraph (b) to read as 
follows:


Sec.  668.5  Written arrangements to provide educational programs.

* * * * *
    (b) Written arrangements for study-abroad. 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.

0
15. Section 668.13 is amended by revising paragraph (b) to read as 
follows:


Sec.  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.
* * * * *

0
16. Section 668.15 is amended by revising paragraph (h) to read as 
follows:


Sec.  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 Sec.  668.23(h).
* * * * *

0
17. Section 668.23 is amended by:
0
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''.
0
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''.
0
C. Removing paragraph (d)(3).
0
D. Redesignating paragraph (d)(4) as paragraph (d)(3).
0
E. Redesignating paragraph (d)(5) as paragraph (d)(4).
0
F. Adding paragraph (h).
    The addition reads as follows:


Sec.  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

[[Page 67199]]

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.
* * * * *

0
18. Section 668.171 is amended by revising paragraph (c) to read as 
follows:


Sec.  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 
Sec.  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 
Sec.  668.174.
* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

0
19. The authority citation for part 682 continues to read as follows:

    Authority:  20 U.S.C. 1071-1087-2, unless otherwise noted.


Sec.  682.200  [Amended]

0
20. Section 682.200 is amended by:

[[Page 67200]]

0
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).
0
B. Removing the definition of Foreign school in paragraph (b).


Sec.  682.611  [Removed and Reserved]

0
21. Section 682.611 is removed and reserved.

PART 685-WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

0
22. The authority citation for part 685 continues to read as follows:

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


Sec.  685.102  [Amended]

0
23. Section 685.102 is amended by:
0
A. Adding the words ``Foreign institution'' immediately after ``Federal 
Family Education Loan (FFEL) Program'' in the list of definitions in 
paragraph (a)(2).
0
B. Removing the words ``Foreign school'' immediately after ``Federal 
Stafford Loan Program'' in the list of definitions in paragraph (a)(3).


Sec.  682.301  [Amended]

0
24. Section 685.301 is amended by:
0
A. In paragraph (b)(6)(i)(B), removing ``; or'' at the end of the 
sentence and adding, in its place, a period.
0
B. Removing paragraph (b)(6)(i)(C).


Sec.  685.303  [Amended]

0
25. Section 685.303 is amended by:
0
A. In paragraph (b)(4)(i)(B), removing ``; or'' at the end of the 
sentence and adding, in its place, a period.
0
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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