SEC. 2. DISTANCE EDUCATION DEMONSTRATION PRO-
GRAMS. 
Part G of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1088 et seq.) is amended by inserting 
after section 486A the following: 
‘‘SEC. 486B. COMPETENCY-BASED EDUCATION DEMONSTRA-
TION PROGRAMS. 
‘‘(a) PURPOSE.—It is the purpose of this section— 
‘‘(1) to allow demonstration programs that are 
monitored by the Secretary to explore ways of deliv-
ering education and disbursing student financial aid 
that are based on learning rather than time; 
‘‘(2) to potentially lower cost and reduce the 
time to degree in the attainment of higher education 
degrees through competency-based programs; and 
‘‘(3) to help determine— 
‘‘(A) the specific statutory and regulatory 
requirements which should be altered to provide 
greater access to competency-based education, 
which may be independent of or combined with 
traditional credit hour or clock hour programs; 
‘‘(B) the most effective means of delivering 
competency-based education via degree pro-
grams; and 
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‘‘(C) the appropriate level and distribution 
methodology of Federal assistance for students 
enrolled in competency-based education. 
‘‘(4) DEFINITION.—For the purpose of this sec-
tion, the term ‘competency-based education’ means 
an educational process that— 
‘‘(A) is characterized by the measurement 
of learning as opposed to the measurement of 
instructional and learning time; 
‘‘(B) uses direct assessment of student 
learning, or recognizes the direct assessment by 
others of student learning, in place of or in ad-
dition to using credit hours or clock hours; and 
‘‘(C) includes direct measures of learning, 
including projects, papers, examinations, pres-
entations, performances, and portfolios. 
‘‘(b) DEMONSTRATION PROGRAMS AUTHORIZED.— 
‘‘(1) IN GENERAL.—In accordance with the pro-
visions of subsection (d), the Secretary is directed to 
select institutions of higher education, systems of 
such institutions, or consortia of such institutions 
for voluntary participation in a Competency-Based 
Education Demonstration Program that provides 
participating institutions with the ability to offer 
competency-based education that do not meet all or 
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a portion of the requirements of the sections or reg-
ulations described in paragraph (2). 
‘‘(2) WAIVERS.—The Secretary is authorized to 
waive for any institution of higher education, sys-
tem, or consortium participating in a Competency- 
Based Education Demonstration Program, the re-
quirements of sections 481(a) and 481(b) as such 
sections relate to requirements for a minimum num-
ber of weeks of instruction, sections 102(a)(3)(A), 
102(a)(3)(B), 
and 
484(l)(1), 
section 
668.32(a)(1)(iii) of title 34, Code of Federal Regula-
tions, as it relates to courses leading to teacher cer-
tification, or one or more of the regulations pre-
scribed under this part or part F which inhibit the 
operation of competency-based education. In addi-
tion to the waivers described above, for institutions 
that propose a rational and defensible plan for com-
petency-based education and for the waivers being 
sought, the Secretary may waive any of the require-
ments under sections (and corresponding regula-
tions) in title I, part F of this title, and this part, 
that inhibit the operation of competency-based edu-
cation, including requirements that relate to— 
‘‘(A) documenting attendance; 
‘‘(B) weekly academic activity; 
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‘‘(C) minimum weeks of instructional time; 
‘‘(D) requirements for credit hour/clock 
hour equivalencies; 
‘‘(E) requirements for substantive inter-
action with faculty; and 
‘‘(F) definitions of the terms ‘academic 
year’, ‘full-time student’, ‘term’ (including 
‘standard term’, ‘non-term’, and ‘non-standard 
term’), ‘satisfactory academic progress’ (SAP), 
‘educational activity’, ‘program of study’, and 
‘payment period’. 
‘‘(3) ELIGIBLE APPLICANTS.— 
‘‘(A) ELIGIBLE INSTITUTIONS.—Except as 
provided in subparagraph (B), to be eligible to 
participate in the demonstration program au-
thorized under this section an institution shall 
be— 
‘‘(i) an institution of higher education 
that is eligible to participate in programs 
under this title; or 
‘‘(ii) an institution that has been ap-
proved to offer direct assessment programs 
under section 481(b)(4). 
‘‘(B) PROHIBITION.—An institution of 
higher 
education 
described 
in 
section 
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102(a)(1)(C) shall not be eligible to participate 
in the demonstration program authorized under 
this section. 
‘‘(c) APPLICATION.— 
‘‘(1) IN GENERAL.—Each institution, system of 
institutions, or consortium of institutions desiring to 
participate in a demonstration program under this 
section shall submit an application to the Secretary. 
‘‘(2) CONTENTS.—Each application shall in-
clude— 
‘‘(A) a description of the competency-based 
education to be offered; 
‘‘(B) a brief description of the proposed 
academic delivery, business, and financial mod-
els, including brief explanations of how this ap-
proach would result in the achievement of com-
petencies and how it would differ from standard 
credit hour approaches; 
‘‘(C) a description of the statutory and 
regulatory requirements described in subsection 
(b)(2) for which a waiver is sought and the rea-
sons for which each such waiver is sought; 
‘‘(D) a description of the proposal for de-
termining a student’s Federal student aid eligi-
bility, the award and distribution of aid, and 
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