To amend the Higher Education Act of 1965 to expand the opportunities for higher education via telecommunications.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Internet Equity and Education Act of 
2001''.

SEC. 2. EXCEPTION TO 50 PERCENT CORRESPONDENCE COURSE LIMITATIONS.

    (a) Definition of Institution of Higher Education for Title IV 
Purposes.--Section 102(a) of the Higher Education Act of 1965 (20 
U.S.C. 1002(a)) is amended by adding at the end the following new 
paragraph:
            ``(7) Exception to limitation based on course of study.--
        Courses offered via telecommunications (as defined in section 
        484(l)(4)) shall not be considered to be correspondence courses 
        for purposes of subparagraph (A) or (B) of paragraph (3) for 
        any institution that--
                    ``(A) is participating in either or both of the 
                loan programs under part B or D of title IV on the date 
                of enactment of the Internet Equity and Education Act 
                of 2001;
                    ``(B) has a cohort default rate (as determined 
                under section 435(m)) for each of the 3 most recent 
                fiscal years for which data are available that is less 
                than 10 percent; and
                    ``(C)(i) has notified the Secretary, in a form and 
                manner prescribed by the Secretary (including such 
                information as the Secretary may require to meet the 
                requirements of clause (ii)), of the election by such 
                institution to qualify as an institution of higher 
                education by means of the provisions of this paragraph; 
                and
                    ``(ii) the Secretary has not, within 90 days after 
                such notice, and the receipt of any information 
                required under clause (i), notified the institution 
                that the election by such institution would pose a 
                significant risk to Federal funds and the integrity of 
                programs under title IV.''.
    (b) Definition of Eligible Student.--Section 484(l)(1) of the 
Higher Education Act of 1965 (20 U.S.C. 1091(l)(1)) is amended by 
adding at the end the following new subparagraph:
                    ``(C) Exception to 50 percent limitation.--
                Notwithstanding the 50 percent limitation in 
                subparagraph (A), a student enrolled in a course of 
                instruction described in such subparagraph shall not be 
                considered to be enrolled in correspondence courses if 
                the student is enrolled in an institution that--
                            ``(i) is participating in either or both of 
                        the loan programs under part B or D of title IV 
                        on the date of enactment of the Internet Equity 
                        and Education Act of 2001;
                            ``(ii) has a cohort default rate (as 
                        determined under section 435(m)) for each of 
                        the 3 most recent fiscal years for which data 
                        are available that is less than 10 percent; and
                            ``(iii)(I) has notified the Secretary, in 
                        form and manner prescribed by the Secretary 
                        (including such information as the Secretary 
                        may require to meet the requirements of 
                        subclause (II)), of the election by such 
                        institution to qualify its students as eligible 
                        students by means of the provisions of this 
                        subparagraph; and
                            ``(II) the Secretary has not, within 90 
                        days after such notice, and the receipt of any 
                        information required under subclause (I), 
                        notified the institution that the election by 
                        such institution would pose a significant risk 
                        to Federal funds and the integrity of programs 
                        under title IV.''.

SEC. 3. DEFINITION OF ACADEMIC YEAR.

    Section 481(a) of the Higher Education Act of 1965 (20 U.S.C. 
1088(a)) is amended by adding at the end the following new paragraph:
    ``(3) For the purposes of any eligible program, a week of 
instruction is defined as a week in which at least one day of regularly 
scheduled instruction or examinations occurs, or at least one day of 
study for final examinations occurs after the last scheduled day of 
classes. For an educational program using credit hours, but not using a 
semester, trimester, or quarter system, an institution of higher 
education shall notify the Secretary, in the form and manner prescribed 
by the Secretary, if the institution plans to offer an eligible program 
of instruction of less than 12 hours of regularly scheduled 
instruction, examinations, or preparation for examinations for a week 
of instructional time.''.

SEC. 4. INCENTIVE COMPENSATION.

    (a) Amendment.--Part G of title IV of the Higher Education Act of 
1965 is amended by inserting after section 484B (20 U.S.C. 1091b) the 
following new section:

``SEC. 484C. INCENTIVE COMPENSATION PROHIBITED.

    ``(a) Prohibition.--No institution of higher education 
participating in a program under this title shall make any payment of a 
commission, bonus, or other incentive payment, based directly on 
success in securing enrollments or financial aid, to any person or 
entity directly engaged in student recruiting or admission activities, 
or making decisions regarding the award of student financial 
assistance, except that this section shall not apply to the recruitment 
of foreign students residing in foreign countries who are not eligible 
to receive Federal student assistance.
    ``(b) Exceptions.--Subsection (a) does not apply to payment of a 
commission, bonus, or other incentive payment--
            ``(1) pursuant to any contract with any third-party service 
        provider that has no control over eligibility for admission or 
        enrollment or the awarding of financial aid at the institution 
        of higher education, provided that no employee of the third-
        party service provider is paid a commission, bonus, or other 
        incentive payment based directly on success in securing 
        enrollments or financial aid; or
            ``(2) to persons or entities for success in securing 
        agreements, contracts, or commitments from employers to provide 
        financial support for enrollment by their employees in an 
        institution of higher education or for activities that may lead 
        to such agreements, contracts, or commitments.
    ``(c) Exception for Fixed Compensation.--For purposes of subsection 
(a), a person shall not be treated as receiving incentive compensation 
when such person receives a fixed compensation that is paid regularly 
for services and that is adjusted no more frequently than every six 
months.''.
    (b) Conforming Amendment.--Paragraph (20) of section 487(a) of the 
Higher Education Act of 1965 (20 U.S.C. 1094(a)(20)) is repealed.
    (c) Technical Amendment.--Section 487(c)(1) of the Higher Education 
Act of 1965 (20 U.S.C. 1094(c)(1)) is amended by striking ``paragraph 
(2)(B)'' each place it appears in subparagraphs (F) and (H) and 
inserting ``paragraph (3)(B)''.

SEC. 5. EVALUATION AND REPORT.

    (a) Information from Institutions.--
            (1) Institutions covered by requirement.--The requirements 
        of paragraph (2) apply to any institution of higher education 
        that--
                    (A) has notified the Secretary of Education of an 
                election to qualify for the exception to limitation 
                based on course of study in section 102(a)(7) of the 
                Higher Education Act of 1965 (20 U.S.C. 1002(a)(7)) or 
                the exception to the 50 percent limitation in section 
                484(l)(1)(C) of such Act (20 U.S.C. 1091(l)(1)(C));
                    (B) has notified the Secretary under section 
                481(a)(3) of such Act (20 U.S.C. 1088(a)(3)); or
                    (C) contracts with outside parties for--
                            (i) the delivery of distance education 
                        programs;
                            (ii) the delivery of programs offered in 
                        nontraditional formats; or
                            (iii) the purpose of securing the 
                        enrollment of students.
            (2) Requirements.--Any institution of higher education to 
        which this paragraph applies shall comply, on a timely basis, 
        with the Secretary of Education's reasonable requests for 
        information on changes in--
                    (A) the amount or method of instruction offered;
                    (B) the types of programs or courses offered;
                    (C) enrollment by type of program or course;
                    (D) the amount and types of grant, loan, or work 
                assistance provided under title IV of the Higher 
                Education Act of 1965 that is received by students 
                enrolled in programs conducted in nontraditional 
                formats; and
                    (E) outcomes for students enrolled in such courses 
                or programs.
    (b) Report by Secretary Required.--The Secretary of Education shall 
conduct by grant or contract a study of, and by March 31, 2003, submit 
to the Congress, a report on--
            (1) the effect that the amendments made by this Act have 
        had on--
                    (A) the ability of institutions of higher education 
                to provide distance learning opportunities to students; 
                and
                    (B) program integrity;
            (2) with respect to distance education or correspondence 
        education courses at institutions of higher education to which 
        the information requirements of subsection (a)(2) apply, 
        changes from year-to-year in--
                    (A) the amount or method of instruction offered and 
                the types of programs or courses offered;
                    (B) the number and type of students enrolled in 
                distance education or correspondence education courses;
                    (C) the amount of student aid provided to such 
                students, in total and as a percentage of the 
                institution's revenue; and
                    (D) outcomes for students enrolled in distance 
                education or correspondence education courses, 
                including graduation rates, job placement rates, and 
                loan delinquencies and defaults;
            (3) any reported and verified claim of inducement to 
        participate in the student financial aid programs and any 
        violation of the Higher Education Act of 1965, including any 
        actions taken by the Department of Education against the 
        violator; and
            (4) any further improvements that should be made to the 
        provisions amended by this Act (and related provisions), in 
        order to accommodate nontraditional educational opportunities 
        in the Federal student assistance programs while ensuring the 
        integrity of those programs.

SEC. 6. LEARNING ANYTIME ANYWHERE PARTNERSHIPS.

    Section 420J of the Higher Education Act of 1965 (20 U.S.C. 1070f-
6) is amended by adding at the end the following new sentence: ``If for 
any fiscal year funds are not appropriated pursuant to this section, 
funds available under part B of title VII, relating to the Fund for the 
Improvement of Postsecondary Education, may be made available for 
continuation grants for any grant recipient under this subpart.''.

SEC. 7. IMPLEMENTATION.

    (a) No Delay in Effective Date.--Section 482(c) of the Higher 
Education Act of 1965 (20 U.S.C. 1089(c)) shall not apply to the 
amendments made by this Act.
    (b) Implementing Regulations.--Section 492 of the Higher Education 
Act of 1965 (20 U.S.C. 1098a) shall not apply to the amendments made by 
sections 2 and 3 of this Act.

            Passed the House of Representatives October 10, 2001.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.

Summary: Internet Equity and Education Act of 2001 - Amends the Higher Education Act of 1965 (HEA) to exempt courses offered through telecommunications from certain limitations on student financial assistance with respect to correspondence courses. (Such limitations include the 50-percent rule, requiring that an institution provide at least 50 percent of its instruction in person.) Allows such exemption if the institution of higher education (IHE) offering such course through telecommunications: (1) is participating in the guaranteed or the direct student loan program; and (2) has a cohort default rate of less than ten percent for each of the three most recent fiscal years for which data are available; and (3) has notified the Secretary of Education of its election to qualify for such exemption, and then has not been notified by the Secretary that such election would pose a significant risk to Federal funds under HEA title IV (Student Assistance).(Sec. 3) Defines a week of instruction, with respect to an academic year for HEA student aid programs, as one in which at least one day of regularly scheduled instruction or examinations occurs, or at least one day of study for final examinations occurs after the last scheduled day of classes. (Such revised definition eliminates a 12-hour rule requiring students to spend at least 12 hours a week in class if enrolled in courses that are not on a semester, trimester, or quarter system.) Requires an IHE to notify the Secretary if it plans to offer an eligible program of instruction of less than 12 hours of regularly scheduled instruction, examinations, or preparation for examinations for a week of instructional time (for educational programs using credit hours, but not using a semester, trimester, or quarter system).(Sec. 4) Revises a prohibition, for IHEs that participate in HEA student assistance programs, against making incentive payments based on success in securing enrollments or financial aid to any person or entity engaged in student recruiting or admission activities, or making decisions regarding the award of student financial assistance. Prohibits such payments only if they are: (1) based directly on such success; and (2) made to a person or entity directly engaged in such activities. Exempts from such prohibition: (1) recruitment of foreign students not eligible to receive Federal student assistance (as does current law); (2) incentive payments under any contract with a third-party service provider with no control over eligibility for admission or enrollment or awarding of financial aid at the IHE, if no employee of that provider is given an incentive payment based directly on success in securing enrollments or financial aid; (3) incentive payments to persons or entities for success in securing (or activities leading to) agreements, contracts, or commitments from employers to provide financial support for enrollment of their employees in an IHE; and (4) persons receiving fixed compensation paid regularly for services and adjusted no more frequently than every six months.(Sec. 5) Requires certain information to be provided to the Secretary by IHEs that have: (1) notified the Secretary of their election to qualify for an exception to a limitation on course of study or to the 50 percent limitation on instruction that is not in person; (2) notified the Secretary of plans to offer an eligible program of instruction of less than 12 hours; or (3) contracts with outside parties for delivery of distance education programs or programs offered in nontraditional formats or for securing enrollment of students.Directs the Secretary to evaluate and report on: (1) the effect of this Act on IHE ability to provide distance learning opportunities and on program integrity; (2) specified types of changes with respect to distance education or correspondence courses at IHEs subject to information requirements under this Act; (3) claims of inducements to participate in student financial aid programs, HEA violations, and Federal actions against violators; and (4) any further revisions to accommodate nontraditional educational opportunities in Federal student assistance programs while ensuring program integrity.(Sec. 6) Authorizes funds to be made available for the Learning Anytime Anywhere Partnerships program from the Fund for Improvement of Postsecondary Education if for any fiscal year funds are not appropriated for such program.