General and Non-Loan Programmatic Issues, 55902-55969 [E9-25373]

Agencies

• [docket Id Ed-2009-Ope-0005]
• DEPARTMENT OF EDUCATION

[Federal Register Volume 74, Number 208 (Thursday, October 29, 2009)]
[Rules and Regulations]
[Pages 55902-55969]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-25373]



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Part II





Department of Education





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34 CFR Parts 600, 668, 675, et al.



General and Non-Loan Programmatic Issues; Final Rule

Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / 
Rules and Regulations

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DEPARTMENT OF EDUCATION

[Docket ID ED-2009-OPE-0005]

34 CFR Parts 600, 668, 675, 686, 690, and 692

RIN 1840-AC99


General and Non-Loan Programmatic Issues

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 Work-Study (FWS) Programs, 
the Teacher Education Assistance for College and Higher Education 
(TEACH) Grant Program, the Federal Pell Grant Program, and the 
Leveraging Educational Assistance Partnership Program (LEAP) to 
implement various general and non-loan provisions of the Higher 
Education Act of 1965 (HEA), as amended by the Higher Education 
Opportunity Act of 2008 (HEOA) and other recently enacted legislation.

DATES: Effective Date: These regulations are effective July 1, 2010.
    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 
Sec. Sec.  600.32(d), 668.28, 668.23(d)(4), 668.43, 675.16, 675.18(g), 
675.18(i), 686.41, and 686.42 on or after November 1, 2009. 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 
regarding these regulations related to the non-title IV revenue 
requirement (90/10), John Kolotos. Telephone: (202) 502-7762 or via the 
Internet at: John.Kolotos@ed.gov.
    For information related to all Federal Pell Grant Program issues 
and the LEAP/GAP Program, Fred Sellers and Jacquelyn Butler. Telephone: 
(202) 502-7502 and (202) 502-7890, respectively or via the Internet at: 
Fred.Sellers@ed.gov or Jacquelyn.Butler@ed.gov.
    For information related to the provisions for readmission for 
servicemembers, teach-outs, peer-to-peer file sharing, baccalaureate in 
liberal arts, and institutional plans for improving the academic 
program, Wendy Macias. Telephone: (202) 502-7526 or via the Internet 
at: Wendy.Macias@ed.gov.
    For information related to all FWS Program issues, Nikki Harris and 
Harold McCullough. Telephone: (202) 219-7050 and (202) 377-4030, 
respectively, or via the Internet at Nikki.Harris@ed.gov or 
Harold.McCullough@ed.gov.
    For information related to the provisions for fire safety 
standards, missing students procedures, hate crime reporting, emergency 
response and evacuation, and students with intellectual disabilities, 
Jessica Finkel. Telephone: (202) 502-7647 or via the Internet at: 
Jessica.Finkel@ed.gov.
    For information related to the provisions for extenuating 
circumstances under the TEACH Grant Program, Jacquelyn Butler. 
Telephone: (202) 502-7890 or via the Internet at: 
Jacquelyn.Butler@ed.gov.
    For information related to the consumer information requirements, 
Brian Kerrigan. Telephone: (202) 219-7058 or via the Internet at: 
Brian.Kerrigan@ed.gov.
    If you use a telecommunications device for the deaf (TDD), call the 
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or computer 
diskette) on request to one of the contact persons listed under FOR 
FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: On August 21, 2009, the Secretary published 
a notice of proposed rulemaking (NPRM) for general and non-loan 
programmatic issues in the Federal Register (74 FR 42380).
    In the preamble to the NPRM, the Secretary discussed on pages 42383 
through 42415 the major regulations proposed in that document to 
implement provisions of the HEOA, including the following:
     Amending Sec. Sec.  690.63(h), 690.64, and 690.67 to 
establish the conditions under which students may receive up to two 
Federal Pell Grant Scheduled Awards during a single award year.
     Amending Sec. Sec.  686.12(c), 686.41, and 686.42(c) to 
establish the extenuating circumstances under which a TEACH Grant 
recipient may be excused from fulfilling all or part of his or her 
service obligation.
     Amending Sec.  675.18(g) to permit institutions to use FWS 
funds to compensate students employed in projects that teach civics in 
school, raise awareness of government functions or resources, or 
increase civic participation.
     Amending Sec.  675.18 by adding paragraph (i) to allow 
institutions located in major disaster areas to make FWS payments to 
disaster-affected students.
     Amending Sec. Sec.  675.41 and 675.43 to revise 
definitions and terms relating to work colleges.
     Adding Sec.  668.28 to establish the requirement that 
proprietary institutions derive at least 10 percent of their revenue 
from sources other than Title IV, HEA program funds and specify how 
institutions calculate the revenue percentage.
     Amending Sec.  668.41(a) and (d) and Sec.  668.45 to 
expand the information that institutions must make available to 
prospective and enrolled students to include information on: the 
employment and placement of students; the retention rates of first-
time, full-time undergraduate students; the placement rate for any 
program offered by the institution, if the institution calculates this 
rate; and the completion and graduation rate data that is disaggregated 
by gender, race, and grant or loan assistance.
     Amending Sec.  668.41(e) to provide that institutions that 
maintain on-campus housing facilities must publish annually a fire 
safety report, maintain a fire log, and report fire statistics to the 
Department.
     Amending Sec.  668.46 by adding paragraph (h) to require 
institutions that provide on-campus housing facilities to develop and 
make available a missing student notification policy and allow students 
who reside on campus to confidentially register contact information.
     Amending Sec.  668.46(c) to expand the list of crimes that 
institutions must include in the hate crimes statistics reported to the 
Department.
     Amending Sec.  668.46 by adding paragraph (g) to require 
institutions to include in their annual security report a statement of 
emergency response and evacuation procedures.
     Adding subpart O to 34 CFR part 668, to specify the 
conditions under which students with intellectual disabilities may 
receive Federal Pell Grant, FWS, and FSEOG Program funds.
     Adding Sec.  668.18 to establish requirements under which 
an institution must readmit servicemembers to the same academic status 
they had when they last attended the institution.
     Amending Sec.  600.32(d) to provide that an institution 
that conducts a teach-out at a site of a closed institution may,

[[Page 55903]]

under certain conditions, establish that site as an additional 
location.
     Amending Sec.  600.5(a) and (e) to include in the 
definition of ``proprietary institution of higher education'' an 
institution that provides a program leading to a baccalaureate degree 
in liberal arts, if the institution provided that program since January 
1, 2009, and has been accredited by a regional accrediting agency since 
October 1, 2007, or earlier.
     Amending Sec.  668.14(b) to provide that an institution 
must have developed and implemented written plans to effectively combat 
unauthorized distribution of copyrighted material and that the 
institution will offer alternatives to illegal downloading or peer-to-
peer distribution of intellectual property.
     Amending Sec.  668.43(a) to include, as part of the 
information an institution must make available to prospective and 
enrolled students, a description of any plans the institution has to 
improve its academic program.
     Amending Sec.  692.10(b) to provide that the non-Federal 
share of student grants or work-study jobs under the LEAP Program must 
be State funds and that the non-Federal share no longer has to come 
from a direct appropriation of State funds.
     Amending Sec.  692.21(k) to provide that the State program 
must notify students that grants are LEAP Grants that are funded by the 
Federal Government, the State, and, for LEAP Grants to students under 
the new Grants for Access and Persistence (GAP) Program, other 
contributing partners.
     Adding subpart C to 34 CFR part 692 to establish the 
activities, awards, allotments to States, matching funds requirements, 
consumer information requirements, application requirements, and other 
requirements needed to begin and continue participating in the GAP 
Program.

Technical Amendments

    In addition to the changes necessary to implement provisions of the 
HEOA, these final regulations also incorporate technical amendments 
made to the HEA by The Higher Education Technical Corrections (Pub. L. 
111-39), enacted on July 1, 2009. These changes are as follows: In 
Sec.  690.75(e) we proposed that a student whose parent was in the 
Armed Forces and died in Iraq or Afghanistan could receive the maximum 
Federal Pell Grant eligibility if the student was under 24 years old or 
enrolled in an institution of higher education at the time the parent 
died, in accordance with section 401(f)(4) of the HEA, as amended by 
the HEOA. However, Public Law 111-39 removed section 401(f)(4) from the 
HEA and added new sections 473(b) and 420R effective July 1, 2009. 
Section 401(f)(4) provided that, for purposes of Federal Pell Grants 
only, a student was deemed to have an expected family contribution 
(EFC) of zero if the student's parent was in the Armed Forces and died 
in Iraq or Afghanistan when the student was under 24 years old or 
enrolled in an institution of higher education at the time the parent 
died.
    Section 473(b) was added to Part F--Need Analysis of the HEA and 
provides that, beginning with the 2009-2010 and succeeding award years, 
each student with a Federal Pell Grant-eligible EFC whose parent or 
guardian was a member of the Armed Forces of the United States and died 
as a result of performing military service in Iraq or Afghanistan after 
September 11, 2001, will be determined to have an EFC of zero that will 
generally apply to all Title IV, HEA programs. Because part F of the 
HEA, where these changes are reflected, is subject to section 478(a) of 
the HEA, which generally prohibits regulating the requirements in part 
F, we are removing proposed Sec.  690.75(e).
    Section 420R of the HEA establishes a new, non-need-based program 
called the Iraq and Afghanistan Service Grants Program (IASG Program) 
starting in the 2010-2011 award year. To qualify for an IASG, a student 
must have a parent or guardian who died as a result of military service 
in Iraq or Afghanistan after September 11, 2001, and must be, at the 
time of the parent or guardian's death, less than 24 years of age or 
enrolled at an institution of higher education. A qualifying student 
who is not eligible for a Federal Pell Grant would be eligible to 
receive an IASG that is the same amount as a maximum Federal Pell Grant 
to assist in paying the student's cost of attendance at an institution 
of higher education. Grants under the IASG Program may not exceed the 
student's cost of attendance, and payments are adjusted like Federal 
Pell Grants if the student is enrolled less than full-time; unlike 
Federal Pell Grants, IASG Program grants are not considered to be 
estimated financial assistance. Under this program, the student's EFC 
will not be changed as a result of a parent or guardian's service. 
Regulations are necessary to implement this Title IV, HEA program. 
However, section 409 of Public Law 111-39 waives the provisions of 
sections 482 and 492 of the HEA concerning the master calendar for 
regulatory effective dates and the requirement to use negotiated 
rulemaking to formulate regulations for the IASG Program. We, 
therefore, expect to initiate the regulatory process without negotiated 
rulemaking and adopt the necessary regulations that would be effective 
on July 1, 2010, for the 2010-2011 award year.
     Section 401(a)(6) of Public Law 111-39 also amended 
section 415E(b)(1)(B) of the HEA governing allotments to States under 
the Grants for Access and Persistence Program (GAP). The allotment 
formula provides that a State with a prior year allotment shall receive 
not less than that amount in the next year's allotment. The HEA 
provides that, if a State received an allotment for 2010-2011 under 34 
CFR part 692, subpart B, the Special Leveraging Educational Assistance 
Partnership Program (SLEAP), the State's 2011-2012 allotment for the 
GAP Program shall not be less than its 2010-2011 SLEAP allotment. We 
are revising Sec.  692.110(a) to reflect this statutory change. We are 
also revising appendix A to subpart C of part 692 that provides a case 
study illustrating the requirements for allotting funds under the GAP 
Program to reflect these changes to the regulations.
    We have also made a number of minor technical corrections and 
conforming changes. Changes that are statutory or that involve only 
minor technical corrections are generally not discussed in the Analysis 
of Comments and Changes section.

Waiver of Proposed Rulemaking for Additional Conforming Changes

    These final regulations incorporate a statutory change made to the 
HEA by the HEOA that was not included on Team V's negotiating agenda or 
in the NPRM published on August 21, 2009. However, this statutory 
change in section 485(h) of the HEA is referenced in Sec.  602.24 of 
the Team III (Accreditation) final regulations published in the Federal 
Register as Docket ID ED-2009-OPE-0009. We are amending Sec.  668.43(a) 
of these regulations to reflect the statutory provisions by adding new 
paragraph (a)(11).
    We are also amending Sec.  690.6 by adding paragraph (e) to reflect 
a statutory change made by the HEOA to section 401(c)(5) of the HEA. 
Section 690.6(e) provides that, if a student receives a Federal Pell 
Grant for the first time on or after July 1, 2008, the student may 
receive no more than the equivalent of nine Scheduled Awards.
    Because these amendments implement changes to the HEA that were not 
negotiated, we do not discuss them in the Analysis of Comments and 
Changes section.

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    Under the Administrative Procedure Act (5 U.S.C. 553) (APA), the 
Department is generally required to publish a notice of proposed 
rulemaking and provide the public with an opportunity to comment on 
proposed regulations prior to issuing final regulations. In addition, 
all Department regulations for programs authorized under title IV of 
the HEA are subject to the negotiated rulemaking requirements of 
section 492 of the HEA. However, both the APA and the HEA provide for 
exemptions from these rulemaking requirements. The APA provides that an 
agency is not required to conduct notice-and-comment rulemaking when 
the agency for good cause finds that notice and comment are 
impracticable, unnecessary, or contrary to the public interest. 
Similarly, section 492 of the HEA provides that the Secretary is not 
required to conduct negotiated rulemaking for Title IV, HEA program 
regulations if the Secretary determines that applying that requirement 
is impracticable, unnecessary, or contrary to the public interest 
within the meaning of the HEA.
    Although the regulations implementing the HEOA are subject to the 
APA's notice-and-comment and the HEA's negotiated rulemaking 
requirements, the Secretary determined that it was unnecessary to 
conduct negotiated rulemaking or notice-and-comment rulemaking on the 
changes needed in Sec.  668.43. These changes simply amend the 
Department's regulations to reflect statutory changes made by the HEOA 
to paragraph (h) of section 485 of the HEA, and these changes are 
already effective. The Secretary does not have discretion in whether or 
how to implement these changes. Accordingly, negotiated rulemaking and 
notice-and-comment rulemaking are unnecessary.

Implementation Date of These Regulations

    Section 482(c) of the HEA requires that regulations affecting 
programs under title IV of the HEA be published in final form by 
November 1 prior to the start of the award year (July 1) to which they 
apply. However, that section also permits the Secretary to designate 
any regulation as one that an entity subject to the regulation may 
choose to implement earlier and 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 following new and amended provisions for early 
implementation, at the discretion of each institution, lender, guaranty 
agency, or servicer, as appropriate:
     The closed school teach out provisions in Sec.  600.32(d).
     The readmission requirements for returning servicemembers 
in Sec.  668.18.
     The 90/10 revenue requirements in Sec. Sec.  668.28 and 
668.23(d)(4).
     The institutional information requirements in Sec.  
668.43.
     The FWS provisions in Sec. Sec.  675.16, 675.18(g), and 
675.18(i).
     The teach grant provisions regarding extenuating 
circumstances in Sec. Sec.  686.12, 686.41, and 686.42.
    In addition, the revisions to Sec. Sec.  690.63, 690.64, and 690.67 
of the Federal Pell Grant Program regulations may apply to the 
crossover payment period that is in both the 2009-10 and 2010-11 award 
years, i.e., a payment period that includes June 30, 2010, and July 1, 
2010. If an institution does not implement these regulations prior to 
July 1, 2010, but, prior to July 1, 2010, designates a student's 2010 
crossover payment period as being in the 2009-10 award year, the 
Secretary does not consider these revisions to be applicable to the 
crossover payment period. Nothing will prevent the institution from 
subsequently designating the 2010 payment period as being in the 2009-
10 award year with the revisions to Sec. Sec.  690.63, 690.64, and 
690.67 then being applicable.

Analysis of Comments and Changes

    Except as noted under Waiver of Proposed Rulemaking for Additional 
Conforming Changes, the regulations in this document were developed 
through the use of negotiated rulemaking. Section 492 of the HEA 
requires that, before publishing any proposed regulations to implement 
programs under title IV of the HEA, the Secretary must obtain public 
involvement in the development of the proposed regulations. After 
obtaining advice and recommendations, the Secretary must conduct a 
negotiated rulemaking process to develop the proposed regulations. The 
negotiated rulemaking committee did not reach consensus on the proposed 
regulations that were published on August 21, 2009. The Secretary 
invited comments on the proposed regulations by September 21, 2009. 
More than 113 parties submitted comments, a number of which were 
substantially similar. An analysis of the comments and of the changes 
in the regulations since publication of the NPRM follows.
    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address minor, 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.

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

Definition of Baccalaureate Liberal Arts Programs Offered by 
Proprietary Institutions (Sec.  600.5)

    Comments: One commenter supported the proposed change, stating that 
it was a reasonable way to clarify the term program leading to a 
baccalaureate degree in liberal arts. One commenter stated that the 
requirement that an institution ``has provided that program since 
January 1, 2009'' should be interpreted to mean that any new liberal 
arts program added from January 1, 2009, forward will qualify an 
otherwise eligible institution as an eligible proprietary institution, 
so long as the institution has been accredited by a recognized regional 
accrediting agency or association since October 1, 2007, or earlier.
    Discussion: The Department does not agree that the requirement that 
the institution ``has provided that program since January 1, 2009'' 
should be interpreted to mean that any new liberal arts program added 
from January 1, 2009, forward will qualify an otherwise eligible 
institution as an eligible proprietary institution. Rather, the 
requirement means that an institution was providing the program (i.e., 
was enrolling students in the program) on January 1, 2009, and has 
continued to do so.
    Changes: Section 600.5(a)(5)(i)(B)(1) has been revised to clarify 
that an institution meets the definition of a proprietary institution 
of higher education if, in addition to being accredited by a recognized 
regional accrediting agency or association continuously since October 
1, 2007, it has provided a program leading to a baccalaureate degree in 
liberal arts continuously since January 1, 2009.

[[Page 55905]]

Institutional Requirements for Teach-Outs and Eligibility and 
Certification Procedures (Sec. Sec.  600.2, 600.32, 668.14)

    Comments: Several commenters supported the proposed changes. One 
commenter stated that Sec.  600.32(d) should be expanded to provide 
that the exemptions from the two-year in existence requirement, the 
assumption of liabilities, and the assumption of the cohort default 
rate apply when an institution conducts a teach-out at an institution 
that closes because a guaranty agency initiated an action to limit, 
suspend, or terminate (LS&T) the participation of an institution, or 
took an emergency action against the institution. One commenter 
explained that a closing can be a very confusing time for students if 
they were not given accurate information about what was happening at 
their institution, and urged the Department to monitor closely the 
process for establishing an additional location under these 
regulations. The commenter noted that accurate and effective 
communication to students is especially critical when the teach-out 
institution is establishing a permanent location at a closed 
institution. The commenter asserted that an institution establishing a 
permanent location at the site of a closed institution must be able to 
provide a teach-out option that meets appropriate quality standards 
even in cases when the prior institution did not meet these standards. 
The commenter stated that the mere submission of a teach-out plan 
should not be viewed as evidence that these standards were met for 
purposes of the closed school discharge.
    Discussion: LS&T and emergency actions initiated by a guaranty 
agency against an institution are promptly reported to the Department, 
and the Department investigates those reports to determine whether to 
initiate a separate LS&T or emergency action against the institution. 
Therefore, we do not believe it is necessary to include as a trigger an 
LS&T or emergency action initiated by a guaranty agency that would 
provide the two-year requirement, liability, and default rate 
exemptions to an institution conducting a teach-out at a closed 
institution. Because of the interplay between the actions taken by a 
guaranty agency and the Department, there may be some instances when an 
institution may close prior to the Department initiating an LS&T or 
emergency action. In other instances, an institution may close 
precipitously before the Department has time to initiate an appropriate 
action under the circumstances. To address these instances, the final 
regulations have been modified so that the action taken by the 
Department may be initiated after the institution closes. The 
Department recognizes that a school closure and teach-out can be a 
confusing time for students, and intends to work closely with the 
States and accrediting agencies to make sure that students are given 
accurate information about their options during this transition. The 
opportunity for another institution to perform the teach-out, and open 
a permanent location under this exemption, should also ensure that the 
teach-out is adequately staffed and designed to serve the students that 
attended the closed school.
    Changes: Section 600.32(d)(1)(i) is revised to clarify that an 
institution that conducts a teach-out at a site of a closed institution 
may apply to have that site approved as an additional location if the 
closed institution ceased operations because the Secretary has taken an 
LS&T or emergency action, regardless of whether the Secretary took that 
action before or after the institution closed.

Part 668 Student Assistance General Provisions

Readmission Requirements for Servicemembers (Sec.  668.18)

    Comments: One commenter supported the proposed regulations, 
including the proposed requirement limiting the institutional charges 
that an institution may charge a returning servicemember. Several 
commenters opposed the proposed requirement limiting the institutional 
charges that an institution may charge a returning servicemember 
because they stated it would be administratively and financially 
burdensome for institutions. For the same reason, some of these 
commenters also opposed the requirement that an institution waive 
charges for previously purchased equipment for the first academic year 
in which the servicemember returns if the returning servicemember is 
readmitted to the same program for the same reason. Many of these 
commenters asserted that, because many of the affected servicemembers 
will receive full tuition and fee benefits under the Post-9/11 GI Bill, 
charging the returning servicemember the current institutional charges 
for a program, rather than the same charges that the returning 
servicemember was or would have been assessed for the academic year 
during which he or she left the institution, will not penalize the 
student for having left to serve in the uniform services. One commenter 
added that this argument is supplemented by the fact that at least one 
State waives any tuition charges not paid by the GI Bill at public 
universities. One of these commenters stated that limiting charges to 
the first year only would create an unrealistic expectation for 
returning servicemembers for the full cost of the program. A few of the 
commenters stated that limiting institutional charges for returning 
servicemembers would be unfair to other students at the institution who 
would assume higher costs, or noted that the proposed requirement could 
preempt State requirements.
    Several commenters asserted that the forced manual billing 
determinations that the regulations would require of institutions would 
be unduly burdensome as the billing software used by most institutions, 
which uses pre-programmed data, including current year charges, does 
not accommodate special case situations, such as the proposed 
regulations would create. Specifically, a few commenters noted that 
institutions would be forced to maintain multi-faceted data tables over 
an undetermined number of years to recreate the prior institutional 
charges for servicemembers who may or may not return, as institutions 
do not keep student financial records for the entire period covered by 
the readmission requirements and billing systems are not designed to 
archive the data necessary to calculate institutional charges years 
later. The commenters contended that, even if an institution has all 
the information necessary, recreating the institutional charges would 
be complicated as institutional charges cover many types of charges 
involving variations by program. One commenter asserted that some 
Department of Defense tuition assistance systems, such as GoArmy, do 
not allow variations in tuition rates and could potentially delay 
tuition assistance processing for both impacted and nonimpacted 
servicemembers. A few commenters stated that determining institutional 
charges for returning servicemembers who may have been admitted, but 
were not enrolled or attending prior to leaving to serve, would be 
particularly difficult as they had never incurred specific charges, 
with one of these commenters noting that their institution has an open 
admission policy resulting in a large number of these students.
    One commenter generally supported the requirement limiting the 
institutional charges that an institution may charge a returning 
servicemember, but stated that an institution should be permitted to 
charge a returning servicemember for new classes when a program has 
changed, requiring the servicemember to take additional

[[Page 55906]]

classes in the form of prerequisites or new requirements. A few 
commenters noted that requiring an institution to provide, if 
necessary, refresher courses at no extra cost seemed to preclude an 
institution from collecting funding from other entities to cover those 
expenses. One commenter stated that requiring an institution to make 
reasonable efforts to help the servicemember become prepared to resume 
the program or to enable the servicemember to complete the program at 
no extra cost, would impose an undue financial hardship and 
administrative burden on the institution. The commenter asserted that, 
when there is only the normal reasonable progression from one year to 
the next, rather than any actual change to the program in the 
servicemember's absence, it is the servicemember's responsibility to 
retain the knowledge attained in the normal course of educational 
progression. In addition, the commenter stated that the definition of 
``reasonable efforts'' is ambiguous and would be difficult to 
determine.
    Discussion: The Department believes that the goal of these 
provisions is to minimize the disruption to the lives of persons 
performing service in the uniformed services, allowing a servicemember 
to return to an institution without penalty for having left because of 
that service. We believe that limiting charges for the year in which 
the servicemember returns to the charges the servicemember was or would 
have been assessed for the academic year during which the servicemember 
left is an important part of this goal, and may necessitate additional 
efforts by institution as well as the absorption of some costs. 
However, we agree that this goal would still be achieved if any 
increase in charges from the amount the servicemember was or would have 
been assessed for the academic year during which the servicemember left 
the institution is covered by veterans' or servicemember education 
benefits. In addition, we believe that requiring institutions to 
maintain only past tuition and fee charges, rather than requiring them 
to maintain all institutional charges and waive charges for new 
equipment required in lieu of equipment previously paid for, will 
accomplish this goal, while minimizing burden to institutions that may 
have had difficulty determining the previous institutional charges 
beyond tuition and fees, as well as difficulty determining which of the 
current institutional charges beyond tuition and fees would be covered 
by veterans' and servicemember education benefits. Therefore, for a 
servicemember who is readmitted to the same program, an institution 
will be considered to have admitted the servicemember with the same 
academic status if, for the first academic year in which the 
servicemember returns, the institution does not increase the tuition 
and fee charges above the prior amount the servicemember was or would 
have been assessed for the academic year when the servicemember left 
the institution, unless there are sufficient veterans' education 
benefits or other servicemember education benefits to pay the increased 
amount of those tuition and fee charges. Consider, for example, a 
servicemember who is readmitted to the same program and was assessed 
tuition and fee charges of $5,000 for the academic year when the 
servicemember left the institution. The current tuition and fee charges 
for the program are $7,000, a $2,000 increase over the charges formerly 
assessed the student. In addition to the original $5,000 in charges, 
the institution may charge the readmitted servicemember for any portion 
of that $2,000 increase that will be covered by veterans' education 
benefits or other servicemember education benefits. If this student 
receives $1,000 in veterans' education benefits or other servicemember 
education benefits for tuition and fees, the institution may assess the 
student tuition and fee charges of up to $6,000. If the student 
receives $2,000 or more in veterans' education benefits or other 
servicemember education benefits for tuition and fees, the institution 
may assess up to $7,000, the tuition and fee charges for other students 
admitted to the program for the current academic year. This approach 
will significantly reduce the burden on institutions to track many of 
the variable charges that were included in the proposed regulation, and 
will simplify the determinations of what tuition or fee amounts would 
be subject to the one-year transition period for a returning 
servicemember. The portion of tuition and fees that are subject to this 
temporary restriction may also be reduced or eliminated by other 
policies set by the institution, or under State law, but the Federal 
requirement will provide a consistent base line for all institutions in 
every State and serve the purpose intended by this provision in the 
law.
    We agree that students who are not informed of any increase in 
tuition and fee charges for subsequent years may have unrealistic 
expectations of the total cost of the program. We would expect that an 
institution would actively inform affected servicemembers upon 
readmission of any subsequent increase and the total expected charges 
for the program (an institution is required to make this information 
available at all times and include it in its annual distribution of 
institutional and financial information to all enrolled students in 
accordance with Sec.  668.41(c) and (d)). To the extent that this 
temporary restriction on the amount of tuition and fees for returning 
servicemembers is a benefit not provided to the other students at an 
institution, it is provided under the law to ease the transition back 
to the institution for the returning servicemembers. We also believe 
that this provision will not create conflicts for benefits provided to 
other servicemembers under the GoArmy education program.
    Although we appreciate that current institutional billing software 
may not easily accommodate affected servicemembers, we believe that any 
burden incurred by an institution that must manually process such a 
student is outweighed by the benefit to the returning servicemember. We 
also believe that limiting the covered costs to tuition and fees 
significantly simplifies this provision for institutions.
    In accordance with Sec.  668.18(a)(2)(iv), an institution may not 
charge a returning servicemember for additional classes offered by the 
institution that are prerequisites for the program. The institution 
does not have to readmit such a servicemember if the institution can 
demonstrate that providing the classes at no cost places an undue 
hardship on the institution. If new classes are required for the 
program and those classes are taken by the servicemember in the 
academic year in which he or she returns, the institution may not 
charge the additional tuition and fees for those programs unless doing 
so does not increase the tuition and fee charges above the prior amount 
the student was or would have been assessed for the academic year when 
he or she left the institution, or there are sufficient veterans' 
education benefits or other servicemember education benefits to pay the 
increased amount of those tuition and fee charges. In requiring an 
institution to provide, if necessary, refresher courses at no extra 
cost, we did not intend to preclude an institution from collecting 
funding from other assisting agencies to cover those expenses. Also, we 
note that any reasonable efforts an institution must make to help the 
student become prepared to resume the program, or to enable the student 
to complete the

[[Page 55907]]

program must be provided at no extra cost to the student. We do not 
agree that requiring an institution to make reasonable efforts to help 
a servicemember become prepared to resume the program or to enable the 
servicemember to complete the program at no extra cost, would 
automatically impose an undue financial hardship and administrative 
burden on the institution, nor do we agree that, in cases where there 
is only the normal reasonable progression from one year to the next, 
rather than any actual change to the program in the servicemember's 
absence, it is the servicemember's responsibility to retain the 
knowledge attained in the normal course of educational progression. 
Again, the goal of these provisions is to minimize the disruption to 
the lives of persons performing service in the uniformed services, 
allowing a servicemember to return to an institution without penalty 
for having left because of that service. Holding a servicemember 
responsible for retaining all knowledge attained through previous 
attendance of the program would be penalizing the servicemember for 
having left to serve. ``Reasonable efforts'' are actions that do not 
place an undue hardship on an institution. An action places an undue 
hardship on an institution if it requires significant difficulty or 
expense to the institution. The mere fact that the readmission of a 
student will create additional expenses or burden to the institution is 
not enough for an institution to deny a student readmission. The 
expenses must be significant when considered in light of the overall 
financial resources of the institution and the impact otherwise of such 
action upon the operation of the institution. An institution carries 
the burden to prove by a preponderance of the evidence that the expense 
or difficulty of readmitting a student would be significant.
    Changes: Section 668.18(a)(2)(iii)(E) is revised to provide that, 
for a servicemember who is readmitted to the same program, an 
institution will be considered to have admitted the servicemember with 
the same academic status if, for the first academic year in which he or 
she returns, the institution does not increase the tuition and fee 
charges above the prior amount the student was or would have been 
assessed for the academic year when the student left the institution, 
unless there are sufficient veterans' education benefits or other 
servicemember education benefits to pay the increased amount of those 
tuition and fee charges. Proposed Sec.  668.18(a)(2)(iii)(F), which 
would have required an institution to waive charges for previously 
purchased equipment, is removed. Section 668.18(a)(2)(iv)(A) has been 
revised: (1) To make clear that any reasonable efforts an institution 
must make to help the servicemember become prepared to resume the 
program, or to enable the servicemember to complete the program must be 
provided at no extra cost, and (2) to make clear that those efforts 
must be provided at no extra cost to the student, to permit an 
institution to collect from other entities for costs associated with 
making such reasonable efforts. The definition of undue hardship in 
Sec.  668.18(a)(2)(iv)(C)(2) is amended to clarify that difficulty and 
expenses must be significant when considered in light of the overall 
financial resources of the institution and the impact otherwise of such 
action on the operation of the institution.
    Comments: One commenter asked what would be required of an 
institution to ``promptly readmit'' an affected servicemember if the 
program to which the servicemember was previously admitted is offered 
infrequently, or is no longer offered. One commenter asked how long a 
servicemember may delay readmission to an institution by requesting to 
be readmitted at a later date, and at what point the institutional 
charges would be locked in. The commenter also questioned whether the 
unusual circumstances under which an institution may admit a 
servicemember at a date later than the next class or classes in the 
program pertain to the institution or just to the servicemember.
    Discussion: If the program to which the servicemember was 
previously admitted is no longer offered, Sec.  668.18(a)(2)(iii)(A) 
requires the institution to admit the servicemember to the program that 
is most similar to that program, unless the student requests or agrees 
to admission to a different program. An institution readmits a 
servicemember ``promptly'' if, in accordance with Sec.  
668.18(a)(2)(ii), the institution readmits the servicemember into the 
next class or classes in the program beginning after he or she provides 
notice of his or her intent to re-enroll, unless the servicemember 
requests a later date of readmission or unusual circumstances require 
the institution to admit the servicemember at a later date.
    These regulations presume that a returning servicemember who 
provides notice of his or her intent to reenroll at an institution 
plans to do so soon after providing such notice. The provision that an 
institution must admit a returning servicemember to the next class or 
classes in the student's program unless the student requests a later 
date of admission was included to ensure that an institution could not 
delay a servicemember's readmission until, for example, the next 
semester if classes in the student's program were offered during the 
upcoming semester. However, the regulations do not preclude the 
returning servicemember from deciding that a later admission date, such 
as the next semester, is acceptable. No matter when the student 
actually resumes his or her program, if the returning servicemember is 
within the window of eligibility in Sec.  668.18(c)(iii), the 
requirements of this section apply. Thus, for the first academic year 
in which the servicemember returns, the institution cannot increase the 
tuition and fee charges above the prior amount the servicemember was or 
would have been assessed for the academic year when the servicemember 
left the institution, unless there are sufficient veterans' education 
benefits or other servicemember education benefits to pay the increased 
amount of those tuition and fee charges. Unusual circumstances under 
which an institution may admit a servicemember at a date later than the 
next class or classes in the program may pertain to the institution or 
to the servicemember. There are a number of factors an institution may 
consider when determining whether unusual circumstances require a later 
date of readmission, such as the length of any necessary retraining or 
intervening changes in the circumstances of the institution. State laws 
or requirements (including any local law or ordinance) or institutional 
requirements that restrict enrollment, due to class size, for example, 
or otherwise conflict with the requirements of this section are not 
``unusual circumstances'' as such laws and requirements are superseded 
by the requirements of this section for the initial enrollment period. 
Institutions should take reasonable steps to resolve such restrictions 
as soon as possible to come into compliance with those provisions.
    Changes: None.

Non-Title IV Revenue Requirement

Compliance Audits and Audited Financial Statements (Sec.  668.23)

    Comments: A few commenters asked the Department to clarify the 
proposed requirement in Sec.  668.23(d)(4) under which a proprietary 
institution must disclose in a footnote to its audited financial 
statements the 90/10 revenue percentage and the components of that 
percentage. The commenters suggested

[[Page 55908]]

that the Department specify that the reference in the regulations to 
Federal revenue means Title IV, HEA revenue and confirm their 
understanding that an institution must disclose: (1) The dollar amount 
of the numerator and denominator of the 90/10 ratio; (2) the dollar 
amount of the temporary relief attributed to institutional loans under 
the Net Present Value (NPV) calculation; and (3) the amount of loan 
funds that exceed the loan limits in effect before ECALSA that are 
treated as non-Federal revenue in the denominator of the 90/10 ratio.
    Discussion: Under proposed Sec.  668.23(d)(4), a proprietary 
institution would have to disclose, by source, the amount of Federal 
and non-Federal revenue the institution included in its 90/10 
calculation. We are amending the regulations to clarify that ``source'' 
means the individual categories of revenues identified in Appendix C to 
subpart B of part 668. To calculate its 90/10 percentage, an 
institution would have to compile the information detailed in Appendix 
C, particularly the aggregated and adjusted amounts in section 2. We 
therefore believe that it is reasonable to require the institution to 
disclose this information. Given the added complexities that come from 
these additional categories of revenue, disclosing the institution's 
calculation will simplify the presentation in the financial statements 
and facilitate the review of that information by the Department.
    Changes: Section 668.23(d)(4) is amended to provide that a 
proprietary institution must disclose in a footnote to its audited 
financial statements, the dollar amount of the numerator and 
denominator of its 90/10 ratio as well as the individual revenue 
amounts identified in section 2 of Appendix C to part 668.

Revenue Generated From Programs and Activities (Sec.  668.28)

    Comments: One commenter asked the Department to clarify whether the 
revenue from students taking a course offered by an institution as part 
of an eligible Title IV, HEA educational program counts for 90/10 
purposes if the students are taking the course to prepare for an 
industry recognized credential or to transfer to another institution. 
For example, students that are not enrolled in a Title IV, HEA-eligible 
program take an Accounting 400 course, normally offered as part of a 
Title IV, HEA-eligible accounting program, as a refresher course to sit 
for the Certified Public Accounting exam or to transfer the credits 
from the course to another institution.
    Discussion: An institution may count the revenue described by the 
commenter as long as the course or program is offered for the purpose 
of preparing students for taking an examination for an industry 
recognized credential, or for any other purpose described in Sec.  
668.28(a)(3)(iii) that would otherwise qualify the revenue from that 
course or program to be included in the 90/10 calculation. However, 
payments from a student taking the class for transfer credits would not 
count as revenue because the student is not taking the class for any of 
these purposes. An institution should make sure that it appropriately 
documents any revenue the institution includes from these classes in 
its 90/10 calculation.
    Changes: None.

Revenue Generated From Institutional Aid (Sec.  668.28)

    Comments: A few commenters asked the Department to clarify whether 
installment sales contracts are considered to be loans made to students 
under Sec.  668.28(a)(5)(i). Other commenters noted that funds are not 
advanced to a student under an installment sales contract, and funds 
are not paid in full to a student's account. Rather, an installment 
sales contract is paid over time by the student to the institution. As 
a result, the commenters concluded that installment sales contracts 
should not be treated as loans under the NPV formula.
    Some commenters asked for clarification of the preamble discussion 
(74 FR 42390) regarding the disposition of third-party loans made to 
students that are subsequently acquired by the institution.
    Other commenters urged the Department to reconsider the provision 
in Sec.  668.28(a)(5)(iv) that a tuition discount is a form of a 
scholarship that must be disbursed from a restricted account with funds 
from an outside source. The commenters stated that treating a tuition 
discount in this way is inconsistent with the intent of the HEOA and 
would encourage students to incur more debt.
    A few commenters asked the Department to clarify that payments made 
by students on financing arrangements that do not qualify as 
institutional loans count as cash collected by the institution for 90/
10 purposes.
    Discussion: An installment sales contract was included in the 
proposed regulations because we believed that it could be structured to 
satisfy all of the conditions of an institutional loan that were set 
forth in proposed Sec.  668.28(a)(5)(i). However, although we noted in 
the preamble to the NPRM (74 FR 42389) that, to be included in the NPV 
calculation, an installment sales contract that would be classified as 
an institutional loan would have to be credited in full to the 
student's account, this condition was not included in the proposed 
regulations. To address the confusion reflected in the comments over 
the qualifying conditions for institutional loans, and the general 
public view that a typical installment sales contract does not provide 
for funds to be credited to a student's account, we agree to remove 
installment sales contracts from this section of the regulations.
    With regard to a loan made by a third party to a student at an 
institution, in the normal course, the proceeds of the loan would be 
credited to the student's account, and the amount credited that paid 
for tuition and fees not covered by Title IV, HEA aid would count as 
non-Title IV, HEA revenue in the 90/10 calculation. If the institution 
made the same loan itself, it would only be permitted to count the NPV 
of the loan in the 90/10 calculation. In both cases the institution has 
credited loan proceeds of the same value to the student's account but 
the institution would derive a greater benefit for 90/10 purposes from 
the loan that was made by the third party. For example, assuming the 
loan proceeds from a third party pay $1,000 for tuition and fees not 
covered by Title IV, HEA aid, the entire $1,000 is counted as non-
Federal revenue for 90/10 purposes. If the institution made the same 
loan, the amount of funds counted as non-Federal revenue would be less 
because of the NPV calculation. For instance, if the institution uses 
the simpler alternative NPV approach, the amount of the non-Federal 
revenue would be $500 or 50% of the loan. This different treatment of 
the loan proceeds is based upon which party is making the loan to the 
student without transferring it afterwards to, or from, the 
institution. These provisions are not intended to permit an institution 
to arrange with a third party to transfer student loans after they are 
made in order to distort the way the revenue from those loans is 
treated under this provision. To equalize the outcome between an 
institution and a third party making and purchasing a loan, an 
institution that purchases a student loan must treat it for 90/10 
purposes as if the institution made the loan itself.
    Similarly, if an institution makes a loan and transfers it to a 
third party, the Department would not view that loan as a loan that 
could be included in any NPV calculation pursuant to section 
487(d)(1)(d)(III) of the HEA. That section

[[Page 55909]]

requires a loan that is included in the NPV calculation to be subject 
to regular loan repayment and collection. Any institutional loan that 
is sold to a third party within a year of when it was made must be 
treated for 90/10 purposes as a loan made by a third party. The amount 
the institution may count as non-Federal revenue may not be more than 
the amount paid to the institution for that loan, less any amount the 
institution agrees to pay the third party if the loan goes into default 
or otherwise triggers a contingent payment by the institution. 
Consistent with the Department's current treatment of recourse loans 
and the requirement to use the cash basis of accounting, the 
institution must adjust its 90/10 revenue for any such payment on an 
institutional loan in the fiscal year when the payment is made.
    We disagree with the commenters that the proposed regulations 
regarding tuition discounts are inconsistent with the intent of the 
law. The regulations simply reflect section 487(d)(1)(D)(iii) of the 
HEA by specifying that an institution may include scholarships as 
revenue if the scholarships are disbursed from an established 
restricted account and that funds in that account represent designated 
funds from an outside source or from income earned on those funds. That 
section of the HEA states that scholarships may be provided by an 
institution in the form of monetary aid or tuition discounts.
    With regard to financing arrangements that are not loans, there is 
no change in the Department's policy that cash payments made under 
those arrangement count as non-Title IV, HEA revenue for 90/10 
purposes.
    Changes: Section 668.28(a)(5)(i) is revised to provide that, to be 
included as an institutional loan for NPV purposes, a loan made to a 
student must be credited in full to the student's account.

Net Present Value (NPV)

    Comments: Several commenters objected to the provision in Sec.  
668.28(b)(2) that an institution may not sell a loan it made to student 
until the loan is in repayment for at least two years. Although this 
provision would apply only if an institution chose to use the 
alternative approach to calculating the NPV of its loans (using 50 
percent of loans made as the NPV), the commenters argued that holding 
the loans for at least two years is contrary to both statutory intent 
and institutional mission. The commenters reasoned that in response to 
the loss of availability of private student loans, the NPV approach 
provided by the HEOA is intended to give an immediate benefit to an 
institution that had to fill a funding gap itself by making loans to 
its students. To the second point, the commenters stated that the 
primary mission of an institution is to provide education and training, 
not to become a lender or remain in the lending business.
    Other commenters agreed with the rationale for the two-year ban on 
selling loans, but argued that the two-year period was too long and 
would unfairly impact an institution that provided loan funds to 
students who are not ``high risk'' and whose loans would perform within 
commercially acceptable norms. To mitigate this impact, the commenters 
recommended reducing the ban to one year.
    One commenter questioned whether the proposed regulations ensure 
that the calculation of the NPV for institutional loans takes into 
account the possibility that institutions do not intend to collect the 
loans they make to students. The commenter asserted that this practice 
calls into question an institution's willingness or ability to 
accurately report estimates of annual payments due, as well as annual 
payments collected on these loans. The commenter also asked whether 
institutional loans that default are properly accounted for 90/10 
purposes and if the Department has the authority to require, or would 
require, an institution to disclose information about its loan 
defaults.
    Discussion: As stated in the NPRM (74 FR 42391), we proposed the 
alternative approach for calculating the NPV as an administrative 
convenience for an institution that either prefers a simpler method to 
determine the NPV or does not need the additional non-Federal revenues 
that might be counted if the NPV formula is used. It is solely up to 
the institution whether to use this alternative method or the actual 
NPV calculation. Each approach has costs and benefits that must be 
weighed by the institution. If the institution believes the alternative 
approach is too restrictive or somehow not in keeping with its mission, 
it should use the NPV calculation.
    With regard to the comments about an institution's unwillingness to 
collect the loans it makes, we note that the institution might benefit 
initially from the NPV calculation, but because its collection rate 
would decrease significantly if it continues this practice, the 
institution would derive no benefit from future NPV calculations. We 
also note that the two-year ban on selling institutional loans, which 
applies to institutions that choose to use the alternate NPV approach, 
is necessary to ensure that the Department and other oversight entities 
have sufficient time to monitor whether the loans are subjected to 
routine collection efforts.
    Changes: None.

Revenue From Loan Funds (Sec.  668.28)

    Comments: A few commenters noted that, although the proposed 
regulations in Sec.  668.28(a)(6) provide that an institution may count 
as non-Title IV, HEA revenue the amount of a loan disbursement for a 
payment period that exceeds the amount a student would have received 
before the enactment of ECALSA, the regulations did not address how an 
institution should treat the excess loan funds when a student withdraws 
during a payment period. The commenters suggested that the excess loan 
funds should be returned in proportion to the overall loan disbursement 
for the payment period. Another commenter requested that when a student 
takes sequential courses within a non-term program, and is charged on a 
course-by-course basis, the excess loan funds should be attributed 
within a payment period on a course-by-course basis. In this case, 
several courses make up the payment period.
    Discussion: When some of a student's loan funds are classified as 
funds in excess of loan limits existing prior to ECASLA, those excess 
loan amounts are included as revenue from a source other than Title IV, 
HEA program funds under Sec.  668.28(a)(6) if those excess amounts pay 
for institutional charges remaining on the student's account after 
Title IV, HEA funds are applied. The determination of which loan funds 
are classified as ``post-ECASLA'' funds, i.e., are funds in excess of 
loan limits existing prior to ECASLA, is generally made on a payment 
period basis. That is, if a student's loan for the loan period contains 
a post-ECASLA amount and the post-ECASLA amount is \1/3\ of the total 
loan amount, then each payment period's loan disbursement is generally 
considered to consist of \1/3\ post-ECASLA loan funds and \2/3\ pre-
ECASLA loan funds. However, if a student takes sequential courses 
within a non-term program where several courses make up a payment 
period, and the student is charged on a course-by-course basis, then 
the determination of which loan funds are classified as post-ECASLA 
funds may be determined on a course-by-course basis. Under Sec.  
668.28(a)(7)(iv), loan funds that are returned pursuant to Sec.  668.22 
when a student withdraws from school are excluded from school revenues. 
The Secretary intends that, when a school determines the amount of loan 
funds that are excluded from revenues under

[[Page 55910]]

Sec.  668.28(a)(7)(iv), it considers the returned loan funds to be pre-
ECASLA loan amounts and post-ECASLA loan amounts based on the ratio 
that existed for those categories of funds in the student's loan for 
the loan period.
    Changes: Section 668.28(a)(7)(iv) is amended to provide that, in 
determining the amount of loan funds that are excluded from 90/10 
revenues under Sec.  668.28(a)(7)(iv) when a student withdraws pursuant 
to Sec.  668.22, and the institution returns loan funds from a loan 
disbursement considered to consist of pre-ECASLA loan funds and loan 
funds that were in excess of loan limits existing prior to ECASLA, the 
funds that the institution returns are pre-ECASLA loan amounts and 
post-ECASLA loan amounts based on the proportion of those loan amounts 
that existed in the loan disbursement used in the Return calculation. 
For example, a student's loan disbursement for a payment period is 
$3,000, and $1,000 represents the funds in excess of loan limits 
existing prior to ECASLA. The proportional breakdown of the funds 
returned under the Return calculation is two-thirds pre-ECALSA loan 
funds and one-third post-ECASLA loan funds.

Application of Funds (Sec.  668.28)

    Comments: A few commenters noted that the proposed regulations did 
not address how military education benefits are treated for 90/10 
purposes. The commenters argued that because students have earned these 
benefits through employment in difficult and often dangerous 
conditions, and are free to use the benefits at an eligible 
institution, the benefits should be treated for 90/10 purposes as 
earned employment benefits. However, a student receiving these 
benefits, which are essentially restricted to pay for tuition and fees, 
may also be fully eligible for Title IV, HEA aid. Consequently, the 
commenters asked the Department to revise the regulations to provide 
that military education benefits overcome the presumption that Title 
IV, HEA funds are used first to pay for tuition and fees.
    Discussion: Section 487(d)(1)(C) of the HEA contains the list of 
funds or sources of aid that overcome the presumption that Title IV, 
HEA funds are used first to pay for tuition and fees. The Department 
does not have the authority to expand that list.
    Changes: None.

Notification to the Department (Sec.  668.28)

    Comments: Several commenters objected to the proposal in Sec.  
668.28(c)(3) that an institution must notify the Department that it 
failed the 90/10 requirement no later than 45 days after the end of its 
fiscal year. Some of the commenters stated that there was no reason to 
shorten the current 90-day notification period. Other commenters argued 
that because the penalty for failing 90/10 (especially for a second 
consecutive year) is so severe, an institution should not be required 
to report unaudited data. According to the commenters, this may result 
because the small number of independent auditors who are experts in 90/
10 calculations may be unavailable to the large percentage of for-
profit institutions that have fiscal years ending December 31, because 
this is time that the auditors would normally be busy doing audit and 
tax work.
    Discussion: We are not persuaded that an institution that knows it 
is close to failing the 90/10 requirement could not plan for or take 
the steps necessary to engage an audit firm in time to meet the 45-day 
reporting deadline.
    Changes: None.

Institutional Plans for Improving the Academic Program (Sec.  
668.43(a))

    Comments: A few commenters stated that the requirement in the 
proposed regulations that an institution make readily available to 
enrolled and prospective students any plans by the institution for 
improving the academic program of the institution should include the 
statement in the preamble of the NPRM that an institution is allowed to 
determine what a ``plan'' is, including when a plan becomes a plan.
    Discussion: We agree that including the concept that an institution 
has the discretion to determine when a plan exists would clarify the 
intent of the regulations.
    Changes: Section 668.43(a)(5)(iv) is amended to clarify that an 
institution must make r