Program Integrity Issues, 34806-34890 [2010-14107]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 75, Number 117 (Friday, June 18, 2010)]
[Proposed Rules]
[Pages 34806-34890]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-14107]



[[Page 34805]]

-----------------------------------------------------------------------

Part II





Department of Education





-----------------------------------------------------------------------



34 CFR Parts 600, 602, et al.



Program Integrity Issues; Proposed Rule

Federal Register / Vol. 75 , No. 117 / Friday, June 18, 2010 / 
Proposed Rules

[[Page 34806]]


-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 602, 603, 668, 682, 685, 686, 690, and 691

[Docket ID ED-2010-OPE-0004]
RIN 1840-AD02


Program Integrity Issues

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Secretary proposes to improve integrity in the programs 
authorized under title IV of the Higher Education Act of 1965, as 
amended (HEA) by amending the regulations for Institutional Eligibility 
Under the HEA, the Secretary's Recognition of Accrediting Agencies, the 
Secretary's Recognition Procedures for State Agencies, the Student 
Assistance General Provisions, the Federal Family Education Loan (FFEL) 
Program, the William D. Ford Federal Direct Loan Program, the Teacher 
Education Assistance for College and Higher Education (TEACH) Grant 
Program, the Federal Pell Grant Program, and the Academic 
Competitiveness Grant (AGC) and National Science and Mathematics Access 
to Retain Talent Grant (National Smart Grant) Programs.

DATES: We must receive your comments on or before August 2, 2010.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments by fax or by e-mail. Please submit your comments only 
one time, in order to ensure that we do not receive duplicate copies. 
In addition, please include the Docket ID at the top of your comments.
     Federal eRulemaking Portal. Go to https://www.regulations.gov to submit your comments electronically. Information 
on using Regulations.gov, including instructions for accessing agency 
documents, submitting comments, and viewing the docket, is available on 
the site under ``How To Use This Site.''
     Postal Mail, Commercial Delivery, or Hand Delivery. If you 
mail or deliver your comments about these proposed regulations, address 
them to Jessica Finkel, U.S. Department of Education, 1990 K Street, 
NW., room 8031, Washington, DC 20006-8502.


    Privacy Note: The Department's policy for comments received from 
members of the public (including those comments submitted by mail, 
commercial delivery, or hand delivery) is to make these submissions 
available for public viewing in their entirety on the Federal 
eRulemaking Portal at https://www.regulations.gov. Therefore, 
commenters should be careful to include in their comments only 
information that they wish to make publicly available on the 
Internet.


FOR FURTHER INFORMATION CONTACT: For information related to gainful 
employment in a recognized occupation, John Kolotos. Telephone: (202) 
502-7762 or via the Internet at: John.Kolotos@ed.gov.
    For information related to the provisions related to the definition 
of credit hour, Marianna Deeken or Fred Sellers. Telephone: (206) 615-
2583 or via the Internet at Marianna.Deeken@ed.gov. Telephone: (202) 
502-7502 or via the Internet at: Fred.Sellers@ed.gov.
    For information related to provisions on State authorization, Fred 
Sellers. Telephone: (202) 502-7502 or via the Internet at: 
Fred.Sellers@ed.gov.
    For information related to the provisions on retaking coursework, 
Vanessa Freeman. Telephone: (202) 502-7523 or via the Internet at: 
Vanessa.Freeman@ed.gov.
    For information related to the provisions for written agreements 
between institutions, Carney McCullough. Telephone: (202) 502-7639 or 
via the Internet at: Carney.McCullough@ed.gov.
    For information on the provisions related to incentive 
compensation, Marty Guthrie. Telephone: (202) 219-7031 or via the 
Internet at: Marty.Guthrie@ed.gov.
    For information related to the provisions on ability to benefit, 
Dan Klock. Telephone: (202) 377-4026 or via the Internet at 
Dan.Klock@ed.gov.
    For information related to the provisions on misrepresentation, 
Vanessa Freeman. Telephone: (202) 502-7523 or via the Internet at: 
Vanessa.Freeman@ed.gov.
    For information related to the provisions on satisfactory academic 
progress, Marianna Deeken. Telephone: (206) 615-2583 or via the 
Internet at: Marianna.Deeken@ed.gov.
    For information related to the provisions on high school diplomas 
and verification of information on the Free Application for Federal 
Student Aid (FAFSA), Jacquelyn Butler. Telephone: (202) 502-7890, or 
via the Internet at: Jacquelyn.Butler@ed.gov.
    For information related to the return of title IV, HEA funds 
calculation provisions for term-based modules or taking attendance, 
Jessica Finkel. Telephone: (202) 502-7647, or via the Internet at: 
Jessica.Finkel@ed.gov.
    For information related to the provisions on timeliness and method 
of disbursement, John Kolotos. Telephone: (202) 502-7762, or via the 
Internet at: John.Kolotos@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: 

Invitation To Comment

    As outlined in the section of this notice entitled Negotiated 
Rulemaking, significant public participation, through a series of three 
regional hearings and three negotiated rulemaking sessions, has 
occurred in developing this notice of proposed rulemaking (NPRM). In 
accordance with the requirements of the Administrative Procedure Act, 
the Department invites you to submit comments regarding these proposed 
regulations on or before August 2, 2010. To ensure that your comments 
have maximum effect in developing the final regulations, we urge you to 
identify clearly the specific section or sections of the proposed 
regulations that each of your comments addresses and to arrange your 
comments in the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Order 12866 and its overall requirement of 
reducing regulatory burden that might result from these proposed 
regulations. Please let us know of any further opportunities we should 
take to reduce potential costs or increase potential benefits while 
preserving the effective and efficient administration of the programs.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations by accessing Regulations.gov. 
You may also inspect the comments, in person, in room 8031, 1990 K 
Street, NW., Washington, DC, between the hours of 8:30 a.m. and 4:00 
p.m., Eastern time, Monday through Friday of each week except Federal 
holidays.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking 
Record

    On request, we will supply an appropriate aid, such as a reader or 
print magnifier, to an individual with a disability who needs 
assistance to review the comments or other documents in the public 
rulemaking record for these proposed regulations. If

[[Page 34807]]

you want to schedule an appointment for this type of aid, please 
contact one of the persons listed under FOR FURTHER INFORMATION 
CONTACT.

Negotiated Rulemaking

    Section 492 of the HEA requires the Secretary, before publishing 
any proposed regulations for programs authorized by title IV of the 
HEA, to obtain public involvement in the development of the proposed 
regulations. After obtaining advice and recommendations from the 
public, including individuals and representatives of groups involved in 
the Federal student financial assistance programs, the Secretary must 
subject the proposed regulations to a negotiated rulemaking process. 
All proposed regulations that the Department publishes on which the 
negotiators reached consensus must conform to final agreements 
resulting from that process unless the Secretary reopens the process or 
provides a written explanation to the participants stating why the 
Secretary has decided to depart from the agreements. Further 
information on the negotiated rulemaking process can be found at: 
https://www.ed.gov/policy/highered/leg/hea08/.
    On September 9, 2009, the Department published a notice in the 
Federal Register (74 FR 46399) announcing our intent to establish two 
negotiated rulemaking committees to prepare proposed regulations. One 
committee would develop proposed regulations governing foreign schools, 
including the implementation of the changes made to the HEA by the 
Higher Education Opportunity Act of 2008 (HEOA), Public Law 110-315, 
that affect foreign schools. The proposed regulations governing foreign 
schools will be published in the Federal Register at a future date. A 
second committee would develop proposed regulations to improve 
integrity in the title IV, HEA programs. The notice requested 
nominations of individuals for membership on the committees who could 
represent the interests of key stakeholder constituencies on each 
committee.
    Team I--Program Integrity Issues (Team I) met to develop proposed 
regulations during the months of November 2009 through January 2010.
    The Department developed a list of proposed regulatory provisions, 
including provisions based on advice and recommendations submitted by 
individuals and organizations as testimony to the Department in a 
series of three public hearings held on:
     June 15, 2009 at Community College of Denver in Denver, 
CO.
     June 18, 2009 at University of Arkansas in Little Rock, 
AR.
     June 22, 2009 at Community College of Philadelphia in 
Philadelphia, PA.
    In addition, the Department accepted written comments on possible 
regulatory provisions submitted directly to the Department by 
interested parties and organizations. A summary of all comments 
received orally and in writing is posted as background material in the 
docket for this NPRM. Transcripts of the regional meetings can be 
accessed at https://www2.ed.gov/policy/highered/reg/hearulemaking/2009/negreg-summerfall.html#ph.
    Staff within the Department also identified issues for discussion 
and negotiation.
    At its first meeting, Team I reached agreement on its protocols. 
These protocols provided that for each community identified as having 
interests that were significantly affected by the subject matter of the 
negotiations, the non-Federal negotiators would represent the 
organizations listed after their names in the protocols in the 
negotiated rulemaking process.
    Team I included the following members:
    Rich Williams, U.S. PIRG, and Angela Peoples (alternate), United 
States Student Association, representing students.
    Margaret Reiter, attorney, and Deanne Loonin (alternate), National 
Consumer Law Center, representing consumer advocacy organizations.
    Richard Heath, Anne Arundel Community College, and Joan Zanders 
(alternate), Northern Virginia Community College, representing two-year 
public institutions.
    Phil Asbury, University of North Carolina, Chapel Hill, and Joe 
Pettibon (alternate), Texas A&M University, representing four-year 
public institutions.
    Todd Jones, Association of Independent Colleges and Universities of 
Ohio, and Maureen Budetti (alternate), National Association of 
Independent Colleges and Universities, representing private, non-profit 
institutions.
    Elaine Neely, Kaplan Higher Education Corp., and David Rhodes, 
(alternate), School of Visual Arts, representing private, for-profit 
institutions.
    Terry Hartle, American Council on Education, and Bob Moran 
(alternate), American Association of State Colleges and Universities, 
representing college presidents.
    David Hawkins, National Association for College Admission 
Counseling, and Amanda Modar (alternate), National Association for 
College Admission Counseling, representing admissions officers.
    Susan Williams, Bridgeport University, and Anne Gross (alternate), 
National Association of College and University Business Officers, 
representing business officers.
    Val Meyers, Michigan State University, and Joan Berkes (alternate), 
National Association of Student Financial Aid Administrators, 
representing financial aid administrators.
    Barbara Brittingham, Commission on Institutions of Higher Education 
of the New England Association of Schools and Colleges, Sharon Tanner 
(1st alternate), National League for Nursing Accreditation Commission, 
and Ralph Wolf (2nd alternate), Western Association of Schools and 
Colleges, representing regional/programmatic accreditors.
    Anthony Mirando, Nation Accrediting Commission of Cosmetology Arts 
and Sciences, and Michale McComis (alternate), Accrediting Commission 
of Career Schools and Colleges, representing national accreditors.
    Jim Simpson, Florida State University, and Susan Lehr (alternate), 
Florida State University, representing work force development.
    Carol Lindsey, Texas Guaranteed Student Loan Corp, and Janet Dodson 
(alternate), National Student Loan Program, representing the lending 
community.
    Chris Young, Wonderlic, Inc., and Dr. David Waldschmidt 
(alternate), Wonderlic, Inc., representing test publishers.
    Dr. Marshall Hill, Nebraska Coordinating Commission for 
Postsecondary Education, and Dr. Kathryn Dodge (alternate), New 
Hampshire Postsecondary Education Commission, representing State higher 
education officials.
    Carney McCullough and Fred Sellers, U.S. Department of Education, 
representing the Federal Government.
    These protocols also provided that, unless agreed to otherwise, 
consensus on all of the amendments in the proposed regulations had to 
be achieved for consensus to be reached on the entire NPRM. Consensus 
means that there must be no dissent by any member.
    During the meetings, Team I reviewed and discussed drafts of 
proposed regulations. At the final meeting in January 2010, Team I did 
not reach consensus on the proposed regulations

[[Page 34808]]

in this document. With regard to gainful employment in a recognized 
occupation, this document addresses technical, reporting, and 
disclosure issues. The remaining issues under consideration that 
address the extent to which certain educational programs lead to 
gainful employment and the conditions under which those programs remain 
eligible for title IV, HEA program funds are not included in this NPRM.

Summary of Proposed Changes

    These proposed regulations would address program integrity issues 
by:
     Requiring institutions to develop and follow procedures to 
evaluate the validity of a student's high school diploma if the 
institution or the Secretary has reason to believe that the diploma is 
not valid or was not obtained from an entity that provides secondary 
school education;
     Expanding eligibility for title IV, HEA program assistance 
to students who demonstrate they have the ability to benefit by 
satisfactorily completing six credits of college work, or the 
equivalent amounts of coursework, that are applicable toward a degree 
or certificate offered by an institution;
     Amending and adding definitions of terms related to 
ability to benefit testing, including ``assessment center,'' 
``independent test administrator,'' ``individual with a disability,'' 
``test,'' ``test administrator,'' and ``test publisher'';
     Consolidating into a single regulatory provision the 
approval processes for ability to benefit tests developed by test 
publishers and States;
     Establishing requirements under which test publishers and 
States must provide descriptions of processes for identifying and 
handling test score abnormalities, ensuring the integrity of the 
testing environment, and certifying and decertifying test 
administrators;
     Requiring test publishers and States to describe any 
accommodations available for individuals with disabilities, as well as 
the process a test administrator would use to identify and report to 
the test publisher instances in which these accommodations were used;
     Revising the test approval procedures and criteria for 
ability to benefit tests, including procedures related to the approval 
of tests for speakers of foreign languages and individuals with 
disabilities;
     Revising the definitions and provisions that describe the 
activities that constitute substantial misrepresentation by an 
institution of the nature of its educational program, its financial 
charges, or the employability of its graduates;
     Removing the ``safe harbor'' provisions related to 
incentive compensation for any person or entity engaged in any student 
recruitment or admission activity, including making decisions regarding 
the award of title IV, HEA program assistance;
     Clarifying what is required for an institution of higher 
education, a proprietary institution of higher education, and a 
postsecondary vocational institution to be considered legally 
authorized by the State;
     Defining a credit hour and establishing procedures that 
certain institutional accrediting agencies must have in place to 
determine whether an institution's assignment of a credit hour is 
acceptable;
     Modifying provisions to clarify whether and when an 
institution must award student financial assistance based on clock or 
credit hours and the standards for credit-to-clock-hour conversions;
     Modifying the provisions related to written arrangements 
between two or more eligible institutions that are owned or controlled 
by the same person or entity so that the percentage of the educational 
program that may be provided by the institution that does not grant the 
degree or certificate under the arrangement may not exceed 50 percent;
     Prohibiting written arrangements between an eligible 
institution and an ineligible institution that has had its 
certification to participate in title IV, HEA programs revoked or its 
application for recertification denied;
     Expanding provisions related to the information that an 
institution with a written arrangement must disclose to a student 
enrolled in a program affected by the arrangement, including, for 
example, the portion of the educational program that the institution 
that grants the degree or certificate is not providing;
     Revising the definition of unsubsidized student financial 
aid programs to include TEACH Grants, Federal PLUS Loans, and Direct 
PLUS Loans;
     Codifying current policy that an institution must complete 
verification before the institution may exercise its professional 
judgment authority;
     Eliminating the 30 percent verification cap;
     Retaining the ability of institutions to select additional 
applicants for verification;
     Replacing the five verification items for all selected 
applicants with a targeted selection from items included in an annual 
Federal Register notice published by the Secretary;
     Allowing interim disbursements when changes to an 
applicant's FAFSA information would not change the amount that the 
student would receive under a title IV, HEA program;
     Codifying the Department's IRS Data Retrieval System 
Process, which allows an applicant to import income and other data from 
the IRS into an online FAFSA;
     Requiring the processing of all changes and corrections to 
an applicant's FAFSA information;
     Modifying the provisions related to institutional 
satisfactory academic progress policies and the impact these policies 
have on a student's eligibility for title IV, HEA program assistance;
     Expanding the definition of full-time student to allow, 
for a term-based program, repeated coursework taken in the program to 
count towards a full-time workload;
     Clarifying when a student is considered to have withdrawn 
from a payment period of enrollment for the purpose of calculating a 
return of title IV, HEA program funds;
     Clarifying the circumstances under which an institution is 
required to take attendance for the purpose of calculating a return of 
title IV, HEA program funds;
     Modifying the provisions for disbursing title IV, HEA 
program funds to ensure that certain students can obtain or purchase 
books and supplies by the seventh day of a payment period;
     Updating the definition of the term recognized occupation 
to reflect current usage; and
     Establishing requirements for institutions to submit 
information on program completers for programs that prepare students 
for gainful employment in recognized occupations.

Significant Proposed Regulations

    We group major issues according to subject, with appropriate 
sections of the proposed regulations referenced in parentheses. We 
discuss other substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
proposed regulatory provisions that are technical or otherwise minor in 
effect.

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

Gainful Employment in a Recognized Occupation (Sec. Sec.  600.2, 600.4, 
600.5, 600.6, 668.6, and 668.8)
    Statute: Sections 102(b) and (c) of the HEA define, in part, a 
proprietary institution and a postsecondary vocational institution, 
respectively, as

[[Page 34809]]

an institution that provides an eligible program of training that 
prepares students for gainful employment in a recognized occupation. 
Section 101(b)(1) of the HEA defines an institution of higher 
education, in part, as any institution that provides not less than a 
one-year program of training that prepares students for gainful 
employment in a recognized occupation.
One-Year Programs at Institutions of Higher Education
    Current Regulations: Sec.  600.4(a)(4)(iii) provides that a public 
or nonprofit institution may provide a training program of at least one 
academic year that leads to a certificate, degree, or other recognized 
educational credential and prepares students for gainful employment in 
a recognized occupation. In addition, Sec.  668.8(c)(3) provides that 
an eligible program at an institution of higher education may be at 
least a one-academic-year training program that leads to a certificate, 
degree, or other recognized credential and prepares students for 
gainful employment in a recognized occupation.
    Proposed Regulations: The proposed regulations would amend 
Sec. Sec.  600.4(a)(4)(iii) and 668.8(c)(3) by removing the reference 
to degree programs.
    Reasons: In keeping with the statute, we would clarify in proposed 
Sec. Sec.  600.4(a)(4)(iii) and 668.8(c)(3) that only certificate or 
credentialed nondegree programs of at least one academic year, that are 
offered by a public or nonprofit institution of higher education, are 
programs that must prepare students for gainful employment in a 
recognized occupation.
    Recognized Occupation
    Current Regulations: Section 600.2 defines a recognized occupation 
as an occupation that is listed in an ``occupational division'' of the 
latest edition of the Dictionary of Occupational Titles, published by 
the U.S. Department of Labor, or an occupation determined to be a 
recognized occupation by the Secretary in consultation with the 
Secretary of Labor.
    Proposed Regulations: Proposed Sec.  600.2 would define recognized 
occupation as an occupation identified by a Standard Occupational 
Classification (SOC) code established by the Office of Management and 
Budget or an Occupational Information Network O* NET-SOC code 
established by the Department of Labor and available at https://online.onetcenter.org or its successor site.
    Reasons: The definition of recognized occupation in proposed Sec.  
600.2 would simply replace an outdated reference to the Dictionary of 
Occupational Titles with current references to SOC codes established by 
the Office of Management and Budget or the Department of Labor.
Gainful Employment
    Current Regulations: Sections 600.4(a)(4)(iii), 600.5(a)(5), and 
600.6(a)(4) mirror the statutory provisions, and like the statute, do 
not define or further describe the meaning of the phrase ``gainful 
employment.''
    Proposed Regulations: Under proposed Sec.  668.6(a), an institution 
would annually submit information about students who complete a program 
that leads to gainful employment in a recognized occupation. That 
information would include, at a minimum, identifying information about 
each student who completed a program, the Classification of 
Instructional Program (CIP) code for that program, the date the student 
completed the program, and the amounts the student received from 
private educational loans and institutional financing plans.
    In addition, under proposed Sec.  668.6(b), an institution would be 
required to disclose on its Web site information about (1) the 
occupations that its programs prepare students to enter, along with 
links to occupational profiles on O*NET, (2) the on-time graduation 
rate of students entering a program, (3) the cost of each program, 
including costs for tuition and fees, room and board, and other 
institutional costs typically incurred by students enrolling in the 
program, (4) beginning no later than June 30, 2013, the placement rate 
for students completing each of those programs, as determined under 
Sec.  668.8(g) or a State-sponsored workforce data system, and (5) the 
median loan debt incurred by students who completed each program in the 
preceding three years, identified separately as title IV, HEA loan debt 
and debt from private educational loans and institutional financing 
plans.
    Reasons: The Department plans to use this information to continue 
to assess the outcomes of programs that lead to gainful employment in a 
recognized occupation. The proposed new requirement would enable the 
Department to further evaluate and monitor the outcomes of these 
programs. In addition, to better inform prospective students, proposed 
Sec.  668.6(b) would require an institution to disclose on its Web site 
the cost, graduation and placement rates, job-related information for 
each of its programs, and debt levels of students who completed the 
program during the past three years. We seek comment on whether the 
proposed Web-based approach is the most appropriate way to ensure that 
prospective students obtain this information or whether we should 
consider other approaches. With regard to disclosing Federal and non-
Federal loan debt, based on the information an institution would submit 
under proposed Sec.  668.6(a), the Department would be able to provide 
the institution with the median title IV, HEA loan debt, by program, 
and the median debt from private loans and institutional financing 
plans by program. The institution would then disclose these amounts. 
While we believe that Sec.  668.43 already requires an institution to 
disclose program cost information, we wish to make it an explicit 
requirement in this part of the regulations because our research showed 
that program cost information was not disclosed on the Web sites of 
many institutions.
Definition of a Credit Hour (Sec. Sec.  600.2, 602.24, 603.24, and 
668.8)
    Statute: Section 481(a)(2) of the HEA defines an academic year for 
an undergraduate program, in part, as requiring a minimum of 24 
semester or trimester credit hours or 36 quarter credit hours in a 
course of study that measures academic progress in credit hours or 900 
clock hours in a course of study that measures academic progress in 
clock hours. Section 481(b) of the HEA defines an eligible program, in 
part, as a program of at least 600 clock hours, 16 semester hours, or 
24 quarter hours or, in certain instances, a program of at least 300 
clock hours, 8 semester hours, or 12 quarter hours. Sections 428(b)(1), 
428B(a)(2), 428H(d)(1), 455(a)(1), and 484(b)(3) and (4) of the HEA 
specify that a student must be carrying at least one-half of the normal 
full-time work load for the student's course of study in order to 
qualify for any loan under parts B and D of title IV of the HEA. 
Section 401 of the HEA provides that a student's Federal Pell Grant 
must be adjusted based on the student's enrollment status and that a 
student must be enrolled at least half-time to be eligible for a second 
consecutive Federal Pell Grant in an award year. Section 496(a)(5)(H) 
of the HEA requires that an accrediting agency assess an institution's 
measure of program length. Section 487(c)(4) of the HEA requires that 
the Secretary publish a list of State agencies which the Secretary 
determines to be reliable authorities as to the quality of public

[[Page 34810]]

postsecondary vocational education in their respective States for the 
purpose of determining institutional eligibility for Federal student 
assistance programs.
    Current Regulations: There is no definition of a credit hour in any 
current regulations for programs funded under the HEA; and the term is 
not defined in the regulations that set out the requirements for the 
Secretary's recognition of accrediting agencies or State agencies for 
the approval of public postsecondary vocational education. The 
regulations that address an institutional accrediting agency's, or 
State approval agency's, reviews and evaluations of an institution's 
assignment of credit hours are set out in 34 CFR part 602 for an 
accrediting agency and 34 CFR part 603 for a State approval agency.
    In current Sec.  668.8(k) and (l), the regulations provide the 
formula that certain undergraduate programs must use to convert the 
number of clock hours offered to the appropriate number of credit hours 
used for title IV, HEA aid calculations and the requirements for 
identifying the undergraduate programs subject to using the formula. 
For these programs, each semester or trimester hour must include at 
least 30 clock hours of instruction, and each quarter hour must include 
at least 20 hours of instruction. An institution must use the formula 
to determine if a program is eligible for title IV, HEA purposes unless 
(1) the institution offers an undergraduate program in credit hours 
that is at least two academic years in length and leads to an associate 
degree, a bachelor's degree, or a professional degree or (2) each 
course within the program is acceptable for full credit toward an 
associate degree, bachelor's degree, or professional degree offered by 
the institution, and the degree offered by the institution requires at 
least two academic years of study.
Proposed Regulations: Definition of a Credit Hour
    The Department proposes to add to Sec.  600.2 a definition of a 
credit hour that would measure credit hours in terms of the amount of 
time and work during which a student is engaged in academic activity 
using commonly accepted academic practice in higher education, and 
further would provide for institutionally established equivalencies as 
represented by learning outcomes and verified achievement.
Accrediting Agency Procedures
    The Department proposes to amend current Sec.  602.24 by adding a 
new paragraph (f). Proposed Sec.  602.24(f) would describe the 
responsibilities of an accrediting agency to review and evaluate an 
institution's policies and procedures for the assignment of credit 
hours and the institution's application of its policies and procedures 
in assigning credit hours to its programs and courses. An accrediting 
agency would be required to make a reasonable determination of whether 
the institution's assignment of credit hours conforms to commonly 
accepted practice in higher education. The proposed regulations in 
Sec.  602.24(f) also would provide that an accrediting agency may use 
sampling or other methods in its reviews of programs at institutions, 
must take such actions that it deems appropriate to address any 
deficiencies that it identifies, and must notify the Secretary promptly 
of any systemic noncompliance with the agency's policies or significant 
noncompliance regarding one or more programs at the institution.
State Approval Agency Procedures
    The Department proposes to amend current Sec.  603.24 by 
redesignating paragraph (c) as paragraph (d) and adding a new paragraph 
(c). For State agencies for the approval of public postsecondary 
education, proposed Sec.  603.24(c) would provide for the same 
responsibilities as described for accrediting agencies regarding the 
review and evaluation of an institution's policies and procedures for 
the assignment of credit hours and the institution's application of its 
policies and procedures in assigning credit hours to its programs and 
courses.
Clock-to-Credit-Hour Conversion
    Proposed Sec.  668.8(l)(1) would revise the method of converting 
clock hours to credit hours to use a ratio of the minimum clock hours 
in an academic year to the minimum credit hours in an academic year, 
i.e., 900 clock hours to 24 semester or trimester hours or 36 quarter 
hours. Thus, a semester or trimester hour would be based on at least 
37.5 clock hours, and a quarter hour would be based on at least 25 
clock hours. Proposed Sec.  668.8(l)(2) creates an exception to the 
conversion ratio in proposed Sec.  668.8(l)(1) if neither an 
institution's designated accrediting agency nor the relevant State 
licensing authority for participation in the title IV, HEA programs 
determines there are any deficiencies in the institution's policies, 
procedures, and practices for establishing the credit hours that the 
institution awards for programs and courses, as defined in proposed 
Sec.  600.2. Under the exception provided by proposed Sec.  
668.8(l)(2), an institution may combine students' work outside of class 
with the clock-hours of instruction in order to meet or exceed the 
numeric requirements established in proposed Sec.  668.8(l)(1). 
However, under proposed Sec.  668.8(l)(2), the institution must use at 
least 30 clock hours for a semester or trimester hour or 20 clock hours 
for a quarter hour.
    In determining whether there is outside work that a student must 
perform, the analysis must take into account differences in coursework 
and educational activities within the program. Some portions of a 
program may require student work outside of class that justifies the 
application of proposed Sec.  668.8(l)(2). In addition, the application 
of proposed Sec.  668.8(l)(2) may vary within a program depending on 
variances in required student work outside of class for different 
portions of the program. Other portions of the program may not have 
outside work, and proposed Sec.  668.8(l)(1) must be applied. Of 
course, an institution applying only proposed Sec.  668.8(l)(1) to a 
program eligible for conversion from clock hours to credit hours, 
without an analysis of the program's coursework, would be considered 
compliant with the requirements of proposed Sec.  668.8(l).
    Proposed Sec.  668.8(k)(1)(ii) modifies a provision in current 
regulations to provide that a program is not subject to the conversion 
formula in Sec.  668.8(l) where each course within the program is 
acceptable for full credit toward a degree that is offered by the 
institution and that this degree requires at least two academic years 
of study. Additionally, under proposed Sec.  668.8(k)(1)(ii), the 
institution would be required to demonstrate that students enroll in, 
and graduate from, the degree program.
    Proposed Sec.  668.8(k)(2)(i) would provide that a program is 
considered to be a clock-hour program if the program must be measured 
in clock hours to receive Federal or State approval or licensure, or if 
completing clock hours is a requirement for graduates to apply for 
licensure or the authorization to practice the occupation that the 
student is intending to pursue. Under proposed Sec.  668.8(k)(2)(ii) 
and (iii), the program is also considered to be offered in clock hours 
if the credit hours awarded for the program are not in compliance with 
the definition of a credit hour in proposed Sec.  600.2, or if the 
institution does not provide the clock hours that are the basis for the 
credit hours awarded for the program or each course in the program and, 
except as provided in current Sec.  668.4(e), require attendance in the 
clock hours that are the basis for the credit hours awarded. The 
proposed regulations on which tentative agreement was reached did not 
include

[[Page 34811]]

the provision in proposed Sec.  668.8(k)(2)(iii) that, except as 
provided in current Sec.  668.4(e), an institution must require 
attendance in the clock hours that are the basis for the credit hours 
awarded. However, during the negotiations we had previously proposed to 
include such a provision.
    Proposed Sec.  668.8(k)(3) would provide that proposed Sec.  
668.8(k)(2)(i) would not apply if a limited portion of the program 
includes a practicum, internship, or clinical experience component that 
must include a minimum number of clock hours due to a State or Federal 
approval or licensure requirement.
Reasons: Definition of a Credit Hour
    A credit hour is a unit of measure that gives value to the level of 
instruction, academic rigor, and time requirements for a course taken 
at an educational institution. At its most basic, a credit hour is a 
proxy measure of a quantity of student learning. The credit hour was 
developed as part of a process to establish a standard measure of 
faculty workloads, costs of instruction, and rates of educational 
efficiencies as well as a measure of student work for transfer 
students. While the credit hour was developed to provide some uniform 
measure, it may not consistently relate to comparable measures of time 
or workload within institutions or between different types of 
institutions. Most postsecondary institutions do not have specific 
policies or criteria to assign credit hours to coursework in a uniform 
manner.
    In keeping with the original purpose of providing a consistent 
measure of at least a minimum quantity of a student's academic 
engagement, the proposed definition of a credit hour will establish a 
basis for measuring eligibility for Federal funding. This standard 
measure will provide increased assurance that a credit hour has the 
necessary educational content to support the amounts of Federal funds 
that are awarded to participants in Federal funding programs and that 
students at different institutions are treated equitably in the 
awarding of those funds.
    We recognize, however, that other measures of educational content 
are being developed by institutions and do not intend to limit the 
methods by which an institution may measure a student's work in his or 
her educational activities. We, therefore, are including in paragraph 
(3) of the proposed definition of a credit hour a provision that an 
institution may provide institutional equivalencies for the amount of 
work specified in paragraph (1) of the proposed definition as 
represented in intended learning outcomes and verified by evidence of 
their achievement. Further, the institution's equivalencies must be in 
accordance with any process or conditions required by an institution's 
designated accrediting agency for title IV, HEA program participation, 
because these agencies are well positioned to provide oversight in this 
area.
    During the negotiated rulemaking sessions, a few of the non-Federal 
negotiators were opposed to any proposal to define a credit hour 
because they believed that a definition would impinge upon an 
institution's ability to create innovative courses and teaching 
methods. They also argued that the proposed definition was too 
restrictive and inhibited the academic freedom of schools. Other non-
Federal negotiators agreed that a definition was necessary and did not 
believe the Department's proposed definition would adversely impact 
institutions. These other non-Federal negotiators agreed with our 
position that the proposed definition of a credit hour would provide 
sufficient flexibilities for institutions and supported keeping it in 
the proposed regulations.
    One significant change is proposed in the regulations to address a 
concern raised during the negotiated rulemaking sessions regarding a 
definition of a credit hour. The change is to recognize in paragraph 
(3) of the proposed definition that an institution would be able to 
establish reasonable equivalent measures of a credit hour. As is also 
the case with paragraphs (1) and (2) of the proposed definition, the 
measures must be reasonable and in accordance with the requirements of 
the institution's designated accrediting agency, or State agency for 
the approval of public postsecondary vocational education, for title 
IV, HEA program participation as well as for participation in other HEA 
programs. This change further ensures that the definition will allow 
institutions to adopt alternative measures of student work.
    The proposed definition of a credit hour does not change our policy 
that we provide funding based only on credit hours that are the direct 
result of postsecondary student work. Thus, we do not currently, nor do 
we propose to, provide funding for credits awarded based on Advanced 
Placement (AP) or International Baccalaureate (IB) programs, tests or 
testing out, life experience, or similar competency measures.
    No agreement was reached to amend Sec.  600.2 to include a 
definition of a credit hour due to the belief of some non-Federal 
negotiators that a definition would limit an institution's ability to 
use alternative measures of student work.
Accrediting Agency Procedures
    Section 496(a)(5) of the HEA requires that, to be recognized by the 
Secretary, an accrediting agency must have standards to evaluate an 
institution's or program's ``measures of program length and the 
objectives of the degrees or credentials offered.'' Thus, accrediting 
agencies are required to make a judgment about program length and the 
amount of credit an institution or program grants for course work. 
Accrediting agency standards related to program length differ 
significantly in their specificity and these standards generally do not 
define what a credit hour is. This lack of specificity in standards 
covering student achievement and program length has inherent 
limitations and may result in inconsistent treatment of Federal funds.
    We believe that the lack of more direct accrediting agency 
oversight in the assignment of credits to coursework may result in some 
institutions not being able to demonstrate that there is sufficient 
course content to substantiate the credit hours for certain programs. 
Such abuse may be more likely due to the expanded availability to a 
student of two Federal Pell Grants in an award year. We believe that 
the potential for such abuse and the inconsistent treatment of Federal 
funds would be significantly alleviated by establishing the proposed 
definition of credit hour in Sec.  600.2 and providing in proposed 
Sec.  602.24(f) that accrediting agencies must review (1) an 
institution's policies and procedures for the assignment of credit 
hours in accordance with the proposed definition in Sec.  600.2 and (2) 
the institution's application of its policies and procedures in 
assigning credit hours to its programs and courses.
    The negotiators reached tentative agreement on adding proposed 
Sec.  602.24(f).
State Agency Procedures for the Approval of Public Vocational Education
    The regulations concerning the recognition of State agencies for 
the approval of public vocational education were not discussed during 
the negotiations. We believe that Sec.  603.24 should be amended to 
make changes comparable to the proposed regulations for the recognition 
of accrediting agencies. We believe these proposed changes are needed 
for the same reasons as we are proposing to amend part 602. The changes 
are also necessary for purposes of determining equivalencies

[[Page 34812]]

to a credit hour under paragraph (3) of the proposed definition of a 
credit hour in Sec.  600.2 as well as for Sec.  668.8(l) regarding 
credit-to-clock-hour conversions.
Credit-to-Clock-Hour Conversion
    Section 668.8(k) and (l) of the current regulations that provide 
conditions and formulas for the conversion of clock hours to credit 
hours for undergraduate programs were adopted prior to the statutory 
change in the definition of an academic year for clock-hour programs. 
Under section 481(b) of the HEA, an academic year for a program must 
now provide for a minimum of 26 weeks of instructional time in a clock-
hour program as opposed to the 30 weeks of instructional time required 
for credit-hour programs. However, undergraduate programs continue to 
include 900 clock hours, 24 semester or trimester hours, or 36 quarter 
credits. We are proposing to update the formula to reflect the 
statute's treatment of 900 clock hours over 26 weeks of instructional 
time as reflecting no outside student work and the 900 clock hours 
being directly proportional to 24 semester hours or 36 quarter credits.
    As a result, proposed Sec.  668.8(l)(1) would revise the minimum 
general standard for converting clock hours to credit hours to reflect 
the ratio of the minimum clock hours in an academic year to the minimum 
credit hours in an academic year. As some non-Federal negotiators 
noted, portions of some clock-hour programs require student work 
outside of class. Proposed Sec.  668.8(l)(2) would, therefore, provide 
an exception to the standard in proposed Sec.  668.8(l)(1) for 
coursework in a program that qualifies for a lesser rate of conversion 
based on additional student work outside of class. For coursework that 
includes student work outside of class in a qualifying program, an 
institution would take into account the amount of outside coursework to 
determine the appropriate number of clock hours to convert to a credit 
hour, but may not use less than the current requirements of 30 clock 
hours for a semester or trimester hour or 20 clock hours for a quarter 
hour.
    We believe that changes are needed to the conditions in current 
Sec.  668.8(k)(1) for determining that a program is not subject to the 
conversion formula in Sec.  668.8(l). We have identified potential 
abuses with the provision that an institution's program is not subject 
to the conversion formula in Sec.  668.8(l) if each course within the 
program is acceptable for full credit toward a degree that is offered 
by the institution and requires at least two academic years of study. 
Some institutions appear to have established degree programs in which 
few if any students enroll or graduate but which are the basis for 
claiming that all courses of another nondegree program are acceptable 
for full credit in the degree program. To address this abuse, proposed 
Sec.  668.8(k)(1)(ii) would require the institution to demonstrate that 
students enroll in, and graduate from, the degree program. Proposed 
Sec.  668.8(k)(2)(i) would provide that a program must be considered a 
clock-hour program if the program must be measured in clock hours to 
receive Federal or State approval or licensure or completing clock 
hours is a requirement for graduates to apply for licensure or the 
authorization to practice the occupation that the student is intending 
to pursue. We believe such requirements show that the program is still 
fundamentally a clock-hour program and should not be treated as a 
credit-hour program for purposes of title IV, HEA program assistance. 
We also believe it is appropriate under proposed Sec.  668.8(k)(2)(ii) 
and (iii) to require that a program must be considered to be offered in 
clock hours if an institution is failing either to award the credit 
hours that are in compliance with the definition of a credit hour in 
proposed Sec.  600.2 or to ensure that students are attending at least 
the minimum number of clock hours that are the basis for the credit 
hours awarded for the program. A program that may qualify for 
conversion to credit hours is still fundamentally a clock-hour program 
that must meet additional requirements. If the provisions of proposed 
Sec.  668.8(k)(1) and (2) are applicable, a program should not qualify 
for conversion to credit hours because the program's essential nature 
as a clock-hour program requires that it be measured in clock hours for 
other purposes or because it fails to be offered in a manner that 
supports the conversion.
    In response to some non-Federal negotiators' concerns, proposed 
Sec.  668.8(k)(3) would clarify the requirements in proposed Sec.  
668.8(k)(2)(i) by providing that proposed Sec.  668.8(k)(2)(i) would 
not apply if a limited portion of a program such as a practicum, 
internship, or clinical experience component must be measured in clock 
hours due to a State or Federal approval or licensure requirement. We 
agree with the non-Federal negotiators that such a limited requirement 
should not be an impediment to the program qualifying for a clock-to-
credit-hour conversion.
    The negotiators reached tentative agreement on proposed Sec.  
668.8(l) and (k), except for proposed Sec.  668.8(k)(2)(iii) which has 
been changed to provide that an institution must require attendance in 
the clock hours that are the basis for the credit hours awarded, except 
as provided in current Sec.  668.4(e). We believe the change assures 
that the clock hours are being offered and that students are attending 
the clock hours that are the basis for the clock-to-credit-hour 
conversion.
State Authorization (Sec. Sec.  600.4(a)(3), 600.5(a)(4), 600.6(a)(3), 
and 600.9)
    Statute: Section 101(a)(2) of the HEA defines the term 
``institution of higher education'' to mean, in part, an educational 
institution in any State that is legally authorized within the State to 
provide a program of education beyond secondary education. Section 
102(a) of the HEA provides, by reference to section 101(a)(2) of the 
HEA, that a proprietary institution of higher education and a 
postsecondary vocational institution must be similarly authorized 
within a State.
    Current Regulations: The regulations do not define or describe the 
statutory requirement that an institution must be legally authorized in 
a State.
    Proposed Regulations: Under proposed Sec.  600.9, an institution 
would be legally authorized by a State through a charter, license, 
approval, or other document issued by a State government agency or 
State entity that affirms or conveys the authority to the institution 
to operate educational programs beyond secondary education. An 
institution would also be considered legally authorized in a State if 
the institution were authorized to offer programs beyond secondary 
education by the Federal Government or an Indian Tribe as that term is 
described in 25 U.S.C. 1802(2) or if it were exempt from State 
authorization as a religious institution under the State constitution.
    The Secretary would consider an institution to be legally 
authorized by a State if (1) the authorization is given to the 
institution specifically to offer programs beyond secondary education, 
(2) the authorization is subject to adverse action by the State, and 
(3) the State has a process to review and appropriately act on 
complaints concerning an institution and enforces applicable State 
laws.
    References to Sec.  600.9 would be added for clarity in Sec. Sec.  
600.4(a)(3), 600.5(a)(4), and 600.6(a)(3).
    Reasons: The HEA requires institutions to have approval from the 
States where they operate to provide postsecondary educational 
programs. State oversight through obtaining approval to offer 
postsecondary

[[Page 34813]]

education and by State regulatory agency ongoing activities plays an 
important role in protecting students, although there may be a lot of 
variation in how those responsibilities are exercised. One indicator of 
the importance of State oversight has been seen in the movement of 
substandard institutions and diploma mills from State to State in 
response to changing requirements. These entities set up operation in 
States that may initially provide very little oversight and operate 
until a State strengthens its oversight of those entities in response 
to complaints from the public. In some cases, those entities simply 
move to another State that appears to offer little oversight and 
repeats the process.
    The Department historically viewed the requirement for State 
authorization for entities to offer postsecondary education as minimal, 
and would deem an entity that had been exempted by its State from State 
oversight to have such approval so long as it was able to operate 
within the State. Thus, in some States an institution was considered to 
be legally authorized to offer postsecondary education based on such 
methods as a business license or establishment as an eleemosynary 
organization.
    Upon further review, we believe the better approach is to view the 
State approval to offer postsecondary educational programs as a 
substantive requirement where the State is expected to take an active 
role in approving an institution and monitoring complaints from the 
public about its operations and responding appropriately. The weakness 
of the historical approach of not requiring active State approval and 
oversight may have contributed to the recent lapse in the existence of 
California's Bureau for Private Postsecondary and Vocational Education. 
The Bureau served as the State's oversight and regulatory agency for 
private proprietary postsecondary institutions until the State 
legislature eliminated the Bureau. We were advised that the Bureau was 
permitted to lapse because the State determined that doing so would not 
immediately harm the institutions that participate in the title IV, HEA 
programs. During the period when there was no State agency authorizing 
private postsecondary institutions, these institutions continued to 
participate in the title IV, HEA programs under some voluntary 
agreements while the State legislature worked on creating a new 
oversight agency. The proposed regulations, had they been in effect at 
that time, would have required that the State keep in place the prior 
oversight agency, or to designate a different State agency to perform 
the required State functions during the transition to a new State 
oversight agency. Otherwise, under the provisions of proposed Sec.  
600.9(b), the affected institutions would have ceased to be considered 
legally authorized by the State for Federal purposes when the prior 
agency's existence lapsed and would have ceased to be eligible 
institutions.
    Additionally, we are concerned that some States are deferring all, 
or nearly all, of their oversight responsibilities to accrediting 
agencies for approval of educational institutions, or are providing 
exemptions for a subset of institutions for other reasons. Since 
accrediting agencies generally require that an institution be legally 
operating in the State, we are concerned that the checks and balances 
provided by the separate processes of accreditation and State legal 
authorization are being compromised.
    We initially proposed that State legal authorization be based on a 
charter, license, or other document issued by an appropriate State 
government agency providing the authority to an institution to operate 
educational programs beyond secondary education and grant degrees 
within the jurisdiction of the State or other documentation, issued by 
an appropriate State government agency that authorizes, licenses, or 
otherwise approves the institution to establish and operate within the 
State nondegree programs that provide education and training beyond 
secondary education. We also provided that State legal authorization 
could include reciprocal agreements between appropriate State agencies. 
In addition, for institutions in a State to be legally authorized, the 
State would be expected to monitor (1) institutional academic quality, 
potentially relying on accrediting agencies recognized by the 
Secretary; (2) an institution's financial viability; and (3) compliance 
with applicable State laws with respect to consumer protection and 
other matters of State oversight.
    In response to concerns from the non-Federal negotiators, we 
clarified in proposed Sec.  600.9(a) that legal authorization could not 
only be provided by an appropriate State agency, but also another State 
entity, e.g., a State legislature or State constitution. We removed the 
references to monitoring the quality of educational programs and 
financial responsibility. We accepted the position of some of the non-
Federal negotiators who argued that these additional State requirements 
could unnecessarily duplicate Federal or accrediting agency actions. 
Similarly we accepted the position of some of the non-Federal 
negotiators that States could enter into reciprocal agreements on an as 
needed basis without regulations.
    Also, in response to recommendations of the non-Federal 
negotiators, we added provisions to clarify that an institution would 
be considered to be legally authorized in a State if the institution is 
authorized to offer educational programs beyond secondary education by 
the Federal Government or, as defined in 25 U.S.C. 1802(2), an Indian 
tribe or if it is exempt from State authorization as a religious 
institution under the State constitution. In proposed Sec.  600.9(b), 
we also further revised the bases under which we would consider an 
institution to be legally authorized by a State. We would require that 
the authorization must be specifically to offer programs beyond 
secondary education and may not be merely of the type required to do 
business in the State. We believe that this provision would remove any 
ambiguity regarding the type of authorization acceptable to establish 
institutional eligibility to participate in Federal programs. The 
regulations also require an institution's legal authorization to be 
subject to adverse action by the State, and that a State has a process 
to review and appropriately act on complaints concerning an 
institution, and to enforce applicable State laws. We believe these 
additional conditions are necessary to establish minimal State 
oversight for institutions to be considered legally authorized to offer 
postsecondary education for purposes of qualifying as an eligible 
institution for Federal programs.
    The committee did not reach agreement on this issue. A few 
negotiators objected to allowing States to continue to rely on an 
institution's status with an outside entity, for example, accredited 
status with a nationally recognized accrediting agency, as a basis for 
State legal authorization and were also concerned that the proposed 
regulations would no longer have a requirement that a State review an 
institution's fiscal viability. The regulations do not prohibit a State 
from relying in part upon an accrediting agency, but the State is still 
required to perform certain functions itself. For example, an 
institution's authorization must be subject to adverse action by a 
State agency or other State entity, and the State must have a process 
for a State agency to review and appropriately act on complaints 
concerning an institution.

[[Page 34814]]

Part 668 Student Assistance General Provisions Coursework (Sec.  668.2)

    Statute: None.
    Current regulations: None
    Proposed regulations: The proposed regulations would amend the 
definition of ``full-time student'' in Sec.  668.2 to allow repeated 
coursework to count towards a student enrollment status in term-based 
programs.
    Reasons: The current policy provides that a student enrolled in a 
term-based program may not be paid for repeating a course unless the 
student will receive credit for the coursework in addition to any 
credits previously earned. The non-Federal negotiators were concerned 
that institutions are unable to track this type of information without 
doing a program audit of each individual student. We agreed and 
proposed to amend the definition of full-time to provide that such 
credits would count toward enrollment status and be eligible for 
payment under the title IV, HEA programs.
    The negotiators reached tentative agreement on this issue.
Written Arrangements (Sec. Sec.  668.5 and 668.43)
    Statute: None.
    Current Regulations: Under current Sec.  668.5(a), an eligible 
institution may enter into a written agreement with another eligible 
institution, or with a consortium of eligible institutions, to provide 
all or part of an educational program. The educational program is 
considered to be an eligible program if it meets the requirements of 
Sec.  668.8. There is no requirement in either Sec.  668.5 or Sec.  
668.43 of the current regulations that institutions provide information 
on written arrangements to enrolled or prospective students.
    Proposed Regulations: The Department proposes to amend current 
Sec.  668.5(a) by revising and redesignating paragraph (a) as paragraph 
(a)(1) and adding a new paragraph (a)(2). Proposed Sec.  668.5(a)(1) 
would be based on the language that is in current paragraph (a), but it 
would be modified to make it consistent with the definition of an 
``educational program'' in 34 CFR 600.2. Proposed new Sec.  668.5(a)(2) 
would 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. These clarifications are also intended to ensure 
that the institution enrolling the student has all necessary approvals 
to offer an educational program in the format in which it is being 
provided, such as through distance education, when the other 
institution is providing instruction under a written agreement using 
that method of delivery. Proposed Sec.  668.5(c)(1) would expand the 
list of conditions that would preclude an arrangement between an 
eligible institution and an ineligible institution. Proposed Sec. Sec.  
668.5(e) and 668.43 would require an institution that enters into a 
written arrangement to provide a description of the arrangement to 
enrolled and prospective students.
    Reasons: Under the definition of an ``educational program'' in 34 
CFR 600.2, if an institution does not provide any instruction itself, 
but merely gives credit for instruction provided by other institutions, 
it is not considered to provide an educational program. The change 
reflected in proposed Sec.  668.5(a)(1) would eliminate the 
inconsistency in these two provisions by clarifying that an institution 
may provide part, but not all, of an educational program under a 
written arrangement.
    Proposed Sec.  668.5(a)(2) would be added to address concerns that 
may arise when two institutions under common ownership enter into 
written arrangements with each other. One concern, for example, is that 
such written agreements between institutions under common ownership 
could be used to circumvent regulations governing cohort default rates 
and ``90-10'' provisions, which limit the percentage of revenue for-
profit institutions may receive from the Federal student financial 
assistance programs, by having one institut