Program Integrity Issues, 66832-66975 [2010-26531]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 75, Number 209 (Friday, October 29, 2010)]
[Rules and Regulations]
[Pages 66832-66975]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-26531]



[[Page 66831]]

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

Part II





Department of Education





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



34 CFR Parts 600, 602, 603, et al.



 Program Integrity Issues; Final Rule

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / 
Rules and Regulations

[[Page 66832]]


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

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: Final regulations.

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

SUMMARY: The Secretary is improving 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 in part 686, 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: These regulations are effective July 1, 2011 with the exception 
of the revision of subpart E of part 668, Verification and Updating of 
Student Aid Application Information. Revised subpart E of part 668 is 
effective July 1, 2012. The incorporation by reference of certain 
publications listed in the rule is approved by the Director of the 
Federal Register as of July 1, 2011.

FOR FURTHER INFORMATION CONTACT: 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 or Wendy Macias. Telephone: (202) 502-7647 or via the 
Internet at: Jessica.Finkel@ed.gov. Telephone: (202) 502-7526 or via 
the Internet at: Wendy.Macias@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 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 satisfactory academic 
progress, Marty Guthrie or Marianna Deeken. Telephone: (202) 219-7031 
or via the Internet at: Marty.Guthrie@ed.gov. Telephone: (206) 615-2583 
or via the Internet at: Marianna.Deeken@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 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 for written agreements 
between institutions, Carney McCullough. Telephone: (202) 502-7639 or 
via the Internet at: Carney.McCullough@ed.gov.
    For information related to the provisions on misrepresentation, 
Carney McCullough or Vanessa Freeman. Telephone: (202) 502-7639 or via 
the Internet at: Carney.McCullough@ed.gov. Telephone: (202) 502-7523 or 
via the Internet at: Vanessa.Freeman@ed.gov.
    For information related to the provisions on timeliness and method 
of disbursement, Harold McCullough. Telephone: (202) 377-4030 or via 
the Internet at: Harold.McCullough@ed.gov.
    For information related to the provisions related to the definition 
of credit hour, Fred Sellers. 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.
    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 June 18, 2010, the Secretary published a 
notice of proposed rulemaking (NPRM) for program integrity issues in 
the Federal Register (75 FR 34806).
    In the preamble to the NPRM, the Secretary discussed on pages 34808 
through 34848 the major regulations proposed in that document to 
strengthen and improve the administration of programs authorized under 
the HEA. These proposed regulations included the following:
     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

[[Page 66833]]

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 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 or 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;
     Establishing requirements for institutions to submit 
information on students who attend or complete programs that prepare 
students for gainful employment in recognized occupations; and
     Establishing requirements for institutions to disclose on 
their Web site and in promotional materials to prospective students, 
the on-time completion rate, placement rate, median loan debt, program 
cost, and other information for programs that prepare students for 
gainful employment in recognized occupations.

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 to specify the conditions under which 
the entity may implement the provisions early.
    The Secretary has not designated any of the provisions in these 
final regulations for early implementation. As indicated in the DATES 
section, the regulations contained in subpart E of part 668, 
Verification and Updating of Student Aid Application Information are 
effective July 1, 2012.
    While the Secretary has designated amended Sec.  600.9(a) and (b) 
as being effective July 1, 2011, we recognize that a State may be 
unable to provide appropriate State authorizations to its institutions 
by that date. We are providing that the institutions unable to obtain 
State authorization in that State may request a one-year extension of 
the effective date of these final regulations to July 1, 2012, and if 
necessary, an additional one-year extension of the effective date to 
July 1, 2013. To receive an extension of the effective date of amended 
Sec.  600.9(a) and (b) for institutions in a State, an institution must 
obtain from the State an explanation of how a one-year extension will 
permit the State to modify its procedures to comply with amended Sec.  
600.9.

Analysis of Comments and 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 June 18, 2010. The Secretary invited comments on the 
proposed regulations by August 2, 2010. Approximately 1,180 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, nonsubstantive 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.

General Comments

    Comment: We received a significant number of comments that 
expressed support for the Secretary's proposed regulations. Many of the 
commenters noted that the proposed regulations would protect taxpayer 
investments in

[[Page 66834]]

higher education by helping to curtail fraud and abuse and would 
protect the interests of a diverse population of students who are 
seeking higher education for personal and professional growth. Some of 
the commenters also stated that the Secretary's proposed regulations 
would provide a level playing field that benefits the majority of 
institutions of higher education that are committed to sound academic 
and administrative practices.
    Discussion: The Department appreciates the numerous comments we 
received in support of the proposed regulations.
    Changes: None.
    Comment: Several commenters disagreed with the process by which the 
Department developed the proposed regulations. The commenters believe 
that the Department did not negotiate in good faith and did not follow 
faithfully the Federal negotiated rulemaking process. These commenters 
believed that the Department excluded important members of the 
proprietary school sector from the process and failed to provide 
adequate time for review of and comment on the proposed regulations. 
Because of the complexity of the proposed regulations, these same 
commenters also requested that the Department delay the effective date 
for implementation of the final regulations. Several other commenters 
believed that before negotiating proposed regulations with such a broad 
scope, the Department should have conducted studies to assess the 
impact the proposed regulations would have on affected institutions. 
Lastly, one commenter expressed the view that the Department began 
negotiations without presenting examples of abuse or data that 
supported additional regulation and that many of the Department's 
concerns about program integrity could have been better addressed by 
enforcing current regulations.
    Discussion: We disagree with the commenters who said that the 
Department did not act in good faith in negotiating the proposed 
regulations or that we did not follow the negotiated rulemaking 
process. In conducting the negotiated rulemaking for these proposed 
regulations, the Department followed the requirements in section 492 of 
the HEA, which govern the negotiated rulemaking process and require the 
Department to choose non-Federal negotiators from the groups involved 
in the student financial assistance programs authorized by title IV of 
the HEA. As addressed earlier in this preamble, all of these groups 
were represented during the negotiations.
    We believe that the 45-day public comment period was an adequate 
period of time for interested parties to submit comments, especially in 
light of the fact that prior to issuing the proposed regulations, the 
Department conducted public hearings and three negotiated rulemaking 
sessions, where stakeholders and members of the public had an 
opportunity to weigh in on the development of much of the language 
reflected in the proposed regulations. In addition, we believe that the 
45-day public comment period is necessary in light of the HEA's master 
calendar requirements. Under those requirements, the Department must 
publish final regulations by November 1, 2010, in order for them to be 
effective on July 1, 2011. The Department must adhere to the master 
calendar set forth by Congress and does not have the statutory 
authority to amend it.
    We also do not agree that, except for certain provisions of the 
regulations such as those that may involve systems changes that require 
adequate lead time to make, implementation of the final regulations 
should be delayed. For example, the proposed regulations on FAFSA 
verification cannot be implemented by the July 1, 2011 effective date 
because the changes would require system updates that will not be in 
place by that date. We discuss the implementation delay of regulations 
that involve these system changes elsewhere in this preamble. Absent 
these system-related or similar issues, however, we believe a delay in 
implementing the final regulations will undermine the Department's goal 
of protecting taxpayers and students by ensuring the integrity of the 
title IV, HEA programs.
    Lastly, we disagree with the commenters who stated that the 
Department should have conducted a study to assess the impact of the 
proposed regulations on institutions of higher education before 
negotiating the proposed changes and those commenters who stated that 
the Department did not present examples of abuse or data to support the 
proposed regulations. The Department's decision to improve program 
integrity by strengthening the regulations was based on many factors, 
including feedback we received from the public. Specifically, the 
Department developed a list of proposed regulatory provisions based on 
advice and recommendations submitted by individuals and organizations 
as testimony in a series of three public hearings in June of 2009, as 
well as written comments submitted directly to the Department. 
Department staff also identified issues for discussion and negotiation. 
The proposed regulations that were negotiated during negotiated 
rulemaking and included in the proposed regulations were developed for 
one or more of the following reasons:
     To implement provisions of the HEA, as amended by the 
Higher Education Opportunity Act of 2008 (HEOA).
     To update current regulations that had not been updated in 
some time so that they more accurately reflect the state of the law as 
well as the Department's current practices and policies (e.g., aligning 
the regulations with the Department's FAFSA simplification initiative).
     To respond to problems identified by students and 
financial aid advisors about the aggressive sales tactics used by some 
institutions.
     To respond to a report from the United States Government 
Accountability Office published in August of 2009 that raised concerns 
about proprietary institutions and recommended stronger Department 
oversight to ensure that only eligible students receive Federal student 
aid.
    We believe that all of these factors provided ample support for the 
Department to immediately propose stronger regulations to protect 
students and prevent fraud and abuse in the title IV, HEA programs.
    Changes: None.
    Comment: Many commenters expressed concern about what they argued 
would be a negative impact of the proposed regulations on institutions 
of higher education, particularly proprietary institutions. These 
commenters stated that the proposed regulations are too complex and too 
broad in scope and that, as a result, they would disproportionately 
impose burdens on the institutions that serve many of the students who 
need the most financial assistance. Other commenters stated that, in 
these trying economic times, institutions simply do not have the 
resources to administer the disclosure, reporting, and implementation 
requirements included in the proposed regulations. Some of these 
commenters stated that they feared that the cost of compliance with 
these regulations, which many argued were ambiguous or inconsistent, 
would drive their small proprietary institutions out of business.
    Several commenters stated that the proposed regulations target the 
entire proprietary school sector of higher education, while the actions 
of only a few proprietary institutions are cause for concern. These 
commenters decried the Department's ``one-size-fits-all'' approach to 
ensuring program integrity.

[[Page 66835]]

Lastly, one commenter requested that the Department indicate in each 
section of the final regulations the types of institutions to which 
that specific section applies.
    Discussion: The Department is aware that some institutions may have 
limited resources to implement some provisions of the final regulations 
and is committed to assisting these institutions in every way possible 
to ensure that all institutions can comply with program requirements. 
Several of the changes are to discrete areas of existing regulations 
rather than wholly new requirements. As such, institutions wishing to 
continue to participate in the title IV, HEA programs have already 
absorbed many of the administrative costs related to implementing these 
final regulations. Any additional costs are primarily due to new 
procedures that, while possibly significant in some cases, are a cost 
of continued program participation.
    The Department believes that the benefits of these regulations for 
students, consumers, and taxpayers justify the burdens of institutional 
compliance, as discussed, in the Regulatory Impact Analysis in Appendix 
A. These regulations strengthen the Federal student aid programs by 
protecting students from aggressive or misleading recruiting practices 
and clarifying State oversight responsibilities, providing consumers 
with better information about the effectiveness of career colleges and 
training programs, and ensuring that only eligible students or programs 
receive aid.
    We do not believe it is necessary to specifically indicate in each 
section which institutions are covered by a particular regulation 
because all provisions of these regulations apply to all postsecondary 
institutions, unless otherwise specified.
    Changes: None.
    Comment: A number of commenters stated that the proposed 
regulations would harm students who are already disadvantaged, 
underserved, and not adequately represented in postsecondary 
institutions because they would limit their choice of educational 
programs and their chances of getting a quality education. Other 
commenters noted that the proposed regulations could become a barrier 
to access for needy students, as well as adult students who work full-
time, because aid may be discontinued for programs that do not meet new 
regulatory requirements. Finally, one commenter urged the Department to 
ensure that the final regulations further the objectives of student 
access and success, and promote quality educational programs.
    Discussion: We are confident that the regulations strengthening 
program integrity are in the best interest of students, consumers, and 
taxpayers, and will improve the quality of the programs offered at 
institutions by ensuring that all programs meet a threshold of quality. 
We believe that students, particularly disadvantaged, high-need 
students who are the most vulnerable, are not well served by enrollment 
in programs that leave them with limited or low-paying job prospects 
and with crushing debt that they are unable to repay. Students who 
complete their educational programs should not expect results that 
leave them in a worse situation than when they began their educational 
programs. We believe the regulations will hold institutions accountable 
and ensure that students can have confidence in the quality of the 
educational programs in which they invest their time, energy, and 
money. The Department has a fiscal responsibility to American taxpayers 
to ensure the value of education provided by all institutions and 
programs that are eligible for Federal student aid, regardless of 
whether they are public, private nonprofit, or proprietary 
institutions, and these regulations will aid the Department in 
achieving the best possible return on taxpayers' investment.
    Changes: None.

Gainful Employment in a Recognized Occupation (Sec. Sec.  600.2, 600.4, 
600.5, 600.0, 668.6, and 668.8) Gainful Employment Reporting and 
Disclosure Requirements (Sec.  668.6)

General

    Comment: Many commenters believed that the proposed reporting and 
disclosure requirements should apply to all programs, regardless of the 
type of institution or credential awarded, or whether the programs are 
otherwise subject to the gainful employment provisions. Alternatively, 
other commenters maintained that since these requirements were targeted 
to prevent known abuses in the for-profit sector, they should apply 
only to those institutions.
    A number of commenters supported the proposed requirements and Web-
based disclosure approach. Some of the commenters urged the Department 
to require institutions to provide the information under Sec.  668.6(b) 
in a clear, prominent, user-friendly, and easily understood manner. The 
commenters also recommended that this information be given directly to 
prospective students prior to enrolling or making a verbal or written 
commitment to enroll. Other commenters made similar suggestions 
including making the information available in a prominent, clear, and 
conspicuous location in the first promotional materials conveyed to 
prospective students. Another commenter believed that disclosures could 
be helpful if they are offered early in the process and are clear and 
conspicuous. However, the commenter opined that there is virtually no 
evidence that disclosures impact consumer decision making in a 
meaningful way. The commenter further stated that the fiction that 
disclosures are sufficient to regulate markets is especially apparent 
for low-literate consumers, citing an example where a client was 
pressured to enroll in a medical assisting program at a for-profit 
institution even though she dropped out of school in the 9th grade and 
had a 6th grade reading level. The student did not complete the 
program, never found work, and defaulted on her loans. The commenter 
concluded that disclosures are not an adequate counterweight to school 
overreaching and are useful only in conjunction with substantive 
standards.
    Discussion: As we noted in the NPRM for these regulations (75 FR 
34808-34809), the reporting and disclosure requirements in Sec.  668.6 
apply only to programs that prepare students for gainful employment, as 
provided under sections 102(b) and (c) and 101(b)(1) of the HEA.
    With regard to the comments on how an institution should disclose 
on its Web site the information required in Sec.  668.6(b), and when it 
would be most beneficial to students to receive this information, we 
expect institutions to abide by the intent of the provisions--to enable 
students to make an informed choice about a program--by making the 
disclosures in a clear, timely, and meaningful manner. To this end, and 
to help ensure that the disclosures are easily accessible, an 
institution must prominently provide the required information on the 
home page of its program Web site and provide a prominent and direct 
link to this page on any other Web page about a program. The 
information displayed must be in an open format that can be retrieved, 
downloaded, indexed, and searched by commonly used Web search 
applications. An open format is one that is platform-independent, is 
machine-readable, and is made available to the public without 
restrictions that would impede the reuse of that information.
    In addition, we agree with the suggestion that an institution 
should be required to make this information available in the 
promotional materials

[[Page 66836]]

conveyed to prospective students. To promote the goal of facilitating 
informed choice, the disclosure must be simple and meaningful.
    The Department intends to develop in the future a disclosure form 
and will be seeking public comment about the design of the form through 
the information collection process under the Paperwork Reduction Act of 
1995 (PRA). While the form will be developed through that process, the 
regulations require institutions to provide clear and prominent notice, 
delivered to students at appropriate times and in promotional materials 
prior to enrollment. Until a form is developed and approved under the 
PRA process, institutions must comply with these disclosure 
requirements independently. In addition, we agree with the comments 
that disclosures alone are likely to be inadequate and have proposed to 
establish program performance standards in our NPRM on Program 
Integrity--Gainful Employment that was published in the Federal 
Register on July 26, 2010 (75 FR 43616).
    Changes: Section 668.6(b) has been revised to provide that an 
institution must prominently provide the information it is required to 
disclose about a program in a simple and meaningful manner on the home 
page of its program Web site, and provide prominent and direct links to 
this page on any other Web page containing general, academic, or 
admissions information about the program. The revised provision also 
states that an institution must use the disclosure form developed by 
the Secretary when it becomes available and the disclosure information 
must be displayed on the institution's Web site in an open format that 
can be retrieved, downloaded, indexed, and searched by commonly use Web 
search applications. An open format is one that is platform-
independent, is machine-readable, and is made available to the public 
without restrictions that would impede the reuse of that information.
    Finally, Sec.  668.6(b) has been revised to provide that an 
institution must make the information available in the promotional 
materials conveyed to prospective students.

Placement Rates

    Comment: Many commenters objected to using the placement rate 
calculation in Sec.  668.8(g) arguing that it is overly burdensome and 
administratively complex. The commenters opined that tracking a student 
for 180 days after graduation for a period of 13 weeks was too long and 
believed that it would be virtually impossible for the Department or 
any other auditor to affirm the accuracy of the placement data because 
the tracking period represents nothing more than a snap-shot of how 
many students were employed for 13 weeks at the time the data was 
collected. The commenters asserted that if the Department requires 
placement information to be disclosed to students, the information that 
an institution currently provides to its accrediting agency, which 
routinely assesses that information, would be more accurate. In 
addition, the commenters were concerned about potential conflicts with 
the misrepresentation provisions in subpart F of part 668 on the 
grounds that any placement rate disclosed to students would be obsolete 
as soon as it was posted to an institution's Web site. Some of the same 
commenters objected to the proposed alternative of relying on State-
sponsored workforce data systems arguing that there is no consistency 
between the States that maintain employment outcome data, and that in 
many cases the data collected fails to provide a full and accurate 
depiction of the demand, growth, and earnings of key occupations.
    A number of commenters opposed using the placement rate calculation 
in Sec.  668.8(g) arguing that it is a highly restrictive measure 
developed solely for extremely short programs offered by a few 
institutions. The commenters noted that an institution is already 
required under Sec.  668.41(d)(5) to disclose any placement rates it 
calculates and that it would be confusing to students to disclose any 
additional rates beyond those that it is required to calculate under 
accrediting agency or State requirements. Some of these commenters 
suggested that in cases where an institution is not required by its 
accrediting agency to calculate placement rates, the institution should 
calculate the rates using a methodology from a national accrediting 
agency or the State in which the institution is authorized to operate. 
Under either the agency or State methodology, the commenters requested 
flexibility in determining the rates for degree programs because 
employment opportunities for graduates of degree programs are much more 
diverse than for graduates of occupationally specific training 
programs.
    One commenter stated that its institution's mission of educating 
working adults is at odds with the concept of placement rates--many of 
the institution's students are already employed and enroll to enhance 
their careers through further education. In addition, the commenter 
stated that it would be impractical to administer a job placement 
regime for students taking online programs who reside throughout the 
world. The commenter recommended that placement rates be calculated in 
accordance with an institution's accrediting agency or State 
requirements, but that the proposed disclosures should not apply where 
there are no agency or State requirements. As an alternative, the 
commenter suggested that regionally accredited institutions, which are 
not required to track employment outcomes, conduct post graduation 
surveys asking program graduates if they are working in their field. An 
affirmative response would count as a ``placement'' even if the 
graduate maintained the same employment he or she had while attending 
the institution. Along the same lines, another commenter suggested that 
the Department allow an institution that is not required by an outside 
agency to calculate placement rates, to develop and implement a method 
that best reflects the make-up of its student body, including surveys, 
collecting employer documentation, or other methods.
    One commenter objected to using the placement rate calculation 
intended for short-term programs in Sec.  668.8(g) because all of its 
programs were at or above the baccalaureate level. While the commenter 
stated that requiring public disclosure of relevant outcomes puts 
pressure on an institution to ensure that it is providing a good 
education to its students, the commenter suggested that unless an 
institution's accrediting agency or State requires it to disclose 
placement rates, the institution should only disclose rates that it 
calculates on an annual basis for internal purposes or any employment 
or placement information it receives from surveying its students. 
Another commenter made the same suggestions and asked the Department to 
clarify that placement rates would only need to be updated annually.
    Another commenter argued that the placement rate methodology in 
Sec.  668.8(g) was never intended for gainful employment purposes and 
made several recommendations including:
    (1) Excluding from the total number of students who completed a 
program during an award year, the students who are unable to seek 
employment due to a medical condition, active military duty, 
international status, continuing education, incarceration, or death. In 
addition, an institution could exclude those graduates who certify they 
are not seeking employment or those that it is unable to locate. The 
commenter specified the documentation an

[[Page 66837]]

institution would have to obtain for each of these exclusions.
    (2) Removing the requirement in Sec.  668.8(g)(1)(iii) that a 
student must be employed, or have been employed, for 13 weeks and 
allowing students to find employment within 6 months from the last 
graduation date in the award year.
    (3) Replacing the employer certification, income tax form, and 
Social Security provisions in Sec.  668.8(g)(3) with other ways that an 
institution would verify that a student obtained gainful employment.
    Several commenters suggested using the methodology developed by a 
national accrediting agency because the proposed method in Sec.  
668.8(g) does not take into consideration circumstances that would 
prevent graduates from seeking employment, such as health issues, 
military deployment or continuing education, or practical issues 
related to the employment of international or foreign students.
    Several commenters stated it would be difficult, if not impossible, 
for these institutions to obtain the data needed to calculate placement 
rates. Some of these commenters supported the use of State-sponsored 
workforce data systems, but cautioned that many community colleges 
would not be able to obtain sufficiently detailed placement information 
through data matches with these systems to satisfy the proposed 
requirements. Other commenters noted that some States do not have 
workforce data systems, so institutions in those States would have to 
use the non preferred placement rate methodology under Sec.  668.8(g). 
Many of the commenters believed the requirement to document employment 
on a case-by-case basis under Sec.  668.8(g)(2) would be overly 
burdensome and labor intensive. Others opined that the placement 
provisions are counterproductive, claiming that a substantial number of 
community colleges eschewed participating in programs under the 
Workforce Investment Act because of placement rate requirements. On the 
other hand, another commenter supported the placement rate provisions 
and recommended that all institutions in a State participate in a 
workforce data system, if the State has one. The commenter asked the 
Department to clarify how the data obtained from a workforce data 
system would be used to meet the placement rate requirements and the 
timeline for reporting those rates. In addition, the commenter 
suggested revising the placement rate provisions in Sec.  668.8(g) to 
more closely align those provisions with practices used by State data 
systems.
    One commenter stated that in order to receive Federal funding under 
the Carl D. Perkins Career and Technical Education Act, a program must 
receive State approval that entails a review of documentation requiring 
that the program be high demand, high wage or in an emerging field. As 
part of the State review, the institution provides documentation of 
potential placement. The commenter recommended that the Department 
waive the gainful employment provisions for all certificate programs 
approved by the State under this review process.
    A commenter supported disclosing placement rate data, but noted 
that the institution would only be able to report on graduates who are 
employed in the State or continued their education. The institution 
would not be able to provide occupationally specific placement data, or 
data about graduates who find employment outside the State, because the 
State's labor data base only tracks (1) the type of business a graduate 
is employed by, not the occupation of the graduate, and (2) graduates 
who are employed in the State.
    Several other commenters supported the proposed placement rate 
disclosures, but believed that the provisions in Sec.  668.8(g) were 
inadequate. The commenters made several suggestions, including:
    (1) Expanding the category of students who complete a program 
(currently in Sec.  668.8(g)(1)(i)) to include students who are 
eligible for a degree or certificate. The commenters stated they are 
aware of institutions that delay providing the degree or certificate to 
students, which omits these students from the placement rate 
calculation.
    (2) Specifying that the time standards in Sec.  668.8(g) 
(employment within 180 days of completing a program and employment for 
13 weeks) also apply to rates calculated from State workforce data 
systems.
    (3) Specifying that employment must be paid. The commenters stated 
they are aware of institutions that have counted students in unpaid 
internships as being employed.
    (4) To be counted in the placement rate, providing that a student 
must find employment in one of the SOC codes identified for the program 
unless the student finds a job that pays more than any of the 
identified SOC codes. The commenters believed that some institutions 
stretch the concept of a ``related'' comparable job as currently 
provided in Sec.  668.8(g)(1)(ii). For example, an institution might 
include any job at a hospital, including the lowest paying jobs, when 
the student was trained for a skilled job such as an x-ray technician. 
The higher earnings recommendation would condition a successful 
placement but allow an institution to count a student employed in an 
unrelated SOC.
    (5) To address the situation where a student cannot qualify for 
employment until he or she passes a licensing or certification 
examination, providing that the 180-day period during which the student 
would otherwise have to find employment should start after the results 
of the examination are available.
    (6) To be counted in the placement rate, specifying that a student 
must work for at least 32 hours per week. The commenters stated that 
they are aware of institutions that include as successful placements 
any student that works at any time during a week, even if it is only 
for a few hours per week.
    (7) Specifying that institutions must use a State data system if it 
is available to ensure accurate reporting.
    (8) If the institution chooses to demonstrate placement rates by 
salary, providing that documentation must include signed copies of tax 
returns, W-4s or paystubs to document earnings.
    (9) To more thoroughly substantiate placement rates, requiring the 
auditor who performs the institution's compliance audit under Sec.  
668.23 to directly contact former students and employers whose 
statements were obtained by the institution.
    Discussion: We are persuaded by the comments that using the 
methodology in Sec.  668.8(g) may not be the most appropriate method 
for determining the placement rate for the majority of the programs 
that are subject to the gainful employment provisions. Moreover, in 
view of the varied suggestions for how the rate should be calculated, 
documented, and verified, in early 2011 we will begin the process for 
developing the method to calculate placement rates for institutions 
through the National Center for Education Statistics (NCES). These 
final regulations establish some reporting requirements using existing 
placement data as explained below, with a transition in a later period 
for institutions to disclose placement rates obtained from the NCES 
methodology. NCES will develop a placement rate methodology and the 
processes necessary for determining and documenting student employment 
and reporting placement data to the Department using the Integrated 
Postsecondary Education Data System (IPEDS).
    NCES employs a collaborative process that affords the public 
significant opportunities to participate in making, and commenting on, 
potential changes to IPEDS. Potential changes are

[[Page 66838]]

examined by the IPEDS Technical Review Panel (TRP), which is a peer 
review panel that includes individuals representing institutions, 
education associations, data users, State governments, the Federal 
government, and other groups. The TRP meets to discuss and review 
IPEDS-related plans and looks at the feasibility and timing of the 
collection of proposed new items, added institutional burden, and 
possible implementation strategies. After each meeting, a meeting 
report and suggestions summary is posted to the IPEDS Web site. The 
postsecondary education community then has 30 days to submit comments 
on the meeting report and summary. After those comments are considered, 
the Department requests the Office of Management and Budget (OMB) to 
include the changes in the next IPEDS data collection. This request for 
forms clearance is required by the Paperwork Reduction Act of 1995, as 
amended. A description of the changes and the associated institutional 
reporting burden is included in the request which is then published by 
OMB as a notice in the Federal Register, initiating a 60-day public 
comment period. After that, a second notice is published in the Federal 
Register, initiating a 30-day public comment period. Issues raised by 
commenters are resolved, and then OMB determines whether to grant forms 
clearance. Only OMB cleared items are added to the IPEDS data 
collection.
    Although we agree with the commenters that the data maintained or 
processes used by workforce data systems may vary State by State, and 
that the data systems are not available to all institutions or in all 
States, we continue to believe that these data systems afford 
participating institutions an efficient and accurate way of obtaining 
employment outcome information. However, because of State-to-State 
variances and in response to comments about how employment outcome data 
translate to a placement rate, NCES will develop the methods needed to 
use State employment data to calculate placement rates under its 
deliberative process for IPEDS.
    Until the IPEDS-developed placement rate methodology is 
implemented, an institution that is required by its accrediting agency 
or State to calculate a placement rate, or that otherwise calculates a 
placement rate, must disclose that rate under the current provisions in 
Sec.  668.41(d)(5). However, under new Sec.  668.6(b), the institution 
must disclose on its Web site and promotional materials the placement 
rate for each program that is subject to the gainful employment 
provisions if that information is available or can be determined from 
institutional placement rate calculations. Consequently, to satisfy the 
new disclosure requirements, an institution that calculates a placement 
rate for one or more programs would disclose that rate under Sec.  
668.6(b) by identifying the accrediting agency or State agency under 
whose requirements the rate was calculated. Otherwise, if an 
accrediting agency or State requires an institution to calculate a 
placement rate only at the institutional level, the institution must 
use the agency or State methodology to calculate the placement rate for 
each of its programs from information it already collects and must 
disclose the program-specific placement rates in accordance with Sec.  
668.6(b).
    Changes: Section 668.6(b) has been revised to specify that an 
institution must disclose for each program the placement rate 
calculated under a methodology developed by its accrediting agency, 
State, or the National Center for Education Statistics (NCES). The 
institution must disclose the accrediting agency or State-required 
placement rate beginning on July 1, 2011 and must identify the 
accrediting agency or State agency under whose requirements the rate 
was calculated. The NCES-developed placement rate would have to be 
disclosed when the rates become available.

On-Time Completion Rate

    Comment: Many commenters asked the Department to clarify the 
meaning of ``on-time'' completion rate. Other commenters assumed that 
``on-time'' completion referred to the graduation rate currently 
calculated under the Student Right to Know requirements in Sec.  
668.45, or encouraged the Department to either (1) adopt the current 
requirements in Sec.  668.45 for gainful employment purposes, or (2) 
use a completion rate methodology from an accrediting agency or State, 
to minimize confusion among students and burden on institutions. One of 
the commenters suggested that if the Department intended ``on-time'' to 
mean 100 percent of normal time for completion, then the proposed rate 
should be calculated in the same manner as the completion rate in Sec.  
668.45 for normal time and incorporate the exclusions for students 
transferring out of programs and other exceptions identified in Sec.  
668.45(c) and (d). Another commenter opined that absent significant 
enforcement to ensure that all institutions consistently use the same 
definition of ``on-time'' completion rate, students will be unfairly 
led to believe that institutions who report conservatively have less 
favorable outcomes than institutions who report aggressively. One 
commenter cautioned that it may be misleading to focus heavily on 
graduation and placement rates, particularly for institutions whose 
students are employed while seeking a degree.
    A number of commenters supported the ``on-time'' completion 
requirement, and in general all of the proposed disclosures, stating 
that providing outcome data would allow prospective students to make 
more informed decisions. The commenters believed that better outcome 
data will help to ensure that the taxpayer investment is well spent, 
and that students are protected from programs that overcharge and 
under-deliver.
    A commenter stated that under State licensing requirements for 
cosmetology schools a student must be present, typically for 1,500 
hours, to qualify for graduation and to complete the program. Taking 
attendance and ensuring that a student is present for these hours is 
typically required. The commenter reasoned that for a student to 
complete the program ``on-time'' the student could not miss a single 
day or even be late for classes as opposed to a credit hour program 
where a student does not have to attend classes 100 percent of the time 
but will still be considered to satisfy the on-time requirement. To 
mitigate the difference between clock and credit hour programs and 
account for legitimate circumstances where a student would miss 
classes, the commenter suggested that the standard for ``on-time'' 
incorporate the concept of a maximum timeframe under the satisfactory 
academic progress provisions that allow a student to complete a program 
at a specified rate.
    Discussion: In proposing the on-time completion rate requirement, 
the Department intended to include all students who started a program 
to determine the portion of those students who completed the program no 
later than its published length. This approach differed significantly 
in two ways from the completion rate under the Student Right to Know 
(SRK) provisions in Sec.  668.45. First, in calculating the completion 
rate the SRK methodology includes in the cohort only full-time, first-
time undergraduate students, not all students. Second, the SRK rate is 
based on 150 percent of normal time, not the actual length of the 
program. However, in view of the comments suggesting that we use the 
SRK methodology, or a modified version, we examined whether the cohort 
of students under SRK could be expanded to include all students and 
from that,

[[Page 66839]]

whether a completion rate could be calculated based on normal time, as 
defined in Sec.  668.41(a). We concluded that doing this would be 
difficult and too complex for institutions and the Department.
    We believe prospective students should know the extent to which 
former students completed a program on time, not only to ground their 
expectations but to plan for the time they will likely be attending the 
program--an important consideration for many students who cannot afford 
to continue their education without earnings from employment. 
Therefore, to minimize burden on institutions while providing 
meaningful information to prospective students, an institution must 
calculate an on-time completion rate for each program subject to the 
gainful employment provisions by:
    (1) Determining the number of students who completed the program 
during the most recently completed award year.
    (2) Determining the number of students in step (1) who completed 
the program within normal time, regardless of whether the students 
transferred into the program or changed programs at the institution. 
For example, the normal time to complete an associate degree is two 
years. The two-year timeframe would apply to all students who enroll in 
the program. In other words, if a student transfers into the program, 
regardless of the number of credits the institution accepts from the 
student's attendance at the prior institution, the transfer credits 
have no bearing on the two-year timeframe. This student would still 
have two years to complete from the date he or she began attending the 
two-year program. To be counted as completing on time, a student who 
enrolls in the two-year program from another program at the institution 
would have to complete the two-year program in normal time beginning 
from the date the student started attending the prior program.
    (3) Dividing the number of students who completed within normal 
time in step (2) by the total number of completers in step (1) and 
multiplying by 100.
    With regard to the commenter who believed that a student could not 
miss a single day of classes to complete a program on time, we note 
that under Sec.  668.4(e) a student can be excused from attending 
classes. Under this section, a student may be excused for an amount of 
time that does not exceed the lesser of (1) any thresholds established 
by the institution's accrediting agency or State agency, or (2) 10 
percent of the clock hours in a payment period. Absent any State or 
accrediting agency requirements, for a typical payment period of 450 
clock hours a student could miss 45 hours. In the commenter's example 
of a 1,500 clock hour program, the student could miss 150 hours and 
still complete on time for this requirement. Also, under Sec.  
668.41(a), normal time for a certificate program is the time published 
in the institution's catalog and that time may include make-up days. 
So, an institution could schedule make-up days, as part of normal time, 
to enable students who missed classes to complete the number of hours 
required for State licensing purposes.
    Changes: Section 668.6(b) has been revised to specify how an 
institution calculates an on-time completion rate for its programs.

Median Loan Debt

    Comment: Many commenters objected strongly to the requirement in 
proposed Sec.  668.6(a)(4) that an institution report annually to the 
Department, for each student attending a program that leads to gainful 
employment, the amount each student received from private education 
loans and institutional financing plans.
    With regard to private education loans taken out by students, the 
commenters argued that because the loans are self-certified, in many 
cases an institution is not aware of the loans and should only have to 
report the amount of the private loans it knows about or the amount of 
those loans that were paid directly to the institution. Commenters 
representing students and consumer advocacy groups contended that most 
institutions have preferred lender lists, help students arrange private 
loans, recommend a lender, receive student payments from a lender, or 
otherwise have information about the lender. Consequently, to clarify 
that an institution cannot avoid reporting on private loans by feigned 
ignorance, the commenters suggested that an institution report any 
private loan it knows about or should reasonably know about. To clarify 
the meaning of ``private education loan'' one commenter suggested that 
the Department reference the definition in Sec.  601.2.
    With regard to institutional financing plans, many commenters, 
argued that an institution should only be required to report the amount 
of any remaining institutional loans or debt obligations owed by a 
student after he or she completes the program, not the amount of the 
loan or credit extended to the student at the start of, or during, the 
program.
    Many commenters asked the Department to clarify whether median loan 
debt would include only loan debt incurred by students who completed a 
particular program or loan debt incurred from previously attended 
programs or institutions. Some of the commenters argued that it would 
be difficult to determine the relevant loan debt of students who enroll 
in postbaccalaureate certificate programs and end up concurrently 
pursuing an associated master's degree. The commenters argued that 
extracting the portion of debt that applies to the certificate would be 
difficult, but reporting based on the total debt accumulated during the 
graduate-level enrollment period would overstate the amount borrowed if 
the intent was to report on the certificate program. They also believed 
that an institution would have to track loan debt pertaining to credits 
accepted for a program that were not necessarily earned by students who 
continue in a graduate program, including transfer credits accepted 
from other institutions. In addition, the commenters believed that for 
any undergraduate work that ``transfers up,'' the portion of the loan 
debt from that period would have to be identified. In view of these 
complexities and considering that two-year transfer programs are 
excluded from the reporting requirements, the commenters requested a 
similar exclusion for graduate certificate programs where the credits 
apply directly to a graduate degree. Along the same lines, other 
commenters requested that postbaccalaureate certificate programs or 
courses such as a certification as a school principal, district 
superintendent, or director of instruction be exempted from these 
regulations.
    A commenter requested an exemption for four-year degree-granting 
institutions stating that such institutions only have a handful of 
certificate programs that would be of no concern to the Department.
    A few commenters believed that institutions should either (1) be 
allowed to disclose separately the amount of loan debt students 
accumulate for institutional charges and the amount incurred for living 
expenses, or (2) not be required to disclose loan debt incurred for 
living expenses because that debt is incurred at the student's 
discretion and not be required to disclose loan debt incurred by a 
student at prior, unrelated institutions.
    Other commenters urged the Department to use the mean instead of 
the median loan debt arguing that using median debt would unjustly 
penalize students attending institutions with larger numbers of 
borrowers by

[[Page 66840]]

providing a competitive advantage to institutions with smaller 
populations of student loan borrowers.
    Many commenters supported the proposed requirement for disclosing 
the median debt of students who complete a program, but suggested that 
institutions should also disclose the median debt of noncompleters. The 
commenters stated that it was one thing for students to be told that 40 
percent graduate with $20,000 in loan debt, but it's another for them 
to understand that the majority of students who don't complete have 
$15,000 in loan debt they would have to repay. The commenters believed 
that separating the disclosures by completers and noncompleters would 
enable better comparisons between programs, and would not create the 
appearance of low median debt for programs with low completion rates. 
In addition, to minimize burden the commenters suggested that 
collecting the data needed to calculate the median loan debt could 
appropriately be limited to programs in which a significant share of 
students borrow. According to the commenters, this approach would 
ensure that potential students and the Department know when a program 
has high student borrowing rates and low completion rates.
    Discussion: We agree with the commenters that the debt an 
institution reports under Sec.  668.6(a)(4) for institutional financing 
plans is the amount a student is obligated to repay upon completing the 
program. Under this same section, an institution must also report the 
amount of any private education loans it knows that students received.
    The HEOA amended both the HEA and the Truth-in-Lending Act (TILA) 
to require significant new disclosures for borrowers of private 
education loans. The HEOA also requires private education lenders to 
obtain a private loan self-certification form from every borrower of 
such a loan before the lender may disburse the private education loan.
    Although the term ``private education lender'' is defined in the 
TILA, the Federal Reserve Board considers an entity to be a private 
education lender, including an institution of higher education, if it 
meets the definition of ``creditor.'' The term ``creditor'' is defined 
by the Federal Reserve Board in 12 CFR 226.2(a)(17) as a person who 
regularly extends consumer credit that is subject to a finance charge 
or is payable by written agreement in more than four installments (not 
including a down payment), and to whom the obligation is initially 
payable, either on the face of the note or contract, or by agreement 
when there is no note or contract. A person regularly extends consumer 
credit only if it extended credit more than 25 times (or more than 5 
times for transactions secured by a dwelling) in the preceding calendar 
year. If a person did not meet these numerical standards in the 
preceding calendar year, the numerical standards must be applied to the 
current calendar year.
    The term private education loan is defined in 12 CFR 226.46(b)(5) 
as an extension of credit that:
     Is not made, insured, or guaranteed under title IV of the 
HEA;
     Is extended to a consumer expressly, in whole or in part, 
for postsecondary educational expenses, regardless of whether the loan 
is provided by the educational institution that the student attends;
     Does not include open-end credit or any loan that is 
secured by real property or a dwelling; and
     Does not include an extension of credit in which the 
covered educational institution is the creditor if (1) the term of the 
extension of credit is 90 days or less (short-term emergency loans) or 
(2) an interest rate will not be applied to the credit balance and the 
term of the extension of credit is one year or less, even if the credit 
is payable in more than four installments (institutional billing 
plans).
    Examples of private education loans include, but are not limited 
to, loans made expressly for educational expenses by financial 
institutions, credit unions, institutions of higher education or their 
a