Program Integrity and Improvement, 92232-92263 [2016-29444]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 81, Number 243 (Monday, December 19, 2016)]
[Rules and Regulations]
[Pages 92232-92263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29444]



[[Page 92231]]

Vol. 81

Monday,

No. 243

December 19, 2016

Part IV





Department of Education





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 34 CFR Parts 600 and 668





Program Integrity and Improvement; Final Rule

Federal Register / Vol. 81 , No. 243 / Monday, December 19, 2016 / 
Rules and Regulations

[[Page 92232]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 668

[Docket ID ED-2016-OPE-0050]
RIN 1840-AD20


Program Integrity and Improvement

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the State authorization sections of the 
Institutional Eligibility regulations issued under the Higher Education 
Act of 1965, as amended (HEA). In addition, the Secretary amends the 
Student Assistance General Provisions regulations issued under the HEA, 
including the addition of a new section on required institutional 
disclosures for distance education and correspondence courses.

DATES: These regulations are effective July 1, 2018.

FOR FURTHER INFORMATION CONTACT: Sophia McArdle, U.S. Department of 
Education, 400 Maryland Ave. SW., Room 6W256, Washington, DC 20202. 
Telephone (202) 453-6318 or by email: sophia.mcardle@ed.gov. Scott 
Filter, U.S. Department of Education, 400 Maryland Ave. SW., Room 
6W253, Washington, DC 20202. Telephone (202) 453-7249 or by email: 
scott.filter@ed.gov. If you use a telecommunications device for the 
deaf (TDD) or a text telephone (TTY), call the Federal Relay Service 
(FRS), toll free, at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: 

Executive Summary

    Purpose of This Regulatory Action: This regulatory action 
establishes requirements for institutional eligibility to participate 
in title IV, HEA programs. These financial aid programs are the Federal 
Pell Grant program, the Federal Supplemental Educational Opportunity 
Grant, the Federal Work-Study program, the Teacher Education Assistance 
for College and Higher Education (TEACH) Grant program, Federal Family 
Educational Loan Program, and the William D. Ford Direct Loan program.
    The HEA established what is commonly known as the program integrity 
``triad'' under which States, accrediting agencies, and the Department 
act jointly as gatekeepers for the Federal student aid programs 
mentioned above. This triad has been in existence since the inception 
of the HEA; and as an important component of this triad, the HEA 
requires institutions of higher education to obtain approval from the 
States in which they provide postsecondary educational programs.
    This requirement recognizes the important oversight role States 
play in protecting students, their families, taxpayers, and the general 
public as a whole. The Department established regulations on October 
29, 2010 (75 FR 66832) to clarify the minimum standards of State 
authorization that an institution must demonstrate in order to 
establish eligibility to participate in HEA title IV programs. While 
the regulations established in 2010 made clear that all eligible 
institutions must have State authorization in the States in which they 
are physically located, the U.S. Court of Appeals for the District of 
Columbia set aside the Department's regulations requiring authorization 
of distance education programs or correspondence courses by other 
States where students were located outside of the State with the 
physical location. Furthermore, the 2010 regulations did not address 
additional locations or branch campuses located in foreign locations. 
As such, these regulations clarify the State authorization requirements 
an institution must comply with in order to be eligible to participate 
in HEA title IV programs, ending uncertainty with respect to State 
authorization and closing any gaps in State oversight to ensure 
students, families, and taxpayers are protected.
    The Office of the Inspector General (OIG), the Government 
Accountability Office (GAO), and others have voiced concerns over 
fraudulent practices, issues of noncompliance with requirements of the 
title IV programs, and other challenges within the distance education 
environment. Such practices and challenges include misuse of title IV 
funds, verification of student identity, and gaps in consumer 
protections for students. The clarified requirements related to State 
authorization will support the integrity of the title IV, HEA programs 
by permitting the Department to withhold those title IV funds from 
institutions that are not authorized to operate in a given State. 
Because institutions that offer distance education programs usually 
offer the programs in multiple States, there are unique challenges with 
respect to oversight of these programs by States and other agencies.
    Many States and stakeholders have expressed concerns with these 
unique challenges, especially those related to ensuring adequate 
consumer protections for students as well as compliance by institutions 
participating in this sector. For example, some States have expressed 
concerns over their ability to identify which out of State providers 
are operating in their States; whether those programs prepare their 
students for employment, including meeting licensure or certification 
requirements in those States; the academic quality of programs offered 
by those providers; as well as the ability to receive, investigate and 
address student complaints about out-of-State institutions. One 
stakeholder provided an example of a student in California who enrolled 
in an online program offered by an institution in Virginia, but then 
informed the institution of her decision to cancel her enrollment 
agreement. Four years later, that student was told that her wages would 
be garnished if she did not begin making monthly payments on her debt 
to the institution. Although the State of California had a cancellation 
law that may have been beneficial to the student, that law did not 
apply due to the institution's lack of physical presence in the State. 
According to the stakeholder, the Virginia-based institution was also 
exempt from oversight by the appropriate State oversight agency, making 
it problematic for the student to voice a complaint or have any action 
taken on it. Documented wrong-doing has been reflected in the actions 
of multiple State Attorney Generals who have filed lawsuits against 
online education providers due to misleading business tactics. For 
example, the Attorney General of Iowa settled a case against a distance 
education provider for misleading Iowa students because the provider 
incorrectly represented that its educational programs would qualify a 
student to earn teacher licensure. As such, this regulatory action also 
establishes requirements for institutional disclosures to prospective 
and enrolled students in programs offered through distance education or 
correspondence courses, which we believe will protect students by 
providing them with important information that will aid their decisions 
regarding whether to enroll in distance education programs or 
correspondence courses as well as improve the efficacy of State-based 
consumer protections for students.
    Since distance education may involve multiple States, authorization 
requirements among States may differ, and students may be unfamiliar 
with or fail to receive information about complaint processes, 
licensure requirements, or other requirements of authorities in States 
in which they do not reside. These disclosures will provide consistent 
information necessary to safeguard students and taxpayer investments in 
the title IV, HEA programs. By requiring disclosures

[[Page 92233]]

that reflect actions taken against a distance education program, how to 
lodge complaints against a program they believe has misled them, and 
whether the program will lead to certification or licensure will 
provide enrolled and prospective students with important information 
that will protect them.
    Summary of the Major Provisions of This Regulatory Action: The 
regulations would--
     Require an institution offering distance education or 
correspondence courses to be authorized by each State in which the 
institution enrolls students, if such authorization is required by the 
State, in order to link State authorization of institutions offering 
distance education to institutional eligibility to participate in the 
title IV, HEA programs, including through a State authorization 
reciprocity agreement.
     Define the term ``State authorization reciprocity 
agreement'' to be an agreement between two or more States that 
authorizes an institution located and legally authorized in a State 
covered by the agreement to provide postsecondary education through 
distance education or correspondence courses to students residing in 
other States covered by the agreement and does not prohibit any State 
in the agreement from enforcing its own statutes and regulations, 
whether general or specifically directed at all or a subgroup of 
educational institutions.
     Require an institution to document the State process for 
resolving complaints from students enrolled in programs offered through 
distance education or correspondence courses.
     Require that an additional location or branch campus 
located in a foreign location be authorized by an appropriate 
government agency of the country where the additional location or 
branch campus is located and, if at least half of an educational 
program can be completed at the location or branch campus, be approved 
by the institution's accrediting agency and be reported to the State 
where the institution's main campus is located.
     Require that an institution provide public and 
individualized disclosures to enrolled and prospective students 
regarding its programs offered solely through distance education or 
correspondence courses.
    Costs and Benefits: The regulations support States in their efforts 
to develop standards and increase State accountability for a 
significant sector of higher education--the distance education sector. 
In 2014, over 2,800,000 students were enrolled in distance education 
programs.\1\ The potential primary benefits of the regulations are: (1) 
Increased transparency and access to institutional/program information 
for prospective students through additional disclosures, (2) updated 
and clarified requirements for State authorization of distance 
education and foreign additional locations, and (3) a process for 
students to access complaint resolution from the State in which the 
institution is authorized and the State in which the students reside. 
The clarified requirements related to State authorization also support 
the integrity of the title IV, HEA programs by permitting the 
Department to withhold title IV funds from institutions that are not 
authorized to operate in a given State. Institutions that choose to 
offer distance education will incur costs in complying with State 
authorization requirements as well as costs associated with the 
disclosures that would be required by the regulations.
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    \1\ 2015 Digest of Education Statistics: Table 311.15: Number 
and percentage of students enrolled in degree-granting postsecondary 
institutions, by distance education participation, location of 
student, level of enrollment, and control and level of institution: 
Fall 2013 and Fall 2014.
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    Public Comments: In response to our invitation in the notice of 
proposed rulemaking (NPRM) published July 25, 2016 (81 FR 48598), 139 
parties submitted comments on the proposed regulations. We also had a 
consultative meeting with staff from the Department of Defense. We 
group major issues according to subject, with appropriate sections of 
the regulations to which they pertain. Generally, we do not address 
technical or other minor changes.
    Analysis of Comments and Changes: An analysis of the comments and 
of any changes to the regulations since publication of the NPRM 
follows:

General Comments

    Comments: Commenters were concerned that the Department has 
overstepped its statutory authority under the HEA, stating that, much 
like the previous State Authorization regulations, the requirement 
under the proposed regulations that schools offering online and 
distance learning programs meet licensing requirements in every State 
where their students happen to be found is contrary to the HEA. Rather, 
the commenters asserted that HEA requires only that an institution be 
authorized in the State where it is located, not where the student is 
located. The commenters noted a discussion from H.R. Rep. No. 105-481, 
at 148 (1998) (explaining that ``States have a number of options in 
overseeing institutions within their boundaries'') and conclude that 
the Department's distance education requirements exceed the statutory 
scope.
    Discussion: We disagree with the commenters and believe that we 
have the authority to require an institution to obtain any required 
State approval for distance education programs by each and every State 
in which its enrolled students reside. The HEA requires institutions to 
be authorized by States, and the Department recognizes that this 
encompasses a State's authority to set standards for in-State students 
for educational programs that originate outside of that State. 
Additionally, the language in the legislative history that the 
commenters quoted was a statement made to explain the elimination from 
the HEA of the State Postsecondary Review Program that had required 
States to create certain postsecondary oversight functions to conduct 
reviews at physical school locations, and that language did not address 
whether States could establish requirements over distance education 
programs.
    Changes: None.

Section 600.2 Definitions

State Authorization Reciprocity Agreement
    Comments: Several commenters supported the Department's definition 
of the term ``State authorization reciprocity agreement.'' Many 
commenters requested clarification on the term ``consumer protection 
laws'' under the definition of a State authorization reciprocity 
agreement. Some commenters suggested that the Department's 
clarification specify that ``consumer protection laws'' encompasses a 
State's consumer protection statutes and the regulations interpreting 
those statutes, both general and specific, including those directed at 
all or a subset of educational institutions. Some commenters further 
asked that ``consumer protection laws'' include laws specifically 
applicable to higher education institutions that cover the following: 
Disclosures to current and prospective students, the contents of any 
documents provided to students or prospective students, prohibited 
practices, refunds, cancellation rights, student protection funds or 
bonds, private causes of action, and student complaint standards and 
procedures. Other commenters asked for clarification that any State 
authorization reciprocity agreement that the Department authorizes for 
the purpose of institutional title IV eligibility must be governed and 
controlled by member

[[Page 92234]]

States under clearly defined policies and procedures that allow the 
member States to exercise ultimate authority for establishing, 
maintaining, and enforcing conditions of State and institutional 
participation in the agreement. Commenters also recommended that 
reciprocity agreements be required to include standard due process 
requirements, similar to those provided in proceedings by State 
agencies, the Department, and by accrediting agencies. Several 
commenters argued that States should not be forced to accept conditions 
that would limit specific State requirements such as refund policies in 
order to join a State authorization reciprocity agreement.
    Other commenters were concerned that the proposed provision on 
``consumer protection laws'' would make the institutions need to comply 
with additional State requirements besides the conditions required 
under the State reciprocity agreement. This was described as something 
that could result in the end of reciprocity agreements because States 
would still be able to enforce their own rules, regardless of the 
reciprocity agreement. Other commenters suggested that ``consumer 
protection laws'' be clarified to refer to a State's general consumer 
protection laws (commonly dealing with issues such as fraud, 
misrepresentation or abuse, and applicable to all entities doing 
business in the State) rather than any consumer protection aspects of 
laws dealing specifically with postsecondary education. Some commenters 
specifically cited the existing State Authorization Reciprocity 
Agreement (SARA) administered by the National Council for State 
Authorization Reciprocity Agreement (NC-SARA) as allowing SARA member 
States to have authority to enforce all their-general purpose laws 
against non-domestic institutions (including SARA participating 
institutions) providing distance education in the State, including, but 
not limited to, those laws related to consumer protection and 
fraudulent activities, where the term ``general-purpose law'' is 
defined as ``one that applies to all entities doing business in the 
State, not just institutions of higher education.'' Commenters stated 
that this type of definition would ensure that distance education 
providers operating in a given State under SARA must still comply with 
the consumer protection standards any other business must meet, and 
noted that those provisions are commonly enforced by the offices of 
Attorneys General. The commenters further said that this approach also 
ensures that a given State may limit the applicability of its own laws 
by recasting State authorization requirements focused solely on 
institutions of higher education as ``consumer protection laws.''
    In a related vein, commenters recommended that the Department 
clarify that a State authorization reciprocity agreement cannot bar any 
State from membership on grounds related to its consumer protection 
laws because a State's consumer protection statutes and regulations 
should never be a barrier to its entry into a reciprocity agreement. 
Commenters recommended that the word ``participating'' should be 
replaced with the word ``any'' so that a prospective State 
authorization reciprocity agreement would not be able to cite the word 
``participating'' to refuse to admit an otherwise eligible State for 
membership in, or force a State to withdraw from, an agreement on the 
grounds that the State's consumer protection laws are too rigorous.
    Discussion: We appreciate commenters' support regarding the 
definition of the term State authorization reciprocity agreement.
    We define a State authorization reciprocity agreement as ``an 
agreement between two or more States,'' not an agreement between States 
and a non-State entity. Therefore, while States may permit a non-State 
entity to oversee the requirements of a State authorization reciprocity 
agreement, we agree with the comment that the ultimate responsibility 
for establishing, maintaining, and enforcing such requirements must 
rest with the member States that are parties to the agreement. An 
agreement that placed such responsibilities with a non-State entity 
would not fulfill the definition of a State authorization reciprocity 
agreement. While we agree that the ultimate responsibility for 
resolving disagreements between two participating States who are party 
to an agreement rests with those States, not with a non-State entity, 
we decline to define due process procedures for resolving conflicts or 
disagreements between States. The member States to an agreement have 
the discretion to establish due process requirements in the manner that 
they so choose.
    We disagree with the recommendation by some commenters that the 
term ``consumer protection laws'' be clarified to only refer to the 
laws that apply to all entities doing business in the State, not just 
institutions of higher education, so that the resulting outcome would 
be that laws that applied only to institutions of higher education 
would be displaced by a State reciprocity agreement. Rather, we believe 
that if a State has laws that are specific to postsecondary 
institutions, the State's laws should not be preempted by a reciprocity 
agreement that does not recognize those State laws. Thus, we believe 
that the definition of a State authorization reciprocity agreement 
should encompass a State's statutes and the regulations interpreting 
those statutes, both general and specific, including those directed at 
all or a subset of educational institutions. We decline to further 
specify the content of State statutes and regulations, and we also 
decline to require specific State policies and procedures.
    Moreover, we agree that States should be active in protecting their 
own students, and thus, agree that the word ``participating'' should be 
replaced with ``any'' when referring to reciprocity agreements, so that 
a State authorization reciprocity agreement does not prohibit any State 
from enforcing its own statutes and regulations, whether general or 
specifically directed at all or a subgroup of educational institutions. 
We would expect States to work together to implement a reciprocity 
arrangement to resolve conflicts between their respective State 
statutes and regulations and the provisions of the State authorization 
reciprocity agreement.
    Changes: We have revised the definition of State authorization 
reciprocity agreement by deleting the words ``consumer protection 
laws'' and adding in their place ``statutes and regulations, whether 
general or specifically directed at all or a subgroup of educational 
institutions.'' In addition, we have replaced the word 
``participating'' with reference to a participating State with the word 
``any'' so that a State authorization reciprocity agreement does not 
prohibit any State from enforcing its own statutes and regulations, 
whether general or specifically directed at all or a subgroup of 
educational institutions. We add the word ``residing'' after the word 
``students'' to clarify that the agreement authorizing and institution 
to provide postsecondary education through distance education or 
correspondence courses is to students residing in other States covered 
by the agreement. We also add the words ``in the agreement'' after 
``any State'' to clarify that the agreement does not prohibit any State 
in the agreement from enforcing its own statutes and regulations.
    Comments: Some commenters stated concerns that certain institutions 
will not be able to participate in the currently existing SARA because 
they

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are not degree-granting institutions and that there is no way for those 
institutions to develop a SARA-type structure due to differences 
between States in length, curriculum, examination requirements, and 
licensure prerequisites. Commenters stated that although utilization of 
technology at their institutions is in its infancy, the proposed 
regulations create a roadblock that will prohibit advances that are 
beneficial to students and recommended that the Department provide some 
form of accommodation so as not to impede the potential benefits 
students attending these institutions would be able to access under 
State authorization reciprocity agreements.
    Discussion: We do not agree with the commenter's recommendation 
that the Department provide accommodations for institutions that cannot 
join an existing reciprocity agreement. The proposed definition of the 
term ``State authorization reciprocity agreement'' is intended to apply 
to any State authorization reciprocity agreement, not just the existing 
SARA. States are able to develop reciprocity agreements as they deem 
necessary or desirable, and there is nothing in the final regulations 
that would prohibit a State from developing or participating in a State 
authorization reciprocity agreement that authorizes non-degree-granting 
institutions.
    Changes: None.
    Comments: A commenter requested that the Department clearly define 
or create a process that provides reciprocity based on accreditation 
status and mandate that all States participate in this as many State 
requirements for approving institutions of higher education were 
created for brick-and-mortar institutions and do not fit well with new 
technologies and pedagogy that crosses State lines.
    Discussion: We disagree that the Department should define or create 
a process that provides reciprocity based on accreditation status and 
mandate that all States participate in this. As we discussed in the 
preamble to the NPRM, the HEA established what is commonly called the 
triad under which States, accrediting agencies, and the Department act 
jointly as gatekeepers for the Federal student aid programs. State 
authorization is an important part of the triad, recognizing the 
important oversight role States play in protecting students, their 
families, taxpayers, and the general public as a whole. Accepting the 
commenter's recommendation would undermine the concept of the triad and 
would jeopardize the State's important oversight role. Lastly, it is 
the State, not accrediting agencies, that has jurisdiction over who 
operates in that State.
    Changes: None.
    Comments: Some commenters stated that State and Federal laws treat 
for-profit entities very differently from nonprofit and public 
entities, and that while the governing boards of for-profit entities 
may spend their revenue virtually without restriction, including taking 
the money for themselves, the corporate structure of public and other 
nonprofit entities is designed to provide built-in protections against 
self-interest. The structural difference results in contrasting 
behavior by colleges, the commenters stated, with for-profit colleges 
far more likely to engage in predatory practices. The commenters 
indicate that some States may not wish to adopt reciprocity that 
recognizes the approval of for-profit colleges by other States and that 
States should not be forced by a reciprocity agreement to accept all of 
a State's approvals without regard to sector. The commenters recommend 
that the Department add a provision that would require reciprocity 
agreements to allow States to adopt reciprocity for public and 
nonprofit colleges without automatic inclusion of for-profit companies.
    Discussion: We do not agree that the Department should require 
reciprocity agreements to allow States to adopt reciprocity for public 
and nonprofit colleges without automatic inclusion of for-profit 
companies. If States want to develop and participate in such 
reciprocity agreements, they are able to do so.
    Changes: None.

Section 600.9(c)(1) State Authorization of Distance Education and 
Correspondence Courses

    Comments: A few commenters cited a letter urging the Department to 
explicitly exempt clinical education rotations from any future 
rulemaking on distance education to avoid compounding the harmful 
impacts of the existing State authorization regulations on educational 
and health professions institutions.
    Discussion: While we understand the commenters' concern regarding 
the effects of this rulemaking on health professions institutions, Dear 
Colleague Letter GEN-12-13 states that, for State authorization 
purposes, in the case of an additional location of an institution where 
a student cannot complete more than 50 percent of a program, the 
student is considered to be enrolled at the main campus of the 
institution, and thus, no additional State authorization would be 
required. We believe that most clinical education rotations would fall 
under this policy, and students enrolled in such rotations would not be 
considered enrolled in distance education or correspondence courses. 
However, it should be noted that States may independently have 
requirements that an institution obtain approval of such locations.
    Changes: None.
    Comments: Some commenters were concerned that the proposed 
regulation would render institutions entirely ineligible to participate 
in title IV programs because they have not met applicable State 
authorization requirements for distance education programs that are not 
title-IV eligible. An institution could be ineligible for Federal 
financial aid for all of its on-campus programs even if none of its 
distance education programs were eligible for title IV aid--or, for 
that matter, if any one non-title IV program or course, including a 
course offered free of charge to students worldwide, failed to exclude 
a student from a State that had not authorized the instruction. The 
commenters asked that if the Department does intend to apply the State 
authorization requirement to overall institutional eligibility, even in 
cases in which no HEA title IV funds are used for students enrolled in 
an institution's distance education programs, clarification be provided 
as to the Department's authority and interest to regulate non-title IV 
distance education programs. Other commenters asked the Department to 
clarify in the case where an institution does not obtain or maintain 
State authorization for distance education programs or correspondence 
courses in any particular State, what financial aid eligibility would 
be at risk in that State--eligibility of the institution or eligibility 
of certain programs?
    Discussion: These regulations do not apply to education programs 
that are not title IV-eligible. However, for title IV-eligible programs 
that include distance education or correspondence courses, if an 
institution does not obtain or maintain State authorization for 
distance education or correspondence courses in any particular State 
that has such requirements, such programs would only lose eligibility 
for HEA title IV funding for students residing in that State. An 
institution's inadvertent or unintentional failure to obtain State 
authorization for distance education or correspondence courses in a 
State where its enrolled students reside would not jeopardize the 
entire institution's eligibility if the institution otherwise met 
eligibility requirements.
    Changes: None.

[[Page 92236]]

    Comments: Some commenters were concerned that the State 
authorization requirement in proposed section 600.9(c) applies at such 
time as an institution ``offers'' postsecondary education through 
distance education or correspondence courses to students in a State in 
which the institution is not physically located, whether or not the 
institution actually enrolls students in the State. Thus, under the 
proposed rule, an institution may face a loss of Federal financial aid 
for failure to comply with requirements of a State in which it has not 
enrolled any distance education students. The commenters recommended 
that the final rule should permit institutions to identify the States 
in which applicants to particular programs reside, and then make 
determinations regarding the need for authorization based on expected 
enrollment, regardless of whether or not courses have been offered more 
broadly.
    Discussion: We disagree with the commenters' recommendation. 
Institutions should not market to, nor enroll students in, a program in 
a State unless the institution has met applicable State authorization 
requirements. A State may also have specific State requirements for how 
postsecondary institutions market distance education programs within 
that State, and we would expect institutions to comply with those 
requirements. We note that, if an institution does not obtain or 
maintain State authorization for distance education or correspondence 
courses in any particular State that has such requirements, such 
programs would only lose eligibility for HEA title IV funding for 
students residing in that State.
    Changes: None.
    Comments: A few commenters expressed concerns regarding the case of 
a student from a State in which the institution was approved at the 
time the student initially enrolled relocating during the period of 
enrollment to a State which requires authorization and in which the 
institution is not authorized. The commenters ask whether, in order to 
maintain compliance with the requirement to be authorized in every 
State in which students are served, would the institution be required 
to administratively dismiss the student from the program. They note 
that if so, this seems unfair to the student who invested time and 
resources in the program and for whom transfer to a different 
institution that is authorized in her new State of residence may be 
costly and burdensome. In addition, commenters argue that such a case 
also creates an untenable situation for the institution that may not, 
due to financial constraints or strategy regarding market area, be in a 
position to seek or obtain approval in the student's new State of 
residence so the student can stay enrolled through completion of the 
program. Even if willing and able to do so, and in the interest of 
supporting the student's educational goals, obtaining such approval 
will take time for the institution and may result in a period of 
noncompliance while in process. The commenters also posit that a rigid 
approach in this circumstance could have a disproportionate impact on 
certain classes of students, including those who are in the military 
and employees who may be required to relocate as a condition of a 
military or work assignment. The commenters recommend some 
consideration for an amnesty, exemption, or ``safe harbor'' that would 
allow these students to remain enrolled in the institution through the 
completion of the program, as long as the institution was in compliance 
in the student's original State of residence at the time the student 
initially enrolled or through a modification to the attestation 
language in the program participation agreement to reflect that the 
institution was in compliance with the Federal program integrity rules 
related to distance education at the time of student enrollment in the 
online program.
    Discussion: An institution is not required to dismiss a student 
from a program if the student moves to a State in which the institution 
is not authorized under the requirements in Sec.  600.9(c); however, 
the institution may not disburse additional Federal student aid to the 
student if the institution has information that the student has moved 
to another State in which the institution is not authorized. For 
purposes of this rulemaking, a student is considered to reside in a 
State if the student meets the requirements for residency under that 
State's law. In general, when determining the State in which a student 
resides, an institution may rely on a student's self-determination 
unless the institution has information that conflicts with that 
determination. An institution should be providing the student with 
information about its State authorization status and should be 
informing the student that, if the student relocates to a State where 
the institution is not authorized, the institution cannot disburse 
Federal student aid to the student as long as the student continues to 
reside in that State.
    With respect to military personnel, just as with non-military 
personnel, we treat the student's State of residence to be the State 
for which the student meets the requirements for residency under State 
law. Further, similar to non-military personnel, when determining the 
State in which the military student resides, the institution may rely 
on the student's self-determination unless the institution has 
information that conflicts with that determination. The Department 
expects institutions who already offer distance education programs to 
be in compliance with State laws and we decline to create any safe 
harbors that would permit an institution to provide title IV funds to a 
student in a State where the program does not meet State requirements. 
Institutions must use the disclosure process and conversations with 
prospective students to ensure the students understand and consider 
that relocating to other States could affect the title IV funding for 
their program.
    Changes: None.
    Comments: Some commenters stated that some educational programs, 
including hybrid programs with on-campus components, are subject to the 
laws of the State in which the institution's physical campus is 
located, and thus, no additional purpose is served by requiring hybrid 
programs to meet both home State requirements and authorization 
requirements from each State in which students reside, simply because a 
portion of the program is offered through distance education. If 
students attend any portion of a program at the physical campus where 
the institution is located, the program is subject to the oversight of 
authorities in the State where the campus is located. The commenters 
recommend that the Department amend Sec.  600.9(c) to apply only to 
educational programs that can be completed ``solely'' through distance 
education or correspondence courses.
    Discussion: The regulations do not require that hybrid programs 
meet both home State requirements and authorization requirements from 
each State in which students reside, simply because a portion of the 
program is offered through distance education. Rather, an institution 
is required to meet any State requirements for it to be legally 
offering postsecondary distance education or correspondence courses in 
the State. If a State has applicable requirements for students taking a 
portion of a hybrid program through distance education, the institution 
must meet those state requirements.
    Changes: None.
    Comments: A commenter recommended that the Department clarify that 
any institution offering distance education has the option to decide 
whether it chooses to be authorized individually in each

[[Page 92237]]

required State or whether it participates in a reciprocity agreement 
between States. The commenter suggested that the regulations clearly 
state the option, perhaps by adding ``or'' between paragraphs (i) and 
(ii) of Sec.  600.9(c)(1).
    Discussion: We agree with the commenter that the regulations 
provide any institution offering distance education with the option to 
decide whether it chooses to be authorized individually in each 
required State or whether it participates in a reciprocity agreement 
between States and that adding ``or'' between paragraphs (i) and (ii) 
of Sec.  600.9(c)(1) clarifies this point. In addition, we note that an 
institution could simultaneously participate in multiple State 
authorization reciprocity agreements and simultaneously be authorized 
individually in multiple States.
    Changes: We have added ``or'' between paragraphs (i) and (ii) of 
Sec.  600.9(c)(1).
    Comments: Some commenters opined that proposed Sec.  600.9(c)(1)(i) 
did not appear to address those States that regulate--in some way--
institutions offering distance education courses to residents, but that 
do not require full State approval or authorization in order to do so. 
They recommended that Sec.  600.9 be revised to address these types of 
situations as there are many States that have an exemption process or 
otherwise have a registration process that results in something less 
than full approval yet still allows the institution to enroll 
residents.
    Discussion: We decline to revise the regulations. It is a State's 
discretion as to how it may choose to regulate by establishing 
requirements that exceed the minimum requirements for title IV program 
eligibility. An institution is responsible for meeting any State 
requirements and should maintain the applicable documentation.
    Changes: None.
    Comments: Some commenters requested clarification regarding what 
entity the Department would rely upon to determine whether an 
institution covered by a State authorization reciprocity agreement is 
operating in a State outside of the limitations of that agreement. 
These commenters also asked the Department to affirm that each State in 
which an institution is offering distance education remains the 
ultimate authority for determining whether an institution is operating 
lawfully in that State, regardless of whether a non-State entity 
administers the agreement.
    Discussion: We agree with the commenters that each State in which 
an institution is offering distance education remains the ultimate 
authority for determining whether an institution is operating lawfully 
in that State, regardless of whether a non-State entity administers the 
agreement, including whether an institution covered by a State 
authorization reciprocity agreement is operating in a State outside of 
the limitations of that agreement.
    Changes: None.
    Comments: Some commenters stated that though the regulation is 
given the title of ``State authorization'' it seems that an institution 
will need to prove compliance with more State agencies than just the 
State higher education agency, such as a State Secretary of State or a 
State's licensing board. These commenters stated that this issue is 
important for institutions so that they can make plans for compliance, 
and if necessary, restrict enrollments in certain States until all 
State requirements are met.
    Discussion: Institutions are required to know what State 
requirements exist for an educational program to be offered to a 
student in a particular State, and the required approvals that 
constitute what is needed for the program to be authorized by that 
State. While we agree that institutions should not enroll students from 
a State until all State requirements are met, we believe institutions 
should routinely identify this information and ensure State 
requirements are being met where their students live.
    Changes: None.
    Comments: A commenter asked the Department to declare that, for the 
purpose of this regulation, an institution authorized to provide higher 
education in its own State is also authorized to serve students from 
any other State in the country.
    Discussion: We disagree with the commenter's suggestion as it would 
allow one State to preempt another State's requirements.
    Changes: None.

Section 600.9(c)(2) State Authorization of Distance Education and 
Correspondence Courses--Complaint Process

    Comments: Some commenters supported the proposal that students 
enrolled in an out-of-State online school are eligible for title IV aid 
only if they are able to seek and receive action on their complaints 
from the authorizing agency in their State of residence. However, the 
commenters were concerned that complaint-handling is inadequate if the 
State does not have the ability to enforce its decisions. They 
recommended language clarifying that the State's process must be able 
to ultimately lead to denying the institution's authority to enroll 
residents of that State.
    Discussion: We appreciate the commenters' support. We further agree 
that a State should be able to deny an institution's authorization to 
enroll students who reside in that State and believe that the 
regulations as drafted do not interfere with the State's ability to 
exercise this authority. We decline to specify that the State complaint 
process must allow a State to deny an institution from enrolling 
students because that is an issue best left to each State.
    Changes: None.
    Comments: Some commenters were concerned that, for institutions 
that do not have access to reciprocity agreements, the proposed 
regulations would impose a number of new compliance requirements that 
will require significant resources on an ongoing basis. For instance, 
States would be required to document the existence of a State process 
for action on complaints in each State from which a distance education 
program enrolls students. The commenters asked that the Department or 
another agency make the determination if a State process exists and 
publish this information, or alternatively, to write into the final 
regulations the previous guidance from the Department (Dear Colleague 
Letter (DCL) GEN-12-13, July 27, 2013, Question 9) which permitted 
institutions offering distance education in multiple States to satisfy 
the requirement to provide State contact information for filing 
complaints by providing a link to non-institutional Web sites that 
identified contact information for filing student complaints for 
multiple States.
    Discussion: We believe that access to a complaint process is an 
important student protection that an institution should be able to 
document and provide to a student regardless of whether the institution 
participates in a reciprocity agreement. This policy is not new, since 
every institution already has to provide this information under 34 CFR 
668.43(b). In addition, DCL GEN-12-13 states that an institution must 
make sure that all of its students are provided with the applicable 
consumer information that corresponds to their enrollment and that the 
information must be for every State in which the institution is 
operating, including every State where students are enrolled for 
distance education. The consumer information to be provided includes 
the complaint process.
    We make a distinction, however, between an institution that 
provides documentation to the Department in order to satisfy the 
requirements under

[[Page 92238]]

the State authorization regulations and an institution that is 
providing information to a student regarding the State's complaint 
process to satisfy the consumer information requirements. DCL GEN-12-13 
Question 9 was related to consumer information requirements, thus we 
would not include this guidance for compliance with the State 
authorization regulations. We discuss consumer information requirements 
further under the consumer disclosures section.
    Changes: None.
    Comments: A few commenters asked that the regulations include 
compliance for their students from States such as California that 
reportedly lack oversight for their out-of-State student complaints. 
Other commenters opined that the proposed rule would require all States 
to have a process for reviewing complaints from any student located in 
that State enrolled in a distance education program or at an out-of-
State institution even if the State law does not require the 
institution to be authorized in that State. Other commenters noted that 
the California Bureau for Private Postsecondary Education (CA-BPPE) 
does not currently require purely online institutions to be authorized 
and will not accept complaints against non-authorized institutions. 
These commenters recommended that the Department determine that these 
students in distance education programs are not adequately covered by a 
complaint process and, therefore, not eligible for title IV funding. 
Some commenters recommended allowing institutions to use their home 
State's complaint processes for students in States lacking adequate 
complaint procedures.
    Discussion: Section 600.9(c)(2) provides that if an institution 
offers postsecondary education or correspondence courses to students 
residing in a State in which the institution is not physically located, 
the institution must document that there is a State complaint process 
in each State in which the institution's enrolled students reside or 
through a State authorization reciprocity agreement which designates 
for this purpose either the State in which the institution's enrolled 
students reside or the State in which the institution's main campus is 
located. In addition, any student who is enrolled in distance or 
correspondence education provided by an institution must have access to 
the consumer complaint system in the State where the institution's main 
campus is located (the home State), as that complaint process is 
described under 34 CFR 600.9(a). Thus, we agree with commenters that, 
if a State does not provide a complaint process as described in a State 
where an institution's enrolled students reside, the institution would 
not be able to disburse Federal student aid to students in that State. 
Additionally, if the State in which the institution's main campus is 
located does not provide an appropriate complaint process to students 
enrolled through distance or correspondence education at that 
institution, none of those students would be eligible to receive 
Federal student aid.
    Changes: None.
    Comments: Commenters stated that policymakers may see not 
establishing a complaint process and not entering into a reciprocity 
agreement as a way to protect their in-State institutions from out-of-
State competition, which would limit opportunities and create 
considerable confusion for students. The commenters recommended that 
the regulations be revised to say that, in cases where a student 
resides in a State that does not participate in a reciprocity agreement 
or have its own student complaint process, a distance or correspondence 
education program located in a State with a student complaint process 
should be able to use such home State complaint procedures, or other 
procedures designated in a reciprocity agreement, to satisfy the 
Department's requirement if clearly and conspicuously disclosed to the 
student under Sec.  668.50(b)(1) and (2).
    Discussion: We disagree with the commenter's suggestion. A State is 
not required to have a complaint process, although, if it does not, 
institutions would not be able to disburse Federal student aid to 
resident students in that State. A State is also not required to 
participate in a reciprocity agreement, thus, it cannot be required to 
be subject to a complaint process under a reciprocity agreement. 
However, as provided in 34 CFR 600.9(a), the complaint process in the 
State where the institution's main campus is located may be utilized.
    Changes: None.
    Comments: Several commenters felt that it is unclear what the term 
``document'' in the proposed regulations requires, stating that some 
commenters are interpreting that term to require that institutions 
verify the efficacy of the process, as opposed to its mere existence. 
They also stated that it is not appropriate for institutions to be put 
in the position of determining whether a student complaint process in a 
particular State contains ``appropriate action'' on complaints, as 
required by the proposed regulations because such a subjective 
determination puts an institution in a position of potential sanctions 
or liabilities for substantial misrepresentation should the institution 
make an incorrect, though good faith, determination. The commenters 
asked that the Department provide clarification or delete the 
requirement. Other commenters asked whether institutions would be 
required to provide yearly proof of compliance.
    Discussion: Institutions will be asked to provide documentation of 
the State's complaint process when an institution is seeking 
certification or recertification or if a question arises due to a 
complaint, program review or audit, not on an annual basis. The 
Department will subsequently determine if the State's complaint process 
is compliant with the State authorization regulations. This same 
process is currently used for institutions under Sec.  600.9(a) and 
(b). If the Department determines that the complaint process is not 
compliant with the State authorization regulations, it will notify the 
institution and subsequently work with the institution to address this 
issue.
    Changes: None.
    Comments: Commenters said that the Disclosures section of the 
proposed regulations are only applicable to students completing 
programs ``solely'' through distance education, yet, the term 
``solely'' is not employed elsewhere to define distance education and 
asked for clarification that distance education in Sec.  600.9(c) 
pertains only to programs offered 100 percent off campus. Commenters 
further stated that the NPRM did not address the issue of hybrid style 
courses or programs and the regulations seem to omit any Federal 
oversight of hybrid programs and requested a formal definition of 
distance education be provided. Some commenters recommended that the 
term ``distance education'' include both purely online programs and 
online programs which include a requirement for a credit-bearing 
internship or practicum that the student could complete in his or her 
State of residence. Other commenters were concerned that the NPRM did 
not adequately distinguish between distance education ``programs'' and 
``courses'' and suggested that the Department focus the intent of the 
NPRM on the programmatic level and amend the regulations to clearly 
refer to ``distance education programs,'' as opposed to distance 
education courses.
    Discussion: We disagree that a formal definition of distance 
education should be provided. A State has discretion as to whether it 
has any State authorization requirements with respect to an

[[Page 92239]]

institution offering postsecondary education through distance education 
in that State and that discretion includes how the State defines 
distance education. States may therefore choose whether or not to 
exercise authority over hybrid distance education or correspondence 
programs, but any requirements established by the State must be 
complied with in order for an institution to be considered authorized 
for title IV eligibility purposes.
    Changes: None.
    Comments: Commenters stated that the NPRM uses disclosure in its 
attempt to address situations in which a college's program does not 
satisfy the occupational licensing or prerequisites in the State where 
the student lives and that, in these situations, disclosure is not an 
adequate or appropriate solution. Instead, the commenters argued that 
the regulations should generally prohibit using title IV funds for 
programs that do not meet State requirements for the occupation, 
allowing for exceptions only when the student has provided the 
specific, personal reason he or she is seeking to enroll in a program 
that does not qualify them for the occupation in the State where they 
live (for example, an intention to relocate). Commenters asked that the 
Department add Sec.  600.9(c)(3) to say that ``If an institution 
described under paragraph (a)(1) of this section offers postsecondary 
education through distance education or correspondence courses, its 
programs must meet the applicable educational prerequisites for 
professional licensure or certification for the occupation for which 
the program prepares students to enter, in the student's State of 
residence, unless prior to enrollment the student affirmatively states 
in writing, in his or her own words, that he or she knows that the 
program does not meet the State requirements, and explains the reason 
he or she is seeking to enroll in the program.''
    Discussion: While we agree with the focus and spirit of this 
comment, we do not agree with the recommendation that we withhold 
Federal student aid where programs provided through distance education 
do not meet State requirements where a student resides unless an 
institution documents the reasons each student decided to enroll in 
that program anyway. We are requiring an institution to determine 
whether a program it offers meets State requirements in each State 
where the students enrolled in that program reside, and to publicly 
disclose that information to students. We also believe that the 
complaint process and program review process will readily identify any 
instances where institutions fail to provide this information through 
disclosures. Furthermore, we note that, upon implementation of this 
final rule, institutions offering GE programs will need to ensure that 
those programs fulfill licensure or certification requirements in each 
State in which the institution is required to be authorized, or in 
which the institution is authorized through a State authorization 
reciprocity agreement. This will ensure that institutions certify that 
distance education or correspondence GE programs fulfill requirements 
for licensure or certification in the majority of States where enrolled 
students reside.
    More specifically, the GE final regulations include several 
provisions under 34 CFR 668.414(d) that are connected to the State 
authorization rules under 34 CFR 600.9. In particular, Sec.  
668.414(d)(2) requires an institution to certify that each eligible GE 
program it offers is programmatically accredited, if such accreditation 
is required by a Federal governmental entity or by a governmental 
entity, in each State in which the institution is required to obtain 
State approval under 34 CFR 600.9. Similarly, Sec.  668.414(d)(3) 
requires an institution to certify that, for each State in which the 
institution is required to obtain State approval under 34 CFR 600.9, 
each eligible GE program that it offers satisfies the applicable 
educational prerequisites for professional licensure or certification 
requirements in that State so that a student who completes the program 
and seeks employment in that State qualifies to take any licensure or 
certification exam that is needed for the student to practice or find 
employment in an occupation that the program prepares students to 
enter. Under these final regulations an institution must fulfill any 
requirements for it to be legally offering postsecondary distance 
education or correspondence courses in that State, or be authorized 
under a State authorization reciprocity agreement if the State chooses 
that mechanism to authorize postsecondary institutions. Therefore, for 
the purposes of institutional compliance with the GE regulations in 34 
CFR 668.414(d)(2) and (3), a GE program will be required to have the 
appropriate programmatic accreditation and/or lead to licensure or 
certification in each State in which at least one enrolled student 
resides and where there is either a State requirement for authorization 
or where the State is part of a State authorization reciprocity 
agreement that confers authorization to the institution.
    We believe that the combination of the disclosure requirements 
regarding licensure and certification in new 34 CFR 668.50(b)(7) and 
the requirements for GE programs to meet licensure and certification 
requirements in each State where students reside (if such States 
require authorization or are part of a reciprocity agreement) are 
sufficient to mitigate the commenter's concerns about distance 
education programs not leading to licensure or certification.
    Changes: None.
    Comments: One commenter expressed concern that a student residing 
in one State could not take an online course from a school located in 
another State, unless the latter conformed to the educational standards 
set for schools in the first State. The commenter further stated that 
what recent experience has shown is that the proposed regulations are 
unlikely to be value-neutral across the board and that some of the 
regulations would establish norms and goals for diversity that would be 
impossible for private, confessional schools to meet in good conscience 
and that the proposed regulations should be withdrawn.
    Discussion: We disagree with the commenter. The regulations do not 
prohibit a student residing in one State from taking an online course 
from a school located in another State, unless the latter conformed to 
the educational standards set for schools in the first State. Rather, 
the regulations establish that an institution that offers postsecondary 
education through distance or correspondence courses to students in a 
State in which the institution is not physically located, or in which 
the institution is otherwise subject to that State's jurisdiction as 
determined by the State, must meet any State requirements for it to be 
legally offering postsecondary distance or correspondence courses in 
the State and offer a complaint process. Institutions may also meet the 
requirements by participating in a State authorization reciprocity 
agreement. In addition, institutions are required to document the 
State's complaint process.
    Changes: None.

Section 600.9(d) State Authorization of Foreign Additional Locations 
and Branch Campuses of Domestic Institutions

General Opposition
    Comments: Some commenters did not support a rulemaking to address 
State authorization of foreign additional locations and branch campuses 
of domestic institutions. A few commenters asserted that the Department 
does not have the authority to regulate foreign locations of domestic 
institutions. Commenters argued that

[[Page 92240]]

the HEA does not grant the Department the authority to regulate 
institutions outside of the United States as it defines an 
``institution of higher education'' as an educational institution in 
any State that is legally authorized within such State to provide a 
program of education beyond secondary education. Commenters also stated 
that the proposed regulations exceeded the Department's authority by 
mandating compliance with the requirements of foreign governments, with 
one commenter stating that enforcement of foreign requirements is the 
responsibility of the foreign country, not the Department. Some 
commenters asserted that the provisions of Sec.  600.9(d) also raise 
significant federalism issues, as they impose substantive requirements 
for foreign authorization that go beyond what individual States may 
decide to require with respect to authorization of institutions with 
locations outside U.S. borders. The commenter noted that State agencies 
may decline to regulate the foreign locations of in-State institutions. 
One commenter stated that education in foreign locations is a complex 
topic and any rulemaking addressing foreign locations should not be 
conflated with the State authorization rulemaking. Some commenters 
opposed regulations for foreign locations on the grounds that they 
would be too complex to implement and too difficult to enforce.
    Discussion: Sections 101(a)(2), 102(a)(1), 102(b)(1)(B), and 
102(c)(1)(B) of the HEA require an educational institution to be 
legally authorized in a State in order to be eligible to apply to 
participate in programs approved under the HEA, unless an institution 
meets the definition of a foreign institution. As stated in the NPRM, 
these regulations allow an institution with a foreign additional 
location or branch campus to meet the statutory State authorization 
requirement for the foreign location or branch campus in a manner that 
recognizes both the domestic control of the institution as a whole, 
while ensuring that the foreign location or branch campus is legally 
operating in the foreign country in which it is located. The Department 
believes it is consistent with the HEA and in the best interest of 
students to allow the provision of title IV, HEA program funds to 
students attending a foreign additional location or branch campus of a 
domestic institution. Thus, we are establishing authorization 
regulations that provide the protections to United States students 
intended by the HEA to those attending foreign locations or branch 
campuses of domestic institutions. To permit an institution to operate 
in violation of a foreign country's requirements would be irresponsible 
and, in many cases, ineffectual as it is the Department's 
responsibility to ensure the proper administration of the title IV, HEA 
programs. We address commenters' specific concerns regarding the 
difficulty in working with foreign countries to comply with the 
regulations in the discussion of the difficulty in obtaining foreign 
authorization below.
    The Department will not be enforcing the requirements of any 
foreign country on behalf of the foreign country. Rather, we will be 
determining whether or not an institution is in compliance with any 
requirements of a foreign country in order to ensure whether title IV, 
HEA program funds are appropriately available to students at any 
foreign additional location or branch.
    Changes: None.
Applicability
    Comments: Commenters asked for clarification of the applicability 
of the regulations. Commenters asked whether the regulations would 
cover programs through agreements that domestic schools have with 
foreign institutions. For example, commenters stated that they have 
agreements to offer programs at foreign ``host'' universities, and it 
is not clear whether the regulations extend to such situations. 
Commenters also asked for clarification of what constitutes a branch 
campus or an additional location of an institution. Specifically, one 
commenter asked whether a faculty-led overseas trip constitutes a 
university establishing a branch campus or additional location since 
the presence in the foreign country is temporary. Commenters also 
questioned whether these regulations would apply to educational 
programs that are not title IV eligible. Commenters, referencing the 
proposed differentiation of requirements for additional locations or 
branch campuses where 50 percent or more of an educational program is 
offered and those where less than 50 percent of the educational program 
is offered, asked what the definition of an ``educational program'' is. 
One commenter asked whether educational program means a degree-seeking 
program only, or whether a study abroad experience would stand alone as 
an educational program. One commenter, an institution contracted to 
offer educational services on military bases abroad, requested that the 
Department include language declaring that (1) as an education services 
contractor, it is fully exempt without proving any foreign government's 
proof of exemption, since the Department of Defense requires it to 
provide educational services on the specified foreign bases/additional 
locations; or (2) that compliance could be verified by providing proof 
of the Education Services contract with the Department of Defense. 
Another commenter, a university active in serving an international 
school by way of distance education, stated that, should they choose to 
offer more than 50 percent of their programs on-site, the international 
school should be treated in a manner similar to military bases. 
Commenters asked whether the regulations would apply when an 
institution does not have a physical presence in a foreign country, but 
offers programs to students in foreign countries through distance 
education. One commenter was also concerned that if the logic of 
domestic requirements for State authorization is eventually extended to 
students in online programs who live abroad (that is, they would need 
to seek authorization in every country in which an international 
student is taking an online class) they would have to discontinue 
enrolling those students.
    Discussion: The requirements of Sec.  600.9(d) apply to foreign 
additional locations and branch campuses of a domestic institution at 
which all or more than half of a title IV, HEA eligible educational 
program is offered by a domestic institution. They do not apply to 
study abroad arrangements or other agreements that domestic 
institutions have with foreign institutions whereby a student attends 
less than half of a program at separate foreign institutions, which are 
regulated under Sec.  668.5. They do not apply to foreign institutions 
(i.e., institutions that have their main campus located outside of a 
State). They do not apply to programs for which the institution does 
not seek title IV, HEA program eligibility. They also do not apply when 
a domestic institution is offering an educational program to title IV 
eligible students in a foreign country through distance education.
    These regulations note that the term ``educational program,'' as 
used in Sec.  600.9(d)(1) and (2), is defined in Sec.  600.2. That is, 
an educational program is a legally authorized postsecondary program of 
organized instruction or study that: (1) Leads to an academic, 
professional, or vocational degree, or certificate, or other recognized 
educational credential, or is a comprehensive transition and 
postsecondary program, as described in 34 CFR part 668, subpart O; and 
(2) May, in lieu of credit hours or clock hours as a measure of student 
learning,

[[Page 92241]]

utilize direct assessment of student learning, or recognize the direct 
assessment of student learning by others, if such assessment is 
consistent with the accreditation of the institution or program 
utilizing the results of the assessment and with the provisions of 
Sec.  668.10.
    A branch campus is defined in Sec.  600.2 as a location of an 
institution that is geographically apart and independent of the main 
campus of the institution. The Department considers an institution to 
be independent of the main campus if the location (1) is permanent in 
nature; (2) offers courses in educational programs leading to a degree, 
certificate, or other recognized educational credential; (3) has its 
own faculty and administrative or supervisory organization; and (4) has 
its own budgetary and hiring authority. Institutions are required to 
obtain approval from the Department for a location to be designated as 
a branch campus. All other locations of an institution are referred to 
as additional locations. An additional location is any location of an 
institution that is geographically apart from the main campus and does 
not meet the definition of a branch campus.
    An institution that is contracted by the U.S. military may be 
exempt from obtaining legal authorization from an appropriate 
government authority to operate in the country for an additional 
location at which 50 percent or more of an educational program is 
offered. That additional location or branch campus would be exempt if 
it is physically located on a U.S. military base, facility, or area 
that the foreign country has granted the U.S. military to use and the 
institution can demonstrate that it is exempt from obtaining such 
authorization from the foreign country. The Department believes the 
regulations provide clear language that reflects when a contractor may 
be exempt from obtaining foreign authorization to offer programs and we 
decline to provide additional regulatory language to further this 
exemption. However, an institution that does not contract with the U.S. 
military as stated that offers more than 50 percent or more of an 
educational program, as defined in Sec.  600.2, would not be eligible 
for that exemption. Institutions that contract with the U.S. military 
are in a unique position in that they have a contract with a U.S. 
military base which has a Status of Forces Agreement with a foreign 
government that may address the inclusion of educational programs 
offered through a contract with the U.S. military.
    The Department wishes to clarify that military bases, for purposes 
of the foreign authorization exemption, are any areas that are under 
use by the U.S. military, including facilities and areas that foreign 
countries have allowed the U.S. military to use.
    A temporary class site may qualify as an additional location. If an 
institution offers or will offer 50 percent or more of an educational 
program at that temporary location, then that temporary location would 
meet the definition of an additional location. Similarly, if an 
institution only rents space that it does not own, then it may still be 
considered an additional location if the institution is offering or 
will offer 50 percent of more of an educational program in that 
temporary space. The Department expects that institutions will comply 
with the appropriate requirements to operate in the foreign country for 
any temporary or permanent locations they establish.
    Changes: The exemption to obtaining foreign authorization in Sec.  
600.9(d)(1)(i) has been altered to include facilities and areas in 
which the foreign country has granted the U.S. military usage.
Difficulty in Obtaining Authorization
    Comments: Some commenters expressed concern about the difficulty of 
obtaining legal authorization from a foreign country for a foreign 
additional location or branch campus under proposed Sec.  
600.9(d)(1)(i). Commenters argued that requiring institutions to obtain 
legal authorization by a foreign government would leave institutions in 
a likely impossible position of attempting to determine the appropriate 
authority amidst multiple levels of government, often in countries in 
which there is no formal governmental process for oversight of foreign 
or private institutions. One commenter asserted that there will be 
certain situations where the foreign government itself will not know 
which of its agencies is responsible for issuing an approval. 
Commenters were also concerned about the difficulty of obtaining legal 
authorization in a foreign country if the foreign country is unaware of 
the requirement that an institution must seek their authorization. 
Commenters asserted that it is also possible that foreign governments 
may see United States-required authorization as a revenue source and 
charge institutions significant sums of money for their required 
approval. Commenters stated that the difficulty in obtaining the 
required legal authorization may limit enriching international 
opportunities for students.
    Commenters asserted that foreign governments are sometimes 
unresponsive. One commenter noted that they have contacted foreign 
governments on occasion and have experienced difficulties getting an 
official response, or any response at all, from certain governments. 
One commenter noted that some foreign governments are highly adverse to 
provide specific wording in an authorization letter. Some commenters 
were concerned with the amount of time it can take to obtain legal 
authorization from a foreign country.
    Discussion: The Department believes that locations should meet the 
legal requirements where they are located in order to provide 
educational programs to students receiving title IV funds. This 
includes institutions operating additional locations or branch campuses 
in foreign countries. This authorization will serve as a protection to 
students against potential interruptions in their education should that 
operation be suspended or shut down due to noncompliance. Institutions 
must perform the due diligence of learning what additional requirements 
a foreign government may put on an institution to offer educational 
programs in their jurisdiction and comply with those requirements as a 
basic price of doing business in that foreign country. An institution 
of higher education is not required to create additional locations in 
foreign countries and should follow the laws of the foreign Nation in 
order to legally operate in that location. An institution that would be 
unable to meet the requirements of a foreign country or that cannot 
show that it has received authorization to operate in that country 
would not have the ability to offer title IV financial aid programs to 
students enrolled at those additional locations.
    Section 600.9(d)(1) specifies the requirements for legal 
authorization for any additional location at which 50 percent or more 
of an educational program is offered, or will be offered, and any 
foreign branch campus. These additional locations and branch campuses 
are required to be legally authorized to operate by an appropriate 
government authority in the country where the foreign additional 
location or branch campus is physically located. An institution is 
required to provide documentation of that authorization by the foreign 
country to the Department upon request, unless the additional location 
or branch campus is located on a U.S. military base and is therefore 
exempt from obtaining such authorization from the foreign country. The 
documentation is required to demonstrate that the government authority 
for the foreign country is aware that the additional location or branch 
provides postsecondary

[[Page 92242]]

education and does not object to those activities. Beyond that, the 
Department declines to provide specific requirements of what that 
documentation must look like, to allow flexibility to institutions 
since foreign countries may vary in what documentation they provide. 
The regulations do not require that any statement of authorization from 
a foreign government include the phrase ``does not object to those 
activities.'' The Department expects that any authorization given by a 
foreign government will show that the foreign government is aware of 
what it is authorizing and that it has given approval to an institution 
that is offering educational programs in its jurisdiction. The 
Department expects that an institution will determine if and what 
authorization requirements a foreign country has for institutions that 
wish to offer educational programs within its jurisdiction. If there 
are legitimate barriers to obtaining authorization, such as a lack of 
authorization requirements in the foreign jurisdiction, then the 
institution should document its efforts to obtain authorization, but 
the Department does not expect that an institution would not offer 
programs in these instances. However, an institution should ensure that 
the lack of receiving written correspondence authorizing the 
institution to offer educational programs at a branch campus or 
additional location is not a denial of authorization by that foreign 
entity. If an institution can readily determine that its locations or 
programs do not meet the authorization requirements, the institution 
cannot operate its program under the guise of an inability to navigate 
a foreign country's authorization process. As mentioned previously, an 
institution that does not meet the clear authorization requirements of 
a foreign country would not be considered authorized under these 
regulations.
    An institution must receive authorization from a foreign government 
prior to enrolling title IV eligible students who would take more than 
50 percent of a program at an additional location or branch campus. An 
institution should plan ahead for a country's authorization process 
before enrolling title IV eligible students so that it is compliant 
with the authorization requirements. For institutions that have 
enrolled students prior to these regulations' effective date, we 
encourage the institution to provide information to students about the 
potential loss of title IV aid for programs that do not receive foreign 
authorization when these regulations go into effect. If an institution 
is advertising a program and recruiting students for a program that 
meets this 50 percent threshold, the Department believes that the 
institution must have obtained authorization from a foreign government 
for that additional location before enrolling any title IV eligible 
students in that program. The Department believes that an institution 
must meet these requirements as the cost of doing business in a foreign 
location, regardless of what those requirements are or if there is a 
monetary cost to meeting the authorization requirements in a foreign 
country.
    We disagree with the commenter that believes that requiring an 
institution to meet any authorization requirements established by the 
foreign country would unfairly limit the opportunities of institutions 
to limit the international experiences of students. The Department 
believes that an institution should follow the requirements of a 
foreign country if an institution is planning on having a branch campus 
or additional location in that country.
    Changes: None.
Sufficient Documentation
    Comments: The commenters also asked, for purposes of Sec.  
600.9(d)(1)(ii), what would constitute sufficient documentation of the 
foreign government's lack of objection. Commenters asserted that it was 
unclear exactly what types of legal authorization and documentation of 
legal authorization would satisfy the requirement. Some commenters 
stated that the Department should provide a list of appropriate foreign 
government authorities that may provide acceptable legal authorization 
and should delineate the types of legal authorizations that would be 
acceptable to demonstrate compliance with the legal authorization 
requirement. Commenters stated that regulations should provide specific 
guidance as to what would be considered sufficient evidence of 
appropriate legal authorization that a foreign government is aware of a 
program and does not object to operation of a program. One commenter 
suggested that the regulations consider a response from a foreign 
government stating it does not prohibit any higher education 
institution of other countries to grant college credit to its citizens 
to be sufficient authorization. With respect to a Status of Forces 
agreement between the U.S. and another country, commenters wanted the 
Department to clarify that this counts as sufficient documentation of 
foreign authorization if the agreement specifically mentions the 
offering of educational programs at additional locations or branch 
campuses located in the country. Commenters asked whether an 
institution would be required to obtain legal authorization if a 
foreign government chooses to exempt the institution from needing 
authorization.
    Discussion: Each country may provide a wide variety of 
documentation to reflect that an institution has authorization to have 
a branch campus or additional location in their country. As such, the 
Department declines to provide an exhaustive list of what documentation 
would be appropriate to prove authorization in a foreign country to 
allow for maximum flexibility to an institution in obtaining 
documentation. However, an institution should ensure that the 
documentation they obtain to prove foreign authorization has made it 
clear that the institution has indeed received authorization. If an 
institution receives documentation stating that a foreign entity does 
not provide authorization approvals to institutions but does not object 
to the establishment of a branch campus or additional location of U.S. 
institutions, then the Department would consider that to be sufficient 
documentation for obtaining foreign authorization. This would also 
apply if an appropriate foreign entity provides documentation that the 
institution is exempt from authorization requirements in that country. 
A Status of Forces Agreement may be used to demonstrate authorization 
if that Status of Forces Agreement addresses and provides for 
authorization of branch campuses or additional locations of domestic 
institutions or provides for exemption to foreign authorization for 
these facilities.
    The Department does not require a specific foreign government 
agency to provide authorization to an institution for the operation of 
branch campuses or additional locations because the relevant approving 
authority will vary from country to country. An institution should 
receive authorization from an appropriate agency that would have the 
authority to legally authorize an educational entity in a foreign 
location. An institution could identify this agency, for example, if 
the agency provided similar authorization for other entities for 
schools within the country, or for other foreign entities or 
businesses. It is also up to the institution to be aware of, and comply 
with, any additional requirements of a foreign country to ensure legal 
operations within the country.
    Changes: None.

[[Page 92243]]

No Objection From Foreign Country
    Comments: Commenters argued that it was unfair to require an 
institution to obtain such legal authorization if a country has no such 
authorization process in place. Commenters stated that, if it is not 
the Department's intent to require legal authorization if the foreign 
government has no mechanism or requirement for such authorization, the 
Department should change Sec.  600.9(d)(1)(i) to a conforming ``no 
objection'' standard. Commenters asserted that there was an 
inconsistency between the language in Sec.  600.9(d)(1)(i), which 
requires that any additional location at which 50 percent or more of an 
education program is offered, or will be offered, or at a branch campus 
``must be legally authorized'' to operate by an appropriate government 
authority, and the wording of Sec.  600.9(d)(1)(ii), which requires the 
institution to provide, upon request, documentation to the Secretary 
that the government authority is aware that the additional location or 
branch campus provides postsecondary education and does not object. One 
commenter asserted that the additional requirement that an 
institution's documentation of their authorization to operate must also 
include a statement by the foreign government that the government 
``does not object to those activities'' should be removed from the 
regulations. The commenter asserted that it is easy to imagine 
circumstances in which a domestic institution may be operating abroad 
in full compliance with all relevant laws and regulations, but the 
government may object to how specific topics are taught. For example, 
foreign governments may condition approval based on changes in 
curriculum, such as revising history to be more favorable to that 
country. With the other provisions that require notification to, and 
approval of, foreign additional locations and branch campuses by 
relevant accreditation agencies and State governments, the commenter 
stated that this requirement is unnecessary to protect student 
interests and is likely to cause significant problems for institutions 
operating abroad.
    Discussion: The Department disagrees with the commenters that 
believe it is unfair to require an institution to obtain legal 
authorization even when their authorization process is unclear. 
Institutions should make an effort to understand the requirements of 
foreign authorization in any country it wishes to do business. As 
mentioned earlier in this preamble, if there are no requirements for 
authorization or a country exempts an institution from its 
authorization requirements, then the Department would consider that 
being legally recognized by a foreign government. However, the 
institution should retain documentation reflecting their efforts in 
determining the authorization process, results of any inquiries with 
appropriate foreign entities, and any exemptions provided by the 
foreign government. The Department does not believe there is 
contradictory wording in Sec.  600.9(d)(1)(i) and (ii).
    If a foreign country has a process in which a U.S. institution can 
be legally recognized in their jurisdiction, it is expected that the 
institution will follow that process and obtain proper authorization 
from an appropriate foreign governmental agency. However, if that 
process does not exist, an institution must obtain some documentation 
that the foreign country does not object to the operation of a branch 
campus or additional location in their jurisdiction, which is 
established in Sec.  600.9(d)(1)(i). An institution must have 
documentation on file and be able to provide that documentation to the 
Secretary, if requested, which is established in Sec.  600.9(d)(1)(ii). 
As stated earlier in the preamble, the regulations do not require that 
any statement of authorization from a foreign government include the 
phrase ``does not object to those activities.'' It is expected that 
institutions doing business in foreign countries follow the 
requirements in those countries. An institution would not be considered 
to be authorized if a foreign country objects to the institution 
providing educational programs within their country, regardless of the 
nature of the foreign country's objection.
    Changes: None.
Miscellaneous
    Comments: One commenter argued that, because the proposed 
requirements would be too difficult to implement, for all foreign 
additional locations and branch campuses, the regulations should 
require only that the educational program does not violate the laws of 
the country in which it is present. One commenter encouraged the 
Department to allow an optional reciprocity agreement for countries 
similar to what is available between States in order to provide a cost-
effective and efficient process for any additional location at which 50 
percent or more of an educational program is offered, or will be 
offered, and any foreign branch campus. Some commenters asserted that 
the proposed legal authorization requirements for foreign additional 
locations and branch campuses are unnecessary because accrediting 
agency criteria for adding international locations are sufficient.
    Some commenters asked the Department to clarify what programs that 
``will be offered'' means for purposes of foreign authorization in 
proposed Sec.  600.9(d). The commenter wanted to know at what point the 
Department considered a program to be one that ``will be offered.'' For 
example if an institution commences development of a program with an 
intent to offer it at a new foreign additional location at some 
undetermined point in the future, but has not yet advised students of 
the potential program, much less enrolled them, is the institution 
required to have met the provisions of the regulations for the 
location?
    One commenter asserted that, as the proposed regulations would 
exempt from legal authorization a foreign additional location or branch 
campus at which 50 percent or more of an educational program is 
offered, or will be offered, that is located on a U.S. military base 
and is exempt from obtaining legal authorization from the foreign 
country, the Department should provide a current and updated list of 
which military bases are exempt in which countries.
    Discussion: The Department disagrees with the commenter who 
suggested that it would be too difficult to obtain authorization for 
all branch campuses in all foreign countries and that it should be 
sufficient to just ensure that the programs do not break the laws of 
the foreign country. If a country has requirements for institutions 
offering programs in their country for authorization, the Department 
expects an institution to follow those requirements and if those 
requirements do not exist, as addressed earlier, an institution should 
make a good faith effort to determine any requirements and document the 
lack of authorization in a country that does not have requirements. 
Should multiple countries establish some sort of reciprocity in which a 
particular foreign government accepts the authorization of another 
country or organization in lieu of making their own determinations on 
any requirements for an institution to be considered legally authorized 
in the country, the Department would not interfere with that country's 
process in authorizing institutions. While accrediting agencies may 
have criteria, the Department believes that these regulations provide 
needed protections to students by reinforcing the State's--or in this 
case the foreign government's--role in the program

[[Page 92244]]

integrity ``triad'' of accrediting agencies, states, and the 
Department.
    An institution should have legal authorization from an appropriate 
foreign governmental agency by the time that it enrolls students at a 
branch campus or additional location in that foreign country. An 
institution should plan for this process when deciding to open a branch 
campus or additional location in a foreign country.
    While these regulations provide an exemption for branch campuses 
that is physically located on a military base, facility, or area that a 
foreign country has granted the U.S. military to use, the Department 
declines to publish a complete listing of these areas. These areas 
would be decided by a Status of Forces agreement between the U.S. and a 
foreign country. Based on the unique nature of having a branch campus 
on a U.S. military base, the Department believes that an institution 
with a branch campus on a military base would know if they fall within 
that exemption.
    Changes: None.
State Provisions
    Some commenters stated that proposed Sec.  600.9(d)(1)(v), which 
would require an institution to report at least annually to the State 
in which its main campus is located regarding the establishment or 
operation of each foreign additional location or branch campus, will 
force States to create a costly reporting mechanism for receiving and 
processing such information, without evident benefit. The commenters 
questioned why the Department does not defer to the States with respect 
to what reporting obligations institutions should or should not have 
with respect to foreign additional locations and branch campuses. One 
commenter, who asserted that the proposed regulation is over-reach by 
the Department, asked to which State an institution would be required 
to report the establishment of a foreign additional location or branch 
campus under proposed Sec.  600.9(d)(1)(v). The commenter also asked 
how the requirement would apply to SARA-participating institutions. A 
few commenters suggested that the Department change the proposed 
regulations to allow those States that do not currently oversee foreign 
additional locations and branch campuses to become compliant without 
adjusting State laws.
    Some commenters were unclear as to the legal authority for States 
to place limitations on institutions' establishment or operation of 
foreign additional locations or branch campuses. These commenters asked 
the Department to clarify the premise underlying proposed Sec.  
600.9(d)(1)(vi), which would require an institution to comply with any 
limitations the State places on the establishment or operation of the 
foreign additional location or branch campus.
    One commenter requested that the Department reconsider the proposed 
regulation that would require State agencies to monitor institutions' 
compliance with international authorizing bodies. The commenter, who 
noted that their experience shows that many State authorizing agencies 
already struggle with limited staff and resources, questioned how a 
State would be able to monitor international authorizations in addition 
to their current responsibilities.
    One commenter asked the Department to clarify the institution's 
home State's role in an institution's compliance with the requirement 
in proposed Sec.  600.9(d)(4), in instances where the home State 
prohibits the foreign additional location or branch campus.
    Discussion: The regulations delineate requirements with which a 
foreign additional location or branch campus of a domestic institution 
must comply to meet the State authorization requirements. They do not 
impose any requirements on State agencies, but instead ensure that 
those State agencies are informed about any foreign locations an 
institution is operating. The State where the institution's main 
location is located will know all locations in which the institution is 
operating within the State, in other States, and in foreign locations 
so that the State is aware of what locations it is authorizing. The 
Department believes that this is basic information that should be 
provided to State agencies when an institution applies for new and 
renewal approvals. Authorization from a State for an institution's main 
campus after the State has been notified of an institution's foreign 
location is required in order for the institution to provide title IV 
financial aid to students attending courses at those foreign locations.
    These regulations do not require States to create sophisticated and 
costly mechanisms for receiving and processing this information on 
additional locations or branch campuses in foreign locations, and each 
State may establish its own application and notification process for 
institutions to provide this information. Additionally, these 
regulations do not require State agencies to monitor an institution's 
compliance with foreign requirements, but instead make sure that States 
are aware the foreign locations are in operation so that further 
inquiry may be made if a State chooses to do so. These regulations do 
not require States to change their laws, as they do not create any 
requirements for States. The regulations in Sec.  600.9(d) create 
requirements for institutions with branch campuses or additional 
locations in foreign locations to be compliant with authorization 
standards, but do not require States to do anything. States can 
determine the level of oversight they deem necessary. These regulations 
do not impose requirements on State agencies and would not necessarily 
require States to increase staff or resources to comply with these 
regulations. Institutions should already be following any requirements 
that a State providing their authorization has established, whether 
that applies to their main campus located in that State or to branch 
campuses in foreign locations.
    The regulations at Sec.  600.9(d) do not delineate any difference 
in authorization for those institutions that may participate in a State 
authorization reciprocity agreement. A State authorization reciprocity 
agreement handles authorization for distance education programs or 
correspondence courses, not the authorization requirements for branch 
campuses or additional locations in foreign countries.
    Changes: None.
Complaint Process
    Comments: One commenter asserted that it would be very complicated 
for an institution to obtain information on the student complaint 
process that is required by proposed Sec.  600.9(d)(3). This commenter 
suggested that the regulations instead require students at foreign 
locations and branches to follow the complaint process of the State in 
which the main campus of the institution is physically located, or as 
prescribed by a reciprocity agreement.
    Discussion: As stated in the preamble to the NPRM on page 48604, 
proposed Sec.  600.9(d)(3) required institutions to disclose 
information regarding that student complaint process to enrolled and 
prospective students to ensure that students at foreign additional 
locations and branches are aware of the complaint process of the State 
in which the main campus of the institution is located and we have 
clarified this point in the final regulations. Section 600.9(d)(3) does 
not impose any new requirements regarding what consumer information 
must be disclosed to students. Note also that an institution is only 
required to make disclosures under Sec.  600.9(d)(3) to title IV-
eligible students enrolled at the foreign location.

[[Page 92245]]

    Changes: Section 600.9(d)(3) has been changed to clarify that 
institutions must disclose to enrolled and prospective students 
information regarding that student complaint process of the State in 
which the main campus of the institution is located.
    Comments: None.
    Discussion: The intent of proposed Sec.  600.9(d)(3), as indicated 
in the preamble to the NPRM on page 48603, was to require institutions 
to disclose to enrolled and prospective students at foreign additional 
locations and foreign branch campuses, the information regarding the 
institution's student complaint process as described in Sec.  
668.43(b). However, we inadvertently left out the reference to foreign 
branch campuses in the proposed regulatory language.
    Changes: Section 600.9(d)(3) has been changed to make clear that an 
institution must disclose to enrolled and prospective students at both 
foreign additional locations and foreign branch campuses the 
information regarding the institution's student complaint process.
More Time Needed for Implementation
    Comment: Some commenters requested a longer implementation period 
for the requirements applicable to foreign additional locations and 
branch campuses because they asserted that some States and institutions 
would not be equipped to implement the new requirements by July 1, 
2017. One commenter stated that complying with the proposed 
requirements that any foreign additional location at which 50 percent 
or more of an education program is offered, or will be offered, and any 
branch campus, be legally authorized by the foreign country in which it 
is located (proposed Sec.  600.9(d)(1)(i)) and receive accrediting 
agency approval (proposed Sec.  600.9(d)(1)(iii)), would impede an 
institution's ability to comply in a short period of time. One 
commenter argued that the Department should not enforce the regulations 
for at least three years after enactment because institutions will need 
time to do initial research and coordinate with the State agency, which 
cannot be done quickly. The commenter added that States that have no 
current process in place will need the extra time to put one in place. 
Commenters from public institutions in Alabama stated that, currently, 
the Alabama Commission on Higher Education and the Alabama State Portal 
Agency consider foreign locations to be outside their jurisdiction for 
regulatory authorization. The commenters asserted that the State would 
need time to make appropriate legislative changes to address this. 
These commenters also asked the Department to prepare a timeline to 
phase in full compliance with this regulation.
    Discussion: These regulations do not require a State to establish 
any authorization requirements or procedures for foreign additional 
locations or branch campuses of a domestic institution, and instead 
ensure that institutions with foreign locations are advising States 
about those locations.
    An institution must report to the State in which the main campus of 
the institution is located at least annually, or more frequently if 
required by the State, the establishment or operation of each 
additional foreign location or branch campus for any additional 
location at which 50 percent or more of an educational program is 
offered, or will be offered, and any foreign branch campus. If an 
institution cannot comply with this requirement through a procedure 
that is already known to the institution, the State can provide the 
institution the proper format to submit this information to the State.
    We note that the Department will review an institution's 
documentation of legal authorization by a foreign jurisdiction, 
established under Sec.  600.9(d)(2), and therefore the State is under 
no obligation to review that documentation if they choose to take no 
action with that information.
    We believe that institutions operating foreign locations should 
already be aware of, and in compliance with, any applicable foreign 
requirements. These regulations will go into effect on July 1, 2018, 
and that should provide institutions with adequate time to ensure they 
are in compliance.
    In the example of Alabama, these regulations do not require the 
State to change their regulatory jurisdiction. These regulations 
require institutions to submit to their State a report of their branch 
campuses or additional locations in foreign locations, but do not 
require States to change their oversight of institutions in their 
State. States may claim regulatory oversight of these locations, but 
may choose to take no action.
    Changes: None.

Section 668.50 Institutional Disclosures for Distance or Correspondence 
Programs

    Comments: Multiple commenters identified conflicting language in 
proposed Sec.  668.50(a) and (c), which referred to an institution that 
offers a program solely through distance education or correspondence 
course, and proposed Sec.  668.50(b), which referred to an institution 
that offers an educational program that is provided, or can be 
completed solely through distance education or correspondence courses, 
excluding internships and practicums. The commenters believed that 
these regulatory provisions should be worded the same.
    Discussion: We agree with the commenters regarding the 
inconsistency between proposed Sec.  668.50(a) and (c) and proposed 
Sec.  668.50(b) and with the recommendation to change the regulatory 
language for consistency and clarity.
    Changes: We have revised Sec.  668.50(a) and (c) to say an 
institution that offers an educational program that is provided, or can 
be completed solely through distance education or correspondence 
courses, excluding internships and practicums.
Public Disclosures
    Comments: A commenter requested clarification on the meaning of 
``enrolled student'' and ``prospective student'' in the context of 
these disclosures. A second commenter stated that these disclosures 
create additional protections that were not given to students who 
enrolled in traditional brick and mortar campuses. Another commenter 
believed that the disclosures in Sec.  668.50 were excessive in number. 
The same commenter asked whether an institution would be required to 
provide these disclosures separately or if an institution could combine 
them all into a larger disclosure for students. Another commenter 
recommended that the Department revise the regulatory language of this 
disclosure to ensure that the institution provides this information 
prominently, clearly and concisely, and that it is readable at a 6th 
grade level.
    Discussion: The term ``enrolled student'' is defined in Sec.  
668.2(b) and is the status of a student who has completed the 
registration requirements (except for the payment of tuition and fees) 
at the institution that he or she is attending; or has been admitted 
into an educational program offered predominantly by correspondence and 
has submitted one lesson after being accepted for enrollment that the 
student completed without the help of a representative of the 
institution. We define the term prospective student as an individual 
who has been in contact with an eligible institution requesting 
information concerning admission to that institution. These definitions 
apply to 34 CFR 668.50.
    The Department is requiring these disclosures because they create 
additional protections that do not exist

[[Page 92246]]

for students enrolling in traditional programs. The distance education 
sector has been fraught with problems where students were not provided 
adequate information that may have informed them of deficiencies in a 
particular program and these disclosures for distance education 
programs are intended to address this problem. We disagree with the 
commenter who believes the disclosures in Sec.  668.50(b) and (c) are 
excessive. The Department believes that this is important information 
that a prospective or enrolled student in a distance education program 
should receive about his or her educational program. An institution may 
combine these disclosures or provide them separately as it sees fit in 
order to ensure that important information will be presented to 
students in a clear and concise manner. The Department believes that 
institutions will make a good faith effort to provide these disclosures 
to students in a way that will clearly convey the information, so the 
Department declines to regulate the exact parameters of these 
disclosures at this time. However, the Secretary may provide additional 
guidance on this matter in the future.
    Changes: None.
Authorization Status Disclosure
    Comments: One commenter supported the regulation by agreeing that 
institutions should notify students whether an institution is 
authorized directly by a State or through participation in a 
reciprocity agreement.
    Other commenters asked for clarification on the level of detail 
that must be disclosed under Sec.  668.50(b)(1).
    Discussion: We appreciate the support for the requirement to 
disclose whether an institution is authorized to enroll students in a 
distance education program.
    This disclosure only requires an institution to inform students 
whether it is authorized to enroll students in a distance education 
program to students residing in a particular State. It does not require 
institutions to provide details related to the authorization process it 
completed to obtain authorization.
    Changes: None.
    Comments: Some commenters asked for additional guidance on how the 
proposed State authorization regulations would coexist with the June 
16, 2016 proposed Defense to Repayment regulations. Commenters discuss 
a hypothetical situation where an online or correspondence student 
resides in a non-SARA participating State or, during their course of 
study, relocates to a non-SARA State, and thus, an institution would be 
faced with either completing the burdensome process of State 
authorization in the non-SARA State in order to ensure that student 
could continue his/her course of study, or disenroll that student. If 
the student is disenrolled, at potentially no fault of the institution, 
the commenter suggests that the student could then potentially begin a 
Defense to Repayment claim against the institution. Under the proposed 
Defense to Repayment regulation, there could be circumstances where the 
institution would be required to post a 10 percent letter of credit. 
Commenters stated this hypothetical case places institutions in a 
regulatory Catch-22 and asked the Department to consider this likely 
scenario and address it either through changes to the regulatory text 
or through a ``Dear Colleague'' letter. The commenters specifically 
recommended that the Department allow students currently enrolled 
through online or correspondence courses to continue to be exempt from 
the proposed regulation through a grandfather clause or delaying 
implementation of the regulation to afford students ample time to 
complete their course of study.
    Discussion: We appreciate the commenter's concern, and we also 
believe that the potential consequences to students of relocating to a 
State where an institution is not authorized or where the student's 
program does not lead to licensure or certification are sufficiently 
severe that disclosure of these consequences by institutions should be 
required. If a school misrepresents or omits information that a student 
reasonably relies on to his or her detriment, it may give rise to a 
borrower defense claim; however, at this stage, without sufficient 
evidence surrounding the potential misrepresentation, it is unclear 
whether the commenter's hypothetical would apply.
    Changes: We revised the disclosures in Sec.  668.50(b)(1) to 
include a disclosure that explains the potential consequences for 
students who change their State of residence to a State where the 
institution does not meet State requirements, or in the case of a GE 
program, where the program does not lead to licensure or certification 
in the State.
Complaint Process Disclosure
    Comments: Multiple commenters asked for clarification about an 
institution's obligation to disclose complaint processes to distance 
education students when the institution participates in a State 
authorization reciprocity agreement, and also when the institution does 
not participate in such an agreement. They specifically asked whether 
an institution would be prohibited from enrolling students in a 
distance education program if those students reside in a State that 
lacks an appropriate complaint process. One commenter stated that 
providing information about complaint processes will confuse students. 
This commenter also recommended that for institutions that participate 
in the currently operating SARA, an institution does not have to 
provide both the disclosure under Sec.  668.50(b)(2) and the disclosure 
under Sec.  668.50(b)(3).
    One commenter believed that this requirement was superfluous and 
should be tied to Sec.  668.43(b), which requires institutions to 
provide prospective and current students with contact information for 
filing complaints with its accreditor and with its State approval or 
licensing entity.
    One commenter believed that this requirement would inappropriately 
cause institutions to interfere and lobby in the legislative process 
for other States. One commenter requested that the Department of 
Education collect the information required for the disclosure in Sec.  
668.50(b)(3) and provide a centralized Web site in which this 
information could be accessed by students. Other commenters also 
recommended that the Department indicate which States it believes to 
have an inadequate student complaint process.
    Other commenters asked whether this disclosure would still be 
required for States that do not require authorization to offer distance 
education programs or for States that choose to not assert jurisdiction 
over a complaint process. Additionally, another commenter recommended 
adding in language to limit this disclosure to those States that have 
an appropriate State complaint process in place by adding the phrase 
``to the extent the State has a complaint process applicable to the 
institution.''
    Discussion: Under Sec.  668.50(b)(2), an institution that is 
authorized directly by a State would need to disclose the process for 
submitting a complaint to an appropriate State agency for the State in 
which the institution's main campus is located. If an institution is 
authorized by a State authorization reciprocity agreement, it would be 
required to provide a description for submitting complaints that was 
established in the reciprocity agreement. For both types of 
authorization, an institution also must provide a description of a 
complaint process for the student's State of residence under Sec.  
668.50(b)(3), if such a process applies. In a State that has not joined 
a State authorization reciprocity agreement and does not have an 
appropriate complaint process for its

[[Page 92247]]

resident, an institution would not meet the authorization requirements 
established in Sec.  600.9(c)(2)(i) and would be precluded from 
providing title IV aid to enrolled students who reside in that 
particular State.
    The Department does not believe Sec.  668.50(b) creates a situation 
where institutions are forced to become involved in the legislative 
process of States without an appropriate complaint process, though such 
institutions could choose to contact States to request that they create 
or revise this process in order to ensure that the State's residents 
become title IV-eligible. We disagree with the commenter that believes 
providing information on State complaint processes will confuse 
students. We believe that students are best served when provided with 
important information regarding their institution that will support 
their decision to enroll or remain enrolled.
    While we agree with the commenter that there may be some overlap 
between the requirements in Sec. Sec.  668.50(b)(2) and 668.43(b), we 
believe that the focus of the information is substantively different. 
The information disclosed under Sec.  668.43(b) focuses on complaint 
processes in States where the institution maintains physical locations, 
and those complaint processes may differ from the complaint process 
disclosed under Sec.  668.50(b)(2). For example, the disclosures in 
Sec.  668.50(b)(2)(ii) refer to complaint processes that are designated 
by a State reciprocity agreement, which could feasibly require an 
institution to disclose complaint processes in any of the fifty States 
and additional jurisdictions within the country. We believe that 
students who reside in States other than the ones in which the 
institution is physically located benefit when they are able to easily 
identify the complaint process that is applicable to them, and the 
place where such students find information about how to file a 
complaint may differ because they are not enrolled to know specifically 
at a physical location of the institution where hard copies of 
information about filing complaints could be readily obtained. 
Therefore, we believe that it is important to require a disclosure 
about the complaint process in the State where the institution's main 
campus is located and any complaint process that is provided through an 
approved State authorization reciprocity agreement that the institution 
is a part of.
    Discussion: The Department does not agree that it should provide a 
centralized Federal Web site listing the complaint processes of each 
State. The Department is concerned that providing this information on 
its Web site may be misperceived as indicating a formal approval of 
such processes by the Department. Additionally, information may become 
outdated regarding State-based complaint processes because these 
processes that change, and the Department does not have the authority 
to compel States to provide and update this information in a timely 
way. We believe that each individual institution is in a better 
position to identify and obtain the necessary approvals from the States 
where it provides educational programs to students, since the 
institution would need to establish and maintain a working relationship 
with those State agencies. The Department does not believe that an 
institution necessarily has to do all the work to provide this 
disclosure to students. The administrators of a State authorization 
reciprocity agreement could provide this information to its members as 
a potential service, which could reduce the burden on individual 
institutions while still providing necessary information for the 
protection of students. The Department expects that all distance 
education programs will provide this disclosure regardless of the level 
of active review a State provides in providing authorization to 
distance education programs. For a distance education program to be 
considered to be authorized in a State, that State must have a 
complaint process in place. Therefore, there should not be programs 
operating in States that are not exerting jurisdiction over a complaint 
process.
    The Department does not believe that adding exemptions to this 
disclosure is in the best interest of protecting students. As 
previously discussed, an institution would be prohibited from using 
title IV funds for students enrolling in distance education programs or 
correspondence courses in States that do not offer an appropriate 
complaint process to students who reside in the State.
    Changes: None.
State Initiated Adverse Actions Disclosure
    Comments: Many commenters requested additional information on the 
definition of ``adverse action'' in Sec.  668.50(b)(4), which requires 
an Institution to disclose any adverse actions related to a 
postsecondary education program that a State entity has initiated. They 
noted that adverse action has a clear definition in the world of 
accreditation, but does not have a clear definition in State law or 
regulation. One commenter recommended that the Department use language 
established in NC-SARA's Agreement's Policies and Standards as a 
definition for adverse actions. One commenter also asked for a 
definition for the word ``initiated,'' stating that there may be 
investigations occurring that take years to resolve, but never result 
in any actions actually taken against the institution. A third 
commenter asked for a definition for the term ``State entity.'' This 
commenter also recommended that those actions initiated by State 
entities be reported to any reciprocity agreement the institution is a 
member of, but only actions taken against the institution be reported 
to students. Another commenter requested that the rule be revised to 
only require that those adverse actions that remain pending or 
unresolved be required to be disclosed to students. One commenter 
requested that the Department eliminate this disclosure because these 
terms vary State by State and may cause confusion among students. One 
commenter requested clarification on whether this disclosure would need 
to be provided only to students in the State where the adverse action 
occurred, or whether it would need to be provided to all students 
enrolled in an institution's distance education programs. One commenter 
recommended the Department use these regulations to limit the title IV 
eligibility of institutions that receive legitimate complaints of 
malfeasance.
    Discussion: The Department declines to define State adverse action 
in these regulations because it is difficult to capture all the 
different States' processes in one comprehensive definition. However, 
we agree that some further clarification is merited regarding what 
constitutes a State initiated adverse action that an institution must 
disclose to students. Adverse actions include any official finding for 
which an institution can appeal an administrative or judicial review, 
any penalty against an institution including a restriction on an 
institution's State approval, or the initiation of a civil or criminal 
legal proceeding. These actions include anything related to distance 
programs offered by an institution, as well as actions that apply to 
the institution as a whole. The Department also considers an adverse 
action to include any settlement of a legal proceeding initiated by a 
State entity, regardless of whether the institution had to admit to any 
wrongdoing. This disclosure is intended to provide students with 
information about adverse actions that either are being taken or were 
taken against an institution or program. An institution must disclose 
any adverse action at the point that it is publicly

[[Page 92248]]

announced or, for instances in which there will be no public 
announcements, within 14 days of being notified of the action, which is 
when the Department considers an adverse action to have been initiated. 
The Department believes that an institution that is a member of a State 
authorization reciprocity agreement should report adverse actions to 
other States members if it is required as part of their agreement, but 
that does not absolve the institution from disclosing that information 
to students, who should be informed of any adverse actions taken 
against an institution or program. Additionally, we believe that 
institutions should disclose information about adverse actions after 
the action concludes to ensure that a student is informed that an 
action was taken, including any settlement, so that the student may 
seek further information about it from the State or from the 
institution.
    The Department believes that these disclosures should be made to 
all prospective or enrolled students in distance education at an 
institution, not just to students who reside in the State that has 
initiated the particular adverse action. This is because such 
disclosures may demonstrate risk indicators that any student should be 
aware of to determine their comfort level with enrollment in a 
particular program.
    A State entity is any State department or agency that has the 
authority of the State to initiate an investigation or lawsuit against 
an institution of higher education. The Department believes that 
institutions which receive legitimate complaints of malfeasance will be 
handled through other mechanisms within the Department, such as audit 
findings and program reviews. As such, the Department does not believe 
these disclosures should be tied to specific penalties for issues 
beyond State authorization.
    Changes: None.
Accreditation Adverse Action Disclosure
    Comments: One commenter expressed concern at the term ``adverse 
actions'' with regards to accrediting agencies in Sec.  668.50(B)(5), 
stating that what may be considered an adverse action for one 
accrediting agency may be a minor issue to another accrediting agency. 
The commenter requested that the Department standardize adverse actions 
initiated by an accrediting agency. Another commenter stated that 
information-gathering activities or those that might place an 
institution or program on probation or show cause should not constitute 
adverse actions under currently used definitions by accrediting 
agencies. That commenter continued by stating that actions that should 
be considered adverse actions are: Denial, withdrawal, suspension, 
revocation, or termination of accreditation. The same commenter also 
noted that those actions of lesser severity that do not incorporate any 
right of appeal should not constitute adverse actions under this 
disclosure. One commenter noted that they felt it was unjustified to 
only require the disclosure of adverse actions of programs offered 
solely through distance education, but that all institutions of higher 
education should be required to disclose this information to students. 
Another commenter stated that accrediting agencies generally take 
actions against an institution and not a program and recommended the 
Department revisit their terminology throughout the regulation.
    Discussion: ``Adverse accrediting action,'' as defined in 34 CFR 
602.3, is the denial, withdrawal, suspension, revocation, or 
termination of accreditation or preaccrediation, or any comparable 
accrediting action an agency may take against an institution or 
program. While the Department believes that these examples provide a 
starting point for adverse actions initiated by an accrediting agency, 
the Department believes that, for purposes of this regulation, any 
downgrade in accreditation status, such as being placed on show cause 
or probation, is an adverse action and must be disclosed to students.
    Information being requested for any type of accreditation review 
would not be considered an adverse action, but if the accrediting 
agency ends their review with a downgrade of accreditation status, then 
the institution would be required to disclose that downgrade as an 
adverse action. While we appreciate the support of the commenter who 
believes a disclosure for accreditation agency initiated adverse 
actions should be provided to students who are enrolled in traditional 
programs, we believe that is beyond the scope of this rulemaking. 
Institutions are required to provide information pertaining to their 
accreditation status per the requirements in 34 CFR 668.43(a)(6) by 
providing the names and addresses of the organizations that accredit 
the institution and their programs to students and prospective students 
upon request, even if it does not require calling specific attention to 
any downgraded status in their accreditation status. The Department 
believes that an institution must disclose adverse actions that pertain 
either to an institution's accreditation status from a regional 
accrediting agency or a programmatic accreditation that the 
institution's programs may have. If a particular adverse action by an 
accrediting agency could affect the ability of an institution to 
continue to offer title IV funds to students enrolled in one of its 
programs, such as a downgrade in accreditation status, we would expect 
that institution to disclose this information. The Department believes 
that the language used in the regulation clearly indicates that any 
adverse actions by an accrediting agency that could have a negative 
impact on a distance education program or correspondence course would 
need to be disclosed to students.
    Changes: None.
Refund Policies Disclosure
    Comments: A number of commenters questioned the efficiency of the 
refund policy disclosure in Sec.  668.50(b)(6) and they believed there 
would be significant errors in accuracy. They recommended that this 
disclosure would be more effective if the information could be 
collected once and then a centralized portal could be created to 
disclose the information to students. One commenter noted that the 
Department should also specifically require institutions to disclose, 
in writing, any refund promises that an institution of higher education 
makes to students beyond what is required by State law. One commenter 
stated that colleges and universities should not be required to comply 
with individual State tuition refund policies due to the high 
administrative burden since all title IV participating institutions are 
required to comply with Return of Title IV funds (R2T4) regulations, as 
established in 34 CFR 668.22. Another commenter asked for clarification 
on whether an institution that is exempt from State regulations, such 
as through a State authorization reciprocity agreement, can use its own 
refund policies.
    Discussion: The Department believes that an institution of higher 
education is required to follow the laws in the State in which it 
operates or enrolls students, including any refund policies that the 
State enacts. While there may be a lack of efficiency in each 
institution providing a disclosure related to the refund policies in 
each State it enrolls students, an institution of higher education 
would still need to know those refund policies in order to follow them. 
Again, this disclosure is one that the Department believes that the 
administrators of a State authorization reciprocity agreement could 
provide as a service to its members, which would increase the 
efficiency and accuracy of

[[Page 92249]]

the information as the reciprocity agreement would have established 
relationships with State agencies to ensure accurate information. Even 
in cases where an institution participates in a State authorization 
reciprocity agreement, the institution must follow the individualized 
State refund policies. The Department considers refund policies as an 
integral part of a State's consumer protection laws and believes that 
institutions of higher education enrolling students within a State's 
jurisdiction are required to follow the laws of that State, even if it 
participates in a State authorization reciprocity agreement. As such, 
based on the definition of State authorization reciprocity agreement in 
Sec.  600.2, a State authorization reciprocity agreement does not have 
the ability to overrule State law with regards to consumer protection, 
including refund policies. Institutions must follow the R2T4 
regulations to determine the proper return of Federal, title IV funds 
when a student does not complete an academic term, however the 
Department does not have any specific requirements for tuitions to make 
tuition refunds to students. While not mandated in this disclosure, 
institutions of higher education must provide information about any 
institutional refund policies that a college or university follows 
under 34 CFR 668.43(a)(2), which requires an institution to disclose 
any refund policy with which the institution is required to comply for 
the return of unearned tuition and fees and other refundable portions 
of costs paid to the institution.
    Changes: None.
Licensure or Certification Disclosure General Support
    Comments: Multiple commenters supported the disclosure of 
educational prerequisites for professional licensure or certification 
in each State under Sec.  668.50(b)(7)(i)(A) and (B). One commenter 
specifically encouraged the Department to keep this disclosure despite 
any opposition to its inclusion in these regulations.
    Discussion: We appreciate the commenters' support for this 
disclosure under Sec.  668.50(b)(7)(i)(A) and (B).
    Changes: None.
Determining State Prerequisites for Licensure
    Comments: Multiple commenters recommended that these regulations 
should generally prohibit using title IV funds for programs that do not 
meet State requirements for the occupation that it prepares students 
for, allowing exemptions only when a particular student has provided a 
specific, personal reason on why they are enrolling in a program that 
does not qualify them for the licensure or certification requirements 
in their state of residence. One commenter specifically asked under 
what circumstances it would be permissible for an institution to not 
make a determination on whether their program meets the licensure or 
certification requirements in a particular State. The same commenter 
asked if it would be permissible for an institution to provide the 
licensure and certification prerequisites for a particular State and 
then distribute a ``do not know'' statement on whether their program 
meets those prerequisites. Another commenter asked that this disclosure 
be limited to States where the program is offered by the institution. 
Another commenter requested that this disclosure be limited to those 
programs that lead to professions that have licensure or certification 
prerequisites in a particular State.
    Discussion: This disclosure is limited to programs that lead to a 
profession where the State has established licensure or certification 
prerequisites. If a State has not established prerequisites to work in 
the jobs associated with the program training, then the institution 
would have nothing to disclose. Obviously, certain professions are more 
regulated than others. For example, programs that lead to teaching or 
nursing as a career would be more likely to have established 
prerequisites, while a general studies program, which could lead to a 
multitude of other careers, may not have established prerequisites. 
However, if an academic program offered in a State may foreseeably lead 
to careers that require licensure or certification in that State, based 
on how an institution markets or advertises a particular distance 
education program or correspondence course, an institution must provide 
information to students on the requirements to meet that licensure or 
certification. We expect that if an institution has determined what the 
licensure or certification prerequisites are for a given State, the 
institution would also determine whether its programs fulfill those 
prerequisite requirements.
    Many distance education programs are also held to the standards 
established by the GE regulations. GE programs are forbidden from using 
title IV aid for students enrolled in programs that do not meet the 
licensure or certification prerequisites of a State. However, these 
regulations do not extend that prohibition to distance education 
programs that are not also GE programs.
    Changes: None.
Determining the Applicable State for Licensure Disclosure
    Comments: One commenter expressed concern that this disclosure was 
unfair to distance education programs which may be offered in States 
where the institution does not have a physical presence. They continued 
that this may be a problem for students who do not plan to remain in a 
particular State after they receive their degree. Another commenter 
recommended a change that a program be given an entire year in which to 
make a determination on whether their program meets licensure or 
certification requirements when a student moves to a State that the 
institution has not made a determination about their program.
    Other commenters expressed concern that these regulations may 
require that they be held responsible for personal characteristics of 
the student that may disqualify the individual from licensure, such as 
moral character issues. Two commenters specifically recommended that 
this disclosure provide information on obtaining a job in-field and if 
the student needs to do anything beyond simply graduating in order to 
meet the State standard.
    One commenter requested that this requirement be revised to include 
providing this disclosure to prospective students in any State where 
the institution is marketing its programs. Multiple commenters asked 
for clarification on the meaning of ``where a student resides.''
    Discussion: We disagree with the commenter that believes it is 
unfair to require this disclosure of distance education programs 
because they do not have a physical presence in the State. In fact, we 
believe that is a strong justification that makes this an important 
justification for this disclosure. It is important that students being 
enrolled by an institution in a distance education program are provided 
information on how their educational program relates to career 
opportunities in the State in which they reside. Institutions should 
make the effort to provide students not in the same State as the 
institution with accurate information about licensure or certification 
prerequisites. As stated above, many distance education programs are 
also GE programs and are required to comply with the GE regulations, 
which prohibit enrollment of title IV eligible students in programs 
that do not meet licensure or certification requirements in a State.

[[Page 92250]]

However, these regulations do not extend that prohibition to distance 
education programs that are not GE programs. However, we expect that 
institutions will provide accurate information to students about the 
licensure or certification prerequisites in their State of residence. 
The Department believes that institutions should make these 
determinations as a part of doing business in a State. Where an 
institution does the research to determine the licensure or 
certification prerequisites for a State, then that institution should 
go the next step and determine whether their programs meet such 
prerequisites.
    While the Department agrees with the commenter that this disclosure 
provides important information that could be shared with students, we 
believe it would be too difficult for institutions to be able to 
accurately identify every possible State in which a potential student 
could reside. Oftentimes, students find information on a program and 
contact an institution about a program from conducting Internet 
searches, rather than the recruitment techniques of an institution. In 
such cases, it would be unrealistic for an institution to be able to 
provide certification or licensure prerequisites to prospective 
students across the country. However, by the time a student enrolls, 
the institution should know what the prerequisites for that student's 
State of residence is and whether the program fulfills those 
requirements. The Department expects institutions to have provided this 
disclosure by the time the student enrolls.
    The Department believes that if graduates of a program are able to 
sit for any type of licensure or certification examination, then the 
distance education program they were enrolled in meets State 
requirements for licensure or certification. If a program does not meet 
State requirements for licensure or certification, the Department 
believes that graduates of that program will be denied the ability to 
sit for licensure or certification. We agree that an institution of 
higher education is only responsible for how their programs meet or do 
not meet the requirements for licensure or certification in a State and 
are not responsible for student-level qualifications to sit for 
licensure or certification. The Department does not feel that providing 
information on obtaining a job in-field is necessary because 
information on State licensure or certification prerequisites is 
sufficient to allow a student to make an informed choice about whether 
to enroll or continue in an educational program.
    The student's State of legal residence is the residency or domicile 
of a student's true, fixed, and permanent home of a student, usually 
where their domicile is located. As noted above, a student is 
considered to reside in a State if the student meets the requirements 
for residency under State law, and an institution may rely on a 
student's self-determination of the State in which he or she resides 
unless the institution has information to the contrary.
    Changes: None.
Miscellaneous Issues Related to Licensure Disclosure
    Comments: Multiple commenters noted that they believed that the 
Department should provide a centralized Web site or searchable 
government data base to ease the burden on institutions of higher 
education. Outside of a Federal Web site, other commenters requested 
clarification on whether an institution could link to a non-
institutional Web site, such as a third-party Web site or a State 
professional licensure board Web site to provide appropriate 
disclosures to students. A number of commenters noted that this 
disclosure is difficult to fulfill because State agencies are not 
equipped to provide responses to institution requests for information 
on licensure and certification requirements. Other commenters requested 
guidance on how to provide this disclosure to students, recommending 
size, format and wording. One commenter specifically requested 
permission to encourage students to confirm whether the program meets 
the licensure or certification requirements of a State. Other 
commenters asked for sufficient time to become compliant with this 
regulation. One commenter asked for clarification on how it will be 
determined if a program leads to a career that would in fact need 
licensure or certification. One commenter requested that the Department 
exempt graduate programs from this disclosure requirement. Another 
commenter recommended that this disclosure only be required for those 
programs and States where schools have awarded more than ten degrees in 
the previous five years. One other commenter recommended that this 
disclosure be waived for institutions that are accredited by a regional 
accreditation agency and for programs that are accredited by a 
nationally recognized accrediting agency. One commenter requested 
clarification on which State's licensure and certification 
prerequisites should be disclosed to students. One commenter asked for 
clarification on how often an institution would need to confirm 
accurate licensing or certification prerequisites to determine that 
their program continues to meet those prerequisites.
    Discussion: The Department does not plan on developing a 
centralized Federal Web site to house information on the licensure or 
certification requirements of each State for those professions that 
States have implemented licensure or certification requirements. 
However, the Department does not believe that this information must 
necessarily be collected by each and every institution independently. 
Rather, an institution can be in compliance with this requirement by 
referring to a non-institutional Web site, including relevant State 
professional licensure board Web sites, which contains such 
information. Institutions that link to a non-institutional Web site 
should follow the guidance issued in Dear Colleague Letter GEN-12-13, 
and make the link accessible from the institution's Web site and have 
the link prominently displayed and accurately described. The 
institution is also responsible for ensuring that the link is 
functioning and accurate. Additionally, an institution should not need 
to request information on the licensure and certification requirements 
through official communications with a State agency. As pointed out by 
other commenters, many State agencies have licensure and certification 
prerequisites listed on a Web site and the Department believes that 
institutions could find this information on the Internet easily and 
they do not need to rely on State agency staff for official 
information. An institution would still be responsible for ensuring 
accurate information is being provided to their students though. 
Administrators of a State authorization reciprocity agreement could 
also offer the collection of this information to institutions as a 
service for membership in the agreement, which would reduce the burden 
on institutions.
    The Department, at this time, declines to mandate any particular 
requirements about how these disclosures must be provided to students, 
but reserves the right to provide further guidance on that issue. 
However, we expect that institutions of higher education will collect 
and disclose this information for students and not put the onus of 
discovering the information on the student. Institutions should not try 
to hide this information deep on their Web sites, but should instead 
make these disclosures easily accessible for students. The institution 
is ultimately responsible for ensuring that this information is 
disclosed to students and should not put the burden on the

[[Page 92251]]

student making the determination about whether the program meets the 
prerequisites for licensure or certification. The Department believes 
that an institution makes the determination about the careers that 
potential academic programs can lead to when developing programs as a 
matter of conducting business. Institutions of higher education 
advertise these linkages between their academic programs and potential 
careers as part of the advertising and student recruitment process. 
Institutions report these linkages, especially in GE reporting, by 
connecting the programs' Classification of Instructional Program (CIP) 
codes to their related Standard Occupational Classification (SOC) 
codes. These regulations become active on July 1, 2018, and the 
Department believes that is sufficient time for institutions of higher 
education to prepare for compliance. The Department disagrees with the 
recommendation that graduate programs should be exempted from this 
disclosure. We believe that graduate students would also benefit from 
this information and should be provided this disclosure, as graduate 
programs may also be preparing students for careers in subject areas 
that States have established licensure or certification prerequisites.
    The Department also disagrees with the recommendation that the 
disclosure only be required of programs for States where the 
institution has awarded more than ten degrees in five years. We believe 
that this information should be provided to all students so they will 
know whether the program they enroll in will meet the licensure or 
certification prerequisites regardless of how many degrees are given in 
a particular program. The Department disagrees with the recommendation 
to provide an exemption to institutions with regional accreditation or 
programs with national accreditation. While accreditation status is 
another disclosure required under these regulations, we believe that 
students should be informed of whether a program meets licensure and 
certification prerequisites and obtaining accreditation does not mean 
that an institution's program necessarily meets those prerequisites. 
The Department believes that an institution must disclose the licensure 
and certification requirements to students for the State in which the 
student resides because that is the State where a student would most 
likely be searching for employment upon completing their academic 
program. The Department does not intend to define the minimum timeframe 
required for an institution to confirm licensing or certification 
prerequisites with State agency information, but believes that an 
institution should do so regularly to ensure that each prospective 
student receives accurate information. The Department would like to 
remind institutions that in addition to providing accurate public 
disclosures that it would also need to ensure accurate information when 
providing individualized disclosures to prospective students that a 
program they are enrolling in does not meet licensure or certification 
prerequisites in their State of residence, as required by Sec.  
668.50(c)(1)(i).
    Changes: None.
Programs That Do Not Satisfy Licensure or Certification Prerequisites
    Comments: Multiple commenters expressed concern with Sec.  
668.50(b)(7)(ii), which requires disclosing whether a program does or 
does not satisfy the applicable educational prerequisites for licensure 
or certification where the institution determines a State's 
requirements. These commenters were concerned that Sec.  
668.50(b)(7)(ii) does not require a program to meet certification or 
licensure prerequisites to be eligible to award title IV aid to 
students. One commenter requested that the Department require 
institutions with distance education programs to make a determination 
with respect to certification or licensure prerequisites for all 
States, regardless of whether the institution is recruiting students 
for enrollment. One commenter also requested clarification on what it 
means to make a ``determination with respect to certification or 
licensure prerequisites.'' Specifically, the commenter asked whether an 
institution that has made an incorrect determination of whether a 
program meets licensure or certification requirements would still be 
considered in compliance with this requirement. The commenter provided 
as an example an institution that advertises that a certain program 
will lead to a career such as teaching, but fails to conduct the 
research on whether the program meets those prerequisites established 
by the State.
    Discussion: The Department believes that students are best served 
by having accurate information to be able to make decisions regarding 
their academic pursuits, including with regard to the certification or 
licensure prerequisites of potential careers. As stated above, most 
distance education programs are also GE programs, which means that an 
institution cannot provide Title IV aid to students enrolled in those 
programs unless the program meets the licensure or certification status 
of a State. The GE regulations do not forbid non-GE distance education 
programs from enrolling title IV eligible students.
    However, the Department expects that institutions will make a good 
faith effort in determining whether their programs meet State licensure 
or certification prerequisites. We do not believe that requiring 
institutions to research and provide information on States that it does 
not plan on recruiting or enrolling students will be useful to 
students, as the individuals that the information would pertain to are 
not being solicited for enrollment.
    Therefore, we believe that requiring institutions to research State 
certification or licensure prerequisites for States in which it is not 
actively recruiting or enrolling students would significantly increase 
the burden associated with this disclosure without substantial benefit 
to those individuals that enroll in their programs. If an institution 
advertises that a distance education program could lead to a career 
that would require certification or licensure in a State, such as 
teaching, but does not follow through to research the licensure 
requirements to determine how the program matches up against the 
prerequisites, then the institution has not provided accurate licensure 
requirements to students nor stated that its program meets the academic 
requirements of those prerequisites, as required by this regulation.
    Changes: None.
Timeline for Individualized Disclosures
    Comments: One commenter requested that the timeframe in which an 
institution must disclose any determination that its program ceases to 
meet licensure or certification prerequisites be increased from 7 days 
to 45 days under Sec.  668.50(c)(1)(ii)(B). The commenter continued by 
stating that it would take significantly more than 7 days to understand 
the impact of a change in licensure requirements, inform internal 
stakeholders, determine impacted learners, craft and route 
communications for approval, educate employees who may receive 
questions from learners, and execute a mass communication. The same 
commenter also asked for clarification on when the clock would start to 
provide this disclosure. Another commenter asked whether an institution 
would be allowed to make a determination that it has not made a 
determination with respect to how their program meets the licensure or 
certification prerequisites

[[Page 92252]]

in a State, rather than disclosing that the institution no longer meets 
those prerequisites.
    Discussion: The Department believes that a 45-day window from 
determining that an institution's distance education program ceases to 
meet licensure or certification programs to informing enrolled and 
prospective students of that determination is too long. However, the 
Department recognizes that seven days may be too small a window to 
inform prospective and enrolled students of a determination. This 
disclosure's time-frame would not start until an institution has made a 
determination that a distance education program no longer meets the 
certification or licensure prerequisites for a State. Once that 
determination has been made, we believe an institution can move quickly 
to prepare notifications and inform students, especially with the use 
of technology in mass communications.
    We believe that a 14-calendar day period from the point that an 
institution has determined a program no longer meets the licensure or 
certification requirements of a State is sufficient to notify 
prospective and enrolled students. If an institution determines that a 
program ceases to meet the licensure or certification requirements in a 
State, the institution must inform students of that determination 
within 14 calendar days. That institution cannot avoid providing 
students with accurate information by claiming the institution is not 
making a determination with respect to those prerequisites.
    Changes: We revised Sec.  668.50(c)(1)(ii)(B) to provide 
institutions 14-calendar days to disclose any determination by the 
institution that the program ceases to meet licensure or certification 
prerequisites of a State.
Individualized Disclosure Acknowledgement
    Comments: One commenter stated that Sec.  668.50(c)(2) should not 
require institutions, under the penalty of losing title IV eligibility, 
to obtain acknowledgment from students that they received notification 
of any determination by the institution that the program does not meet 
licensure or certification prerequisites in the State of the student's 
residence, prior to the student's enrollment. Another commenter stated 
that institutions with a very mobile student population, such as 
military students, would have particular difficulty in obtaining this 
acknowledgment.
    Discussion: The Department disagrees with the commenters that 
receiving acknowledgment of this disclosure would be extremely 
difficult to achieve. As mentioned in the NPRM, the Department believes 
that an institution could simply add in a paragraph to their enrollment 
agreement, a process that takes place electronically for many distance 
education programs already, that addresses receiving this disclosure. 
This disclosure does not require a separate, stand-alone affirmation 
and can be combined with other acknowledgments that the student may 
have to provide to an institution during the enrollment process. As 
such, the Department does not believe that an institution would have to 
create a separate process for record keeping of these disclosures 
outside of the record keeping an institution would already do on 
enrollment agreements. Based on the flexibility of how an institution 
can obtain acknowledgement from a student that they received the 
disclosure that the program they are enrolling in does not meet the 
licensure or certification prerequisites in their State of residence, 
we believe that institutions with a highly mobile population should not 
have any difficulty obtaining this acknowledgement from individuals 
enrolling in their distance education programs. We believe that the 
best way to demonstrate to students that they are receiving important 
information that may influence their decision to enroll in a program 
would be for the student to attest to receiving such information before 
enrollment.
    Changes: None.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

Introduction
    Under Executive Order 12866, it must be determined whether this 
regulatory action is ``significant'' and, therefore, subject to the 
requirements of the Executive order and subject to review by the Office 
of Management and Budget (OMB). Section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action likely to 
result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This regulatory action is a significant regulatory action subject 
to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these regulations only on a reasoned determination 
that their benefits would justify their costs. In choosing among 
alternative regulatory approaches, we selected those approaches that 
maximize net benefits. Based on the analysis that follows, the 
Department believes that these

[[Page 92253]]

regulations are consistent with the principles in Executive Order 
13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    In this Regulatory Impact Analysis we discuss the need for 
regulatory action, the potential costs and benefits, net budget 
impacts, assumptions, limitations, and data sources, as well as 
regulatory alternatives we considered. Although the majority of the 
costs related to information collection are discussed within this RIA, 
elsewhere in this Notice of Final Rules, under Paperwork Reduction Act 
of 1995, we also identify and further explain burdens specifically 
associated with information collection requirements.
Need for Regulatory Action
    States have a vital and unique role in the oversight of higher 
education and the Department believes that states are a key partner in 
setting minimum standards for institutions to operate. Recognizing the 
important role that States play in the oversight of distance education 
and the interest that States have in protecting their residents, the 
Department's regulation requires that institutions fulfill any 
requirements imposed by States whose residents are enrolled in the 
institution's postsecondary programs. The landscape of higher education 
has changed over the last 20 years. During that time, the role of 
distance education in the higher education sector has grown 
significantly. For the 1999-2000 Academic Year, eight percent of 
undergraduate students participated in at least one distance education 
course.\2\ Recent National Center for Education Statistics' Integrated 
Postsecondary Education Data System (IPEDS) data indicate that in the 
fall of 2014, 28.5 percent of students at degree-granting, title IV 
participating institutions were enrolled in at least one distance 
education class.\3\ The emergence of online learning options has 
allowed students to enroll in colleges authorized in other States and 
jurisdictions with relative ease. According IPEDS, in the fall of 2014, 
the number of students enrolled exclusively in distance education 
programs totaled 2,824,334.\4\ Distance education industry sales have 
increased alongside student enrollment. As students continue to embrace 
distance education, revenue for distance education providers has 
increased steadily. In 2014, market research firm Global Industry 
Analysts projected that 2015 revenue for the distance education 
industry would reach $107 billion.\5\ For the same year, gross output 
for the overall non-hospital private Education Services sector totaled 
$332.2 billion. Distance education has grown to account for roughly 
one-third of the U.S. non-hospital private Education Services sector.
---------------------------------------------------------------------------

    \2\ NCES, ``A Profile of Participation in Distance Education: 
1999-2000'', p.6 available at https://nces.ed.gov/pubs2003/2003154.pdf.
    \3\ 2015 Digest of Education Statistics: Table 311.15: Number 
and percentage of students enrolled in degree-granting postsecondary 
institutions, by distance education participation, location of 
student, level of enrollment, and control and level of institution: 
Fall 2013 and Fall 2014.
    \4\ Id.
    \5\ Online Learning Industry Poised for $107 Billion In 2015 
(https://www.forbes.com/sites/tjmccue/2014/08/27/online-learning-industry-poised-for-107-billion-in-2015/#46857a0966bc).
---------------------------------------------------------------------------

    In this aggressive market environment, distance education providers 
have looked to expand their footprint to gain market share. An analysis 
of recent data from IPEDS indicates that 2,301 HEA title-IV-
participating institutions offered 23,434 programs through distance 
education in 2014. Approximately 2.8 million students were exclusively 
enrolled in distance education courses, with 1.2 million of those 
students enrolled in programs offered by institutions from a different 
State. Table 1 summarizes the number of institutions, programs, and 
students involved in distance education by sector.

                           Table 1--2014 Participation in Distance Education by Sector
----------------------------------------------------------------------------------------------------------------
                                                                                                    Students
                                         Institutions                            Students        exclusively in
                                      offering distance   No. of distance     exclusively in      out-of-state
               Sector                     education          education           distance           distance
                                           programs           programs          education          education
                                                                                 programs           programs
----------------------------------------------------------------------------------------------------------------
Public 4-year.......................                540              5,967            692,074            144,039
Private Not-for-Profit 4-year.......                745              6,555            607,224            333,495
Proprietary 4-year..................                255              5,153            820,630            628,699
Public 2-year.......................                625              5,311            690,771             45,684
Private Not-for-Profit 2-year.......                 15                 42                814                388
Proprietary 2-year..................                 87                339             21,421              5,291
Public less-than-2-year.............                  7                 10                 55  .................
Private Not-for-Profit less-than- 2-                  1                  1  .................  .................
 year...............................
Proprietary less-than-2-year........                 26                 56              1,056                382
                                     ---------------------------------------------------------------------------
    Total...........................              2,301             23,434          2,834,045          1,157,978
----------------------------------------------------------------------------------------------------------------

    States have differing requirements that institutions of higher 
education must meet, such as varying application requirements and fees. 
The different requirements can potentially cause increased costs and 
burden for those institutions, and some States have entered into 
reciprocity agreements with other States in an effort to coordinate 
oversight of distance education. For example, as of June 2016, 40 
States and the District of Columbia have entered into a State 
Authorization Reciprocity Agreement administered by the National 
Council for State Authorization Reciprocity Agreements, which 
establishes standards for the interstate offering of postsecondary 
distance-education courses and programs. Through a State authorization 
reciprocity agreement, an approved institution may provide distance 
education to residents of any other member State without seeking 
authorization from each member State. However, even where States accept 
the terms of a reciprocity agreement, that agreement may not apply to 
all institutions and programs in any given State. The regulation 
defines the type of reciprocity agreements that are an acceptable means 
for States to confer

[[Page 92254]]

authorization to distance education programs.
    There also has been a significant growth in the number of American 
institutions and programs enrolling students abroad. As of May 2016, 
American universities were operating 80 foreign locations worldwide 
according to information available from the Department's Postsecondary 
Education Participation System (PEPS).
    American institutions operating foreign locations are still 
relatively new. As such, data about the costs involved in these 
operations is limited. Some American institutions establishing 
locations in other countries have negotiated joint ventures and 
reimbursement agreements with foreign governments to share the startup 
costs or other costs of doing business.
    With the expansion of these higher education models, the Department 
believes it is important to maintain a minimum standard of State 
authorization of postsecondary education institutions. These 
regulations support States in their efforts to develop standards for 
this growing sector of higher education. The clarified requirements 
related to State authorization also support the integrity of the 
Federal student aid programs by not supplying funds to programs and 
institutions that are not authorized to operate in a given State.

Summary of Comments and Changes

    Following the publication of the NPRM on July 25, 2016 (81 FR 
48598), the Department received 139 comments on the proposed 
regulations. Many of these comments have been addressed in the Analysis 
of Comments and Changes in this preamble. A number of commenters 
expressed concern about the costs of complying with these State 
authorization regulations. These commenters state that the Department 
underestimated the costs of researching State authorization 
requirements, coordination between the institution and foreign 
locations, and interactions with State agencies. Commenters 
representing HBCUs and other Minority Serving Institutions (``MSIs'') 
raised concerns about the costs and effect on those institutions, with 
some commenters requesting additional resources be made available to 
help them comply if the regulations passed. Additionally, commenters 
representing small institutions stated that the regulations and 
associated compliance costs would serve as a barrier to entry that 
would prevent small, highly reputable institutions from competing in 
the distance education market and potentially deny students a high-
quality and cost-effective educational opportunity. The commenters 
noted that, in recent years, distance education has become an important 
source of revenue and a way to level the playing field with larger and 
better funded public and private institutions. The comments asserted 
that the Department underestimated the complexity and burden of 
complying with the regulations, and that the costs, including 
unintended negative consequences of the regulations such as cost 
transfers to students, outweigh the benefits.
    The Department appreciates the comments and the specificity with 
which some commenters discussed the calculation of burden for the 
regulations. Where applicable, comments about the relevant burden 
calculation will be addressed in the Paperwork Reduction Act section of 
this preamble. Other comments about the overall costs of the regulation 
relative to the benefits are addressed in the Discussion of Costs, 
Benefits, and Transfers section.
    Based on the comments received and the Department's internal 
review, a number of changes have been made from the proposed 
regulations. In particular, with respect to distance education, the 
final regulations: (1) State that for a reciprocity agreement to be 
valid under these regulations, it may not prohibit a State from 
enforcing its own statutes and regulations; (2) clarify that 
institutions may choose to be authorized individually in each State 
required or to participate in a reciprocity agreement between States; 
(3) revise the language in Sec.  668.50(a) and (c) to be consistent 
with Sec.  668.50(b) in requiring the specified disclosure from 
institutions that offer programs solely through distance education or 
correspondence courses, excluding internships and practicums; (4) Add a 
new requirement under Sec.  668.50(b)(1)(iii) that an institution must 
explain to students the consequences of relocating to a State where the 
institution does not meet State requirements or where one of the 
institution's GE programs does not meet licensure or certification 
requirements in the State; and (5) revise the timeframe in Sec.  
668.50(c)(1)(ii)(B) for disclosing that the program ceases to meet 
licensure or certification prerequisites of a State within 14 days of 
that determination, not 7 days as proposed in the NPRM. With respect to 
foreign locations, the final regulations make the following changes: 
(1) Revise Sec.  600.9(d)(1)(i) to clarify that military bases, for 
purposes of foreign authorization exemption, are any area that is under 
use by the U.S. military, including facilities and areas that foreign 
countries have allowed the U.S. military to use; (2) revise Sec.  
600.9(d)(3) to clarify that institutions must disclose to enrolled and 
prospective students information regarding the student complaint 
process of the State in which the main campus of the institution is 
located; and (3) revise Sec.  600.9(d)(3) to make clear that an 
institution must disclose to enrolled and prospective students at both 
foreign additional locations and foreign branch campuses the 
information regarding the institution's student complaint process.

Discussion of Costs, Benefits, and Transfers

    The primary benefits of these regulations are: (1) Increased 
transparency and access to institutional and program information, (2) 
updated and clarified requirements for State authorization of distance 
education and foreign additional locations, and (3) a process for 
students to access complaint resolution in either the State in which 
the institution is authorized or the State in which they reside.
    We have identified the following groups and entities we expect to 
be affected by these regulations:
     Students
     Institutions
     Federal, State, and local government

Students

    During the negotiated rulemaking students stated that the 
availability of online courses allowed them to earn credentials in an 
environment that suited their personal needs. We believe, therefore, 
that students would benefit from increased transparency about distance 
education programs. The disclosures of adverse actions against the 
programs, refund policies, consequences of moving to a State in which 
the program does not meet requirements, and the prerequisites for 
licensure and whether the program meets those prerequisites in States 
for which the institution has made those determinations will provide 
valuable information that can help students make more informed 
decisions about which institution to attend.
    Increased access to information could help students identify 
programs that offer credentials that potential employers recognize and 
value. Additionally, institutions have to provide an individualized 
disclosure to enrolled and prospective students of adverse actions 
against the institution and when programs offered solely through 
distance education or correspondence courses do not meet licensure or 
certification prerequisites

[[Page 92255]]

in the student's State of residence. The disclosure regarding adverse 
actions will ensure that students have information about potential 
wrongdoing by institutions. Similarly, disclosures regarding whether a 
program meets applicable licensure or certification requirements will 
provide students with valuable information about whether attending the 
program will allow them to pursue the chosen career upon program 
completion, helping students make a better choice of program before 
they incur significant loan debt or use up their Pell Grant and 
subsidized loan eligibility.
    In response to comments received about the NPRM, the Department has 
added a requirement that institutions disclose the potential loss of 
title IV eligibility or disenrollment of students who relocate to a 
State in which the program does not meet the requirements. This 
information does not require an individualized disclosure, but should 
provide students with generalized information on where the program 
meets requirements and the consequences if the student relocates to a 
State not on that list and will give the student information about how 
their choice of residence and program interact with respect to 
eligibility for title IV funding. The licensure disclosure requires 
acknowledgment by the student before enrollment, which emphasizes the 
importance of ensuring students receive that information. It also 
recognizes that students may have specific plans for using their 
degree, potentially in a new State of residence where the program would 
meet the relevant prerequisites.
    Students in distance education or at foreign locations of domestic 
institutions will also benefit from the disclosure and availability of 
complaint resolution processes that will let them know how to submit 
complaints to the State in which the main campus of the institution is 
located or, for distance education students, the students' State of 
residence. This will help students to access available consumer 
protections.
    Some commenters did note that students could bear the costs of 
compliance with the regulations through increased tuition and fees or 
through reduced options for pursuing their education. The Department 
recognizes that some colleges may choose to pass some costs through to 
students, but we believe that the increased value of a program that is 
legally authorized to operate in a State, has a clear complaints 
process, and lets students know if it leads to valid licensure 
opportunities, if applicable, is worth the potential cost increase.
    Commenters representing small colleges expressed concern that the 
costs of compliance with the regulations would favor larger and better 
resourced institutions, potentially reducing competition and options 
for students. The Department appreciates these comments and 
acknowledges that the burden will vary for different types of 
institutions, but we believe that requiring institutions to comply with 
State standards is a minimum expectation to operate a program.

Institutions

    Institutions will benefit from the increased clarity concerning the 
requirements and process for State authorization of distance education 
and of foreign additional locations. Institutions will bear the costs 
of complying with State authorization requirements, whether through 
entering into a State authorization reciprocity agreement or 
researching and meeting the relevant requirements of the States in 
which they operate distance education programs. The Department does not 
ascribe specific costs to the State authorization regulations and 
associated definitions because it is presumed that institutions are 
already complying with applicable State authorization requirements. 
Additionally, nothing in these regulations would require institutions 
to participate in distance education. In the NPRM, the Department 
estimated potential costs of complying with State authorization 
requirements as an illustrative example in the event that the 
clarification of the State authorization requirements in the 
regulations, among other factors, would provide an incentive for more 
institutions to offer distance education courses. As noted in the NPRM, 
the actual costs to institutions would vary based on a number of 
factors including the institutions' size, the extent to which an 
institution provides distance education, and whether it participates in 
a State authorization reciprocity agreement or chooses to obtain 
authorization in specific States. The Department applied the costs 
associated with a SARA arrangement to all 2,301 title IV participating 
institutions reported as offering distance education programs in IPEDS 
for a total of $19.3 million annually in direct fees and charges 
associated with distance education authorization. Additional State fees 
to institutions applied were $3,000 for institutions under 2,500 FTE, 
$6,000 for 2,500 to 9,999 FTE, and $10,000 for institutions with 10,000 
or more FTE.
    As discussed previously, several commenters stated that the 
Department underestimated the costs of compliance with the regulations, 
noting that extensive research would be required for each program in 
each State. One institution noted that it costs $23,520 to obtain 
authorization for a program with an internship in all 50 States and 
$3,650 to obtain authorization for a new 100 percent online program in 
all 50 States. To renew the authorization for its existing programs, 
this institution estimates a cost of $75,000 including fees, costs for 
surety bonds, and accounting services, and notes these costs have been 
increasing in recent years. The commenter noted the institution 
currently has one full-time employee to oversee the State authorization 
process and contracts with State authorization and licensing experts 
and expects those personnel and contracting costs would increase 
significantly under the proposed regulations from the NPRM. We 
appreciate the cost information provided by the commenters. These 
comments demonstrate that the costs of establishing distance education 
programs could vary significantly, but, as stated earlier, we assume 
that institutions are already operating programs with appropriate 
authorizations. Domestic institutions that choose to operate foreign 
locations may incur costs from complying with the requirements of the 
foreign country or the State of their main campus, and these will vary 
based on the location, the State, the percentage of the program offered 
at the foreign location, and other factors. As with distance education, 
nothing in the regulation requires institutions to operate foreign 
locations and we assume that institutions have complied with applicable 
requirements in operating their foreign locations.
    In addition to the costs institutions incur from identifying State 
requirements or entering a State authorization reciprocity agreement to 
comply with the regulations, institutions will incur costs associated 
with the disclosure requirements. This additional workload is discussed 
in more detail under the Paperwork Reduction Act of 1995 section of 
this preamble. In total, these regulations are estimated to increase 
burden on institutions participating in the title IV, HEA programs by 
152,565 hours. The monetized cost of this burden on institutions, using 
wage data developed using Bureau of Labor Statistics BLS data available 
at: www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $5,576,251. This burden 
estimate is based on an hourly rate of $36.55.

[[Page 92256]]

Federal, State, and Local Governments

    These regulations maintain the important role of States in 
authorizing institutions and in providing consumer protection for 
residents. The increased clarity about State authorization should also 
assist the Federal government in administering the title IV, HEA 
programs. The regulations do not require States to take specific 
actions related to authorization of distance education programs. States 
may choose the systems they establish, their participation in a State 
authorization reciprocity agreement, and the fees they charge 
institutions and States have the option to do nothing in response to 
the regulations. Therefore, the Department has not quantified specific 
annual costs to States based on these regulations.

Net Budget Impacts

    As indicated in the NPRM, these regulations are not estimated to 
have a significant net budget impact in costs over the 2017-2026 loan 
cohorts. A cohort reflects all loans originated in a given fiscal year. 
Consistent with the requirements of the Credit Reform Act of 1990, 
budget cost estimates for the student loan programs reflect the 
estimated net present value of all future non-administrative Federal 
costs associated with a cohort of loans.
    In the absence of evidence that these regulations will 
significantly change the size and nature of the student loan borrower 
population, the Department estimates no significant net budget impact 
from these regulations. While the clarity about the requirements for 
State authorization and the option to use State authorization 
reciprocity agreements may expand the availability of distance 
education, that does not necessarily mean the volume of student loans 
will expand greatly. Additional distance education could serve as a 
convenient option for students to pursue their education and loan 
funding may shift from physical to online campuses. Distance education 
has expanded significantly already and these regulations are only one 
factor in institutions' plans within this field. The distribution of 
title IV, HEA program funding could continue to evolve, but the overall 
volume is also driven by demographic and economic conditions that are 
not affected by these regulations and State authorization requirements 
are not expected to change loan volumes in a way that would result in a 
significant net budget impact.
    Likewise, the availability of options to study abroad at foreign 
locations of domestic institutions offers students flexibility and 
potentially rewarding experiences, but is not expected to significantly 
change the amount or type of loans students use to finance their 
education. Therefore, the Department does not estimate that the foreign 
location requirements in Sec.  600.9(d) will have a significant budget 
impact on title IV, HEA programs. The changes made from the proposed 
regulations discussed in the Summary of Comments and Changes section of 
this RIA are not expected to significantly change the budget impact of 
these regulations.

Assumptions, Limitations, and Data Sources

    In developing these estimates, a wide range of data sources were 
used, including data from the National Student Loan Data System, and 
data from a range of surveys conducted by the National Center for 
Education Statistics such as the 2012 National Postsecondary Student 
Aid Survey. Data from other sources, such as the U.S. Census Bureau, 
were also used.

Alternatives Considered

    In the interest of promoting good governance and ensuring that 
these regulations produce the best possible outcome, the Department 
reviewed and considered various proposals from both internal sources as 
well as from non-Federal negotiators. We summarize below the major 
proposals that we considered but ultimately declined to adopt these 
regulations.
    The Department has addressed State authorization during two 
negotiated rulemaking sessions, one in 2010 and the other in 2014. In 
2010, State authorization of distance education was not a topic 
addressed in the negotiations, but the Department addressed the issue 
in the final rule in response to public comment. The distance education 
provision in the 2010 regulation was struck down in court on procedural 
grounds, leading to the inclusion of the issue in the 2014 
negotiations. The 2014 negotiated rulemaking considered, in part, 
requiring an institution of higher education to obtain State 
authorization wherever its students were located. That option would 
also have allowed for reciprocity agreements between States as a form 
of State authorization, including State authorization reciprocity 
agreements administered by a non-State entity. The Department and 
participants of the 2014 rulemaking session were unable to reach 
consensus.
    As it developed the regulations, the Department considered adopting 
the approaches considered in 2010 or 2014. However, the 2010 rule did 
not allow for reciprocity agreements and did not require a student 
complaint process for distance education students if a State did not 
already require it. The option considered in 2014 raised concerns about 
complexity and the level of burden involved. The Department therefore 
used elements of both the 2010 and 2014 rulemakings in formulating 
these regulations. Using the 2010 rule as a starting point, these 
regulations allow for State authorization reciprocity agreements and 
provide a student complaint process requirement to achieve a balance 
between appropriate oversight and burden level. In 2014, the Department 
and non-Federal negotiators reached agreement on the provisions related 
to foreign locations without considering specific alternative 
proposals.

Regulatory Flexibility Analysis

    The final regulations would affect institutions that participate in 
the title IV, HEA. The U.S. Small Business Administration (SBA) Size 
Standards define ``for-profit institutions'' as ``small businesses'' if 
they are independently owned and operated and not dominant in their 
field of operation with total annual revenue below $7,000,000. The SBA 
Size Standards define ``not-for-profit institutions'' as ``small 
organizations'' if they are independently owned and operated and not 
dominant in their field of operation, or as ``small entities'' if they 
are institutions controlled by governmental entities with populations 
below 50,000. Under these definitions, approximately 4,267 of the IHEs 
that would be subject to the paperwork compliance provisions of the 
final regulations are small entities. Accordingly, we have prepared 
this regulatory flexibility analysis to present an estimate of the 
effect on small entities of the final regulations.

Description of the Reasons That Action by the Agency Is Being 
Considered

    The Secretary is amending the regulations governing the title IV, 
HEA programs to provide clarity to the requirements for, and options 
to: Obtain State authorization of distance education, correspondence 
courses, and foreign locations; document the process to resolve 
complaints from distance education students in the State in which they 
reside; and make disclosures about distance education and 
correspondence courses.

Succinct Statement of the Objectives of, and Legal Basis for, the 
Proposed Regulations

    Section 101(a)(2) of the HEA defines the term ``institution of 
higher education'' to mean, in part, an

[[Page 92257]]

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. Section 485(a)(1) of the HEA provides that an 
institution must disclose information about the institution's 
accreditation and State authorization.

Description of and, Where Feasible, an Estimate of the Number of Small 
Entities To Which the Regulations Will Apply

    These final regulations would affect IHEs that participate in the 
Federal Direct Loan Program and borrowers. Approximately 60 percent of 
IHEs qualify as small entities, even if the range of revenues at the 
not-for-profit institutions varies greatly. Using data from IPEDS, the 
Department estimates that approximately 4,267 IHEs participating in the 
title IV, HEA programs qualify as small entities--1,878 are not-for-
profit institutions, 2,099 are for-profit institutions with programs of 
two years or less, and 290 are for-profit institutions with four-year 
programs. The Department believes that most proprietary institutions 
that are heavily involved in distance education should not be 
considered small entities because the scale required to operate 
substantial distance education programs would put them above the 
relevant revenue threshold. However, the private non-profit sector's 
involvement in the field may mean that a significant number of small 
entities could be affected. The Department also expects this to be the 
case for foreign locations of domestic institutions, with proprietary 
institutions operating foreign locations unlikely to be small entities 
and a number of private not-for-profits classified as small entities 
involved.
    Distance education offers small entities, particularly not-for-
profit entities of substantial size that are classified as small 
entities, an opportunity to serve students who could not be 
accommodated at their physical locations. Institutions that that choose 
to provide distance education could potentially capture a larger share 
of the higher education market. Overall, as of Fall 2014, approximately 
14.5 percent of students receive their education exclusively through 
distance education while 71.5 percent took no distance education 
courses. However, at proprietary institutions almost 53.9 percent of 
students were exclusively distance education students and 38.6 percent 
had not enrolled in distance education courses.\6\ As discussed above, 
we assume that most of the proprietary institutions offering a 
substantial amount of distance education are not small entities, but if 
not-for-profit institutions expand their role in the distance education 
sector, small entities could increase their share of revenue. On the 
other hand, small entities that operate physical campuses could face 
more competition from distance education providers. The potential 
reshuffling of resources within higher education would occur regardless 
of the final regulations, but the clarity provided by the distance 
education requirements and the acceptance of State authorization 
reciprocity agreements could accelerate those changes.
---------------------------------------------------------------------------

    \6\ 2015 Digest of Education Statistics: Table 311.15: Number 
and percentage of students enrolled in degree-granting postsecondary 
institutions, by distance education participation, location of 
student, level of enrollment, and control and level of institution: 
Fall 2013 and Fall 2014.
---------------------------------------------------------------------------

    In order to accommodate students through distance learning, 
institutions face a number of costs, including the costs of complying 
with authorization requirements. As with the broader set of 
institutions, the costs for small entities would vary based on the 
scope of the distance education they choose to provide, the States in 
which they operate, and the size of the institution. In the Initial 
Regulatory Flexibility Analysis in the NPRM, we estimated that small 
entities will face annual costs of $7.0 million for SARA fees and 
additional state fees, using the same analysis and costs as in Table 2 
of the NPRM.\7\ As noted in the Regulatory Impact Analysis, several 
commenters stated that the Department's illustrative costs were 
understated, and, in particular, that the cost of complying with State 
authorization requirements would be a greater burden for small 
institutions. The Department acknowledges that the costs of obtaining 
State authorization will vary by type and existing resources of 
institutions and that these considerations may influence the extent to 
which small entities operate distance education programs. It is 
possible that some costs can be mitigated through shared research on 
compliance requirements through national organizations or other 
approaches, but the Department maintains that State authorization is an 
important oversight mechanism and a minimum expectation for 
institutions to operate a program, whatever their size.
---------------------------------------------------------------------------

    \7\ Notice of Proposed Rulemaking published July 25, 2016, Table 
2, p.48609 available at https://www.gpo.gov/fdsys/pkg/FR-2016-07-25/pdf/2016-17068.pdf.

            Table 3--Estimated Costs for State Authorization of Distance Education for Small Entities
----------------------------------------------------------------------------------------------------------------
                                                                                                    Additional
                          Institutions                                 Count         SARA fees      State fees
----------------------------------------------------------------------------------------------------------------
Private Not-for-Profit 2-year or less
    Under 2,500.................................................              16         $32,000         $48,000
    2,500 to 9,999..............................................  ..............  ..............  ..............
    10,000 or more..............................................  ..............  ..............  ..............
Proprietary 2-year or less
    Under 2,500.................................................             109         218,000         327,000
    2,500 to 9,999..............................................  ..............  ..............  ..............
    10,000 or more..............................................  ..............  ..............  ..............
Private Not-for-Profit 4-year
    Under 2,500.................................................             474         948,000       1,422,000
    2,500 to 9,999..............................................             227         908,000       1,362,000
    10,000 or more..............................................              44         264,000         440,000
Proprietary 4-year
    Under 2,500.................................................             198         396,000         594,000
    2,500 to 9,999..............................................  ..............  ..............  ..............

[[Page 92258]]

 
    10,000 or more..............................................  ..............  ..............  ..............
                                                                 -----------------------------------------------
        Total...................................................           1,068       2,766,000       4,193,000
----------------------------------------------------------------------------------------------------------------

Description of the Projected Reporting, Recordkeeping and Other 
Compliance Requirements of the Regulations, Including an Estimate of 
the Classes of Small Entities That Will Be Subject to the Requirement 
and the Type of Professional Skills Necessary for Preparation of the 
Report or Record

    Table 3 relates the estimated burden of each information collection 
requirement to the hours and costs estimated in the Paperwork Reduction 
Act of 1995 section of the preamble. This additional workload is 
discussed in more detail under the Paperwork Reduction Act of 1995 
section of the preamble. Additional workload would normally be expected 
to result in estimated costs associated with either the hiring of 
additional employees or opportunity costs related to the reassignment 
of existing staff from other activities. In total, these changes are 
estimated to increase burden on small entities participating in the 
title IV, HEA programs by 13,981 hours. The monetized cost of this 
additional burden on institutions, using wage data developed using BLS 
data available at www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $510,991. 
This cost was based on an hourly rate of $36.55.

                           Table 4--Paperwork Reduction Act Burden for Small Entities
----------------------------------------------------------------------------------------------------------------
                                                            OMB control
              Provision                  Reg. section          number             Hours              Costs
----------------------------------------------------------------------------------------------------------------
Reporting related to foreign                      600.9          1845-0144                 86             $3,158
 additional locations or branch
 campuses...........................
Public disclosure made to enrolled            668.50(b)          1845-0145             57,743          2,110,547
 and prospective students in the
 institution's distance education
 programs or correspondence courses.
 Requires 7 disclosures related to
 State authorization, complaints
 process, adverse actions, refund
 policies, and whether the program
 meets prerequisites for licensure
 or certification...................
Individualized disclosure to and              668.50(c)          1845-0145                271              9,912
 attestation by enrolled and
 prospective students of distance
 education programs about adverse
 actions or the program not meeting
 licensure requirements in the
 student's State....................
                                     ---------------------------------------------------------------------------
    Total...........................  .................  .................             58,101          2,123,577
----------------------------------------------------------------------------------------------------------------

Identification, to the Extent Practicable, of All Relevant Federal 
Regulations That May Duplicate, Overlap, or Conflict With the 
Regulations

    As acknowledged in the Analysis of Comments and Changes, the 
disclosure requirement about the State complaint process in Sec.  
668.50(b)(2) overlaps the more generalized institutional information 
disclosure requirement in Sec.  668.43(b). The Department believes this 
overlap is warranted because of the importance of these disclosures to 
distance education students and the means of providing the disclosure 
may be different for this population.

Alternatives Considered

    As described above, the Department participated in negotiated 
rulemaking when developing the proposed regulations, and considered a 
number of options for some of the provisions. No alternatives were 
aimed specifically at small entities.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions; respondents can 
provide the requested data in the desired format; reporting burden 
(time and financial resources) is minimized; collection instruments are 
clearly understood; and the Department can properly assess the impact 
of collection requirements on respondents.
    Sections 600.9 and 668.50 contain information collection 
requirements. Under the PRA, the Department has submitted a copy of 
these sections, and an Information Collection Request (ICR) to OMB for 
its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number.
    Notwithstanding any other provision of law, no person is required 
to comply with, or is subject to penalty for failure to comply with, a 
collection of information if the collection instrument does not display 
a currently valid OMB control number.
    In these final regulations, we display the control numbers assigned 
by OMB to any information collection requirements proposed in the NPRM 
and adopted in the final regulations.

Background

    The following data will be used throughout this section: For the 
year 2014, there were 2,301 institutions that reported to IPEDS that 
they had enrollment of 2,834,045 students attending 23,434 programs 
offered through distance education as follows:

[[Page 92259]]

    1,172 public institutions reported 1,382,900 students attending 
11,288 programs through distance education;
    761 private, not-for-profit institutions reported 608,038 students 
attending 6,598 programs through distance education;
    368 private, for-profit institutions reported 843,107 students 
attending 5,548 programs through distance education.
    According to information available from the Department's 
Postsecondary Education Participation System (PEPS), there are 
currently 80 domestic institutions with identified additional locations 
in 60 foreign countries; 35 public institutions, 42 private, not-for-
profit institutions, and 3 private, for-profit institutions.

Section 600.9 State Authorization

State Authorization of Foreign Additional Locations and Branch Campuses 
of Domestic Institutions
    Requirements: Section 600.9(d)(1)(v) specifies that, for any 
foreign additional location at which 50 percent or more of an 
educational program is offered, or will be offered, and any foreign 
branch campus, an institution is required to report the establishment 
or operation of the foreign additional location or branch campus to the 
State in which the main campus of the institution is located at least 
annually, or more frequently if required by the State.
    Burden Calculation: There will be burden on each domestic 
institution reporting the establishment or continued operation of a 
foreign additional location or branch campus to the State in which the 
main campus of the domestic institution is located. We estimate that 
each institution will require 2 hours annually to draft and submit the 
required notice. We estimate that 35 public institutions will require a 
total of 70 hours to draft and submit the required State notice (35 
institutions x 2 hours). We estimate that 42 private, not-for-profit 
institutions will require a total of 84 hours to draft and submit the 
required State notice (42 institutions x 2 hours). We estimate that 3 
private, for-profit institutions will require a total of 6 hours to 
draft and submit the required State notice (3 institutions x 2 hours).
    The total estimated burden for 34 CFR 600.9 will be 160 hours under 
OMB Control Number 1845-0144.

Section 668.50 Institutional Disclosures for Distance or Correspondence 
Programs

    Requirements: The Department added new Sec.  668.50(b) and (c), 
which requires disclosures to enrolled and prospective students in the 
institution's distance education programs or correspondence courses. 
Seven disclosures will be made publicly available, and up to three 
disclosures will require direct communication with enrolled and 
prospective students when certain conditions have been met. These 
disclosures will not change any other required disclosures of the 
Student Assistance General Provisions regulations.
Public Disclosures
    Under Sec.  668.50(b)(1), an institution will be required to 
disclose whether or not the program offered through distance education 
or correspondence courses is authorized by each State in which enrolled 
students reside. If an institution is authorized through a State 
authorization reciprocity agreement, the institution will be required 
to disclose its authorization status under such an agreement. An 
institution will also be required to explain to students the 
consequences of relocating to a State where the institution does not 
meet State authorization requirements, or, in the case of a GE program, 
where the program does not meet licensure or certification requirements 
in the State.
    Under Sec.  668.50(b)(2)(i), an institution authorized by a State 
agency will be required to disclose the process for submitting 
complaints to the appropriate State agency in the State in which the 
main campus of the institution is located, including contact 
information for the appropriate State agencies that handle consumer 
complaints.
    Under Sec.  668.50(b)(2)(ii), an institution authorized by a State 
authorization reciprocity agreement will be required to disclose the 
complaint process established by the reciprocity agreement, if the 
agreement established such a process. An institution will be required 
to provide contact information for receipt of such complaints, as set 
out in the State authorization reciprocity agreement.
    Under Sec.  668.50(b)(3), an institution will be required to 
disclose the process for submitting complaints to the appropriate State 
agency in the State in which enrolled students reside, including 
contact information for those State agencies that handle consumer 
complaints.
    Under Sec.  668.50(b)(4), an institution will be required to 
disclose any adverse actions a State entity has initiated related to 
the institution's distance education programs or correspondence courses 
for a five calendar year period prior to the year in which the 
institution makes the disclosure.
    Under Sec.  668.50(b)(5) an institution will be required to 
disclose any adverse actions an accrediting agency has initiated 
related to the institution's distance education programs or 
correspondence courses for a five calendar year period prior to the 
year in which the institution makes the disclosure.
    Under Sec.  668.50(b)(6), an institution will be required to 
disclose any refund policies for the return of unearned tuition and 
fees with which the institution is required to comply by any State in 
which the institution enrolls students in a distance education program 
or correspondence courses. This disclosure requires publication of the 
State-specific requirements on the refund policies as well as any 
institutional refund policies that would be applicable to students 
enrolled in programs offered through distance education or 
correspondence courses with which the institution must comply.
    Under Sec.  668.50(b)(7), an institution will be required to 
disclose the applicable educational prerequisites for professional 
licensure or certification which the program offered through distance 
education or correspondence course prepares the student to enter for 
each State in which students reside. The institution must also make 
this disclosure for any other State which the institution has made a 
determination regarding such prerequisites as well as if the 
institution's program meets those requirements. For any State for which 
an institution has not made a determination with respect to the 
licensure or certification requirement, an institution will be required 
to disclose a statement to that effect.
    Burden Calculation: We anticipate that most institutions will 
provide this information electronically to enrolled and prospective 
students regarding their distance education or correspondence courses. 
We estimate that the six of the seven public disclosure requirements 
would take institutions an average of 15 hours to research, develop, 
and post on a Web site. We estimate that 1,172 public institutions will 
require 17,580 hours to research, develop, and post on a Web site the 
required public disclosures (1,172 institutions x 15 hours). We 
estimate that 761 private, not-for-profit institutions will require 
11,415 hours to research, develop, and post on a Web site the required 
public disclosures (761 institutions x 15 hours). We estimate that 368 
private, for-profit institutions will require 5,520 hours to research, 
develop, and post on a Web site the required public disclosures (368 
institutions x 15 hours).

[[Page 92260]]

    The estimated burden for Sec.  668.50(b)(1) through (6) is 34,515 
hours under OMB Control Number 1845-0145.
    After reviewing the comments that were received we are adding 100 
hours of burden per program specifically pertaining to the disclosure 
requirements for the prerequisites for professional licensure or 
certification. We estimate that 1,172 programs or five percent of the 
23,434 distance education or correspondence programs at the affected 
institutions will require the professional licensure or certification 
disclosure information. We estimate that there will be 564 programs at 
public institutions which will require 56,400 hours (564 x 100 hours = 
56,400) for the research and development of this required public 
disclosure. We estimate that there will be 330 programs at private, 
not-for-profit institutions which will require 33,000 hours (330 x 100 
hours = 33,000) for the research and development of this required 
public disclosure. We estimate that there will be 278 programs at 
private, for-profit institutions which will require 27,800 hours (278 x 
100 hours = 27,800) for the research and development of this required 
public disclosure.
    The estimated burden for Sec.  668.50(b)(7) is 117,200 hours under 
OMB Control Number 1845-0145.
Individualized Disclosures
    Under Sec.  668.50(c)(1)(i), an institution will be required to 
provide an individualized disclosure to prospective students when it 
determines a program offered solely through distance education or 
correspondence courses does not meet licensure or certification 
prerequisites in the State of the student's residence.
    Under Sec.  668.50(c)(1)(ii), an institution will be required to 
provide an individualized disclosure to both enrolled and prospective 
students within 30 days of when it becomes aware of any adverse action 
initiated by a State or an accrediting agency related to the 
institution's programs offered through distance education or 
correspondence courses; or within seven days of the institution's 
determination that a program ceases to meet licensure or certification 
prerequisites of a State.
    For prospective students who receive any individualized disclosure 
and subsequently enroll, Sec.  668.50(c)(2) will require an institution 
to obtain an acknowledgment from the student that the communication was 
received prior to the student's enrollment in the program.
    Burden Calculation: We anticipate that institutions will provide 
this information electronically to enrolled and prospective students 
regarding their distance education or correspondence courses. We 
estimate that institutions will take an average of 2 hours to develop 
the language for the individualized disclosures. We estimate that it 
will take an additional average of 4 hours for the institution to 
individually disclose this information to enrolled and prospective 
students for a total of 6 hours of burden to the institutions. We 
estimate that five percent of institutions will meet the criteria to 
require these individual disclosures. We estimate that 59 public 
institutions will require 354 hours to develop the language for the 
disclosures and to individually disclose this information to enrolled 
and prospective students (59 institutions x 6 hours). We estimate that 
38 private, not-for-profit institutions will require 228 hours to 
develop the language for the disclosures and to individually disclose 
this information to enrolled and prospective students (38 institutions 
x 6 hours). We estimate that 18 private, for-profit institutions will 
require 108 hours to develop the language for the disclosures and to 
individually disclose this information to enrolled and prospective 
students (18 institutions x 6 hours).
    The total estimated burden for Sec.  668.50(c) is 690 hours under 
OMB Control Number 1845-0145.
    The combined total estimated burden for Sec.  668.50 is 152,405 
(34,515 + 117,200 + 690) hours under OMB Control Number 1845-0145.
    Consistent with the discussion above, the following chart describes 
the sections of the final regulations involving information 
collections, the information being collected, and the collections that 
the Department will submit to OMB for approval and public comment under 
the PRA, and the estimated costs associated with the information 
collections. The monetized net costs of the increased burden on 
institutions, lenders, guaranty agencies, and borrowers, using BLS wage 
data, available at www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $5,576,251 
as shown in the chart below. This cost was based on an hourly rate of 
$36.55 for institutions.

                                            Collection of Information
----------------------------------------------------------------------------------------------------------------
                                                                         OMB control number and
          Regulatory section                Information collection      estimated burden [change     Estimated
                                                                               in burden]              costs
----------------------------------------------------------------------------------------------------------------
Sec.   600.9..........................  The regulations specify that,   1845-0144--This is a new          $5,848
                                         for any foreign additional      collection. We estimate
                                         location at which 50 percent    that the burden would
                                         or more of an educational       increase by 160 hours.
                                         program is offered, or will
                                         be offered, and any foreign
                                         branch campus, an institution
                                         would be required to report
                                         the establishment or
                                         operation of the foreign
                                         additional location or branch
                                         campus to the State in which
                                         the main campus of the
                                         institution is located at
                                         least annually, or more
                                         frequently if required by the
                                         State.
Sec.   668.50(b)......................  The regulations require         1845-0145--This is a new       5,545,183
                                         institutions to produce         collection. We estimate
                                         disclosures to enrolled and     that the burden would
                                         prospective students in the     increase by 151,715
                                         institution's distance          hours.
                                         education programs or
                                         correspondence courses. Seven
                                         disclosures must be made
                                         publicly available. These
                                         disclosures include:
                                        (1) Whether the distance
                                         education programs are
                                         authorized by the State where
                                         the student resides, if the
                                         institution participate in a
                                         state authorization
                                         reciprocity agreement and
                                         explain consequences of
                                         moving to a State where the
                                         institution does not meet
                                         State authorization
                                         requirements;
                                        (2) The process for submitting
                                         a complaint to the
                                         appropriate State agency in
                                         the State where the main
                                         campus of the institution is
                                         located;
                                        (3) The process for submitting
                                         a complaint if the
                                         institution is covered by a
                                         State authorization
                                         reciprocity agreement and it
                                         has such a process;

[[Page 92261]]

 
                                        (4) The disclosure of any
                                         adverse action initiated by
                                         the institution's State
                                         entity related to the
                                         distance education program;
                                        (5) The disclosure of any
                                         adverse action initiated by
                                         the institution's accrediting
                                         agency related to the
                                         distance education program;
                                        (6) The disclosure of any
                                         refund policy required by any
                                         State in which the
                                         institution enrolls students;
                                        (7) The disclosure of any
                                         determination made regarding
                                         whether or not the distance
                                         education program meets
                                         applicable prerequisites for
                                         professional licensure or
                                         certification in the State
                                         where the student resides, if
                                         such a determination has been
                                         made. If such a determination
                                         has not been made, a
                                         statement to that effect
                                         would be required.
Sec.   668.50(c)......................  The regulations require         1845-0145--This is a new          25,220
                                         institutions to produce         collection. We estimate
                                         disclosures to enrolled and     that the burden would
                                         prospective students in the     increase by 690 hours..
                                         institution's distance
                                         education programs or
                                         correspondence courses. Three
                                         disclosures must be made
                                         available to individuals.
                                         These disclosures include:
                                        (1) Notice of an adverse
                                         action by the State or
                                         accrediting agency related to
                                         the distance education
                                         program. This disclosure must
                                         be provided within 30 days of
                                         when the institution becomes
                                         aware of the action;
                                        (2) Notice of the
                                         institution's determination
                                         that the distance education
                                         program no longer meets the
                                         prerequisites for licensure
                                         or certification of a State.
                                         This disclosure must be
                                         provided within 7 days of
                                         when the institution makes
                                         such a determination.
----------------------------------------------------------------------------------------------------------------

    The total burden hours and change in burden hours associated with 
each OMB Control number affected by the regulations follows:

------------------------------------------------------------------------
                                           Total burden      Change in
               Control No.                     hours       burden hours
------------------------------------------------------------------------
1845-0144...............................             160            +160
1845-0145...............................         152,405        +152,405
                                         -------------------------------
    Total...............................         152,565        +152,565
------------------------------------------------------------------------

Assessment of Educational Impact

    In the NPRM we requested comments on whether the regulations would 
require transmission of information that any other agency or authority 
of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Federalism

    Executive Order 13132 requires us to ensure meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.
    In the NPRM we identified specific sections that may have 
federalism implications and encouraged State and local elected 
officials to review and provide comments on the regulations. In the 
Public Comment section of this preamble, we discuss any comments we 
received on this subject.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to one of the program contact 
persons listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Adobe Portable Document Format (PDF). To use PDF 
you must have Adobe Acrobat Reader, which is available free at the 
site. You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.
    (Catalog of Federal Domestic Assistance: 84.007 FSEOG; 84.033 
Federal Work Study Program; 84.037 Federal Perkins Loan Program; 84.063 
Federal Pell Grant Program; 84.069 LEAP; 84.268 William D. Ford Federal 
Direct Loan Program; 84.379 TEACH Grant Program)

List of Subjects

34 CFR Part 600

    Colleges and universities, Foreign relations, Grant programs--
education, Loan programs--education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

34 CFR Part 668

    Administrative practice and procedure, Colleges and universities, 
Consumer protection, Grant programs--education, Loan programs--
education, Reporting and recordkeeping requirements, Selective Service 
System, Student aid, Vocational education.

    Dated: December 5, 2016.
John B. King, Jr.,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary amends 34 
CFR parts 600 and 668 as follows:

[[Page 92262]]

PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT 
OF 1965, AS AMENDED

0
1. The authority citation for part 600 continues to read as follows:

    Authority: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 
and 1099c, unless otherwise noted.

0
2. Section 600.2 is amended by adding, in alphabetical order, a 
definition of ``State authorization reciprocity agreement'' to read as 
follows:


Sec.  600.2  Definitions.

* * * * *
    State authorization reciprocity agreement: An agreement between two 
or more States that authorizes an institution located and legally 
authorized in a State covered by the agreement to provide postsecondary 
education through distance education or correspondence courses to 
students residing in other States covered by the agreement and does not 
prohibit any State in the agreement from enforcing its own statutes and 
regulations, whether general or specifically directed at all or a 
subgroup of educational institutions.
* * * * *

0
3. Section 600.9 is amended by revising paragraph (c) and adding 
paragraph (d) to read as follows:


Sec.  600.9   State authorization.

* * * * *
    (c)(1)(i) If an institution that meets the requirements under 
paragraph (a)(1) of this section offers postsecondary education through 
distance education or correspondence courses to students residing in a 
State in which the institution is not physically located or in which 
the institution is otherwise subject to that State's jurisdiction as 
determined by that State, except as provided in paragraph (c)(1)(ii) of 
this section, the institution must meet any of that State's 
requirements for it to be legally offering postsecondary distance 
education or correspondence courses in that State. The institution 
must, upon request, document the State's approval to the Secretary; or
    (ii) If an institution that meets the requirements under paragraph 
(a)(1) of this section offers postsecondary education through distance 
education or correspondence courses in a State that participates in a 
State authorization reciprocity agreement, and the institution is 
covered by such agreement, the institution is considered to meet State 
requirements for it to be legally offering postsecondary distance 
education or correspondence courses in that State, subject to any 
limitations in that agreement and to any additional requirements of 
that State. The institution must, upon request, document its coverage 
under such an agreement to the Secretary.
    (2) If an institution that meets the requirements under paragraph 
(a)(1) of this section offers postsecondary education through distance 
education or correspondence courses to students residing in a State in 
which the institution is not physically located, for the institution to 
be considered legally authorized in that State, the institution must 
document that there is a State process for review and appropriate 
action on complaints from any of those enrolled students concerning the 
institution--
    (i) In each State in which the institution's enrolled students 
reside; or
    (ii) Through a State authorization reciprocity agreement which 
designates for this purpose either the State in which the institution's 
enrolled students reside or the State in which the institution's main 
campus is located.
    (d) An additional location or branch campus of an institution that 
meets the requirements under paragraph (a)(1) of this section and that 
is located in a foreign country, i.e., not in a State, must comply with 
Sec. Sec.  600.8, 600.10, 600.20, and 600.32, and the following 
requirements:
    (1) For any additional location at which 50 percent or more of an 
educational program (as defined in Sec.  600.2) is offered, or will be 
offered, or at a branch campus--
    (i) The additional location or branch campus must be legally 
authorized by an appropriate government authority to operate in the 
country where the additional location or branch campus is physically 
located, unless the additional location or branch campus is physically 
located on a U.S. military base, facility, or area that the foreign 
country has granted the U.S. military to use and the institution can 
demonstrate that it is exempt from obtaining such authorization from 
the foreign country;
    (ii) The institution must provide to the Secretary, upon request, 
documentation of such legal authorization to operate in the foreign 
country, demonstrating that the foreign governmental authority is aware 
that the additional location or branch campus provides postsecondary 
education and that the government authority does not object to those 
activities;
    (iii) The additional location or branch campus must be approved by 
the institution's recognized accrediting agency in accordance with 
Sec. Sec.  602.24(a) and 602.22(a)(2)(viii), as applicable;
    (iv) The additional location or branch campus must meet any 
additional requirements for legal authorization in that foreign country 
as the foreign country may establish;
    (v) The institution must report to the State in which the main 
campus of the institution is located at least annually, or more 
frequently if required by the State, the establishment or operation of 
each foreign additional location or branch campus; and
    (vi) The institution must comply with any limitations the State 
places on the establishment or operation of the foreign additional 
location or branch campus.
    (2) An additional location at which less than 50 percent of an 
educational program (as defined in Sec.  600.2) is offered or will be 
offered must meet the requirements for legal authorization in that 
foreign country as the foreign country may establish.
    (3) In accordance with the requirements of 34 CFR 668.41, the 
institution must disclose to enrolled and prospective students at 
foreign additional locations and foreign branch campuses the 
information regarding the student complaint process described in 34 CFR 
668.43(b), of the State in which the main campus of the institution is 
located.
    (4) If the State in which the main campus of the institution is 
located limits the authorization of the institution to exclude the 
foreign additional location or branch campus, the foreign additional 
location or branch campus is not considered to be legally authorized by 
the State.

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

0
4. The authority citation for part 668 continues to read as follows:

    Authority:  20 U.S.C. 1001-1003, 1070a, 1070g, 1085, 1087b, 
1087d, 1087e, 1088, 1091, 1092, 1094, 1099c, 1099c-1, 1221e-3, and 
3474, unless otherwise noted.


Sec.  668.2  [Amended]

0
5. Section 668.2 is amended in paragraph (a) by adding to the list of 
definitions, in alphabetical order, ``Distance education''.

0
6. Section 668.50 is added to subpart D to read as follows:


Sec.  668.50  Institutional disclosures for distance or correspondence 
programs.

    (a) General. In addition to the other institutional disclosure 
requirements established in this and other subparts, an institution 
described under 34 CFR 600.9(a)(1) or (b) that offers an

[[Page 92263]]

educational program that is provided, or can be completed solely 
through distance education or correspondence courses, excluding 
internships and practicums, must provide the information described in 
paragraphs (b) and (c) of this section to enrolled and prospective 
students in that program.
    (b) Public disclosures. An institution described under 34 CFR 
600.9(a)(1) that offers an educational program that is provided, or can 
be completed solely through distance education or correspondence 
courses, excluding internships and practicums, must make available the 
following information to enrolled and prospective students of such 
program, the form and content of which the Secretary may determine:
    (1)(i) Whether the institution is authorized by each State in which 
enrolled students reside to provide the program;
    (ii) Whether the institution is authorized through a State 
authorization reciprocity agreement, as defined in 34 CFR 600.2, to 
provide the program; and
    (iii) An explanation of the consequences, including ineligibility 
for title IV, HEA funds, for a student who changes his or her State of 
residence to a State where the institution does not meet State 
requirements or, in the case of a GE program, as defined under Sec.  
668.402, where the program does not meet licensure or certification 
requirements in the State;
    (2)(i) If the institution is required to provide a disclosure under 
paragraph (b)(1)(i) of this section, a description of the process for 
submitting complaints, including contact information for the receipt of 
consumer complaints at the appropriate State authorities in the State 
in which the institution's main campus is located, as required under 
Sec.  668.43(b); and
    (ii) If the institution is required to provide a disclosure under 
paragraph (b)(1)(ii) of this section, and that agreement establishes a 
complaint process as described in 34 CFR 600.9(c)(2)(ii), a description 
of the process for submitting complaints that was established in the 
reciprocity agreement, including contact information for receipt of 
consumer complaints at the appropriate State authorities;
    (3) A description of the process for submitting consumer complaints 
in each State in which the program's enrolled students reside, 
including contact information for receipt of consumer complaints at the 
appropriate State authorities;
    (4) Any adverse actions a State entity has initiated, and the years 
in which such actions were initiated, related to postsecondary 
education programs offered solely through distance education or 
correspondence courses at the institution for the five calendar years 
prior to the year in which the disclosure is made;
    (5) Any adverse actions an accrediting agency has initiated, and 
the years in which such actions were initiated, related to 
postsecondary education programs offered solely through distance 
education or correspondence courses at the institution for the five 
calendar years prior to the year in which the disclosure is made;
    (6) Refund policies with which the institution is required to 
comply by any State in which enrolled students reside for the return of 
unearned tuition and fees; and
    (7)(i) The applicable educational prerequisites for professional 
licensure or certification for the occupation for which the program 
prepares students to enter in--
    (A) Each State in which the program's enrolled students reside; and
    (B) Any other State for which the institution has made a 
determination regarding such prerequisites;
    (ii) If the institution makes a determination with respect to 
certification or licensure prerequisites in a State, whether the 
program does or does not satisfy the applicable educational 
prerequisites for professional licensure or certification in that 
State; and
    (iii) For any State as to which the institution has not made a 
determination with respect to the licensure or certification 
prerequisites, a statement to that effect.
    (c) Individualized disclosures. (1) An institution described under 
34 CFR 600.9(a)(1) or (b) that offers an educational program that is 
provided, or can be completed solely through distance education or 
correspondence courses, excluding internships or practicums, must 
disclose directly and individually--
    (i) Prior to each prospective student's enrollment, any 
determination by the institution that the program does not meet 
licensure or certification prerequisites in the State of the student's 
residence; and
    (ii) To each enrolled and prospective student--
    (A) Any adverse action initiated by a State or an accrediting 
agency related to postsecondary education programs offered by the 
institution solely through distance education or correspondence study 
within 30 days of the institution's becoming aware of such action; or
    (B) Any determination by the institution that the program ceases to 
meet licensure or certification prerequisites of a State within 14 
calendar days of that determination.
    (2) For a prospective student who received a disclosure under 
paragraph (c)(1)(i) of this section and who subsequently enrolls in the 
program, the institution must receive acknowledgment from that student 
that the student received the disclosure and be able to demonstrate 
that it received the student's acknowledgment.

(Authority: 20 U.S.C. 1092)

[FR Doc. 2016-29444 Filed 12-16-16; 8:45 am]
 BILLING CODE 4000-01-P