Financial Value Transparency and Gainful Employment (GE), Financial Responsibility, Administrative Capability, Certification Procedures, Ability to Benefit (ATB), 32300-32511 [2023-09647]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 88, Number 97 (Friday, May 19, 2023)]
[Proposed Rules]
[Pages 32300-32511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09647]



[[Page 32299]]

Vol. 88

Friday,

No. 97

May 19, 2023

Part II





Department of Education





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34 CFR Parts 600 and 668





Financial Value Transparency and Gainful Employment (GE), Financial 
Responsibility, Administrative Capability, Certification Procedures, 
Ability to Benefit (ATB); Proposed Rule

Federal Register / Vol. 88 , No. 97 / Friday, May 19, 2023 / Proposed 
Rules

[[Page 32300]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 668

[Docket ID ED-2023-OPE-0089]
RIN 1840-AD51, 1840-AD57, 1840-AD64, 1840-AD65, and 1840-AD80


Financial Value Transparency and Gainful Employment (GE), 
Financial Responsibility, Administrative Capability, Certification 
Procedures, Ability to Benefit (ATB)

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary is proposing new regulations to promote 
transparency, competence, stability, and effective outcomes for 
students in the provision of postsecondary education. Using the 
terminology of past regulatory proposals, these regulations seek to 
make improvements in the areas of gainful employment (GE); financial 
value transparency; financial responsibility; administrative 
capability; certification procedures; and Ability to Benefit (ATB).

DATES: We must receive your comments on or before June 20, 2023.

ADDRESSES: Comments must be submitted via the Federal eRulemaking 
Portal at regulations.gov. Information on using Regulations.gov, 
including instructions for finding a rule on the site and submitting 
comments, is available on the site under ``FAQ.'' If you require an 
accommodation or cannot otherwise submit your comments via 
regulations.gov, please contact one of the program contact persons 
listed under FOR FURTHER INFORMATION CONTACT. The Department will not 
accept comments submitted by fax or by email or comments submitted 
after the comment period closes. To ensure that the Department does not 
receive duplicate copies, please submit your comment only once. 
Additionally, please include the Docket ID at the top of your comments.
    Privacy Note: The Department's policy is to generally make comments 
received from members of the public available for public viewing in 
their entirety on the Federal eRulemaking Portal at https://www.regulations.gov. Therefore, commenters should be careful to include 
in their comments only information about themselves that they wish to 
make publicly available. Commenters should not include in their 
comments any information that identifies other individuals or that 
permits readers to identify other individuals. If, for example, your 
comment describes an experience of someone other than yourself, please 
do not identify that individual or include information that would 
facilitate readers identifying that individual. The Department reserves 
the right to redact at any time any information in comments that 
identifies other individuals, includes information that would 
facilitate readers identifying other individuals, or includes threats 
of harm to another person.

FOR FURTHER INFORMATION CONTACT: For financial value transparency and 
GE: Joe Massman. Telephone: (202) 453-7771. Email: [email protected]. 
For financial responsibility: Kevin Campbell. Telephone: (214) 661-
9488. Email: [email protected]. For administrative capability: 
Andrea Drew. Telephone: (202) 987-1309. Email: [email protected]. For 
certification procedures: Vanessa Gomez. Telephone: (202) 453-6708. 
Email: [email protected]. For ATB: Aaron Washington. Telephone: 
(202) 987-0911. Email: [email protected]. The mailing address for 
the contacts above is U.S. Department of Education, Office of 
Postsecondary Education, 400 Maryland Avenue SW, 5th floor, Washington, 
DC 20202.
    If you are deaf, hard of hearing, or have a speech disability and 
wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION: 
    Directed Questions: The Department invites you to submit comments 
on all aspects of the proposed regulations, as well as the Regulatory 
Impact Analysis. The Department is particularly interested in comments 
on questions posed throughout the Preamble, which are collected here 
for the convenience of commenters, with a reference to the section in 
which they appear. The Department is also interested in comments on 
questions posed in the Regulatory Impact Analysis.

Calculating Earnings Premium Measure (Sec.  668.404)

    We recognize that it may be more challenging for some programs 
serving students in economically disadvantaged locales to demonstrate 
that graduates surpass the earnings threshold when the earnings 
threshold reflects the median statewide earnings, including locales 
with higher earnings. We invite public comments concerning the possible 
use of an established list, such as list of persistent poverty counties 
compiled by the Economic Development Administration, to identify such 
locales, along with comments on what specific adjustments, if any, the 
Department should make to the earnings threshold to accommodate in a 
fair and data-informed manner programs serving those populations.

Student Disclosure Acknowledgments (Sec.  668.407)

    The Department is aware that in some cases, students may transfer 
from one program to another or may not immediately declare a major upon 
enrolling in an eligible non-GE program. We welcome public comments 
about how to best address these situations with respect to 
acknowledgment requirements. The Department also understands that many 
students seeking to enroll in non-GE programs may place high importance 
on improving their earnings and would benefit if the regulations 
provided for acknowledgements when a non-GE program is low-earning. We 
further welcome public comments on whether the acknowledgement 
requirements should apply to all programs, or to GE programs and some 
subset of non-GE programs, that are low-earning.
    The Department is also aware that some communities face unequal 
access to postsecondary and career opportunities, due in part to the 
lasting impact of historical legal prohibitions on educational 
enrollment and employment. Moreover, institutions established to serve 
these communities, as reflected by their designation under law, have 
often had lower levels of government investment. The Department 
welcomes comments on how we might consider these factors, in accord 
with our legal obligations and authority, as we seek to ensure that all 
student loan borrowers can make informed decisions and afford to repay 
their loans.

Financial Responsibility--Reporting Requirements (Sec.  
668.171)(f)(i)(iii)

    We specifically invite comments as to whether an investigation as 
described in Sec.  668.171(f)(1)(iii) warrants inclusion in the final 
regulations as either a mandatory or discretionary financial trigger. 
We also invite comment as to what actions associated with the 
investigation would have to occur to initiate the financial trigger.

Provisional Certification (Sec.  668.13(c))

    Proposed Sec.  668.13(c)(2)(ii) requires reassessment of 
provisionally certified institutions that have significant consumer 
protection concerns (i.e., those arising from claims under consumer 
protection laws) by the end of their second year of receiving 
certification. We invite comment about whether to maintain the proposed 
two-

[[Page 32301]]

year limit or extend recertification to no more than three years for 
provisionally certified schools with major consumer protection issues.

Approved State Process (Sec.  668.156(f))

    As agreed by Committee consensus, we propose a success rate 
calculation under proposed Sec.  668.156(f). To further inform the 
final regulations, we specifically request comments on the proposed 85 
percent threshold, the comparison groups in the calculation, the 
components of the calculation, and whether the success rate itself is 
an appropriate outcome indicator for the State process.

Executive Summary

Purpose of This Regulatory Action

    The financial assistance students receive under the title IV, HEA 
programs for postsecondary education and training represent a 
significant annual expenditure by the Federal government. When used 
effectively, Federal aid for postsecondary education and training is a 
powerful tool for promoting social and economic mobility. However, many 
programs fail to effectively enhance students' skills or increase their 
earnings, leaving them no better off than if they had never pursued a 
postsecondary credential and with debt they cannot afford.
    The Department is also aware of a significant number of instances 
where institutions shut down with no warning and is concerned about the 
impact of such events for students. For instance, one recent study 
shows that, of closures that took place over a 16-year period, 70 
percent of the students at such institutions (100,000 individuals) 
received insufficient warning that the closures were coming.\1\ These 
closures often come at a significant cost to taxpayers. Students who 
were enrolled at or close to the time of closure and did not graduate 
from the shuttered institution may receive a discharge of their Federal 
student loans. The cost of such discharges is rarely fully reimbursed 
because once the institution closes there are often few assets to use 
for repaying Federal liabilities. For example, the Department recouped 
less than 2 percent of the $550 million in closed school discharges 
awarded between January 2, 2014, to June 30, 2021, to students who 
attended private for-profit colleges.\2\ While these closures may have 
occurred without notice for the students, they were often preceded by 
months if not years of warning signs. Unfortunately, existing 
regulations do not provide the Department the necessary authority to 
rely on those indicators of risk to take action and unfortunately, 
despite observing these signs, the Department has lacked authority 
under existing regulations to take action based on those indicators of 
risk in order to secure financial protection before the institution 
runs out of money and closes.
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    \1\ https://nscresearchcenter.org/wp-content/uploads/SHEEO-NSCRCCollegeClosuresReport.pdf.
    \2\ Figure excludes the $1.1 billion in additional closed school 
discharges for ITT Technical Institute announced in August 2021.
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    The Department's inability to act also has implications for 
students. Students whose colleges close tend to have high default rates 
and are highly unlikely to continue their educational journeys 
elsewhere. Those who enrolled well before the point of closure may have 
been misled into taking on loans through admissions and recruitment 
efforts based on misrepresentations about the ability of attendees to 
obtain employment or transfer credit. Acting more swiftly in the future 
to obtain financial protection would help either deter risky 
institutional behavior or ensure the Department has more funds in place 
to offset the cost to taxpayers of closed schools or borrower defense 
discharges.
    There are also institutions that operate title IV, HEA programs 
without the administrative capability necessary to successfully serve 
students, for example, where institutions that lack the resources 
needed to deliver on promises made about career services and 
externships or where institutions employ principals, affiliates, or 
other individuals who exercise substantial control over an institution 
who have a record of misusing title IV, HEA aid funds. A lack of 
administrative capability can also result in insufficient institutional 
controls over verifying students' high school diplomas, which are a key 
criterion for title IV, HEA eligibility.
    Furthermore, there have been instances where institutions have 
exhibited material problems yet remained fully certified to participate 
in the Federal student aid programs. This full certification status can 
limit the ability of the Department to remedy problems identified 
through monitoring until it is potentially too late to improve 
institutional behavior or prevent a school closure that ends up wasting 
taxpayer resources in the form of loan discharges, as well as the lost 
time, resources, and foregone opportunities of students.
    To address these concerns, the Department convened a negotiated 
rulemaking committee, the Institutional and Programmatic Eligibility 
Committee (Committee), that met between January 18, 2022, and March 18, 
2022, to consider proposed regulations for the Federal Student Aid 
programs authorized under title IV of the HEA (title IV, HEA programs) 
(see the section under Negotiated Rulemaking for more information on 
the negotiated rulemaking process). The Committee operated by 
consensus, defined as no dissent by any member at the time of a 
consensus check. Consensus checks were taken by issue, and the 
Committee reached consensus on the topic of ATB.
    These proposed regulations address five topics: financial value 
transparency and GE, financial responsibility, administrative 
capability, certification procedures, and ATB.
    Proposed regulations for financial value transparency would address 
concerns about the rising cost of postsecondary education and training 
and increased student borrowing by establishing an accountability and 
transparency framework to encourage eligible postsecondary programs to 
produce acceptable debt and earnings outcomes, apprise current and 
prospective students of those outcomes, and provide better information 
about program price. Proposed regulations for GE would establish 
eligibility and certification requirements to address ongoing concerns 
about educational programs that are required by statute to provide 
training that prepares students for gainful employment in a recognized 
occupation, but instead are leaving students with unaffordable levels 
of loan debt in relation to their earnings. These programs often lead 
to default or provide no earnings benefit beyond that provided by a 
high school education, thus failing to fulfill their intended goal of 
preparing students for gainful employment. GE programs include nearly 
all educational programs at for-profit institutions of higher 
education, as well as most non-degree programs at public and private 
non-profit institutions.
    The proposed financial responsibility regulations establish 
additional factors that will be viewed by the Department as indicators 
of an institution's lack of financial responsibility. When one of the 
factors occurs, the Department may seek financial protection from the 
institution, most commonly through a letter of credit. The indicators 
of a lack of financial responsibility proposed in this NPRM are events 
that put an institution at a higher risk of financial instability and 
sudden closure. Particular emphasis will be made regarding events that 
bring about a major change in an institution's composite score, the 
metric used to

[[Page 32302]]

determine an entity's financial strength based on its audited financial 
statement as described in Sec.  668.172 and Appendices A and B in 
subpart L of part 668. Other examples of high-risk events that could 
trigger a finding of a lack of financial responsibility are when an 
institution is threatened with a loss of State authorization or loses 
eligibility to participate in a Federal educational assistance program 
other than those administered by the Department.
    The events linked to the proposed financial triggers are often 
observed in institutions facing possible or probable closure due to 
financial instability. By allowing the Department to take certain 
actions in response to specified financial triggers, the proposed 
regulations provide the Department with tools to minimize the impact of 
an institution's financial decline or sudden closure. The additional 
financial protections established in these regulations are critical to 
offset potential losses sustained by taxpayers when an institution 
closes and better ensure the Department may take actions in advance of 
a potential closure to better protect taxpayers against the financial 
costs resulting from an institutional closure. These protections would 
also dissuade institutions from engaging in overly risky behavior in 
the first place. We also propose to simplify the regulations by 
consolidating the financial responsibility requirements for changes in 
ownership under proposed part 668, subpart L and removing and reserving 
current Sec.  668.15.
    We propose several additional standards in the administrative 
capability regulations at Sec.  668.16 to ensure that institutions can 
appropriately administer the title IV, HEA programs. While current 
administrative capability regulations include a host of requirements, 
the Department proposes to address additional concerns which could 
indicate severe or systemic administrative problems that negatively 
impact student outcomes and are not currently reflected in those 
regulations. The Department already requires institutions to provide 
adequate financial aid counseling to students, for instance. However, 
many institutions provide financial aid information to students that is 
confusing and misleading. The information that institutions provide 
often lacks accurate information about the total cost of attendance, 
and groups all types of aid together instead of clearly separating 
grants, loans, and work study aid. The proposed administrative 
capability regulations would address these issues by specifying 
required elements to be included in financial aid communications.
    We also propose to add an additional requirement for institutions 
to provide adequate career services to help their students find jobs, 
particularly where the institution offers career-specific programs and 
makes commitments about job assistance. Adequate services would be 
evaluated based on the number of students enrolled in GE programs at 
the school, the number and distribution of career services staff, the 
career services the institution promised to its students, and the 
presence of partnerships between institutions and recruiters who 
regularly hire graduates. We believe this requirement would help ensure 
that institutions provide adequate career services to students. The 
proposed revisions and additions to Sec.  668.16 address these and 
other concerns that are not reflected in current regulations.
    The proposed certification procedures regulations would create a 
more rigorous process for certifying institutions for initial and 
ongoing participation in the title IV, HEA programs and better protect 
students and taxpayers through a program participation agreement (PPA). 
The proposed revisions to Sec.  668.2, 668.13, and 668.14 aim to 
protect the integrity of the title IV, HEA programs and to protect 
students from predatory or abusive behaviors. For example, in Sec.  
668.14(e) we propose requiring institutions that are provisionally 
certified and that we determine to be at risk of closure to submit an 
acceptable teach-out plan or agreement to the Department, the State, 
and the institution's recognized accrediting agency. This would ensure 
that the institution has an acceptable plan in place that allows 
students to continue their education in the event the institution 
closes.
    Finally, the Department proposes revisions to current regulations 
for ATB. These proposed changes to Sec.  668.156 would clarify the 
requirements for the approval of a State process. The State process is 
one of the three ATB alternatives (see the Background section for a 
detailed explanation) that an individual who is not a high school 
graduate could fulfill to receive title IV, HEA, Federal student aid 
for enrollment in an eligible career pathway program. The proposed 
changes to Sec.  668.157 add documentation requirements for eligible 
career pathway programs.
    Summary of the Major Provisions of this Regulatory Action: The 
proposed regulations would make the following changes.

Financial Value Transparency and Gainful Employment (Sec.  600.10, 
600.21, 668.2, 668.43, 668.91, 668.401, 668.402, 668.403, 668.404, 
668.405, 668.406, 668.407, 668.408, 668.409, 668.601, 668.602, 668.603, 
668.604, 668.605, and 668.606)

     Amend Sec.  600.10(c) to require an institution seeking to 
establish the eligibility of a GE program to add the program to its 
application.
     Amend Sec.  600.21(a) to require an institution to notify 
the Secretary within 10 days of any change to information included in 
the GE program's certification.
     Amend Sec.  668.2 to define certain terminology used in 
subparts Q and S, including ``annual debt-to-earnings rate,'' 
``classification of instructional programs (CIP) code,'' ``cohort 
period,'' ``credential level,'' ``debt-to-earnings rates (D/E rates),'' 
``discretionary debt-to-earnings rates,'' ``earnings premium,'' 
``earnings threshold,'' ``eligible non-GE program,'' ''Federal agency 
with earnings data,'' ``gainful employment program (GE program),'' 
``institutional grants and scholarships,'' ``length of the program,'' 
``poverty guideline,'' ``prospective student,'' ``student,'' and 
``Title IV loan.''
     Amend Sec.  668.43 to establish a Department website for 
the posting and distribution of key information and disclosures 
pertaining to the institution's educational programs, and to require 
institutions to provide the information required to access that website 
to a prospective student before the student enrolls, registers, or 
makes a financial commitment to the institution.
     Amend Sec.  668.91(a) to require that a hearing official 
must terminate the eligibility of a GE program that fails to meet the 
required GE metrics, unless the hearing official concludes that the 
Secretary erred in the calculation.
     Add a new Sec.  668.401 to provide the scope and purpose 
of newly established financial value transparency regulations under 
subpart Q.
     Add a new Sec.  668.402 to provide a framework for the 
Secretary to determine whether a GE program or eligible non-GE program 
leads to acceptable debt and earnings results, including establishing 
annual and discretionary D/E rate metrics and associated outcomes, and 
establishing an earnings premium metric and associated outcomes.
     Add a new Sec.  668.403 to establish a methodology to 
calculate annual and discretionary D/E rates, including parameters to 
determine annual loan payments, annual earnings, loan debt

[[Page 32303]]

and assessed charges, as well as to provide exclusions and specify when 
D/E rates will not be calculated.
     Add a new Sec.  668.404 to establish a methodology to 
calculate a program's earnings premium measure, including parameters to 
determine median annual earnings, as well as to provide exclusions and 
specify when the earnings premium measure will not be calculated.
     Add a new Sec.  668.405 to establish a process by which 
the Secretary will obtain the administrative and earnings data required 
to issue D/E rates and the earnings premium measure.
     Add a new Sec.  668.406 to require the Secretary to notify 
institutions of their financial value transparency metrics and 
outcomes.
     Add a new Sec.  668.407 to require current and prospective 
students to acknowledge having seen the information on the disclosure 
website maintained by the Secretary if an eligible non-GE program has 
failed the D/E rates measure, to specify the content and delivery of 
such acknowledgments, and to require that students must provide the 
acknowledgment before the institution may disburse any title IV, HEA 
funds.
     Add a new Sec.  668.408 to establish institutional 
reporting requirements for students who enroll in, complete, or 
withdraw from a GE program or eligible non-GE program and to define the 
timeframe for institutions to report this information.
     Add a new Sec.  668.409 to establish severability 
protections ensuring that if any financial value transparency provision 
under subpart Q is held invalid, the remaining provisions of that 
subpart and of other subparts would continue to apply.
     Add a new Sec.  668.601 to provide the scope and purpose 
of newly established GE regulations under subpart S.
     Add a new Sec.  668.602 to establish criteria for the 
Secretary to determine whether a GE program prepares students for 
gainful employment in a recognized occupation.
     Add a new Sec.  668.603 to define the conditions under 
which a failing GE program would lose title IV, HEA eligibility, to 
provide the opportunity for an institution to appeal a loss of 
eligibility only on the basis of a miscalculated D/E rate or earnings 
premium, and to establish a period of ineligibility for failing GE 
programs that lose eligibility or voluntarily discontinue eligibility.
     Add a new Sec.  668.604 to require institutions to provide 
the Department with transitional certifications, as well as to certify 
when seeking recertification or the approval of a new or modified GE 
program, that each eligible GE program offered by the institution is 
included in the institution's recognized accreditation or, if the 
institution is a public postsecondary vocational institution, the 
program is approved by a recognized State agency.
     Add a new Sec.  668.605 to require warnings to current and 
prospective students if a GE program is at risk of a loss of title IV, 
HEA eligibility, to specify the content and delivery requirements for 
such notifications, and to provide that students must acknowledge 
having seen the warning before the institution may disburse any title 
IV, HEA funds.
     Add a new Sec.  668.606 to establish severability 
protections ensuring that if any GE provision under subpart S is held 
invalid, the remaining provisions of that subpart and of other subparts 
would continue to apply.

Financial Responsibility (Sec. Sec.  668.15, 668.23, and 668, subpart L 
Sec. Sec.  171, 174, 175, 176 and 177)

     Remove and reserve Sec.  668.15 thereby consolidating all 
financial responsibility factors, including those governing changes in 
ownership, under part 668, subpart L.
     Amend Sec.  668.23(a) to require that audit reports are 
submitted in a timely manner, which would be the earlier of 30 days 
after the date of the report or six months after the end of the 
institution's fiscal year.
     Amend Sec.  668.23(d) to require that financial statements 
submitted to the Department must match the fiscal year end of the 
entity's annual return(s) filed with the Internal Revenue Service. We 
would further amend Sec.  668.23(d) to require the institution to 
include a detailed description of related entities with a level of 
detail that would enable the Department to readily identify the related 
party. Such information must include, but is not limited to, the name, 
location and a description of the related entity including the nature 
and amount of any transactions between the related party and the 
institution, financial or otherwise, regardless of when they occurred. 
Section 668.23(d) would also be amended to require that any domestic or 
foreign institution that is owned directly or indirectly by any foreign 
entity holding at least a 50 percent voting or equity interest in the 
institution must provide documentation of the entity's status under the 
law of the jurisdiction under which the entity is organized. 
Additionally, we would amend Sec.  668.23(d) to require an institution 
to disclose in a footnote to its financial statement audit the dollar 
amounts it has spent in the preceding fiscal year on recruiting 
activities, advertising, and other pre-enrollment expenditures.
     Amend Sec.  668.171(b) to require institutions to 
demonstrate that they are able to meet their financial obligations by 
noting additional cases that constitute a failure to do so, including 
failure to make debt payments for more than 90 days, failure to make 
payroll obligations, or borrowing from employee retirement plans 
without authorization.
     Amend Sec.  668.171(c) to revise the set of conditions 
that automatically require posting of financial protection if the event 
occurs as prescribed in the regulations. These mandatory triggers are 
designed to measure external events that pose risk to an institution, 
financial circumstances that may not appear in the institution's 
regular financial statements, or financial circumstances that may not 
yet be reflected in the institution's composite score. Some examples of 
these mandatory triggers include when, under certain circumstances, 
there is a withdrawal of owner's equity by any means and when an 
institution loses eligibility to participate in another Federal 
educational assistance program due to an administrative action against 
the institution.
     Amend Sec.  668.171(d) to revise the set of conditions 
that may, at the discretion of the Department, require posting of 
financial protection if the event occurs as prescribed in the 
regulations. These discretionary triggers are designed to measure 
external events or financial circumstances that may not appear in the 
institution's regular financial statements and may not yet be reflected 
in the institution's composite score. An example of these discretionary 
triggers is when an institution is cited by a State licensing or 
authorizing agency for failing to meet State or agency requirements. 
Another example is when the institution experiences a significant 
fluctuation between consecutive award years or a period of award years 
in the amount of Federal Direct Loan or Federal Pell Grant funds that 
cannot be accounted for by changes in those title IV, HEA programs.
     Amend Sec.  668.171(f) to revise the set of conditions 
whereby an institution must report to the Department that a triggering 
event, described in Sec.  668.171(c) and (d), has occurred.
     Amend Sec.  668.171(h) to adjust the language regarding an 
auditor's opinion of doubt about the institution's ability to continue 
operations to clarify that the Department may independently assess 
whether the auditor's concerns have

[[Page 32304]]

been addressed or whether the opinion of doubt reflects a lack of 
financial responsibility.
     Amend Sec.  668.174(a) to clarify the language related to 
compliance audit or program review findings that lead to a liability of 
greater than 5 percent of title IV, HEA volume at the institution, so 
that the language more clearly states that the timeframe of the 
preceding two fiscal years timeframe relates to when the reports 
containing the findings in question were issued and not when the 
reviews were actually conducted.
     Add a new proposed Sec.  668.176 to consolidate financial 
responsibility requirements for institutions undergoing a change in 
ownership under Sec.  668, subpart L.
     Redesignate the existing Sec.  668.176, establishing 
severability, as Sec.  668.177 with no change to the regulatory text.

Administrative Capability (Sec.  668.16)

     Amend Sec.  668.16(h) to require institutions to provide 
adequate financial aid counseling and financial aid communications to 
advise students and families to accept the most beneficial types of 
financial assistance available to enrolled students that includes clear 
information about the cost of attendance, sources and amounts of each 
type of aid separated by the type of aid, the net price, and 
instructions and applicable deadlines for accepting, declining, or 
adjusting award amounts.
     Amend Sec.  668.16(k) to require that an institution not 
have any principal or affiliate whose misconduct or closure contributed 
to liabilities to the Federal government in excess of 5 percent of that 
institution's title IV, HEA program funds in the award year in which 
the liabilities arose or were imposed.
     Add Sec.  668.16(n) to require that the institution has 
not been subject to a significant negative action or a finding by a 
State or Federal agency, a court, or an accrediting agency, where in 
which the basis of the action or finding is repeated or unresolved, 
such as non-compliance with a prior enforcement order or supervisory 
directive; and to further require that the institution has not lost 
eligibility to participate in another Federal educational assistance 
program due to an administrative action against the institution.
     Amend Sec.  668.16(p) to strengthen the requirement that 
institutions must develop and follow adequate procedures to evaluate 
the validity of a student's high school diploma.
     Add Sec.  668.16(q) to require that institutions provide 
adequate career services to eligible students who receive title IV, HEA 
program assistance.
     Add Sec.  668.16(r) to require that an institution provide 
students with accessible clinical, or externship opportunities related 
to and required for completion of the credential or licensure in a 
recognized occupation, within 45 days of the successful completion of 
other required coursework.
     Add Sec.  668.16(s) to require that an institution timely 
disburses funds to students consistent with the students' needs.
     Add Sec.  668.16(t) to require institutions to meet new 
standards for their GE programs, as outlined in regulation.
     Add Sec.  668.16(u) to require that an institution does 
not engage in misrepresentations or aggressive and deceptive 
recruitment.

Certification Procedures (Sec. Sec.  668.2, 668.13, and 668.14)

     Amend Sec.  668.2 to add a definition of ``metropolitan 
statistical area.''
     Amend Sec.  668.13(b)(3) to eliminate the provision that 
requires the Department to approve participation for an institution if 
it has not acted on a certification application within 12 months so the 
Department can take additional time where it is needed.
     Amend Sec.  668.13(c)(1) to include additional events that 
lead to provisional certification, such as if an institution triggers 
one of the new financial responsibility triggers proposed in this rule.
     Amend Sec.  668.13(c)(2) to require provisionally 
certified schools that have major consumer protection issues to 
recertify after no more than two years.
     Add a new Sec.  668.13(e) to establish supplementary 
performance measures the Secretary may consider in determining whether 
to certify or condition the participation of the institution.
     Amend Sec.  668.14(a)(3) to require an authorized 
representative of any entity with direct or indirect ownership of a 
private institution to sign a PPA.
     Amend Sec.  668.14(b)(17) to include all Federal agencies 
and add State attorneys general to the list of entities that have the 
authority to share with each other and the Department any information 
pertaining to the institution's eligibility for or participation in the 
title IV, HEA programs or any information on fraud, abuse, or other 
violations of law.
     Amend Sec.  668.14(b)(26)(ii) to limit the number of hours 
in a GE program to the greater of the required minimum number of clock 
hours, credit hours, or the equivalent required for training in the 
recognized occupation for which the program prepares the student, as 
established by the State in which the institution is located, or the 
required minimum number of hours required for training in another 
State, if the institution provides documentation of that State meeting 
one of three qualifying requirements to use a State in which the 
institution is not located that is substantiated by the certified 
public accountant who prepares the institution's compliance audit 
report as required under Sec.  668.23.
     Amend Sec.  668.14(b)(32) to require all programs that are 
designed to lead to employment in occupations requiring completion of a 
program that is programmatically accredited as a condition of State 
licensure to meet those requirements.
     Amend Sec.  668.14(e) to establish a non-exhaustive list 
of conditions that the Secretary may apply to provisionally certified 
institutions, such as the submission of a teach-out plan or agreement.
     Amend Sec.  668.14(f) to establish conditions that may 
apply to institutions that undergo a change in ownership seeking to 
convert from a for-profit institution to a nonprofit institution.
     Amend Sec.  668.14(g) to establish conditions that may 
apply to an initially certified nonprofit institution, or an 
institution that has undergone a change of ownership and seeks to 
convert to nonprofit status.

Ability To Benefit (Sec. Sec.  668.2, 668.32, 668.156, and 668.157)

     Amend Sec.  668.2 to add a definition of ``eligible career 
pathway program.''
     Amend Sec.  668.32 to differentiate between the title IV, 
HEA aid eligibility of non-high school graduates that enrolled in an 
eligible program prior to July 1, 2012, and those that enrolled after 
July 1, 2012.
     Amend Sec.  668.156(b) to separate the State process into 
an initial two-year period and a subsequent period for which the State 
may be approved for up to five years.
     Amend Sec.  668.156(a) to strengthen the Approved State 
process regulations to require that: (1) The application contain a 
certification that each eligible career pathway program intended for 
use through the State process meets the proposed definition of an 
eligible career pathway program in regulation; (2) The application 
describe the criteria used to determine student eligibility for 
participation in the State process; (3) The withdrawal rate for a 
postsecondary institution listed for the first time on a State's 
application not exceed 33 percent; (4) That upon initial

[[Page 32305]]

application the Secretary will verify that a sample of the proposed 
eligible career pathway programs meet statutory and regulatory 
requirements; and (5) That upon initial application the State will 
enroll no more than the greater of 25 students or one percent of 
enrollment at each participating institution.
     Amend Sec.  668.156(c) to remove the support services 
requirements from the State process which include: orientation, 
assessment of a student's existing capabilities, tutoring, assistance 
in developing educational goals, counseling, and follow up by teachers 
and counselors.
     Amend the monitoring requirement in Sec.  668.156(c)(4) to 
provide a participating institution that did not achieve the 85 percent 
success rate up to three years to achieve compliance.
     Amend Sec.  668.156(c)(6) to prohibit an institution from 
participating in the State process for title IV, HEA purposes for at 
least five years if the State terminates its participation.
     Amend Sec.  668.156 to clarify that the State is not 
subject to the success rate requirement at the time of the initial 
application but is subject to the requirement for the subsequent 
period, reduce the required success rate from the current 95 percent to 
85 percent, and specify that the success rate be calculated for each 
participating institution. Also, amend the comparison groups to include 
the concept of ``eligible career pathway programs.''
     Amend Sec.  668.156 to require that States report 
information on race, gender, age, economic circumstances, and 
educational attainment and permit the Secretary to release a Federal 
Register notice with additional information that the Department may 
require States to submit.
     Amend Sec.  668.156 to update the Secretary's ability to 
revise or terminate a State's participation in the State process by (1) 
providing the Secretary the ability to approve the State process once 
for a two-year period if the State is not in compliance with a 
provision of the regulations and (2) allowing the Secretary to lower 
the success rate to 75 percent if 50 percent of the participating 
institutions across the State do not meet the 85 percent success rate.
     Add a new Sec.  668.157 to clarify the documentation 
requirements for eligible career pathway programs.
    Costs and benefits: The Department estimates that the proposed 
regulations would generate benefits to students, postsecondary 
institutions, and the Federal government that exceed the costs. The 
Department also estimates substantial transfers, primarily in the form 
of reduced net title IV, HEA spending by the Federal government. Net 
benefits are created primarily by shifting students from low-financial-
value to high-financial-value programs or, in some cases, away from 
low-financial-value postsecondary programs to non-enrollment. This 
shift would be due to improved and standardized market information 
about all postsecondary programs that would facilitate better decision 
making by current and prospective students and their families; the 
public, taxpayers, and the government; and institutions. Furthermore, 
the GE component would improve the quality of options available to 
students by directly eliminating the ability of low-financial-value GE 
programs to receive title IV, HEA funds. This enrollment shift and 
improvement in program quality would result in higher earnings for 
students, which would generate additional tax revenue for Federal, 
State, and local governments. Students would also benefit from lower 
accumulated debt and lower risk of default. The proposed regulations 
would also generate substantial transfers, primarily in the form of 
title IV, HEA aid shifting between students, postsecondary 
institutions, and the Federal government, generating a net budget 
savings for the Federal government. Other components of this proposed 
regulation related to financial responsibility would provide benefits 
to the Department and taxpayers by increasing the amount of financial 
protection available before an institution closes or incurs borrower 
defense liabilities. This would also help dissuade unwanted behavior 
and benefit institutions that are in stronger financial shape by 
dissuading struggling institutions from engaging in questionable 
behaviors to gain a competitive advantage in increasing enrollment. 
Similarly, the changes to administrative capability and certification 
procedures would benefit the Department in increasing its quality of 
oversight of institutions so that students have more valuable options 
when they enroll. Finally, the ATB regulations would provide needed 
clarity to institutions and States on how to serve students who do not 
have a high school diploma.
    The primary costs of the proposed regulations related to the 
financial value transparency and GE accountability requirements are the 
additional reporting required by institutions, the time for students to 
acknowledge having seen disclosures, and additional spending at 
institutions that accommodate students who would otherwise have decided 
to attend failing programs. The proposed regulations may also dissuade 
some students from enrolling that otherwise would have benefited from 
doing so. For the financial responsibility portion of the proposed 
regulations, costs would be primarily related to the expense of 
providing financial protection to the Department as well as transfers 
that arise from shifting the cost and burden of closed school 
discharges from the taxpayer to the institution and the entities that 
own it. Costs related to certification procedures and administrative 
capability would be related to any necessary steps to comply with the 
added requirements. Finally, States and institutions would have some 
added administrative expenses to administer the proposed ability-to-
benefit processes.
    Invitation to Comment: We invite you to submit comments regarding 
these proposed regulations. To ensure that your comments have maximum 
effect in developing the final regulations, we urge you to clearly 
identify the specific section or sections of the proposed regulations 
that each of your comments addresses and to arrange your comments in 
the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirement of reducing regulatory burden that might result from these 
proposed regulations. Please let us know of any further ways we could 
reduce potential costs or increase potential benefits while preserving 
the effective and efficient administration of the Department's programs 
and activities. The Department also welcomes comments on any 
alternative approaches to the subjects addressed in the proposed 
regulations.
    During and after the comment period, you may inspect public 
comments about these proposed regulations on the Regulations.gov 
website.
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request, we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of accommodation or auxiliary 
aid, please contact one of the persons listed under FOR FURTHER 
INFORMATION CONTACT.

[[Page 32306]]

Background

Financial Value Transparency and Gainful Employment (Sec. Sec.  600.10, 
600.21, 668.2, 668.43, 668.91, 668.401, 668.402, 668.403, 668.404, 
668.405, 668.406, 668.407, 668.408, 668.409, 668.601, 668.602, 668.603, 
668.604, 668.605, and 668.606)

    Postsecondary education and training generate important benefits 
both to the students pursuing new knowledge and skills and to the 
Nation overall. Higher education increases wages and lowers 
unemployment risk,\3\ and leads to myriad non-financial benefits 
including better health, job satisfaction, and overall happiness.\4\ In 
addition, increasing the number of individuals with postsecondary 
education creates social benefits, including productivity spillovers 
from a better educated and more flexible workforce,\5\ increased civic 
participation,\6\ improvements in health and well-being for the next 
generation,\7\ and innumerable intangible benefits that elude 
quantification. The improvements in productivity and earnings lead to 
increases in tax revenues from higher earnings and lower rates of 
reliance on social safety net programs. These downstream increases in 
net revenue to the government can be so large that public investments 
in higher education more than pay for themselves.\8\
---------------------------------------------------------------------------

    \3\ Barrow, L., & Malamud, O. (2015). Is College a Worthwhile 
Investment? Annual Review of Economics, 7(1), 519-555.
    Card, D. (1999). The causal effect of education on earnings. 
Handbook of labor economics, 3, 1801-1863.
    \4\ Oreopoulos, P., & Salvanes, K.G. (2011). Priceless: The 
Nonpecuniary Benefits of Schooling. Journal of Economic 
Perspectives, 25(1), 159-184.
    \5\ Moretti, E. (2004). Workers' Education, Spillovers, and 
Productivity: Evidence from Plant-Level Production Functions. 
American Economic Review, 94(3), 656-690.
    \6\ Dee, T.S. (2004). Are There Civic Returns to Education? 
Journal of Public Economics, 88(9-10), 1697-1720.
    \7\ Currie, J., & Moretti, E. (2003). Mother's Education and the 
Intergenerational Transmission of Human Capital: Evidence from 
College Openings. The Quarterly Journal of Economics, 118(4), 1495-
1532.
    \8\ Hendren, N., & Sprung-Keyser., B. (2020). A Unified Welfare 
Analysis of Government Policies. The Quarterly Journal of Economics, 
135(3), 1209-1318.
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    These benefits are not guaranteed, however. Research has 
demonstrated that the returns, especially the gains in earnings 
students enjoy as a result of their education, vary dramatically across 
institutions and among programs within those institutions.\9\ As we 
illustrate in the Regulatory Impact Analysis of this proposed rule, 
even among the same types of programs--that is, among programs with 
similar academic levels and fields of study--both the costs and the 
outcomes for students differ widely. Most postsecondary programs 
provide benefits to students in the form of higher wages that help them 
repay any loans they may have borrowed to attend the program. But too 
many programs fail to increase graduates' wages, having little, or even 
negative, effects on graduates' earnings.\10\ At the same time, too 
many programs charge much higher tuition than similar programs with 
comparable outcomes, leading students to borrow much more than they 
could have had they attended a more affordable option.
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    \9\ Hoxby, C.M. 2019. The Productivity of US Postsecondary 
Institutions. In Productivity in Higher Education, C.M. Hoxby and 
K.M. Stange (eds). University of Chicago Press: Chicago, 2019.
    Lovenheim, M. and J. Smith. 2023. Returns to Different 
Postsecondary Investments: Institution Type, Academic Programs, and 
Credentials. In Handbook of the Economics of Education Volume 6, E. 
Hanushek, L. Woessmann, and S. Machin (Eds). New Holland.
    \10\ Cellini, S. and Turner, N. 2018. Gainfully Employed? 
Assessing the Employment and Earnings of For-Profit College Students 
Using Administrative Data. Journal of Human Resources. 54(2).
---------------------------------------------------------------------------

    With college tuition consistently rising faster than inflation, and 
given the growing necessity of a postsecondary credential to compete in 
today's economy, it is critical for students, families, and taxpayers 
alike to have accurate and transparent information about the possible 
financial consequences of their postsecondary program career options 
when choosing whether and where to enroll. Providing information on the 
typical earnings outcomes, borrowing amounts, cost of attendance, and 
sources of financial aid--and providing it directly to prospective 
students in a salient way at a key moment in their decision-making 
process--would help students make more informed choices and would allow 
taxpayers and college stakeholders to better monitor whether public and 
private resources are being well used. For many students these 
financial considerations would, appropriately, be just one of many 
factors used in deciding whether and where to enroll.
    For programs that consistently produce graduates with very low 
earnings, or with earnings that are too low to repay the amount the 
typical graduate borrows to complete a credential, additional measures 
are needed to protect students from financial harm. Although making 
information available has been shown to improve consequential financial 
choices across a variety of settings, it is a limited remedy, 
especially for more vulnerable populations that may have less support 
in interpreting and acting upon the relevant 
information.11 12 We believe that providing more detailed 
information about the debt and earnings outcomes of specific 
educational programs would assist students in making better informed 
choices about whether and where to enroll.
---------------------------------------------------------------------------

    \11\ Dominique J. Baker, Stephanie Riegg Cellini, Judith Scott-
Clayton, and Lesley J. Turner, ``Why information alone is not enough 
to improve higher education outcomes,'' The Brookings Institution 
(2021). www.brookings.edu/blog/brown-center-chalkboard/2021/12/14/why-information-alone-is-not-enough-to-improve-higher-education-outcomes/ outcomes/.
    \12\ Mary Steffel, Dennis A. Kramer II, Walter McHugh, Nick 
Ducoff, ``Information disclosure and college choice,'' The Brookings 
Institution (2019). www.brookings.edu/wp-content/uploads/2020/11/ES-11.23.20-Steffel-et-al-1.pdf.
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    To address these issues, the Department proposes to amend 
Sec. Sec.  600.10, 600.21, 668.2, 668.13, 668.43, and 668.98, and to 
establish subparts Q and S of part 668. Through this proposed 
regulatory action, the Department seeks to establish the following 
requirements:
    (1) In subpart Q, a financial value transparency framework that 
would increase the quality and availability of information provided 
directly to students about the costs, sources of financial aid, and 
outcomes of students enrolled in all eligible programs. The framework 
establishes measures of the earnings premium that typical program 
graduates experience relative to the earnings of typical high school 
graduates, as well as the debt service burden for typical graduates. It 
also establishes performance benchmarks for each measure, denoting a 
threshold level of performance below which the program may have adverse 
financial consequences to students. This information would be made 
available via a website maintained by the Department, and in some cases 
students and prospective students would be required to acknowledge 
viewing these disclosures before receiving title IV, HEA funds to 
attend programs with poor outcomes. Further, the website would provide 
the public, taxpayers, and the government with relevant information to 
better safeguard the Federal investment in these programs. Finally, the 
transparency framework would provide institutions with meaningful 
information that they could use to benchmark their performance to other 
institutions and improve student outcomes in these programs.
    (2) In subpart S, we propose an accountability framework for career 
training programs (also referred to as gainful employment, or GE, 
programs)

[[Page 32307]]

that uses the same earnings premium and debt-burden measures to 
determine whether a GE program remains eligible for title IV, HEA 
program funds. The GE eligibility criteria are designed to define what 
it means to prepare students for gainful employment in a recognized 
occupation, and they tie program eligibility to whether GE programs 
provide education and training to their title IV, HEA students that 
lead to earnings beyond those of high school graduates and sufficient 
to allow students to repay their student loans. GE programs that fail 
the same measure in any two out of three consecutive years for which 
the measure is calculated would lose eligibility for participation in 
title IV, HEA programs.
    Sections 102(b) and (c) of the HEA define, in part, a proprietary 
institution and a postsecondary vocational institution as one that 
provides an eligible program of training that prepares students for 
gainful employment in a recognized occupation. Section 101(b)(1) of the 
HEA defines an institution of higher education, in part, as any 
institution that provides not less than a one-year program of training 
that prepares students for gainful employment in a recognized 
occupation. The statute does not further specify this requirement, and 
through multiple reauthorizations of the HEA, Congress has neither 
further clarified the concept of gainful employment, nor curtailed the 
Secretary's authority to further define this requirement through 
regulation, including when Congress exempted some liberal arts programs 
offered by proprietary institutions from the gainful employment 
requirement in the Higher Education Opportunity Act of 2008.
    The Department previously issued regulations on this topic three 
times. In 2011, the Department published a regulatory framework to 
determine the eligibility of a GE program based on three metrics: (1) 
Annual debt-to-earnings (D/E) rate, (2) Discretionary D/E rate, and (3) 
Loan repayment rate. We refer to that regulatory action as the 2011 
Prior Rule (76 FR 34385). Following a legal challenge, the program 
eligibility measures in the 2011 Prior Rule were vacated on the basis 
that the Department had failed to adequately justify the loan repayment 
rate metric.\13\ In 2014, the Department issued new GE regulations, 
which based eligibility determinations on only the annual and 
discretionary D/E rates as accountability metrics, rather than the loan 
repayment rate metric that had been the core source of concern to the 
district court in previous litigation, and included disclosure 
requirements about program outcomes. We refer to that regulatory action 
as the 2014 Prior Rule (79 FR 64889). The 2014 Prior Rule was upheld by 
the courts except for certain appeal procedures used to demonstrate 
alternate program earnings.14 15 16
---------------------------------------------------------------------------

    \13\ Ass'n of Priv. Colleges & Universities v. Duncan, 870 F. 
Supp. 2d 133 (D.D.C. 2012).
    \14\ Ass'n of Proprietary Colleges v. Duncan, 107 F. Supp. 3d 
332 (S.D.N.Y. 2015).
    \15\ Ass'n of Priv. Sector Colleges & Universities v. Duncan, 
110 F. Supp. 3d 176 (D.D.C. 2015), aff'd, 640 F. App'x 5 (D.C. Cir. 
2016) (per curiam).
    \16\ Am. Ass'n of Cosmetology Sch. v. DeVos, 258 F. Supp. 3d 50 
(D.D.C. 2017).
---------------------------------------------------------------------------

    The Department rescinded the 2014 Prior Rule in 2019 based on its 
judgments and assessments at the time, citing: the inconsistency of the 
D/E rates with the requirements of other repayment options; that the D/
E rates failed to properly account for factors other than program 
quality that affect student earnings and other outcomes; a lack of 
evidence for D/E thresholds used to differentiate between ``passing,'' 
``zone,'' and ``failing'' programs; that the disclosures required by 
the 2014 Prior Rule included some data, such as job placement rates, 
that were deemed unreliable; that the rule failed to provide 
transparency regarding debt and earnings outcomes for all programs, 
leaving students considering enrollment options about both non-profit 
and proprietary institutions without information; and relatedly, that a 
high percentage of GE programs did not meet the minimum cohort size 
threshold and were therefore not included in the debt-to-earnings 
calculations.\17\ In light of the Department's reasoning at the time, 
the 2019 Prior Rule (i.e., the action to rescind the 2014 Prior Rule) 
eliminated any accountability framework in favor of non-regulatory 
updates to the College Scorecard on the premise that transparency could 
encourage market forces to bring accountability to bear.
---------------------------------------------------------------------------

    \17\ 84 FR 31392.
---------------------------------------------------------------------------

    This proposed rule departs from the 2019 rescission, as well as the 
2014 Prior Rule, for reasons that are previewed here and elaborated on 
throughout this preamble.\18\ At the highest level, the Department 
remains concerned about the same problems documented in the 2011 and 
2014 Prior Rules. Too many borrowers struggle to repay their loans, 
evidenced by the fact that over a million borrowers defaulted on their 
loans in the year prior to the payment pause that was put in place due 
to the COVID-19 pandemic. The Regulatory Impact Analysis (RIA) shows 
these problems are more prevalent among programs where graduates have 
high debts relative to their income, and where graduates have low 
earnings. While both existing and proposed changes to income-driven 
repayment plans (``IDR'') for Federal student loans partially shield 
borrowers from these risks, such after-the-fact protections do not 
address underlying program failures to prepare students for gainful 
employment in the first place, and they exacerbate the impact of such 
failures on taxpayers as a whole when borrowers are unable to pay. Not 
all borrowers participate in these repayment plans and, where they do, 
the risks of nonpayment are shifted to taxpayers when borrowers' 
payments are not sufficient to fully pay back the loans they borrowed. 
This is because borrowers with persistently low incomes who enroll in 
IDR--and thereby make payments based on a share of their income that 
can be as low as $0--will see their remaining balances forgiven at 
taxpayer expense after a specified number of years (e.g., 20 or 25) in 
repayment.
---------------------------------------------------------------------------

    \18\ We discuss potential reliance interests regarding all parts 
of the proposed rule below, in the ``Reliance Risks'' section.
---------------------------------------------------------------------------

    The Department recognizes that, given the high cost of education 
and correspondingly high need for student debt, students, families, 
institutions, and the public have an acute interest in ensuring that 
higher education investments are justified through positive repayment 
and earnings outcomes for graduates. The statute acknowledges there are 
differences across programs and colleges and this means we have 
different tools available to promote these goals in different contexts. 
Recognizing this fact, for programs that the statute requires to 
prepare students for gainful employment in a recognized occupation, we 
propose reinstating a version of the debt-to-earnings requirement 
established under the 2014 Prior Rule and adding an earnings premium 
metric to the GE accountability framework. At the same time, we propose 
expanding disclosure requirements to all eligible programs and 
institutions to ensure all students have the benefit of access to 
accurate information on the financial consequences of their education 
program choices.
    First, the proposed rule incorporates a new accountability metric--
an earnings premium (EP)--that captures a distinct aspect of the value 
provided by a program. The earnings premium measures the extent to 
which the typical graduate of a program out-earns the typical 
individual with only a high school diploma or equivalent in the same 
State the program is located. In

[[Page 32308]]

order to be considered a program that prepares students for gainful 
employment in a recognized occupation, we propose that programs must 
both have graduates whose typical debt levels are affordable, based on 
a similar debt-to-earnings (D/E) test as used in the 2014 Prior Rule, 
and also have a positive earnings premium.
    Second, we propose to calculate and require disclosures of key 
information about the financial consequences of enrolling in higher 
education programs for almost all eligible programs at all 
institutions. As we elaborate below and in the RIA, we believe this 
will help students understand differences in the costs, borrowing 
levels, and labor market outcomes of more of the postsecondary options 
they might be considering. It is particularly important for students 
who are considering or attending a program that may carry a risk of 
adverse financial outcomes to have access to comparable information 
across all sectors so they can explore other options for enrollment and 
potentially pursue a program that is a better financial value.
    As further explained in the significant proposed regulations 
section of this Notice and in the RIA, there are several connected 
reasons for adding the EP metric to the proposed rule.\19\ First, the 
Department believes that, for postsecondary career training programs to 
be deemed as preparing students for gainful employment, they should 
enable students to secure employment that provides higher earnings than 
what they might expect to earn if they did not pursue a college 
credential. This position is consistent with the ordinary meaning of 
the phrase ``gainful employment'' and the purposes of the title IV, HEA 
programs, which generally require students who receive assistance to 
have already completed a high school education,\20\ and then require GE 
programs ``to prepare'' those high school graduates for ``gainful 
employment'' in a recognized occupation.\21\ Clearly, GE programs are 
supposed to add to what high school graduates already have achieved in 
their preparation for gainful employment, not leave them where they 
started. We propose to measure that gain, in part, with an 
administrable test that is pegged to earnings beyond a typical high 
school graduate. This approach is likewise supported by the fact that 
the vast majority of students cite the opportunity for a good job or 
higher earnings as a key, if not the most important, reason they chose 
to pursue a college degree.\22\
---------------------------------------------------------------------------

    \19\ For further discussion of the earnings premium metric and 
the Department's reasons for proposing it, see below at ''Authority 
for this Regulatory Action,'' and at ''668.402 Financial value 
transparency framework'' and ``668.602 Gainful employment criteria'' 
under the Significant Proposed Regulations section of this Notice. 
Those discussions also address the D/E metric.
    \20\ See, for example, 20 U.S.C. 1001(a)(1), 1901.
    \21\ 20 U.S.C. 1002(b)(1)(A), (c)(1)(A). See also 20 U.S.C. 
1088(b)(1)()(i), which refers to a recognized profession.
    \22\ For example, a recent survey of 2,000 16 to 19 year olds 
and 2,000 22 to 30 year old recent college graduates rated 
affordable tuition, higher income potential, and lower student debt 
as the top 3 to 4 most important factors in choosing a college 
(https://www.nytimes.com/2023/03/27/opinion/problem-college-rankings.html). The RIA includes citation to other survey results 
with similar findings.
---------------------------------------------------------------------------

    Furthermore, the EP metric that we propose would set only 
reasonable expectations for programs that are supposed to help students 
move beyond a high school baseline. The median earnings of high school 
graduates is about $25,000 nationally, which corresponds to the 
earnings level of a full-time worker at an hourly wage of about $12.50 
(lower than the State minimum wage in 15 States).\23\ While the 2014 
Prior Rule emphasized that borrowers should be able to earn enough to 
afford to repay their debts, the Department recognizes that borrowers 
need to be able to afford more than ''just'' their loan payments, and 
that postsecondary programs should help students reach a minimal level 
of labor market earnings. Exceeding parity with the earnings of 
students who never attend college is a modest expectation.
---------------------------------------------------------------------------

    \23\ See https://www.dol.gov/agencies/whd/mw-consolidated.
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    Another benefit of adding the EP metric is that it helps protect 
students from the adverse borrowing outcomes prevalent among programs 
with very low earnings. Research conducted since the 2014 Prior Rule as 
well as new data analyses shown in this RIA illustrate that, for 
borrowers with low earnings, even small amounts of debt (including 
levels of debt that would not trigger failure of the D/E rates) can be 
unmanageable. Default rates tend to be especially high among borrowers 
with lower debt levels, often because these borrowers left their 
programs and as a result have very low earnings.\24\ Analyses in this 
RIA show that the default rate among students in programs that pass the 
D/E thresholds but fail the earnings premium are very high--even higher 
than programs that fail the D/E measure but pass the earnings premium 
measure.
---------------------------------------------------------------------------

    \24\ See https://libertystreeteconomics.newyorkfed.org/2015/02/looking_at_student_loan_defaults_through_a_larger_window/.
---------------------------------------------------------------------------

    Finally, as detailed further below, the EP measure helps protect 
taxpayers. Borrowers with low earnings are eligible for reduced loan 
payments and loan forgiveness which increase the costs of the title IV, 
HEA loan program to taxpayers.
    While the EP and D/E metrics are related, they measure distinct 
dimensions of gainful employment, further supporting the proposal to 
require that programs pass both measures. For example, programs that 
have median earnings of graduates above the high school threshold might 
still be so expensive as to require excessive borrowing that students 
will struggle to repay. And, on the other hand, even if debt levels are 
low relative to a graduate's earnings, those earnings might still be no 
higher than those of the typical high school graduate in the same 
State.
    As noted above, the D/E metrics and thresholds in the proposed rule 
mirror those in the 2014 Prior Rule and are based on both academic 
research about debt affordability and industry practice. Analyses in 
the Regulatory Impact Analysis (RIA) of this proposed rule illustrate 
that borrowers who attended programs that fail the D/E rates are more 
likely to struggle with their debt. For example, programs that fail the 
proposed D/E standards (including both GE and non-GE programs) account 
for just 4.1 percent of title IV enrollments (i.e., Federally aided 
students), but 11.19 percent of all students who default within 3 years 
of entering repayment. GE programs represent 15.2 percent of title IV, 
HEA enrollments overall, but 49.6 percent of title IV, HEA enrollments 
within the programs that fail the D/E standards and 65.6 percent of the 
defaulters. These facts, in part, motivate the Department's proposal to 
calculate and disclose D/E and EP rates for all programs under proposed 
subpart Q, while establishing additional accountability for GE programs 
with persistently low performance in the form of loss of title IV, HEA 
eligibility under proposed subpart S.
    In addition to ensuring that career training programs ensure that 
graduates attain at least a minimal level of earnings and have 
borrowing levels that are manageable, the two metrics in the proposed 
rule also protect taxpayers from the costs of low financial value 
programs. For example, the RIA presents estimates of loan repayment 
under the hypothetical assumption that all borrowers pay on either (1) 
the most generous repayment plan or (2) the most generous plan that 
would be available under the income-driven repayment rule proposed by 
the Department in January (88 FR 1894). These analyses show that both 
D/E rates and the

[[Page 32309]]

earnings premium metrics are strongly correlated with an estimated 
subsidy rate on Federal loans, which measures the share of a disbursed 
loan that will not be repaid, and thus provides a proxy for the cost of 
loans to taxpayers. In short, the D/E and earnings premium metrics are 
well targeted to programs that generate a disproportionate share of the 
costs to taxpayers and negative borrower outcomes that the Department 
seeks to improve.
    We have also reconsidered the concerns raised in the 2019 Prior 
Rule about the effect of some repayment options on debt-to-earnings 
rates. We recognize that some repayment plans offered by the Department 
allow borrowers to repay their loans as a fraction of their income, and 
that this fraction is lower for some plans than the debt-to-earnings 
rate used to determine ineligibility under this proposed rule and the 
2014 Prior Rule. For example, under the Revised Pay-As-You-Earn 
(REPAYE) income-driven repayment plan, borrowers' monthly payments are 
set at 10 percent of their discretionary income, defined as income in 
excess of 150 percent of the Federal poverty guideline (FPL). Noting 
that many borrowers continue to struggle to repay, the Department has 
proposed more generous terms, allowing borrowers to pay 5 percent of 
their discretionary income (now redefined as income in excess of 225 
percent of the FPL) to repay undergraduate loans, and 10 percent of 
their discretionary income to repay graduate loans.\25\
---------------------------------------------------------------------------

    \25\ 88 FR 1902 (Jan. 11, 2023).
---------------------------------------------------------------------------

    Income driven repayment plans are aimed at alleviating the burden 
of high debt for students who experience unanticipated circumstances, 
beyond an institution's control, that adversely impact their ability to 
repay their debts. While the Department believes it is critical to 
reduce the risk of unexpected barriers that borrowers face, and to 
protect borrowers from delinquency, default and the associated adverse 
credit consequences, it would be negligent to lower our accountability 
standards across the entire population as a result and to permit 
institutions to encumber students with even more debt while expecting 
taxpayers to pay more for poor outcomes related to the educational 
programs offered by institutions. Instead, we view the D/E rates as an 
appropriate measure of what students can borrow and feasibly repay. Put 
another way, the D/E provisions proposed in this rule define a maximum 
amount of borrowing as a function of students' earnings that would 
leave the typical program graduate in a position to pay off their debt 
without having to rely on payment assistance programs like income-
driven repayment plans.
    The concerns raised by the 2019 Prior Rule about the effect of 
student demographics on the debt and earnings measures used in the 2014 
Prior Rule (which we also propose to use in this NPRM) are addressed at 
length in this NPRM's RIA. The Department has considered that 
discrimination based on gender identity or race and ethnicity may 
influence the aggregate outcomes of programs that disproportionately 
enroll members of those groups. However, our analyses, and an ever-
increasing body of academic research, strongly rebut the claim that 
differences across programs are solely or primarily a reflection of the 
demographic or other characteristics of the students enrolled.\26\ 
Moreover, consistent with recurring allegations in student complaints 
and qui tam lawsuits (a type of lawsuit through which private 
individuals who initiate litigation on behalf of the government can 
receive for themselves all or part of the damages or penalties 
recovered by the government), through our compliance oversight 
activities including program reviews, the Department has concluded that 
many institutions aggressively recruit individuals with low income, 
women, and students of color into programs with substandard quality and 
poor outcomes and then claim their outcomes are poor because of the 
``access'' they provide to such individuals. An analysis of the effects 
on access presented in the RIA demonstrates that more than 90 percent 
of students enrolled in failing programs have at least one non-failing 
option within the same geographic area, credential level, and broad 
field. These alternative programs usually entail lower borrowing, 
higher earnings, or both.
---------------------------------------------------------------------------

    \26\ Christensen, Cody and Turner, Lesley. (2021) Student 
Outcomes at Community Colleges: What Factors Explain Variation in 
Loan Repayment and Earnings? The Brookings Institution. Washington, 
DC. https://www.brookings.edu/wp-content/uploads/2021/09/Christensen_Turner_CC-outcomes.pdf. lack, Dan A., and Jeffrey A. 
Smith. ``Estimating the returns to college quality with multiple 
proxies for quality.'' Journal of labor Economics 24.3 (2006): 701-
728.
    Cohodes, Sarah R., and Joshua S. Goodman. ``Merit aid, college 
quality, and college completion: Massachusetts' Adams scholarship as 
an in-kind subsidy.'' American Economic Journal: Applied Economics 
6.4 (2014): 251-285.
    Andrews, Rodney J., Jing Li, and Michael F. Lovenheim. 
``Quantile treatment effects of college quality on earnings.'' 
Journal of Human Resources 51.1 (2016): 200-238.
    Dillon, Eleanor Wiske, and Jeffrey Andrew Smith. ``The 
consequences of academic match between students and colleges.'' 
Journal of Human Resources 55.3 (2020): 767-808.
---------------------------------------------------------------------------

    The Department has also reconsidered concerns raised in the 2019 
Prior Rule about the basis for proposed thresholds for debt-to-earnings 
rates. We have re-reviewed the research underpinning those thresholds. 
This includes considering concerns raised by one researcher about the 
way the Department interpreted one of her studies in the 2019 Prior 
Rule.\27\ From this, we have proposed using one set of thresholds that 
are based upon research and industry practice. This departs from prior 
approaches that distinguished between programs in a ``zone'' versus 
``failing.''
---------------------------------------------------------------------------

    \27\ www.urban.org/urban-wire/devos-misrepresents-evidence-seeking-gainful-employment-deregulation.
---------------------------------------------------------------------------

    The 2019 Prior Rule also raised concerns about the inclusion of 
potentially unreliable metrics. We agree with this conclusion with 
respect to job placement and thus do not propose including job 
placement rates among the proposed disclosures required from 
institutions.\28\ Because inconsistencies in how institutions calculate 
job placement rates limit their usefulness to students and the public 
in comparing institutions and programs, until we find a meaningful and 
comparable measure, the Department does not rely upon job placement 
rates in this proposed rule.
---------------------------------------------------------------------------

    \28\ These rates were not required disclosures under the 2014 
Prior Rule, but rather among a list of items that the Secretary may 
choose to include.
---------------------------------------------------------------------------

    The Department also considered concerns raised in the 2019 Prior 
Rule that the accountability framework was flawed because many programs 
did not have enough graduates to produce data. Since many programs 
produce only a small number of graduates each year, it is unavoidable 
that the Department will not be able to publish debt and earnings based 
aggregate statistics for such programs to protect the privacy of the 
individual students attending them or to ensure that the data from 
those programs are adequately reliable. As further explained in our 
discussion of proposed Sec.  668.405, the IRS adds a small amount of 
statistical noise to earnings data for privacy protection purposes, 
which would be greater for populations smaller than 30.
    While the Department is mindful of the fractions of programs likely 
covered, we also are concentrating on the numbers of people who may 
benefit from the metrics: enrolled students, prospective students, 
their families, and others. Despite the data limitations noted above, 
under the proposed regulations, we estimate that programs representing 
69 and 75 percent of all title IV, HEA enrollment in eligible non-GE 
programs and GE programs,

[[Page 32310]]

respectively, would have debt and earnings measures available to 
produce the metrics. We further estimate the share of enrollment that 
would additionally be covered under the four-year cohort approach 
(discussed later in this NPRM) by examining the share of enrollment in 
programs that have fewer than 30 graduates in our data for a two-year 
cohort, but at least 30 in a four-year cohort. Under this approach, we 
estimate that an additional 13 percent of eligible non-GE enrollment 
and 8 percent of GE enrollment would be covered. All told, the metrics 
could be produced for programs that enroll approximately 82 percent of 
all students. These students are enrolled in 34 percent of all eligible 
non-GE programs and 26 percent of all GE programs.\29\
---------------------------------------------------------------------------

    \29\ These figures use four-year cohorts to compute rates. The 
comparable share of programs with calculatable metrics using only 
the two-year cohorts is 19 and 15 percent for non-GE and GE 
programs, respectively.
---------------------------------------------------------------------------

    The metrics that we could calculate, therefore, would show results 
for postsecondary education programs that are attended by the large 
majority of enrolled students. Those numbers would be directly relevant 
to those students. And it seems reasonable to further conclude that the 
covered programs will be the primary focus of attention for the 
majority of prospective students, as well. The programs least likely to 
be covered will be the smallest in terms of the number of completers 
(and likely enrollment), which is correlated with the breadth of 
interest among those considering enrolling in those programs. We 
acknowledge that these programs represent potential options for future 
and even current enrollees, and that relatively small programs might be 
different in various ways from programs with larger enrollments. At the 
same time, the Department does not view the fraction of programs 
covered by D/E and EP as the most important metric. The title IV, HEA 
Federal student aid programs, after all, provide aid to students 
directly, making the share of students covered a natural focus of 
concern. The Department believes that the benefits of providing this 
information to millions of people about programs that account for the 
majority of students far outweighs the downside of not providing data 
on the smallest programs. Furthermore, even for students interested in 
smaller programs, the outcome measures for other programs at the same 
institution may be of interest.
    The Department continues to agree with the stance taken in the 2019 
Prior Rule that publishing metrics that help students, families, and 
taxpayers understand the financial value of all programs is important. 
Prospective students often consider enrollment options at public, for 
profit, and non-profit institutions simultaneously and deserve 
comparable information to assess the financial consequences of their 
choices. A number of research studies show that such information, when 
designed well, delivered by a trusted source, and provided at the right 
time can help improve choices and outcomes.\30\ However, as further 
discussed under ``Sec.  668.401 Financial value transparency scope and 
purpose,'' merely posting the information on the College Scorecard 
website has had a limited impact on enrollment choices. Consequently, 
our proposed rule, in subpart Q below, outlines a financial value 
transparency framework that proposes measures of debt-to-earnings and 
earnings premiums that would be calculated for nearly all programs at 
all institutions. To help ensure students are aware of these outcomes 
when financial considerations may be particularly important, the 
framework includes a requirement that all students receive a link to 
program disclosures including this information, and that students 
seeking to enroll in programs that do not meet standards on the 
relevant measures would need to acknowledge viewing that information 
prior to the disbursement of title IV, HEA funds.
---------------------------------------------------------------------------

    \30\ For an overview of research findings see, for example, 
ticas.org/files/pub_files/consumer_information_in_higher_education.pdf.
---------------------------------------------------------------------------

    At the same time, the Department believes that the transparency 
framework alone is not sufficient to protect students and taxpayers 
from programs with persistently poor financial value 
outcomes.31 32 The available information continues to 
suggest that graduates of some GE programs have earnings below what 
could be reasonably expected for someone pursuing postsecondary 
education. In the Regulatory Impact Analysis, the Department shows that 
about 460,000 students per year, comprising 16 percent of all title IV, 
HEA recipients enrolled in GE programs annually, attend GE programs 
where the typical graduate earns less than the typical high school 
graduate, and an additional 9 percent of those enrolled in GE programs 
have unmanageable debt.\33\ These rates are much higher among GE 
programs than eligible non-GE programs, where 4 percent of title IV, 
HEA enrollment is in programs with zero or negative earnings premiums 
and 2 percent are in programs with unsustainable debt levels.
---------------------------------------------------------------------------

    \31\ Dominique J. Baker, Stephanie Riegg Cellini, Judith Scott-
Clayton, and Lesley J. Turner, ``Why information alone is not enough 
to improve higher education outcomes,'' The Brookings Institution 
(2021). www.brookings.edu/blog/brown-center-chalkboard/2021/12/14/why-information-alone-is-not-enough-to-improve-higher-education-outcomes/ outcomes/.
    \32\ Mary Steffel, Dennis A. Kramer II, Walter McHugh, Nick 
Ducoff, ``Information disclosure and college choice,'' The Brookings 
Institution (2019). www.brookings.edu/wp-content/uploads/2020/11/ES-11.23.20-Steffel-et-al-1.pdf.
    \33\ A similar conclusion was reached in a recent study that 
found that about 670,000 students per year, comprising 9 percent of 
all students that exit postsecondary programs on an annual basis, 
attended programs that leave them worse off financially. See Jordan 
D. Matsudaira and Lesley J. Turner. ``Towards a framework for 
accountability for federal financial assistance programs in 
postsecondary education.'' The Brookings Institution. (2020) 
www.brookings.edu/wp-content/uploads/2020/11/20210603-Mats-Turner.pdf.
---------------------------------------------------------------------------

    Researchers have found that while providing information alone can 
be important and consequential in some settings, barriers to 
information and a lack of support for interpreting and acting upon 
information can limit its impact on students' education choices, 
particularly among more vulnerable populations.\34\ We are also 
concerned about evidence from Federal and State investigations and qui 
tam lawsuits indicating that a number of institutions offering GE 
programs engage in aggressive and deceptive marketing and recruiting 
practices. As a result of these practices, prospective students and 
their families are potentially being pressured and misled into critical 
decisions regarding their educational investments that are against 
their interests.
---------------------------------------------------------------------------

    \34\ See discussion in section ''Outcome Differences Across 
Programs'' of the Regulatory Impact Analysis for an overview of 
these research findings.
---------------------------------------------------------------------------

    We therefore propose an additional level of protection for GE 
programs that disproportionately leave students with unsustainable debt 
levels or no gain in earnings. We accordingly include an accountability 
framework in subpart S that links debt and earnings outcomes to GE 
program eligibility for title IV, HEA student aid programs. Since these 
programs are intended to prepare students for gainful employment in 
recognized occupations, tying eligibility to a minimally acceptable 
level of financial value is natural and supported by the relevant 
statutes; and as detailed above and in the RIA, these programs account 
for a disproportionate share of students who complete programs with 
very low earnings and unmanageable debt. This approach has been 
supported by a number of researchers who have recently suggested 
reinstating the 2014 GE rule with an added layer of accountability 
through a high school

[[Page 32311]]

earnings metric.\35\ We further explain the debt-to-earnings (D/E) and 
earnings premium (EP) metrics in discussions above and below.
---------------------------------------------------------------------------

    \35\ Stephanie R. Cellini and Kathryn J. Blanchard, ``Using a 
High School Earnings Benchmark to Measure College Student Success 
Implications for Accountability and Equity.'' The Postsecondary 
Equity and Economics Research Project. (2022). 
www.peerresearchproject.org/peer/research/body/2022.3.3-PEER_HSEarnings-Updated.pdf.
---------------------------------------------------------------------------

    Consistent with our statutory authority, this proposed rule limits 
the linking of debt and earnings outcomes to program eligibility for 
programs that are defined as preparing students for gainful employment 
in a recognized occupation rather than a larger set of programs. The 
differentiation between GE and non-GE programs in the HEA reflects that 
eligible non-GE programs serve a broader array of goals beyond career 
training. Conditioning title IV, HEA eligibility for such programs to 
debt and earnings outcomes not only would raise questions of legal 
authority, it could increase the risk of unintended educational 
consequences. However, for purposes of program transparency, we propose 
to calculate and disclose debt and earnings outcomes for all programs 
along with other measures of the true costs of programs for students. 
Since students consider both GE and non-GE programs when selecting 
programs, providing comparable information for students would help them 
find the program that best meets their needs across any sector.
    While we propose reinstating the consequential accountability 
provisions, including sanctions of eligibility loss, proposed in the 
2011 and 2014 Prior Rules, we depart from those regulations in several 
ways in addition to those already mentioned above. First, we decided 
against using measures of loan repayment, like the one proposed in the 
2011 Prior Rule. Even with an acceptable basis for setting such a 
threshold, we recognize that changes to the repayment options available 
to borrowers may cause repayment rates to change, and as a result such 
a measure may be an imperfect, or unstable, proxy for students' 
outcomes and program quality.
    We also propose changes relative to the 2014 Prior Rule, including 
elimination of the ``zone'' and changes to appeals processes. Based on 
the Department's analyses and experience administering the 2014 Rule, 
these provisions added complexity and burden in administering the rule 
but did not further their stated goals and instead unnecessarily 
limited the Department's ability to remove low-value programs from 
eligibility. We further explain those choices below.\36\
---------------------------------------------------------------------------

    \36\ See the discussions below at [TK].
---------------------------------------------------------------------------

    Finally, the Department proposes to measure earnings using only the 
median of program completers' earnings, rather than the maximum of the 
mean or median of completers' earnings. This approach reflects an 
updated assessment that the median is a more appropriate measure, 
indicating the earnings level exceeded by a majority of the programs' 
graduates. The mean can be less representative of program quality since 
it may be elevated or lowered by just a few ''outlier'' completers with 
atypically high or low earnings outcomes. Furthermore, in aggregate 
National or State measures of earnings, mean earnings are always higher 
than median earnings due to the right skew of earnings distributions 
and the presence of a long right tail, when a small number of 
individuals earn substantially more than the typical person does.\37\ 
As a result, using mean values, rather than medians, would 
substantially increase the state-level earnings thresholds derived from 
the earnings of high school graduates. Aggregated up to the State 
level, the mean earnings of those in the labor force with a high school 
degree is about 16 percent higher than the median earnings. By State, 
this difference between mean and median earnings ranges from 9 percent 
(in Delaware and Vermont) to 28 percent (in Louisiana).
---------------------------------------------------------------------------

    \37\ Neal, Derek and Sherwin Rosen. (2000) Chapter 7: Theories 
of the distribution of earnings. Handbook of Income Distribution. 
Elsevier. Vol. 1. 379-427. https://doi.org/10.1016/S1574-0056(00)80010-X.
---------------------------------------------------------------------------

    The use of means as a comparison earnings measure within a State 
would set a much higher bar for programs, driven largely by the 
presence of high-earning outliers. In contrast, the use of mean 
earnings, rather than medians, for individual program data typically 
has a more muted effect. Using 2014 GE data, the typical increase from 
the use of mean, rather than median earnings, is about 3 percent across 
programs. Further, some programs have lower earnings when measured 
using a mean rather than median. Programs at the 25th percentile in 
earnings difference have a mean that is 3 percent less than the median, 
and programs at the 75th percentile have a mean than is 12 percent 
higher than the median. On balance, we believe that using median 
earnings for both the measure of program earnings and the earnings 
threshold measure used to calculate the earnings premium leads to a 
more representative comparison of earnings outcomes for program 
graduates.

Financial Responsibility (Sec. Sec.  668.15, 668.23, 668.171, and 
668.174 Through 668.177) (Section 498(c) of the HEA)

    Section 498(c) of the HEA requires the Secretary to determine 
whether an institution has the financial responsibility to participate 
in the title IV, HEA programs on the basis of whether the institution 
is able to:
     Provide the services described in its official 
publications and statements;
     Provide the administrative resources necessary to comply 
with the requirements of the law; and
     Meet all of its financial obligations.
    In 1994, the Department made significant changes to the regulations 
governing the evaluation of an institution's financial responsibility 
to improve our ability to implement the HEA's requirement. The 
Department strengthened the factors used to evaluate an institution's 
financial responsibility to reflect statutory changes made in the 1992 
amendments to the HEA.
    In 1997, we further enhanced the financial responsibility factors 
with the creation of part 668, subpart L that established a financial 
ratio requirement using composite scores and performance-based 
financial responsibility standards. The implementation of these new and 
enhanced factors limited the applicability of the previous factors in 
Sec.  668.15 to only situations where an institution is undergoing a 
change in ownership.
    These proposed regulations would remove the outdated regulations 
from Sec.  668.15 and reserve that section. Proposed regulations in a 
new Sec.  668.176, under subpart L, would be specific to institutions 
undergoing a change in ownership and detail the precise financial 
requirements for that process. Upon implementation, all financial 
responsibility factors for institutions, including institutions 
undergoing a change in ownership, would reside in part 668, subpart L.
    In 2013, the Office of Management and Budget's Circular A-133, 
which governed independent audits of public and nonprofit, private 
institutions of higher education and postsecondary vocational 
institutions, was replaced with regulations at 2 CFR part 200--Uniform 
Administrative Requirements, Cost Principles, And Audit Requirements 
For Federal Awards. In Sec.  668.23, we would replace all references to 
Circular A-133 with the current reference, 2 CFR part 200--Uniform 
Administrative Requirements, Cost Principles, And Audit Requirements 
For Federal Awards.

[[Page 32312]]

    Audit guides developed by and available from the Department's 
Office of Inspector General contain the requirements for independent 
audits of for-profit institutions of higher education, foreign schools, 
and third-party servicers. Traditionally, these audits have had a 
submission deadline of six months following the end of the entity's 
fiscal year. These proposed regulations would establish a submission 
deadline that would be the earlier of two dates:
     Thirty days after the date of the later auditor's report 
with respect to the compliance audit and audited financial statements; 
or
     Six months after the last day of the entity's fiscal year.
    The Department primarily monitors institutions' financial 
responsibility through the ``composite score'' calculation, a formula 
derived through a final rule published in 1997 that relies on audited 
financial statements and a series of tests of institutional 
performance. The composite score is only applied to private nonprofit 
and for-profit institutions. Public institutions are generally backed 
by the full faith and credit of the State or equivalent governmental 
entity and, if so, are not evaluated using the composite score test or 
required to post financial protection.
    The composite score does not effectively account for some of the 
ways in which institutions' financial difficulties may manifest, 
however, because institutions submit audited financial statements after 
the end of an institution's fiscal year. An example of this would be 
when the person or entity that owns the school makes a short-term cash 
contribution to the school, thereby increasing the school's composite 
score in a way that allows what would have been a failing composite 
score to pass. We have seen examples of this activity occurring when 
that same owner withdraws the same or similar amount after the end of 
the fiscal year and after the calculation of a passing composite score 
based on the contribution. The effect is that the institution passes 
just long enough for the score to be reviewed and then goes back to 
failing. This is the type of manipulation that the proposed regulation 
seeks to address.
    As part of the 2016 Student Assistance General Provisions, Federal 
Perkins Loan Program, Federal Family Education Loan Program, William D. 
Ford Federal Direct Loan Program, and Teacher Education Assistance for 
College and Higher Education Grant Program regulations \38\ (referred 
to collectively as the 2016 Final Borrower Defense Regulations), the 
Department introduced, as part of the financial responsibility 
framework, ``triggering events'' to serve as indicators of an 
institution's lack of financial responsibility or the presence of 
financial instability. These triggers were used in conjunction with the 
composite score and already existing standards of financial 
responsibility and offset the limits inherent in the composite score 
calculation. Some of the existing standards include that:
---------------------------------------------------------------------------

    \38\ 81 FR 75926.
---------------------------------------------------------------------------

     The institution's Equity, Primary Reserve, and Net Income 
ratios yield a composite score of at least 1.5;
     The institution has sufficient cash reserves to make 
required returns of unearned title IV, HEA program funds;
     The institution is able to meet all of its financial 
obligations and otherwise provide the administrative resources required 
to comply with title IV, HEA program requirements; and
     The institution or persons affiliated with the institution 
are not subject to a condition of past performance as outlined in 34 
CFR 668.174.
    The triggering events introduced in the 2016 Final Borrower Defense 
Regulations were divided into two categories: mandatory and 
discretionary.
    Some required an institution to post a letter of credit or provide 
other financial protection when that triggering event occurred. This 
type of mandatory trigger included when an institution failed to 
demonstrate that at least 10 percent of its revenue derived from 
sources other than the title IV, HEA program funds (the 90/10 rule). 
Other mandatory triggers required a recalculation of the institution's 
composite score, which would result in a request for financial 
protection only if the newly calculated score was less than 1.0. An 
example of the latter type of trigger was when an institution's 
recalculated composite score was less than 1.0 due to its being 
required to pay any debt or incur any liability arising from a final 
judgment in a judicial proceeding or from an administrative proceeding 
or determination, or from a settlement.
    The 2016 Final Borrower Defense Regulations also introduced 
discretionary triggers that only required financial protection from the 
institution if the Department determined it was necessary. An example 
of such a trigger was if an institution had been cited by a State 
licensing or authorizing agency for failing that entity's requirements. 
In that case, the Department could require financial protection if it 
believed that the failure was reasonably likely to have a material 
adverse effect on the financial condition, business, or results of 
operations of the institution.
    In 2019, as part of the Student Assistance General Provisions, 
Federal Family Education Loan Program, and William D. Ford Federal 
Direct Loan Program \39\ (2019 Final Borrower Defense Regulations) the 
Department revised many of these triggers, moving some from being 
mandatory to being discretionary; eliminating some altogether; and 
linking some triggers to post-appeal or final events. An example of a 
mandatory 2016 trigger that was removed entirely in 2019 was when an 
institution's recalculated composite score was less than 1.0 due to its 
being sued by an entity other than a Federal or State authority for 
financial relief on claims related to the making of Direct Loans for 
enrollment at the institution or the provision of educational services. 
In amending the financial responsibility requirements in the 2019 Final 
Borrower Defense Regulations, the Department reasoned that it was 
removing triggers that were speculative, such as triggers based on the 
estimated dollar value of a pending lawsuit, and limiting triggers to 
events that were known and quantified, such as triggers based on the 
actual liabilities incurred from a defense to repayment discharge. The 
rationale for the 2019 Final Borrower Defense Regulations was also 
based on the idea that some of the 2016 triggers were not indicators of 
the institution's actual financial condition or ability to operate. 
However, after implementing the financial responsibility changes from 
the 2019 Final Borrower Defense Regulations, the Department has 
repeatedly encountered institutions that appeared to be at significant 
risk of closure where we lacked the ability to request financial 
protection due to the more limited nature of the triggers. To address 
this fact, these proposed regulations would reinstate or expand 
mandatory and discretionary triggering events that would require an 
institution to post financial protection, usually in the form of a 
letter of credit. Discretionary triggers would provide the Department 
flexibility on whether to require a letter of credit based on the 
financial impact the triggering event has on the institution, while the 
specified mandatory triggering conditions would either automatically 
require the institution to obtain financial surety or require that the 
composite score be recalculated to determine if an institution would 
have to provide surety because it no longer passes. These proposed new 
triggers would increase

[[Page 32313]]

the Department's ability to monitor institutions for issues that may 
negatively impact their financial responsibility and to better protect 
students and taxpayers in cases of institutional misconduct and 
closure.
---------------------------------------------------------------------------

    \39\ 84 FR 49788.
---------------------------------------------------------------------------

Administrative Capability (Sec.  668.16)

    Under section 487(c)(1)(B) of the HEA, the Secretary is authorized 
to issue regulations necessary to provide reasonable standards of 
financial responsibility, and appropriate institutional administrative 
capability to administer the title IV, HEA programs, in matters not 
governed by specific program provisions, including any matter the 
Secretary deems necessary to the administration of the financial aid 
programs. Section 668.16 specifies the standards that institutions must 
meet in administering title IV, HEA funds to demonstrate that they are 
administratively capable of providing the education they promise and of 
properly managing the title IV, HEA programs. In addition to having a 
well-organized financial aid office staffed by qualified personnel, a 
school must ensure that its administrative procedures include an 
adequate system of internal checks and balances. The Secretary's 
administrative capability regulations protect students and taxpayers by 
requiring that institutions have proper procedures and adequate 
administrative resources in place to ensure fair, legal, and 
appropriate conduct by title IV, HEA participating schools. These 
procedures are required to ensure that students are treated in a fair 
and transparent manner, such as receiving accurate and complete 
information about financial aid and other institutional features and 
receiving adequate services to support a high-quality education. A 
finding that an institution is not administratively capable does not 
necessarily result in immediate loss of access to title IV aid. A 
finding of a lack of administrative capability generally results in the 
Department taking additional proactive monitoring steps, such as 
placing the institution on a provisional PPA or HCM2 as necessary.
    Through program reviews, the Department has identified 
administrative capability issues that are not adequately addressed by 
the existing regulations. The Department proposes to amend Sec.  668.16 
to clarify the characteristics of institutions that are 
administratively capable. The proposed changes would benefit students 
in several ways.
    First, we propose to improve the information that institutions 
provide to applicants and students to understand the cost of the 
education being offered. Specifically, we propose to require 
institutions to provide students financial aid counseling and 
information that includes the institution's cost of attendance, the 
source and type of aid offered, whether it must be earned or repaid, 
the net price, and deadlines for accepting, declining, or adjusting 
award amounts. We believe that these proposed changes would make it 
easier for students to compare costs of the schools that they are 
considering and understand the costs they are taking on to attend an 
institution.
    Additionally, the Department proposes that institutions must 
provide students with adequate career services and clinical or 
externship opportunities, as applicable, to enable students to gain 
licensure and employment in the occupation for which they are prepared. 
We propose that institutions must provide adequate career services to 
create a pathway for students to obtain employment upon successful 
completion of their program. Institutions must have adequate career 
service staff and established partnerships with recruiters and 
employers. With respect to clinical and externship opportunities where 
required for completion of the program, we propose that accessible 
opportunities be provided to students within 45 days of completing 
other required coursework.
    We also propose that institutions must disburse funds to students 
in a timely manner to enable students to cover institutional costs. 
This proposed change is designed to allow students to remain in school 
and reduce withdrawal rates caused by delayed disbursements.
    The Department proposes that an institution that offers GE programs 
is not administratively capable if it derives more than half of its 
total title IV, HEA funds in the most recent fiscal year from GE 
programs that are failing. Similarly, an institution is not 
administratively capable if it enrolls more than half of its students 
who receive title IV, HEA aid in programs that are failing under the 
proposed GE metrics. Determining that these institutions are not 
administratively capable would allow the Department to take additional 
proactive monitoring steps for institutions that could be at risk of 
seeing significant shares of their enrollment or revenues associated 
with ineligible programs in the following year. This could include 
placing the institution on a provisional PPA or HCM2.
    The Department also proposes to prohibit institutions from engaging 
in aggressive and deceptive recruitment and misrepresentations. These 
practices are defined in Part 668 Subpart F and Subpart R. The former 
was amended by the borrower defense regulations published on November 
1, 2022 (87 FR 65904), while the latter was created in that regulation. 
Both provisions are scheduled to go into effect on July 1, 2023. The 
scope and definition of misrepresentations was first discussed during 
the 2009-2010 negotiated rulemaking session. We are now proposing to 
include aggressive and deceptive recruitment tactics or conduct as one 
of the types of activities that constitutes substantial 
misrepresentation by an eligible institution.
    We propose that institutions must confirm that they have not been 
subject to negative action by a State or Federal agency and have not 
lost eligibility to participate in another Federal educational 
assistance program due to an administrative action against the 
institution. Additionally, we propose that institutions certify when 
they sign their PPA that no principal or affiliate has been convicted 
of or pled nolo contender or guilty to a crime related to the 
acquisition, use, or expenditure of government funds or has been 
determined to have committed fraud or any other material violation of 
law involving those funds.
    Finally, the Department proposes procedures that we believe would 
be adequate to verify the validity of a student's high school diploma. 
This standard was last addressed during negotiated rulemaking in 2010. 
In these proposed regulations, we identify specific documents that can 
be used to verify the validity of a high school diploma if the 
institution or the Secretary has reason to believe that the high school 
diploma is not valid. We also propose criteria to help institutions 
with identifying a high school diploma that is not valid.

Certification Procedures (Sec. Sec.  668.2, 668.13, and 668.14)

    Certification is the process by which a postsecondary institution 
applies to initially participate or continue participating in the title 
IV, HEA student aid programs. To receive certification, an institution 
must meet all applicable statutory and regulatory requirements in HEA 
section 498. Currently, postsecondary institutions use the Electronic 
Application for Approval to Participate in Federal Student Financial 
Aid Programs (E-App) to apply for designation as an eligible 
institution, initial participation, recertification, reinstatement, or 
change in ownership, or to update a current

[[Page 32314]]

approval. Once an institution submits its application, we examine three 
major factors about the school--institutional eligibility, 
administrative capability, and financial responsibility.
    Once an institution has demonstrated that it meets all 
institutional title IV eligibility criteria, it must enter into a PPA 
to award and disburse Federal student financial assistance. The PPA 
defines the terms and conditions that the institution must meet to 
begin and continue participation in the title IV programs. Institutions 
can be fully certified, provisionally certified, or temporarily 
certified under their PPAs. Full certification constitutes the standard 
level of oversight applied to an institution under which financial and 
compliance audits must be completed and institutions are generally 
subject to the same standard set of conditions.
    Provisionally certified institutions are subject to more frequent 
oversight (i.e., a shorter timeframe for certification), and have one 
or more conditions applied to their PPA depending on specific concerns 
about the school. For instance, we may require that an institution seek 
approval from the Department before adding new locations or programs. 
Institutions that are temporarily certified are subject to very short-
term, month-to-month approvals and a variety of conditions to enable 
frequent oversight and reduce risk to students and taxpayers.
    We notify institutions six months prior to the expiration of their 
PPA, and institutions must submit a materially complete application 
before the PPA expires. The Department certifies the eligibility of 
institutions for a period of time that may not exceed three years for 
provisional certification or six years for full certification. The 
Department may place conditions on the continued participation in the 
title IV, HEA programs for provisionally certified institutions.
    As part of the 2020 final rule for Distance Education and 
Innovation,\40\ the Department decided to automatically grant an 
institution renewal of certification if the Secretary did not grant or 
deny certification within 12 months of the expiration of its current 
period of participation. At the time, we believed this regulation would 
encourage prompt processing of applications, timely feedback to 
institutions, proper oversight of institutions, and speedier remedies 
of deficiencies. However, HEA section 498 does not specify a time 
period in which certification applications need to be approved, and we 
have since determined that the time constraint established in the final 
rule for Distance Education and Innovation negatively impacted our 
ability to protect program integrity. Furthermore, a premature decision 
to grant or deny an application when unresolved issues remain under 
review creates substantial negative consequences for students, 
institutions, taxpayers, and the Department. Accordingly, we propose to 
eliminate the provision that automatically grants an institution 
renewal of certification after 12 months without a decision from the 
Department. Eliminating this provision would allow us to take 
additional time to investigate institutions thoroughly prior to 
deciding whether to grant or deny a certification application and 
ensure institutions are approved only when we have determined that they 
are in compliance with Federal rules.
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    \40\ 85 FR 54742
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    Our proposed changes to the certification process would better 
address conditions that create significant risk for students and 
taxpayers, such as institutions that falsely certify students' 
eligibility to receive a loan and subsequently close. Students expect 
their programs to be properly certified and for their institutions to 
continue operating through the completion of their programs and beyond. 
In fact, the value of an educational degree is heavily determined by 
the reputation of the issuer, thus when institutions mislead students 
about their certification status, students may invest their money and 
time in a program that they will not be able to complete, which 
ultimately creates financial risk for students and taxpayers.
    Our proposed changes would also address institutions undergoing 
changes in ownership while being at risk of closure. We propose to add 
new events that would require institutions to be provisionally 
certified and add several conditions to provisional PPAs to increase 
oversight to better protect students. For example, we propose that 
institutions that we determine to be at risk of closure must submit an 
acceptable teach-out plan or agreement to the Department, the State, 
and the institution's recognized accrediting agency. This would ensure 
that the institution has an acceptable plan in place that allows 
students to continue their education in the event the institution 
closes.
    We also propose that, as part of the institution's PPA, the 
institution must demonstrate that a program that prepares a student for 
gainful employment in a recognized occupation and requires programmatic 
accreditation or State licensure, meets the institution's home State or 
another qualifying State's programmatic and licensure requirements. 
Another State's requirements could only be used if the institution can 
document that a majority of students resided in that other State while 
enrolled in the program during the most recently completed award year 
or if a majority of students who completed the program in the most 
recently completed award year were employed in that State. In addition, 
if the other State is part of the same metropolitan statistical area 
\41\ as the institution's home State and a majority of students, upon 
enrollment in the program during the most recently completed award 
year, stated in writing that they intended to work in that other State, 
then that other State's programmatic and licensure requirements could 
also be used to demonstrate that the program prepares a student for 
gainful employment in a recognized occupation. For any programmatic and 
licensure requirements that come from a State other than the home 
State, the institution must provide documentation of that State meeting 
one of three aforementioned qualifying requirements and the 
documentation provided must be substantiated by the certified public 
accountant who prepares the institution's compliance audit report as 
required under Sec.  668.23. In addition, we propose to require that 
institutions inform students about the States where programs do and do 
not meet programmatic and licensure requirements. The Department is 
proposing these regulations because we believe students deserve to have 
relevant information to make an informed decision about programs they 
are considering. We also believe programs funded in part by taxpayer 
dollars should meet the requirements for the occupation for which they 
prepare students as a safeguard of the financial investment in these 
programs.
---------------------------------------------------------------------------

    \41\ Metropolitan statistical area as defined by the U.S. Office 
of Management and Budget (OMB), www.census.gov/programs-surveys/metro-micro.html.
---------------------------------------------------------------------------

    Additionally, as discussed in the 2022 final rule on changes in 
ownership,\42\ the Department has seen an increase in the number of 
institutions applying for changes in ownership and has determined that 
it is necessary to reevaluate the relevant policies to accommodate the 
increased complexity of changes in ownership arrangements and increased 
risk to students and to taxpayers that arises when institutions

[[Page 32315]]

do not provide adequate information to the Department. For example, 
approving a new owner who does not have the financial and other 
necessary resources to successfully operate the institution jeopardizes 
the education of students and increases the likelihood of closure. 
Consequently, we propose a more rigorous process for certifying 
institutions to help address this issue. Namely, we propose to mitigate 
the risk of institutions failing to meet Federal requirements and 
creating risky financial situations for students and taxpayers by 
applying preemptive conditions for initially certified nonprofit 
institutions and institutions that have undergone a change of ownership 
and seek to convert to nonprofit status. These preemptive conditions 
would help us monitor risks associated with some for-profit college 
conversions, such as the risk of improper benefit to the school owners 
and affiliated persons and entities. Examples of such benefits include 
having additional time to submit annual compliance audit and financial 
statements and avoiding the 90/10 requirements that for-profit colleges 
must comply with. Under these proposed regulations, we would monitor 
and review the institution's IRS correspondence and audited financial 
statements for improper benefit from the conversion to nonprofit 
status.
---------------------------------------------------------------------------

    \42\ 87 FR 65426.
---------------------------------------------------------------------------

    Lastly, we recognize that private entities may exercise control 
over proprietary and private, nonprofit institutions, and we propose to 
increase coverage of an institution's liabilities by holding these 
entities to the same standards and liabilities as the institution. For 
instance, owners of private, nonprofit universities and teaching 
hospitals may greatly influence the institution's operations and should 
be held liable for losses incurred by the institution.

Ability To Benefit (Sec. Sec.  668.2, 668.32, 668.156, and 668.157)

    Prior to 1991, students without a high school diploma or its 
equivalent were not eligible for title IV, HEA aid. In 1991, section 
484(d) of the HEA was amended to allow students without a high school 
diploma or its recognized equivalent to become eligible for title IV, 
HEA aid if they could pass an independently administered examination 
approved by the Secretary (Pub. L. 102-26) (1991 amendments). These 
examinations were commonly referred to as ``ability to benefit tests'' 
or ``ATB tests.''
    In 1992, Public Law 102-325 amended section 484(d) to provide 
students without a high school diploma or its recognized equivalent an 
additional alternative pathway to title IV, HEA aid eligibility through 
a State-defined process (1992 amendments). The State could prescribe a 
process by which a student who did not have a high school diploma or 
its recognized equivalent could establish eligibility for title IV, HEA 
aid. The Department required States to apply to the Secretary for 
approval of such processes. Unless the Secretary disapproved a State's 
proposed process within six months after the submission to the 
Secretary for approval, the process was deemed to be approved. In 
determining whether to approve such a process, the HEA requires the 
Secretary to consider its effectiveness in enabling students without a 
high school diploma or its equivalent to benefit from the instruction 
offered by institutions utilizing the process. The Secretary must also 
consider the cultural diversity, economic circumstances, and 
educational preparation of the populations served by such institutions.
    In 1995, the Department published final regulations \43\ to 
implement the changes made to section 484(d). Under the final rule, in 
Sec.  668.156, the Department would approve State processes if (1) the 
institutions participating in the State process provided services to 
students, including counseling and tutoring, (2) the State monitored 
participating institutions, which included requiring corrective action 
for deficient institutions and termination for refusal to comply, and 
(3) the success rate of students admitted under the State process was 
within 95 percent of the success rates of high school graduates who 
were enrolled in the same educational programs at the institutions that 
participated in the State process.
---------------------------------------------------------------------------

    \43\ 60 FR 61830.
---------------------------------------------------------------------------

    In 2008, Public Law 110-315 (2008 amendments) further amended 
section 484(d) of the HEA to allow students without a high school 
diploma or its recognized equivalent a third alternative pathway to 
title IV, HEA aid eligibility: satisfactory completion of six credit 
hours or the equivalent coursework that are applicable toward a degree 
or certificate offered by the institution of higher education.
    In 2011, the Consolidated Appropriations Act of 2012 (Pub. L. 112-
74) (2011 amendments) further amended section 484(d) by repealing the 
ATB alternatives created by the 1991, 1992, and 2008 amendments. 
Notably, Congress stipulated that the amendment only applied ``to 
students who first enroll in a program of study on or after July 1, 
2012.''
    In 2014, Public Law 113-235 amended section 484(d) (2014 
amendments) to create three ATB alternatives, effectively restoring 
significant elements of the alternatives that were in the statute prior 
to the enactment of the 2011 amendments, using substantially identical 
text. However, the 2014 amendments made a significant change to the ATB 
processes in that they required students to be enrolled in eligible 
career pathway programs, in contrast to the pre-2011 statutory 
framework which permitted students to enroll in any eligible program.
    In 2015, Public Law 114-113 amended the definition of an ``eligible 
career pathway program'' in section 484(d) to match the definition in 
Public Law 113-128, the Workforce Innovation and Opportunity Act (2015 
amendments). Specifically, the 2015 amendments defined the term 
``eligible career pathway program'' as a program that combines rigorous 
and high-quality education, training, and other services and that:
     Aligns with the skill needs of industries in the economy 
of the State or regional economy involved;
     Prepares an individual to be successful in any of a full 
range of secondary or postsecondary education options, including 
apprenticeships registered under the Act of August 16, 1937 (commonly 
known as the ``National Apprenticeship Act''; 50 Stat. 664, chapter 
663; 29 U.S.C. 50 et seq.);
     Includes counseling to support an individual in achieving 
the individual's education and career goals;
     Includes, as appropriate, education offered concurrently 
with and in the same context as workforce preparation activities and 
training for a specific occupation or occupational cluster;
     Organizes education, training, and other services to meet 
the particular needs of an individual in a manner that accelerates the 
educational and career advancement of the individual to the extent 
practicable;
     Enables an individual to attain a secondary school diploma 
or its recognized equivalent, and at least one recognized postsecondary 
credential; and
     Helps an individual enter or advance within a specific 
occupation or occupational cluster.
    The Department proposes to amend Sec. Sec.  668.2, 668.32, 668.156, 
and 668.157. These proposed changes would amend the requirements for 
approval of a State process and establish a regulatory

[[Page 32316]]

definition of ``eligible career pathway programs.''
    As discussed, fulfilling one of the three ATB alternatives grants a 
student without a high school diploma or its recognized equivalent 
access to title IV, HEA aid for enrollment in an eligible career 
pathway program. Although the Department released Dear Colleague 
Letters GEN 15-09 (May 15, 2015) \44\ and GEN 16-09 (May 9, 2016) \45\ 
explaining the statutory changes, the current ATB regulations do not 
reflect the 2014 amendments to the HEA that require a student to enroll 
in an eligible career pathway program in addition to fulfilling one of 
the ATB alternatives. We are now proposing to codify those changes in 
regulation.
---------------------------------------------------------------------------

    \44\ fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2015-05-22/gen-15-09-subject-title-iv-eligibility-students-without-valid-high-school-diploma-who-are-enrolled-eligible-career-pathway-programs.
    \45\ fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2016-05-09/gen-16-09-subject-changes-title-iv-eligibility-students-without-valid-high-school-diploma-who-are-enrolled-eligible-career-pathway-programs.
---------------------------------------------------------------------------

    Specifically, we propose to: (1) add a definition of ``eligible 
career pathway program''; (2) make technical updates to student 
eligibility; (3) amend the State process to allow for time to collect 
outcomes data while establishing new safeguards against inadequate 
State processes; (4) establish documentation requirements for 
institutions that wish to begin or maintain title IV, HEA eligible 
career pathway programs; and (5) establish a verification process for 
career pathway programs to ensure regulatory compliance.

Reliance Interests

    Given that the Department proposes to adopt rules that are 
significantly different from the current rules, we have considered 
whether those current rules, including the 2019 Prior Rule, engendered 
serious reliance interests that must be accounted for in this 
rulemaking. For a number of reasons, we do not believe that such 
reliance interests exist or, if they do exist, that they would justify 
changes to the proposed rules.
    First of all, the Department's prior regulatory actions would not 
have encouraged reasonable reliance on any particular regulatory 
position. The 2019 Prior Rule was written to rescind the 2014 Prior 
Rule at a point where no gainful employment program had lost 
eligibility due to failing outcome measures. Furthermore, as various 
circumstances have changed, in law and otherwise, and as more 
information and further analyses have emerged, the Department's 
position and rules have changed since the 2011 Prior Rule. With respect 
to the proposed regulations in this NPRM, the Department provided 
notice of its intent to regulate on December 8, 2021. As the proposed 
regulations would not be effective before July 1, 2024, we believe 
institutions will have had sufficient time to take any internal actions 
necessary to comply with the final regulations.
    Even if relevant actors might have relied on some prior regulatory 
position despite this background, the extent of alleged reliance would 
have to be supported by some kind of evidence. The Department aims to 
ensure that any asserted reliance interests are real and demonstrable 
rather than theoretical and speculative. Furthermore, to affect 
decisions about the rules, reliance interests must be added to a 
broader analysis that accords with existing statutes. Legitimate and 
demonstrable reliance interests, to the extent they exist, should be 
considered as one factor among a number of counter-balancing 
considerations, within applicable law and consistent with sound policy. 
We do not view any plausible reliance interests as nearly strong enough 
to alter our proposals in this NPRM.
    In any event, the Department welcomes public comment on whether 
there are serious, reasonable, legitimate, and demonstrable reliance 
interests that the Department should account for in the final rule.

Public Participation

    The Department has significantly engaged the public in developing 
this NPRM, including through review of oral and written comments 
submitted by the public during five public hearings. During each 
negotiated rulemaking session, we provided opportunities for public 
comment at the end of each day. Additionally, during each negotiated 
rulemaking session, non-Federal negotiators obtained feedback from 
their stakeholders that they shared with the negotiating committee.
    On May 26, 2021, the Department published a notice in the 
Federal Register (86 FR 28299) announcing our intent to 
establish multiple negotiated rulemaking committees to prepare proposed 
regulations on the affordability of postsecondary education, 
institutional accountability, and Federal student loans.
    The Department proposed regulatory provisions for the Institutional 
and Programmatic Eligibility Committee (Committee) based on advice and 
recommendations submitted by individuals and organizations in testimony 
at three virtual public hearings held by the Department on June 21 and 
June 23-24, 2021.
    The Department also accepted written comments on possible 
regulatory provisions that were submitted to the Department by 
interested parties and organizations as part of the public hearing 
process. You may view the written comments submitted in response to the 
May 26, 2021, and the October 4, 2021, Federal Register 
notices on the Federal eRulemaking Portal at www.regulations.gov, 
within docket ID ED-2021-OPE-0077. Instructions for finding comments 
are also available on the site under ``FAQ.''
    You may view transcripts of the public hearings at www2.ed.gov/policy/highered/reg/hearulemaking/2021/.

Negotiated Rulemaking

    Section 492 of the HEA requires the Secretary to obtain public 
involvement in the development of proposed regulations affecting 
programs authorized by title IV of the HEA. After obtaining extensive 
input and recommendations from the public, including individuals and 
representatives of groups involved in the title IV, HEA programs, the 
Department, in most cases, must engage in the negotiated rulemaking 
process before publishing proposed regulations in the 
Federal Register. If negotiators reach consensus on the 
proposed regulations, the Department agrees to publish without 
substantive alteration a defined group of proposed regulations on which 
the negotiators reached consensus--unless the Secretary reopens the 
process or provides a written explanation to the participants stating 
why the Secretary has decided to depart from the agreement reached 
during negotiations. You can find further information on the negotiated 
rulemaking process at: www2.ed.gov/policy/highered/reg/hearulemaking/2021/.
    On December 8, 2021, the Department published a notice in the 
Federal Register (86 FR 69607) announcing its intention to 
establish a Committee, the Institutional and Programmatic Eligibility 
Committee, to prepare proposed regulations for the title IV, HEA 
programs. The notice set forth a schedule for Committee meetings and 
requested nominations for individual negotiators to serve on the 
negotiating Committee and announced the topics that Committee would 
address.
    The Committee included the following members, representing their 
respective constituencies:
     Accrediting Agencies: Jamienne S. Studley, WASC Senior 
College and

[[Page 32317]]

University Commission, and Laura Rasar King (alternate), Council on 
Education for Public Health.
     Civil Rights Organizations: Amanda Martinez, UnidosUS.
     Consumer Advocacy Organizations: Carolyn Fast, The Century 
Foundation, and Jaylon Herbin (alternate), Center for Responsible 
Lending.
     Financial Aid Administrators at Postsecondary 
Institutions: Samantha Veeder, University of Rochester, and David 
Peterson (alternate), University of Cincinnati.
     Four-Year Public Institutions of Higher Education: Marvin 
Smith, University of California, Los Angeles, and Deborah Stanley 
(alternate), Bowie State University.
     Legal Assistance Organizations that Represent Students 
and/or Borrowers: Johnson Tyler, Brooklyn Legal Services, and Jessica 
Ranucci (alternate), New York Legal Assistance Group.
     Minority-Serving Institutions: Beverly Hogan, Tougaloo 
College (retired), and Ashley Schofield (alternate), Claflin 
University.
     Private, Nonprofit Institutions of Higher Education: Kelli 
Perry, Rensselaer Polytechnic Institute, and Emmanual A. Guillory 
(alternate), National Association of Independent Colleges and 
Universities (NAICU).
     Proprietary Institutions of Higher Education: Bradley 
Adams, South College, and Michael Lanouette (alternate), Aviation 
Institute of Maintenance/Centura College/Tidewater Tech.
     State Attorneys General: Adam Welle, Minnesota Attorney 
General's Office, and Yael Shavit (alternate), Office of the 
Massachusetts Attorney General.
     State Higher Education Executive Officers, State 
Authorizing Agencies, and/or State Regulators of Institutions of Higher 
Education and/or Loan Servicers: Debbie Cochrane, California Bureau of 
Private Postsecondary Education, and David Socolow (alternate), New 
Jersey's Higher Education Student Assistance Authority (HESAA).
     Students and Student Loan Borrowers: Ernest Ezeugo, Young 
Invincibles, and Carney King (alternate), California State Senate.
     Two-Year Public Institutions of Higher Education: Anne 
Kress, Northern Virginia Community College, and William S. Durden 
(alternate), Washington State Board for Community and Technical 
Colleges.
     U.S. Military Service Members, Veterans, or Groups 
Representing them: Travis Horr, Iraq and Afghanistan Veterans of 
America, and Barmak Nassirian (alternate), Veterans Education Success.
     Federal Negotiator: Gregory Martin, U.S. Department of 
Education.
    The Department also invited nominations for two advisors. These 
advisors were not voting members of the Committee; however, they were 
consulted and served as a resource. The advisors were:
     David McClintock, McClintock & Associates, P.C. for issues 
with auditing institutions that participate in the title IV, HEA 
programs.
     Adam Looney, David Eccles School of Business at the 
University of Utah, for issues related to economics, as well as 
research, accountability, and/or analysis of higher education data.
    The Committee met for three rounds of negotiations, the first of 
which was held over four days, while the remaining two were five days 
each. At its first meeting, the Committee reached agreement on its 
protocols and proposed agenda. The protocols provided, among other 
things, that the Committee would operate by consensus. The protocols 
defined consensus as no dissent by any member of the Committee and 
noted that consensus checks would be taken issue by issue. During its 
first week of sessions, the legal aid negotiator petitioned the 
Committee to add a Committee member representing the civil rights 
constituency to distinguish that constituency from the legal aid 
constituency. The Committee subsequently reached consensus on adding a 
member from the constituency group, Civil Rights Organizations.
    The Committee reviewed and discussed the Department's drafts of 
regulatory language, as well as alternative language and suggestions 
proposed by Committee members. During each negotiated rulemaking 
session, we provided opportunities for public comment at the end of 
each day. Additionally, during each negotiated rulemaking session, non-
Federal negotiators obtained feedback from their stakeholders that they 
shared with the negotiating committee.
    At the final meeting on March 18, 2022, the Committee reached 
consensus on the Department's proposed regulations on ATB. The 
Department has published the proposed ATB amendatory language without 
substantive alteration to the agreed-upon proposed regulations.
    For more information on the negotiated rulemaking sessions please 
visit www2.ed.gov/policy/highered/reg/hearulemaking/2021/.

Summary of Proposed Changes

    The proposed regulations would make the following changes to 
current regulations.

Financial Value Transparency and Gainful Employment (Sec. Sec.  600.10, 
600.21, 668.2, 668.43, 668.91, 668.401 Through 668.409, 668.601 Through 
668.606) (Sections 101 and 102 of the HEA)

     Amend Sec.  600.10(c) to require an institution seeking to 
establish the eligibility of a GE program to add the program to its 
application.
     Amend Sec.  600.21(a) to require an institution to notify 
the Secretary within 10 days of any change to the information included 
in the GE program's certification.
     Amend Sec.  668.2 to define certain terminology used in 
subparts Q and S, including ``annual debt-to-earnings rate,'' 
``classification of instructional programs (CIP) code,'' ``cohort 
period,'' ``credential level,'' ``debt-to-earnings rates (D/E rates),'' 
``discretionary debt-to-earnings rates,'' ``earnings premium,'' 
``earnings threshold,'' ``eligible non-GE program,'' ``Federal agency 
with earnings data,'' ``gainful employment program (GE program),'' 
``institutional grants and scholarships,'' ``length of the program,'' 
``poverty guideline,'' ``prospective student,'' ``student,'' and 
``Title IV loan.''
     Amend Sec.  668.43 to establish a Department website for 
the posting and distribution of key information and disclosures 
pertaining to the institution's educational programs, and to require 
institutions to provide the information required to access the website 
to a prospective student before the student enrolls, registers, or 
makes a financial commitment to the institution.
     Amend Sec.  668.91(a) to require that a hearing official 
must terminate the eligibility of a GE program that fails to meet the 
GE metrics, unless the hearing official concludes that the Secretary 
erred in the calculation.
     Add a new Sec.  668.401 to provide the scope and purpose 
of newly established financial value transparency regulations under 
subpart Q.
     Add a new Sec.  668.402 to provide a framework for the 
Secretary to determine whether a GE program or eligible non-GE program 
leads to acceptable debt and earnings results, including establishing 
annual and discretionary D/E rate metrics and associated outcomes, and 
establishing an earnings premium metric and associated outcomes.
     Add a new Sec.  668.403 to establish a methodology to 
calculate annual and

[[Page 32318]]

discretionary D/E rates, including parameters to determine annual loan 
payments, annual earnings, loan debt, and assessed charges, as well as 
to provide exclusions and specify when D/E rates will not be 
calculated.
     Add a new Sec.  668.404 to establish a methodology to 
calculate a program's earnings premium measure, including parameters to 
determine median annual earnings, as well as to provide exclusions and 
specify when the earnings threshold measure will not be calculated.
     Add a new Sec.  668.405 to establish a process by which 
the Secretary will obtain the administrative and earnings data required 
to calculate the D/E rates and the earnings premium measure.
     Add a new Sec.  668.406 to require the Secretary to notify 
institutions of their financial value transparency metrics and 
outcomes.
     Add a new Sec.  668.407 to require current and prospective 
students to acknowledge having seen the information on the disclosure 
website maintained by the Secretary if an eligible non-GE program has 
failed the D/E rates measure, to specify the content and delivery of 
such acknowledgments, and to require that students must provide the 
acknowledgment before the institution may disburse any title IV, HEA 
funds.
     Add a new Sec.  668.408 to establish institutional 
reporting requirements for students who enroll in, complete, or 
withdraw from a GE program or eligible non-GE program and to establish 
the timeframe for institutions to report this information.
     Add a new Sec.  668.409 to establish severability 
protections ensuring that if any financial value transparency provision 
under subpart Q is held invalid, the remaining provisions continue to 
apply.
     Add a new Sec.  668.601 to provide the scope and purpose 
of newly established GE regulations under subpart S.
     Add a new Sec.  668.602 to establish criteria for the 
Secretary to determine whether a GE program prepares students for 
gainful employment in a recognized occupation.
     Add a new Sec.  668.603 to define the conditions under 
which a failing GE program would lose title IV, HEA eligibility, to 
provide the opportunity for an institution to appeal a loss of 
eligibility only on the basis of a miscalculated D/E rate or earnings 
premium, and to establish a period of ineligibility for failing GE 
programs that lose eligibility or voluntarily discontinue eligibility.
     Add a new Sec.  668.604 to require institutions to provide 
the Department with transitional certifications, as well as to certify 
when seeking recertification or the approval of a new or modified GE 
program, that each eligible GE program offered by the institution is 
included in the institution's recognized accreditation or, if the 
institution is a public postsecondary vocational institution, the 
program is approved by a recognized State agency.
     Add a new Sec.  668.605 to require warnings to current and 
prospective students if a GE program is at risk of losing title IV, HEA 
eligibility, to specify the content and delivery requirements for such 
notifications, and to provide that students must acknowledge having 
seen the warning before the institution may disburse any title IV, HEA 
funds.
     Add a new Sec.  668.606 to establish severability 
protections ensuring that if any GE provision under subpart S is held 
invalid, the remaining provisions would continue to apply.

Financial Responsibility (Sec. Sec.  668.15, 668.23, 668.171, and 
668.174 Through 668.177) (Section 498(c) of the HEA)

     Remove all regulations currently under Sec.  668.15 and 
reserve that section.
     Amend Sec.  668.23 to establish a new submission deadline 
for compliance audits and audited financial statements not subject to 
the Single Audit Act, Chapter 75 of title 31, United States Code, to be 
the earlier of 30 days after the date of the auditor's report, with 
respect to the compliance audit and audited financial statements, or 6 
months after the last day of the entity's fiscal year.
     Replace all references to the ``Office of Management and 
Budget Circular A-133'' in Sec.  668.23 with the updated reference, ``2 
CFR part 200--Uniform Administrative Requirements, Cost Principles, And 
Audit Requirements For Federal Awards.''
     Amend Sec.  668.23(d)(1) to require that financial 
statements submitted to the Department must match the fiscal year end 
of the entity's annual return(s) filed with the Internal Revenue 
Service.
     Add new language to Sec.  668.23(d)(2)(ii) that would 
require a domestic or foreign institution that is owned directly or 
indirectly by any foreign entity to provide documentation stating its 
status under the law of the jurisdiction under which it is organized.
     Add new Sec.  668.23(d)(5) that would require an 
institution to disclose in a footnote to its financial statement audit 
the dollar amounts it has spent in the preceding fiscal year on 
recruiting activities, advertising, and other pre-enrollment 
expenditures.
     Amend Sec.  668.171(b)(3)(i) so that an institution would 
be deemed unable to meet its financial or administrative obligations 
if, in addition to the already existing factors, it fails to pay title 
IV, HEA credit balances, as required.
     Further amend Sec.  668.171(b)(3) to establish that an 
institution would not be able to meet its financial or administrative 
obligations if it fails to make a payment in accordance with an 
existing undisputed financial obligation for more than 90 days; or 
fails to satisfy payroll obligations in accordance with its published 
schedule; or it borrows funds from retirement plans or restricted funds 
without authorization.
     Amend Sec.  668.171(c) to establish additional mandatory 
triggering events that would determine if an institution is able to 
meet its financial or administrative obligations. If any of the 
mandatory trigger events occur, the institution would be deemed unable 
to meet its financial or administrative obligations and the Department 
would obtain financial protection.
     Amend Sec.  668.171(d) to establish additional 
discretionary triggering events that would assist the Department in 
determining if an institution is able to meet its financial or 
administrative obligations. If any of the discretionary triggering 
events occur, we would determine if the event is likely to have a 
material adverse effect on the financial condition of the institution, 
and if so, would obtain financial protection.
     Amend Sec.  668.171(e) to recognize the liability or 
liabilities as an expense when recalculating an institution's composite 
score after a withdrawal of equity.
     Amend Sec.  668.171(f) to require an institution to notify 
the Department, typically no later than 10 days, after any of the 
following occurs:
    [ssquf] The institution incurs a liability as described in proposed 
Sec.  668.171(c)(2)(i)(A);
    [ssquf] The institution is served with a complaint linked to a 
lawsuit as described in Sec.  668.171(c)(2)(i)(B) and an updated notice 
when such a lawsuit has been pending for at least 120 days;
    [ssquf] The institution receives a civil investigative demand, 
subpoena, request for documents or information, or other formal or 
informal inquiry from any government entity;
    [ssquf] As described in proposed Sec.  668.171(c)(2)(x), the 
institution makes a contribution in the last quarter of its fiscal year 
and makes a distribution in the first or second quarter of the 
following fiscal year;
    [ssquf] As described in proposed Sec.  668.171(c)(2)(vi) or 
(d)(11), the U.S Securities and Exchange Commission (SEC) or an 
exchange where the entity's

[[Page 32319]]

securities are listed takes certain disciplinary actions against the 
entity;
    [ssquf] As described in proposed Sec.  668.171(c)(2)(iv), 
(c)(2)(v), or (d)(9), the institution's accrediting agency or a State, 
Federal or other oversight agency notifies it of certain actions being 
initiated or certain requirements being imposed;
    [ssquf] As described in proposed Sec.  668.171(c)(2)(xi), there are 
actions initiated by a creditor of the institution;
    [ssquf] A proprietary institution, for its most recent fiscal year, 
does not receive at least 10 percent of its revenue from sources other 
than Federal educational assistance programs as provided in Sec.  
668.28(c)(3) (This notification deadline would be 45 days after the end 
of the institution's fiscal year);
    [ssquf] As described in proposed Sec.  668.171(c)(2)(ix) or 
(d)(10), the institution or one of its programs loses eligibility for 
another Federal educational assistance program;
    [ssquf] As described in proposed Sec.  668.171(d)(7), the 
institution discontinues an academic program;
    [ssquf] The institution fails to meet any one of the standards in 
Sec.  668.171(b);
    [ssquf] As described in proposed Sec.  668.171(c)(2)(xii), the 
institution makes a declaration of financial exigency to a Federal, 
State, Tribal, or foreign governmental agency or its accrediting 
agency;
    [ssquf] As described in proposed Sec.  668.171(c)(2)(xiii), the 
institution or an owner or affiliate of the institution that has the 
power, by contract or ownership interest, to direct or cause the 
direction of the management of policies of the institution, is 
voluntarily placed, or is required to be placed, into receivership;
    [ssquf] The institution is cited by another Federal agency for not 
complying with requirements associated with that agency's educational 
assistance programs and which could result in the institution's loss of 
those Federal education assistance funds;
    [ssquf] The institution closes more than 50 percent of its 
locations or any number of locations that enroll more than 25 percent 
of its students. Locations for this purpose include the institution's 
main campus and any additional location(s) or branch campus(es) as 
described in Sec.  600.2;
    [ssquf] As described in proposed Sec.  668.171(d)(2), the 
institution suffers other defaults, delinquencies, or creditor events;
     Amend Sec.  668.171(g) to require public institutions to 
provide documentation from a government entity that confirms that the 
institution is a public institution and is backed by the full faith and 
credit of that government entity to be considered as financially 
responsible.
     Amend Sec.  668.171(h) to provide that an institution is 
not financially responsible if the institution's audited financial 
statements include an opinion expressed by the auditor that was 
adverse, qualified, disclaimed, or if they include a disclosure about 
the institution's diminished liquidity, ability to continue operations, 
or ability to continue as a going concern.
     Amend Sec.  668.174(a) to clarify that an institution 
would not be financially responsible if it has had an audit finding in 
either of its two most recent compliance audits that resulted in the 
institution being required to repay an amount greater than 5 percent of 
the funds the institution received under the title IV, HEA programs or 
if we require it to repay an amount greater than 5 percent of its title 
IV, HEA program funds in a Department-issued Final Audit Determination 
Letter, Final Program Review Determination, or similar final document 
in the institution's current fiscal year or either of its preceding two 
fiscal years.
     Add Sec.  668.174(b)(3) to state that an institution is 
not financially responsible if an owner who exercises substantial 
control, or the owner's spouse, has been in default on a Federal 
student loan, including parent PLUS loans, in the preceding five years 
unless certain conditions are met when the institution first applies to 
participate in Title IV, HEA programs, or when the institution 
undergoes a change in ownership.
     Amend Sec.  668.175(c) to clarify that we would consider 
an institution that did not otherwise satisfy the regulatory standards 
of financial responsibility, or that had an audit opinion or disclosure 
about the institution's liquidity, ability to continue operations, or 
ability to continue as a going concern, to be financially responsible 
if it submits an irrevocable letter of credit to the Department in an 
amount we determine. Furthermore, the proposed regulation would clarify 
that if the institution's failure is due to any of the factors in Sec.  
668.171(b), it must remedy the issues that gave rise to the failure.
     Add Sec.  668.176 to specify the financial responsibility 
standards for an institution undergoing a change in ownership. The 
proposed regulations would consolidate financial responsibility 
requirements in subpart L of part 668 and remove the requirements that 
currently reside in Sec.  668.15.
     Add a new Sec.  668.177 to contain the severability 
statement that currently resides in Sec.  668.176.

Administrative Capability (Sec.  668.16) (Section 498(a) of the HEA)

     Amend Sec.  668.16(h) to require institutions to provide 
adequate financial aid counseling and financial aid communications to 
enrolled students that advises students and families to accept the most 
beneficial types of financial assistance available to them and includes 
clear information about the cost of attendance, sources and amounts of 
each type of aid separated by the type of aid, the net price, and 
instructions and applicable deadlines for accepting, declining, or 
adjusting award amounts.
     Amend Sec.  668.16(k) to require that an institution not 
have any principal or affiliate that has been subject to specified 
negative actions, including being convicted of or pleading nolo 
contendere or guilty to a crime involving governmental funds.
     Add Sec.  668.16(n) to require that the institution has 
not been subject to a significant negative action or a finding by a 
State or Federal agency, a court or an accrediting agency, where the 
basis of the action is repeated or unresolved, such as non-compliance 
with a prior enforcement order or supervisory directive; and the 
institution has not lost eligibility to participate in another Federal 
educational assistance program due to an administrative action against 
the institution.
     Amend Sec.  668.16(p) to strengthen the requirement that 
institutions must develop and follow adequate procedures to evaluate 
the validity of a student's high school diploma.
     Add Sec.  668.16(q) to require that institutions provide 
adequate career services to eligible students who receive title IV, HEA 
program assistance.
     Add Sec.  668.16(r) to require that an institution provide 
students with accessible clinical, or externship opportunities related 
to and required for completion of the credential or licensure in a 
recognized occupation, within 45 days of the successful completion of 
other required coursework.
     Add Sec.  668.16(s) to require that an institution 
disburse funds to students in a timely manner consistent with the 
students' needs.
     Add Sec.  668.16(t) to require institutions that offer GE 
programs to meet program standards as outlined in regulation.
     Add Sec.  668.16(u) to require that an institution does 
not engage in misrepresentations or aggressive recruitment.

[[Page 32320]]

Certification Procedures (Sec. Sec.  668.2, 668.13, and 668.14) 
(Section 498 of the HEA)

     Amend Sec.  668.2 to add a definition of ``metropolitan 
statistical area.''
     Amend Sec.  668.13(b)(3) to eliminate the provision that 
requires the Department to approve participation for an institution if 
it has not acted on a certification application within 12 months so the 
Department can take additional time where it is needed.
     Amend Sec.  668.13(c)(1) to include additional events that 
lead to provisional certification.
     Amend Sec.  668.13(c)(2) to require provisionally 
certified schools that have major consumer protection issues to 
recertify after two years.
     Add a new Sec.  668.13(e) to establish supplementary 
performance measures the Secretary may consider in determining whether 
to certify or condition the participation of the institution.
     Amend Sec.  668.14(a)(3) to require an authorized 
representative of any entity with direct or indirect ownership of a 
proprietary or private nonprofit institution to sign a PPA.
     Amend Sec.  668.14(b)(17) to provide that all Federal 
agencies and State attorneys general have the authority to share with 
each other and the Department any information pertaining to an 
institution's eligibility for participation in the title IV, HEA 
programs or any information on fraud, abuse, or other violations of 
law.
     Amend Sec.  668.14(b)(18)(i) and (ii) to add to the list 
of reasons for which an institution or third-party servicer may not 
employ, or contract with, individuals or entities whose prior conduct 
calls into question the ability of the individual or entity to adhere 
to a fiduciary standard of conduct. We also propose to prohibit owners, 
officers, and employees of both institutions and third-party servicers 
from participating in the title IV, HEA programs if they have exercised 
substantial control over an institution, or a direct or indirect parent 
entity of an institution, that owes a liability for a violation of a 
title IV, HEA program requirement and is not making payments in 
accordance with an agreement to repay that liability.
     Amend Sec.  668.14(b)(18)(i) and (ii) to add to the list 
of situations in which an institution may not knowingly contract with 
or employ any individual, agency, or organization that has been, or 
whose officers or employees have been, ten-percent-or-higher equity 
owners, directors, officers, principals, executives, or contractors at 
an institution in any year in which the institution incurred a loss of 
Federal funds in excess of 5 percent of the institution's annual title 
IV, HEA program funds.
     Amend Sec.  668.14(b)(26)(ii)(A) to limit the number of 
hours in a gainful employment program to the greater of the required 
minimum number of clock hours, credit hours, or the equivalent required 
for training in the recognized occupation for which the program 
prepares the student, as established by the State in which the 
institution is located, if the State has established such a 
requirement, or as established by any Federal agency or the 
institution's accrediting agency.
     Amend Sec.  668.14(b)(26)(ii)(B) as an exception to 
paragraph (A) that limits the number of hours in a gainful employment 
program to the greater of the required minimum number of clock hours, 
credit hours, or the equivalent required for training in the recognized 
occupation for which the program prepares the student, as established 
by another State if: the institution provides documentation, 
substantiated by the certified public accountant that prepares the 
institution's compliance audit report as required under Sec.  668.23, 
that a majority of students resided in that other State while enrolled 
in the program during the most recently completed award year or that a 
majority of students who completed the program in the most recently 
completed award year were employed in that State; or if the other State 
is part of the same metropolitan statistical area as the institution's 
home State and a majority of students, upon enrollment in the program 
during the most recently completed award year, stated in writing that 
they intended to work in that other State.
     Amend Sec.  668.14(b)(32) to require all programs that 
prepare students for occupations requiring programmatic accreditation 
or State licensure to meet those requirements and comply with all State 
consumer protection laws.
     Amend Sec.  668.14(b)(33) to require institutions to not 
withhold transcripts or take any other negative action against a 
student related to a balance owed by the student that resulted from an 
error in the institution's administration of the title IV, HEA 
programs, returns of funds under the Return of Title IV Funds process, 
or any fraud or misconduct by the institution or its personnel.
     Amend Sec.  668.14(b)(34) to prohibit institutions from 
maintaining policies and procedures to encourage, or conditioning 
institutional aid or other student benefits in a manner that induces, a 
student to limit the amount of Federal student aid, including Federal 
loan funds, that the student receives, except that the institution may 
provide a scholarship on the condition that a student forego borrowing 
if the amount of the scholarship provided is equal to or greater than 
the amount of Federal loan funds that the student agrees not to borrow.
     Amend Sec.  668.14(e) to establish a non-exhaustive list 
of conditions that the Secretary may apply to provisionally certified 
institutions.
     Amend Sec.  668.14(f) to establish conditions that may 
apply to institutions that undergo a change in ownership seeking to 
convert from a for-profit institution to a nonprofit institution.
     Amend Sec.  668.14(g) to establish conditions that may 
apply to an initially certified nonprofit institution, or an 
institution that has undergone a change of ownership and seeks to 
convert to nonprofit status.

ATB (Sec. Sec.  668.2, 668.32, 668.156, and 668.157 (Section 484(d) of 
the HEA)

     Amend Sec.  668.2 to codify a definition of ``eligible 
career pathway program.''
     Amend Sec.  668.32(e) to differentiate between the title 
IV, HEA aid eligibility of non-high school graduates who enrolled in an 
eligible program prior to July 1, 2012, and those that enrolled after 
July 1, 2012.
     Amend Sec.  668.156(b) to separate the State process into 
an initial two-year period and a subsequent period for which the State 
may be approved for up to five years.
     Amend Sec.  668.156(a) to strengthen the Approved State 
process regulations to require that: (1) The application contains a 
certification that each eligible career pathway program intended for 
use through the State process meets the proposed definition of an 
``eligible career pathway program''; (2) The application describes the 
criteria used to determine student eligibility for participation in the 
State process; (3) The withdrawal rate for a postsecondary institution 
listed for the first time on a State's application does not exceed 33 
percent; (4) Upon initial application the Secretary will verify that a 
sample of the proposed eligible career pathway programs are valid; and 
(5) Upon initial application the State will enroll no more than the 
greater of 25 students or one percent of enrollment at each 
participating institution.
     Remove current Sec.  668.156(c) to remove the support 
services requirements from the State process--orientation, assessment 
of a student's existing capabilities, tutoring, assistance in 
developing educational goals,

[[Page 32321]]

counseling, and follow up by teachers and counselors--as these support 
services generally duplicate the requirements in the proposed 
definition of ``eligible career pathway programs.''
     Amend the monitoring requirement in current Sec.  
668.156(d), now redesignated proposed Sec.  668.156(c) to provide a 
participating institution that has failed to achieve the 85 percent 
success rate up to three years to achieve compliance.
     Amend current Sec.  668.156(d), now redesignated proposed 
Sec.  668.156(c) to require that an institution be prohibited from 
participating in the State process for title IV, HEA purposes for at 
least five years if the State terminates its participation.
     Amend current Sec.  668.156(b), now redesignated proposed 
Sec.  668.156(e) to clarify that the State is not subject to the 
success rate requirement at the time of the initial application but is 
subject to the requirement for the subsequent period, reduce the 
required success rate from the current 95 percent to 85 percent, and 
specify that the success rate be calculated for each participating 
institution. Also, amend the comparison groups to include the concept 
of ``eligible career pathway programs.''
     Amend current Sec.  668.156(b), now redesignated proposed 
Sec.  668.156(e) to require that States report information on race, 
gender, age, economic circumstances, and education attainment and 
permit the Secretary to publish a notice in the Federal Register with 
additional information that the Department may require States to 
submit.
     Amend current Sec.  668.156(g), now redesignated proposed 
Sec.  668.156(j) to update the Secretary's ability to revise or 
terminate a State's participation in the State process by (1) providing 
the Secretary the ability to approve the State process once for a two-
year period if the State is not in compliance with a provision of the 
regulations and (2) allowing the Secretary to lower the success rate to 
75 percent if 50 percent of the participating institutions across the 
State do not meet the 85 percent success rate.
     Add a new Sec.  668.157 to clarify the documentation 
requirements for eligible career pathway programs.

Significant Proposed Regulations

    We discuss substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
proposed regulatory provisions that are technical or otherwise minor in 
effect.

Financial Value Transparency and Gainful Employment

    Authority for This Regulatory Action: The Department's authority to 
pursue financial value transparency in GE programs and eligible non-GE 
programs and accountability in GE programs is derived primarily from 
three categories of statutory enactments: first, the Secretary's 
generally applicable rulemaking authority, which includes provisions 
regarding data collection and dissemination, and which applies in part 
to title IV, HEA; second, authorizations and directives within title 
IV, HEA regarding the collection and dissemination of potentially 
useful information about higher education programs, as well as 
provisions regarding institutional eligibility to benefit from title 
IV; and third, the further provisions within title IV, HEA that address 
the limits and responsibilities of gainful employment programs.
    As for crosscutting rulemaking authority, Section 410 of the 
General Education Provisions Act (GEPA) grants the Secretary authority 
to make, promulgate, issue, rescind, and amend rules and regulations 
governing the manner of operation of, and governing the applicable 
programs administered by, the Department.\46\ This authority includes 
the power to promulgate regulations relating to programs that we 
administer, such as the title IV, HEA programs that provide Federal 
loans, grants, and other aid to students, whether to pursue eligible 
non-GE programs or GE programs. Moreover, section 414 of the Department 
of Education Organization Act (DEOA) authorizes the Secretary to 
prescribe those rules and regulations that the Secretary determines 
necessary or appropriate to administer and manage the functions of the 
Secretary or the Department.\47\
---------------------------------------------------------------------------

    \46\ 20 U.S.C. 1221e-3.
    \47\ 20 U.S.C. 3474.
---------------------------------------------------------------------------

    Moreover, Section 431 of GEPA grants the Secretary additional 
authority to establish rules to require institutions to make data 
available to the public about the performance of their programs and 
about students enrolled in those programs. That section directs the 
Secretary to collect data and information on applicable programs for 
the purpose of obtaining objective measurements of the effectiveness of 
such programs in achieving their intended purposes, and also to inform 
the public about Federally supported education programs.\48\ This 
provision lends additional support for the proposed reporting and 
disclosure requirements, which will enable the Department to collect 
data and information for the purpose of developing objective measures 
of program performance, not only for the Department's use in evaluating 
programs but also to inform the public--including enrolled students, 
prospective students, their families, institutions, and others--about 
relevant information related to those Federally-supported programs.
---------------------------------------------------------------------------

    \48\ 20 U.S.C. 1231a(2)-(3). The term ``applicable program'' 
means any program for which the Secretary or the Department has 
administrative responsibility as provided by law or by delegation of 
authority pursuant to law. 20 U.S.C. 1221(c)(1).
---------------------------------------------------------------------------

    As for provisions within title IV, HEA, several of them address the 
effective delivery of information about higher education programs. In 
addition to older methods of information dissemination, for example, 
section 131 of the Higher Education Opportunity Act, as amended, and 
\49\ taken together, several provisions declare that the Department's 
websites should include information regarding higher education 
programs, including college planning and student financial aid,\50\ the 
cost of higher education in general, and the cost of attendance with 
respect to all institutions of higher education participating in title 
IV, HEA programs.\51\ Those authorizations and directives expand on 
more traditional methods of delivering important information to 
students, prospective students, and others, including within or 
alongside application forms or promissory notes for which 
acknowledgments by signatories are typical and longstanding.\52\ 
Educational institutions have been distributing information to students 
at the direction of the Department and in accord with the applicable 
statutes for decades.\53\
---------------------------------------------------------------------------

    \49\ 20 U.S.C. 1015(a)(3), (b), (c)(5), (e), (h). See also 
section 111 of the Higher Education Opportunity Act (20 U.S.C. 
1015a), which authorizes the College Navigator website and successor 
websites.
    \50\ E.g., 20 U.S.C. 1015(e).
    \51\ 20 U.S.C. 1015(a)(3), (b), (c)(5), (e), (h). See also 
section 111 of the Higher Education Opportunity Act (20 U.S.C. 
1015a), which authorizes the College Navigator website and successor 
websites.
    \52\ E.g., 20 U.S.C. 1082(m), regarding common application forms 
and promissory notes or master promissory notes.
    \53\ A compilation of the current and previous editions of the 
Federal Student Aid Handbook, which includes detailed discussion of 
consumer information and school reporting and notification 
requirements, is posted at https://fsapartners.ed.gov/knowledge-center/fsa-handbook.
---------------------------------------------------------------------------

    The proposed rules also are supported by the Department's statutory 
responsibilities to observe eligibility limits in the HEA. Section 498 
of the HEA requires institutions to establish eligibility to provide 
title IV, HEA funds

[[Page 32322]]

to their students. Eligible institutions must also meet program 
eligibility requirements for students in those programs to receive 
title IV, HEA assistance.
    One type of program for which certain types of institutions must 
establish program-level eligibility is ``a program of training to 
prepare students for gainful employment in a recognized occupation.'' 
54 55 Section 481 of the HEA articulates this same 
requirement by defining, in part, an ``eligible program'' as a 
``program of training to prepare students for gainful employment in a 
recognized profession.'' \56\ The HEA does not more specifically define 
''training to prepare,'' ``gainful employment,'' ''recognized 
occupation,'' or ''recognized profession'' for purposes of determining 
the eligibility of GE programs for participation in title IV, HEA. At 
the same time, the Secretary and the Department have a legal duty to 
interpret, implement, and apply those terms in order to observe the 
statutory eligibility limits in the HEA. In the section-by-section 
discussion below, we explain further the Department's interpretation of 
the GE statutory provisions and how those provisions should be 
implemented and applied.
---------------------------------------------------------------------------

    \54\ 20 U.S.C. 1001(b)(1).
    \55\ 20 U.S.C. 1002(b)(1)(A)(i), (c)(1)(A).
    \56\ 20 U.S.C. 1088(b).
---------------------------------------------------------------------------

    The statutory eligibility limits for GE programs are one part of 
the foundation of authority for disclosures and/or warnings from 
institutions to prospective and enrolled GE students. In the GE 
setting, the Department has not only a statutory basis for pursuing the 
effective dissemination of information to students about a range of GE 
program attributes and performance metrics,\57\ the Department also has 
authority to use certain metrics to determine that an institution's 
program is not eligible to benefit, as a GE program, from title IV, HEA 
assistance. When an institution's program is at risk of losing 
eligibility based on a given metric, there should be no real doubt that 
the Department may require the institution that operates the at-risk 
program to alert prospective and enrolled students that they may not be 
able to receive title IV, HEA assistance at the program in question. 
Without a direct communication from the institution to prospective and 
enrolled students, the students themselves risk losing the ability to 
make educational decisions with the benefit of critically relevant 
information about programs, contrary to the text, purpose, and 
traditional understandings of the relevant statutes.
---------------------------------------------------------------------------

    \57\ Ass'n of Priv. Sector Colleges & Universities v. Duncan, 
110 F. Supp. 3d 176, 198-200 (D.D.C. 2015) (recognizing statutory 
authority to require institutions to disclose certain information 
about GE programs to prospective and enrolled GE students), aff'd, 
640 F. App'x 5, 6 (D.C. Cir. 2016) (per curiam) (unpublished) 
(indicating that the plaintiff's challenge to the GE disclosure 
provisions was abandoned on appeal).
---------------------------------------------------------------------------

    The above authorities collectively empower the Secretary to 
promulgate regulations to (1) Require institutions to report 
information about GE programs and eligible non-GE programs to the 
Secretary; (2) Require institutions to provide disclosures or warnings 
to students regarding programs that do not meet financial value 
measures established by the Department; and (3) Define the gainful 
employment requirement in the HEA by establishing measures to determine 
the eligibility of GE programs for participation in title IV, HEA. 
Where helpful and appropriate, we will elaborate on the relevant 
statutory authority in our overviews and section-by-section discussions 
below.

Financial Value Transparency Scope and Purpose (Sec.  668.401)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add subpart Q, which would 
establish a financial value transparency framework for the Department 
to calculate measures of the financial value of eligible programs, 
categorize programs based on those measures as low-earning or high-
debt-burden, provide information about the financial value of programs 
to students, and require, when applicable, acknowledgments from 
students who are enrolled--and prospective students who are seeking to 
enroll--in programs with high debt burdens. The proposed regulations 
would establish rules and procedures for institutions to report 
information to the Department and for the Department to calculate these 
measures. The regulations would apply to all educational programs that 
participate in the title IV, HEA programs except for approved prison 
education programs and comprehensive transition and postsecondary 
programs. Proposed Sec.  668.401 would establish the scope and purpose 
of these financial value transparency regulations in subpart Q.
    Reasons: The Department recognizes that with the high cost of 
attendance for postsecondary education and resulting need for high 
levels of student borrowing, students, families, institutions, and the 
public have a strong interest in ensuring that higher education 
investments are justified through their benefits to students and 
society.
    Choosing whether and where to pursue a postsecondary education is 
one of the most important and consequential investments individuals 
make during their lifetimes. The considerations are not purely, or in 
many cases even primarily, financial in nature: an education requires 
time away from other pursuits, the possibility of increased family 
stress, and the hard work required to master new knowledge. Aside from 
the potential for improved career prospects and higher earnings, a 
college education has also been shown to improve health, life 
satisfaction, and civic engagement among other non-financial 
benefits.\58\
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    \58\ Oreopoulos, P. & Salavanes, K. (2011). Priceless: The 
Nonpecuniary Benefits of Schooling. Journal of Economic 
Perspectives. 25(1) 159-84. Marken, S. (2021). Ensuring a More 
Equitable Future: Exploring the Relationship Between Wellbeing and 
Postsecondary Value. Post Secondary Value Commission. Ross, C. & Wu, 
C. (1995). The Links Between Education and Health. American 
Sociological Review. 60(5) 719-745. Cutler, D. & Lleras-Muney, A. 
(2008). Education and Health: Evaluating Theories and Evidence. In 
Making Americans Healthier: Social and Economic Policy as Health 
Policy. House, J. et al (Eds). Russel Sage Foundation. New York.
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    The financial consequences of the choice of whether and where to 
enroll in higher education, however, are substantial. In the 2020-21 
award year, the average cost of attendance for first-time, full-time 
degree seeking undergraduate student across all 4-year institutions was 
$27,200, and the top 25 percent of students paid more than $44,800. 
According to NCES data, median total debt at graduation among students 
who borrow for degrees was around $23,000 for undergraduates competing 
in 2017-18 \59\ and $67,000 for graduate students,\60\ with the top 25 
percent of students leaving school with more than $33,000 \61\ and 
$118,000,\62\ respectively. There is significant heterogeneity in debt 
outcomes and costs across programs, even among credentials at the same 
level and in the same field.
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    \59\ nces.ed.gov/datalab/powerstats/table/ugaxgt.
    \60\ Nces.ed.gov/datalab/powerstats/table/uuaklv.
    \61\ nces.ed.gov/datalab/powerstats/table/ugaxgt.
    \62\ Nces.ed.gov/datalab/powerstats/table/uuaklv.
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    The typical college graduate enjoys substantial financial benefits 
in the form of increased earnings from their degree. Research has shown 
that the typical bachelor's degree recipient earns twice what a typical 
high school graduate earns over the course of their career.\63\ But 
here too, there are enormous

[[Page 32323]]

earnings differences across different credential levels and fields of 
study, and across similar programs at different institutions.\64\ For 
example, measures of institutional productivity (assessed using wage 
and salary earnings, employment in the public or nonprofit sector, and 
innovation in terms of contributions to research and development) vary 
substantially within institutions of similar selectivity, especially 
among less-selective institutions.\65\ Typical returns to enrollment 
vary widely across selected fields, even after accounting for 
individual student characteristics that may affect selection into a 
given major or pre-enrollment earnings. These differences are large and 
consequential over an individual's lifetime. For example, one study 
found that even after controlling for differences in the 
characteristics of enrolled students, students at four-year 
institutions in Texas who majored in high-earning fields earned $5,000 
or more per quarter more than students who majored in the lowest 
earning field of study even 16 to 20 years after college.\66\ 
Similarly, another study found that those who earned master's degrees 
in Ohio experienced earnings increases ranging from a 24 percent 
increase for degrees in high earning fields such as health to 
essentially no increase, relative to baseline earnings, for some lower-
value fields.\67\
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    \63\ Hershbein, B., and Kearney, M. (2014). Major Decisions: 
What Graduates Earn Over Their Lifetimes. The Hamilton Project. 
Brookings Institution. Washington, DC.
    \64\ Webber, D. (2016). Are college costs worth it? How ability, 
major, and debt affect the returns to schooling, Economics of 
Education Review, 53, 296-310.
    \65\ Hoxby, C.M. 2019. The Productivity of US Postsecondary 
Institutions. In Productivity in Higher Education, C. M. Hoxby and 
K. M. Stange(eds). University of Chicago Press: Chicago, 2019.
    \66\ Andrews, R.J., Imberman, S.A., Lovenheim, M.F. & Stange, 
K.M. (2022), ``The returns to college major choice: Average and 
distributional effects, career trajectories, and earnings 
variability,'' NBER Working Paper w30331.
    \67\ Heterogeneity in Labor Market Returns to Master's Degrees: 
Evidence from Ohio. (EdWorkingPaper: 22-629). Retrieved from 
Annenberg Institute at Brown University: doi.org/10.26300/akgd-9911.
---------------------------------------------------------------------------

    Surveys of current and prospective college students indicate that 
overwhelming majorities of students consider the financial outcomes of 
college as among the very most important reasons for pursuing a 
postsecondary credential. A national survey of college freshmen at 
baccalaureate institutions consistently finds students identifying ``to 
get a good job'' as the most common reason why students chose their 
college.\68\ Another survey of a broader set of students found 
financial concerns dominate in the decision to go to college with the 
top three reasons identified being ``to improve my employment 
opportunities,'' ``to make more money,'' and ``to get a good job.'' 
\69\
---------------------------------------------------------------------------

    \68\ Stolzenberg, E. B., Aragon, M.C., Romo, E., Couch, V., 
McLennan, D., Eagan, M.K., Kang, N. (2020). ``The American Freshman: 
National Norms Fall 2019,'' Higher Education Research Institute at 
UCLA, www.heri.ucla.edu/monographs/TheAmericanFreshman2019.pdf.
    \69\ Rachel Fishman (2015), ``2015 College Decisions Survey: 
Part I Deciding To Go To College,'' New America, 
static.newamerica.org/attachments/3248-deciding-to-go-to-college/CollegeDecisions_PartI.148dcab30a0e414ea2a52f0d8fb04e7b.pdf.
---------------------------------------------------------------------------

    Great strides have been made in providing accurate and comparable 
information to students about their college options in the last decade. 
The College Scorecard, launched in 2015, provided information on the 
earnings and borrowing outcomes of students at nearly all institutions 
participating in the title IV, HEA aid programs. Recognizing the 
important variation in these outcomes across programs of study, even 
within the same institution, program-level information was added to the 
Scorecard in 2019. The dissemination of this information has 
dramatically improved the information available on the financial value 
of different programs, and enabled a new national conversation on 
whether, how, and for whom higher education institutions provide 
financial benefit.\70\
---------------------------------------------------------------------------

    \70\ For example, the work of the Postsecondary Value Commission 
(postsecondaryvalue.org/), the Hamilton Project 
(www.hamiltonproject.org/papers/major_decisions_what_graduates_earn_over_their_lifetimes),and 
Georgetown University`s Center on Education and the Workforce 
(https://cew.georgetown.edu/).
---------------------------------------------------------------------------

    Still, the Department recognizes that merely posting the 
information on the College Scorecard website has had a limited impact 
on student choice. For example, one study \71\ found the College 
Scorecard influenced the college search behavior of some higher income 
students but had little effect on lower income students. Similarly, a 
randomized controlled trial inviting high school students to examine 
program-level data on costs and earnings outcomes had little effect on 
students' college choices, possibly due to the fact that few students 
accessed the information outside of school-led sessions.\72\
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    \71\ Hurwitz, Michael, and Jonathan Smith. ``Student 
responsiveness to earnings data in the College Scorecard.'' Economic 
Inquiry 56, no. 2 (2018): 1220-1243. Also Huntington-Klein 2017. 
nickchk.com/Huntington-Klein_2017_The_Search.pdf.
    \72\ Blagg, Kristin, Matthew M. Chingos, Claire Graves, and Anna 
Nicotera. ``Rethinking consumer information in higher education.'' 
(2017) Urban Institute, Washington DC. www.urban.org/research/publication/rethinking-consumer-information-higher-education.
---------------------------------------------------------------------------

    It is critical to provide students and families access to 
information that is consistently calculated and presented across 
programs and institutions, especially for key metrics like program-
level net price estimates. When institutions report net price to 
students, there can be substantial variation in how the prices are 
calculated,\73\ and in how institutions characterize these values, 
making it difficult for prospective students to compare costs across 
programs and institutions.\74\
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    \73\ Anthony, A., Page, L. and Seldin, A. (2016) In the Right 
Ballpark? Assessing the Accuracy of Net Price Calculators. Journal 
of Student Financial Aid. 46(2). 3.
    \74\ The Institute for College Access & Success (TICAS). (2012). 
Adding it All Up 2012: Are College Net Price Calculators Easy to 
Find, Use, and Compare? ticas.org/files/pub_files/Adding_It_All_Up_2012.pdf.
---------------------------------------------------------------------------

    Applicants' use of data at key points during the college decision-
making process has been a consistent challenge with other transparency-
focused initiatives that the Department administers. Students can often 
receive information concerning their eligibility for financial aid that 
is inconsistent or difficult to compare.\75\ The College Navigator also 
provides critical data on college pricing, completion rates, default 
rates, and other indicators, but there is little evidence that it 
affects college search processes or enrollment decisions. Similarly, we 
also administer lists of institutions with the highest prices and 
changes in price measured in a few ways, but there is no indication 
that the presence of such lists alters institutional or borrower 
behavior.\76\
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    \75\ Burd, S. et al. (2018) Decoding the Cost of College: The 
Case for Transparent Financial Aid Award Letters. New America. 
Washington, DC. https://www.newamerica.org/education-policy/policy-papers/decoding-cost-college/. Anthony, A., Page, L., & Seldin, A. 
(2016) In the Right Ballpark? Assessing the Accuracy of Net Price 
Calculators. Journal of Student Financial Aid. 46(2) 3. https://files.eric.ed.gov/fulltext/EJ1109171.pdf.
    \76\ Baker, D. J. (2020). ``Name and Shame'': An Effective 
Strategy for College Tuition Accountability? Educational Evaluation 
and Policy Analysis, 42(3), 393-416. doi.org/10.3102/0162373720937672.
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    A broader set of research has, however, illustrated that providing 
information on the financial value of college options can have 
meaningful impacts on college choices. The difference in effectiveness 
of information interventions has been studied extensively and informs 
our proposed approach to the financial transparency framework.\77\ To 
affect

[[Page 32324]]

college decision-making, information must be timely, personalized, and 
easy to understand.
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    \77\ Steffel, M., Kramer, D., McHugh, W., & Ducoff, N. (2020). 
Informational Disclosure and College Choice. Brookings. Washington, 
DC www.brookings.edu/research/information-disclosure-and-college-choice/; Robertson, B. & Stein, B. (2019). Consumer Information in 
Higher Education. The Institute for College Access & Success 
(TICAS). ticas.org/files/pub_files/consumer_information_in_higher_education.pdf; Morgan, J. & Dechter, 
G. (2012). Improving the College Scorecard. Using Student Feedback 
to Create an Effective Disclosure. Center For American Progress, 
Washington, DC.
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    The timing of when applicants receive information about 
institutions and programs is critical--data should be available at key 
points during the college search process and applicants should have 
sufficient time and resources to process new information. Informational 
interventions work best when they arrive at the right moment and are 
offered with additional guidance and support.\78\ For example, 
unemployment insurance (UI) recipients who received letters informing 
them of Pell Grant availability and institutional support were 40 
percent more likely to enroll in postsecondary education.\79\ Families 
who received information about the FAFSA, as well as support in 
completing it while filing their taxes, were more likely to submit 
their aid applications, and students from these families were more 
likely to attend and persist in college.\80\
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    \78\ Carrel, S. & Sacerdote, B. (2017). Why Do College-Going 
Interventions Work? American Economic Journal; Applied Economics. 
1(3) 124-151.
    \79\ Barr, A. & Turner, S. (2018). A Letter and Encouragement: 
Does Information Increase Postsecondary Enrollment of UI Recipients? 
American Economic Journal: Economic Policy 2018, 10(3): 42-68. 
doi.org/10.1257/pol.20160570.
    \80\ Eric P. Bettinger, Bridget Terry Long, Philip Oreopoulos, 
Lisa Sanbonmatsu, The Role of Application Assistance and Information 
in College Decisions: Results from the H&R Block Fafsa Experiment, 
The Quarterly Journal of Economics. 127(3) 1205-1242. doi.org/10.1093/qje/qjs017.
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    Informational interventions are most likely to sway choice when 
they are tailored to the applicant's personal context.\81\ High school 
students who learn about their peers' admission experiences through an 
online college search platform tend to shift their college application 
and attendance choices.\82\ Students who receive personalized outreach 
from colleges, particularly when outreach is paired with information 
about financial aid eligibility, are more likely to apply to and enroll 
in those institutions.\83\
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    \81\ Goldstein, D.G., Johnson, E.J., Herrmann, A., Heitmann, M. 
(2008). Nudge your customers toward better choices. Harvard Business 
Review, 86(12). 99-105.
    Johnson, E.J., Shu, S.B., Benedict G.C. Dellaert, Fox, C., 
Goldstein, D.G., H[auml]ubl, G., Larrick, R.P., Payne, J.W., Peters, 
E., Schkade, D., Wansink, B., & Weber, E.U. (2012). Beyond nudges: 
Tools of a choice architecture. Marketing Letters, 23(2), 487-504.
    \82\ Mulhern, C. (2021). Changing College Choices with 
Personalized Admissions Information at Scale: Evidence on Naviance. 
Journal of Labor Economics. 39(1) 219-262.
    \83\ Dynarski, S., Libassi, C., Michelmore, K. & Owen, S. 
(2021). Closing the Gap: The Effect of Reducing Complexity and 
Uncertainty in College Pricing on the Choices of Low-Income 
Students. American Economic Review, 111 (6): 1721-56.; Gurantz, O., 
Hurwitz, M. and Smith, J. (2017). College Enrollment and Completion 
Among Nationally Recognized High-Achieving Hispanic Students. J. 
Pol. Anal. Manage., 36: 126-153. doi.org/10.1002/pam.21962; Howell, 
J., Hurwitz, M. & Smith, J., The Impact of College Outreach on High 
Schoolers' College Choices--Results From Over 1,000 Natural 
Experiments (November 2020). ssrn.com/abstract=3463241.
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    Interventions are most effective when the content is salient and 
easy to understand. Students, particularly those who are enrolling for 
the first time, may need additional context for understanding student 
debt amounts and the feasibility of repayment.\84\ Evidence that 
students defer attention to their student debt while enrolled \85\ 
suggests that inclusion of typical post-graduate earnings data may be 
likely to engage students.\86\ Finally, it is important that these data 
are consistently presented from a trusted source across institutions 
and programs.\87\
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    \84\ Boatman, A., Evans, B.J., & Soliz, A. (2017). Understanding 
Loan Aversion in Education: Evidence from High School Seniors, 
Community College Students, and Adults. AERA Open, 3(1). doi.org/10.1177/2332858416683649; Evans, B., Boatman, A. & Soliz, A. (2019). 
``Framing and Labeling Effects in Preferences for Borrowing for 
College: An Experimental Analysis,'' Research in Higher Education, 
Springer; Association for Institutional Research, 60(4), 438-457.
    \85\ Darolia, R., & Harper, C. (2018). Information Use and 
Attention Deferment in College Student Loan Decisions: Evidence From 
a Debt Letter Experiment. Educational Evaluation and Policy 
Analysis, 40(1), 129-150. doi.org/10.3102/0162373717734368.
    \86\ Ruder, A. & Van Noy, M. (2017). Knowledge of earnings risk 
and major choice: Evidence from an information experiment, Economics 
of Education Review, 57, 80-90, doi.org/10.1016/j.econedurev.2017.02.001.; Baker, R., Bettinger, E., Jacob, B. & 
Marinescu, I. (2018). The Effect of Labor Market Information on 
Community College Students' Major Choice, Economics of Education 
Review, 65, 18-30, doi.org/10.1016/j.econedurev.2018.05.005.
    \87\ Previous informational interventions around net price, for 
example, were less consistent in the calculation of values, and in 
the presentation of net price calculation aids. Anthony, A., Page, 
L., & Seldin, A. (2016). In the Right Ballpark? Assessing the 
Accuracy of Net Price Calculators, Journal of Student Financial Aid. 
46(2), 3. publications.nasfaa.org/jsfa/vol46/iss2/3;
    The Institute For College Access & Success (TICAS). (2012) 
Adding it all up 2012: Are college net price calculators easy to 
find, use, and compare? ticas.org/files/pub_files/Adding_It_All_Up_2012.pdf.
---------------------------------------------------------------------------

    In keeping with the idea of presenting salient and easy-to-
understand information, we propose categorization of acceptable levels 
of performance on two measures of financial value. This approach 
ensures that students have clear indication of when attending a program 
presents a significant risk of negative financial consequences. In 
particular, and reflecting the concerns noted above, we would 
categorize programs with low performance with the easy-to-understand 
labels of ``high debt-burden'' and ``low earnings,'' based on the debt 
and earnings measures used in the framework.
    Research shows that receiving information from a trusted source, in 
a manner that is easy to compare across different programs and 
institutions, and in a timely fashion is important for disclosures to 
be effective. Moreover, we believe that actively distributing 
information to prospective students before the prospective student 
signs an enrollment agreement, registers, or makes a financial 
commitment to the institution increases the likelihood that they will 
view and act upon the information, compared to information that 
students would have to seek out on their own. Accordingly, we propose 
to provide disclosures through a website that the Department would 
administer and use to deliver information directly to students. 
Additionally, to ensure that students see this information before 
receiving federal aid for programs with potentially harmful financial 
consequences, we propose requiring acknowledgment of receipt for high-
debt-burden programs before federal aid is disbursed.
    We also seek to improve the information available to students and 
propose several refinements relative to information available on the 
College Scorecard, including debt measures that are inclusive of 
private and institutional loans (including income sharing agreements or 
loans covered by tuition payment plans), as well as measures of 
institutional, State, and private grant aid. This information would 
enable the calculation of both the net price to students as well as 
total amounts paid from all sources. We believe these improvements 
would better capture the program's costs to students, families, and 
taxpayers.
    To calculate these measures, we would require new reporting from 
institutions, discussed below under proposed Sec.  668.408.
    As noted above, we propose that this transparency framework apply 
to (nearly) all programs at all institutions. In particular, 
disclosures of this information would be available for all programs, 
subject to privacy limitations. This is a departure from the 2014 Prior 
Rule, which only required disclosures for GE programs. Since students 
consider both GE and non-GE programs when selecting programs, providing 
comparable information for students

[[Page 32325]]

would help them find the program that best meets their needs across any 
sector. In the proposed subpart S, we address the need for additional 
accountability measures for GE programs, including sanctions for 
programs determined to lead to high-debt-burden or low earnings under 
the metrics described in subpart Q of part 668.

Financial Value Transparency Framework (Sec.  668.402)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add new Sec.  668.402 to 
establish a framework to measure two different aspects of the financial 
value of programs based on their debt and earnings outcomes, and to 
classify programs as ``low-earning'' or ``high-debt-burden'' for the 
purpose of providing informative disclosures to students.
D/E Rates
    We would define a debt-to-earnings (D/E) metric to measure the debt 
burden faced by the typical graduate of a program by determining the 
share of their annual or discretionary income that would be required to 
make their student loan debt payments under fixed-term repayment plans. 
We categorize programs as ``high debt-burden'' if the typical graduate 
has a D/E rate that is above recognized standards for debt 
affordability.
    In particular, a program would be classified as ``high debt-
burden'' if its discretionary debt-to-earnings rate is greater than 20 
percent and its annual debt-to-earnings rate is greater than 8 percent. 
If the denominator (median annual or discretionary earnings) of either 
rate is zero, then that rate is considered ''high-debt-burden'' only if 
the numerator (median debt payments) is positive.
    If it is not possible to calculate or issue D/E rates for a program 
for an award year, the program would receive no D/E rates for that 
award year. The program would remain in the same status under the D/E 
rates measure as the previous award year.
Earnings Premium (EP)
    In addition, we would establish an earnings premium measure to 
assess the degree to which program graduates out-earn individuals who 
did not enroll in postsecondary education. The measure would be 
calculated as the difference in the typical earnings of a program 
graduate relative to the typical earnings of individuals in the State 
where the program is located who have only a high school or equivalent 
credential.
    We would categorize programs as ``low-earning'' if the median 
annual earnings of the students who complete the program, measured 
three years after completion, does not exceed the earnings threshold--
that is, if the earnings premium is zero or negative. The earnings 
threshold for each program would be calculated as the median earnings 
of individuals with only a high school diploma or the equivalent, 
between the ages of 25 to 34, who are either employed or report being 
unemployed (i.e., looking and available for work), located in the State 
in which the institution is located, or nationally if fewer than 50 
percent of students in the program are located in the State where the 
institution is located while enrolled.
    If it is not possible to calculate or publish the earnings premium 
measure for a program for an award year, the program would receive no 
result under the earnings premium measure for that award year and would 
remain in the same status under the earnings premium measure as the 
previous award year.
    Proposed changes to Sec.  668.43 would require institutions to 
distribute information to students, prior to enrollment, about how to 
access a disclosure website maintained by the Secretary. The disclosure 
website would provide information about the program. These items might 
include the typical earnings and debt levels of graduates; information 
to contextualize each measure including D/E and EP measures; 
information about the net yearly cost of attendance at the program and 
total costs paid by completing students; information about typical 
amounts of student aid received; and information about career programs, 
such as the occupation the program is meant to provide training for and 
relevant licensure information. Certain information may be highlighted 
or otherwise emphasized to assist viewers in finding key points of 
information.
    For eligible non-GE programs classified by the Department as 
``high-debt-burden,'' proposed Sec.  668.407 would require students to 
acknowledge viewing these informational disclosures prior to receiving 
title IV, HEA funds for enrollment in these programs.
    Reasons: The proposed regulations include two debt-to-earnings 
measures that are similar to those under the 2014 Prior Rule. The debt-
to-earnings measures would assess the debt burden incurred by students 
who completed a program in relation to their earnings. Comparing debt 
to earnings is a commonly accepted practice when making determinations 
about a person's relative financial strength, such as when a lender 
assesses suitability for a mortgage or other financial product. To 
determine the likelihood a borrower will be able to afford repayments, 
lenders use debt-to-earnings ratios to consider whether the recipient 
would be able to afford to repay the debt with the earnings available 
to them. This practice also protects borrowers from incurring debts 
that they cannot afford to repay and can prevent negative consequences 
associated with delinquency and default such as damaged credit scores.
    Using the two D/E measures together, the Department would assess 
whether a program leads to reasonable debt levels in relation to 
completers' earnings outcomes. This categorization based on the 
program's median earnings and median debt levels is depicted in Figure 
1 below. This Figure shows how the two D/E rates are used to define 
``high debt-burden'' programs, using the relevant amortization rate of 
certificate programs as an illustrative example. The region labelled D, 
where program completers' median debt levels are high relative to their 
median earnings, is categorized as ``high debt burden.''

[[Page 32326]]

[GRAPHIC] [TIFF OMITTED] TP19MY23.000

    Under the proposed regulations, the annual debt-to-earnings rate 
would estimate the proportion of annual earnings that students who 
complete the program would need to devote to annual debt payments. The 
discretionary debt-to-earnings rate would measure the proportion of 
annual discretionary income--the amount of income above 150 percent of 
the Poverty Guideline for a single person in the continental United 
States--that students who complete the program would need to devote to 
annual debt payments. We note that given the variation in what is an 
affordable payment from borrower to borrower, a variety of definitions 
could potentially be justified. We do not mean to enshrine a single 
definition for affordability across every possible purpose, but for 
this proposed rule we choose to maintain the standard used under the 
2014 Prior Rule.
    The proposed thresholds for the discretionary D/E rate and the 
annual D/E rate are based upon expert recommendations and mortgage 
industry practices. The acceptable threshold for the discretionary 
income rate would be set at 20 percent, based on research conducted by 
economists Sandy Baum and Saul Schwartz,\88\ which the Department 
previously considered in connection with the 2011 and 2014 Prior Rules. 
Specifically, Baum and Schwartz proposed benchmarks for manageable debt 
levels at 20 percent of discretionary income and concluded that there 
are virtually no circumstances under which higher debt-service ratios 
would be reasonable.
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    \88\ Baum, Sandy, and Schwartz, Saul, 2006. ``How Much Debt is 
Too Much? Defining Benchmarks for Managing Student Debt.'' 
eric.ed.gov/?id=ED562688.
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    In the Figure above, the points along the steeper of the two lines 
drawn represents the combination of median earnings (on the x-axis) and 
median debt levels (on the y-axis) where the debt-service payments on a 
10-year repayment plan at 4.27 percent interest are exactly equal to 20 
percent of discretionary income. Programs with median debt and earnings 
levels above that line (regions B and D) have discretionary D/E rates 
above 20 percent, and programs below that line (regions A and C) have 
discretionary D/E rates below 20 percent.
    The acceptable threshold of 8 percent for the annual D/E rate used 
in the proposed regulations has been a reasonably common mortgage-
underwriting standard, as many lenders typically recommend that all 
non-mortgage loan installments not exceed 8 percent of the borrower's 
pretaxed income. Studies of student debt have accepted the 8 percent 
standard and some State agencies have established guidelines based on 
this limit. Eight percent represents the difference between the typical 
ratios used by lenders for the limit of total debt service payments to 
pretaxed income, 36 percent, and housing payments to pretax income, 28 
percent.
    In Figure 1, the less steep of the two lines shows the median 
earnings and debt levels where annual D/E is exactly 8 percent. 
Programs above the line (regions D and C) have annual D/E greater than 
8 percent and programs below the line have annual D/E less than 8 
percent (regions B and A). Note that programs are defined as ``high 
debt-burden'' only if their discretionary D/E is above 20 percent and 
their annual D/E is above 8 percent. As a result, the use of both 
measures means that programs in region B and C are not deemed ``high 
debt-burden'' even though they have debt levels that are too high based 
on one of the two standards. Classifying programs that have D/E rates 
below the discretionary D/E threshold but above the annual D/E 
threshold (i.e., region C) as not ``high debt-burden'' reflects the 
fact that devoting the same share of earnings to service student debt 
is less burdensome when earnings are higher. For example, paying $2,000 
per year is less manageable when you make $20,000 a year than paying 
$4,000 per year when you make $40,000 a year, since at lower levels of 
income most spending must go to necessities.

[[Page 32327]]

    The D/E rates would help identify programs that burden students who 
complete the programs with unsustainable debt, which may both generate 
hardships for borrowers and pass the costs of loan repayment on to 
taxpayers. But the D/E measures do not capture another important aspect 
of financial value, which is the extent to which graduates improve 
their earnings potential relative to what they might have earned if 
they did not pursue a higher education credential. Some programs lead 
to very low earnings, but still pass the D/E metrics either because 
typical borrowing levels are low or because few or no students borrow 
(and so median debt is zero, regardless of typical levels among 
borrowers). The Department believes that an additional metric is 
necessary beyond the D/E measures, to ensure students are aware that 
these low-earnings programs may not be delivering on their promise or 
providing what students expected from a postsecondary education in 
helping them secure more remunerative employment.
    We propose, therefore, to calculate an earnings premium metric.\89\ 
This metric would be equal to the median earnings of program graduates 
measured three years after they complete the program, minus the median 
earnings of high school graduates (or holders of an equivalent 
credential) who are between the ages of 25 and 34, and either working 
or unemployed, excluding individuals not in the labor force, in the 
State where the institution is located, or nationally if fewer than 50 
percent of the students in the program are located in the State where 
the institution is located while enrolled. When this earnings premium 
is positive, it indicates that graduates of the program gain 
financially (i.e., have higher typical earnings than they might have 
had they not attended college).
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    \89\ For further discussion of the earnings premium metric and 
the Department's reasons for proposing it, see above at [TK--
preamble general introduction, legal authority], and below at [TK--
method for calculating metrics, around p.180], and at [TK--GE 
eligibility, around p.250]. The discussion here concentrates on 
transparency issues.
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    Similar earnings premium metrics are used ubiquitously by 
economists and other analysts to measure the earnings gains associated 
with college credentials relative to a high school education.\90\ Other 
policy researchers have proposed similar earnings premium measures for 
accountability purposes that incorporate additional adjustments to 
subtract some amortized measure of the total cost of college to 
estimate a ``net earnings premium.'' \91\ At the same time, our 
proposed measure is conservative in the sense that it would compare the 
earnings of completers only to the earnings of high school graduates, 
without incorporating the additional costs students incur to earn the 
credential or the value of their time spent pursuing the credential. 
Moreover, as noted above, the corresponding level of earnings that 
programs must exceed is modest--corresponding approximately to the 
earnings someone working full-time at an hourly rate of $12.50 might 
earn.
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    \90\ See for example, www.hamiltonproject.org/papers/major_decisions_what_graduates_earn_over_their_lifetimes/, 
cew.georgetown.edu/cew-reports/the-college-payoff/, 
www.clevelandfed.org/publications/economic-commentary/2012/ec-201210-the-college-wage-premium, among many other examples.
    \91\ Matsudaira and Turner Brookings. PVC ``threshold zero'' 
measure.
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    As discussed elsewhere in this NPRM, student eligibility 
requirements in Section 484 of the HEA support this concept that 
postsecondary programs supported by title IV, HEA funds should lead to 
outcomes that exceed those obtained by individuals who have only a 
secondary education. To receive title IV, HEA funds, HEA section 484 
generally requires that students have a high school diploma or 
recognized equivalent. Students who do not have such credentials have a 
more limited path to title IV, HEA aid, involving ascertainment of 
whether they have the ability to benefit from their postsecondary 
program. These statutory requirements, in effect, make high-school-
level achievement the presumptive starting point for title IV, HEA 
funds. Postsecondary training that is supported by title IV, HEA funds 
should help students to progress and achieve beyond that baseline. The 
earnings premium follows from the principle that if postsecondary 
training must be for individuals who are moving beyond secondary-level 
education, knowledge, and skills, it is reasonable to expect graduates 
of those programs to earn more than someone who never attended 
postsecondary education in the first place.
    The Department would classify programs as ``low earning'' if the 
earnings premium is equal to zero or is negative. This is again a 
conservative approach, using this label only when a majority of program 
graduates--that is, ignoring the (likely lower) earnings of students 
who do not complete the program--fail to out-earn the majority of 
individuals who never attend postsecondary education. As noted above, 
this metric would also ignore tuition costs and the value of students' 
time in earning the degree. The ``low earning'' label suggests that, 
even ignoring these costs, students are not financially better off than 
students who did not attend college.
    The Department also considered whether this approach would create a 
risk of programs being labelled ``low-earning'' based on earnings 
measures several years after graduation, even though those programs 
eventually lead to significantly higher levels of earnings over a 
longer time horizon. Based on the estimates in the RIA, however, most 
programs that would be identified as ``low-earning'' are certificate 
programs, and for these programs in particular, any earnings gains tend 
to be realized shortly after program completion (i.e., often 
immediately or within a few quarters), whereas earnings trajectories 
for typical degree earners tend to continue to grow over time.\92\
---------------------------------------------------------------------------

    \92\ Minaya, Veronica and Scott-Clayton, Judith (2022). Labor 
Market Trajectories for Community College Graduates: How Returns to 
Certificates and Associate's Degrees Evolve Over Time. Education 
Finance and Policy, 17(1): 53-80.
---------------------------------------------------------------------------

    The D/E and earnings premium metrics capture related, but distinct 
and important dimensions of how programs affect students' financial 
well-being. The D/E metric is a measure of debt-affordability that 
indicates whether the typical graduate will have earnings enough to 
manage their debt service payments without incurring undue hardship. 
For any median earnings level of a program, the D/E metric and 
thresholds imply a maximum level of total borrowing beyond which 
students should be concerned that they may not be able to successfully 
manage their debt. The earnings premium measure, meanwhile, captures 
the extent to which programs leave graduates better off financially 
than those who do not enroll in college, a minimal benchmark that 
students pursuing postsecondary credentials likely expect to achieve. 
In addition to capturing distinct aspects of programs' effects on 
students' financial well-being, these metrics complement each other. 
For example, as the RIA shows, borrowers in programs that pass the D/E 
metric but fail the EP metric have very high rates of default, so the 
EP metric helps to identify programs where borrowing may be overly 
risky even when debt levels are relatively low.
    The Department believes this information on financial value is 
important to students and would enable them to make a more informed 
decision, which may include weighing whether low-earnings or high-debt-
burden programs nonetheless help them achieve other non-financial goals 
that

[[Page 32328]]

they might find more important when considering whether to attend.
    Helping students make informed decisions may provide other 
benefits, too. First, as shown in the RIA, low-earnings programs that 
are not categorized as high debt-burden still have very high rates of 
student loan default and low repayment rates. For example, borrowers in 
low-earnings programs that are not high debt-burden have default rates 
12.6 percent higher than high-debt-burden programs that have earnings 
above the level of a high school graduate in their State. The low-
earnings classification complements the high debt-burden classification 
in identifying programs where borrowers are likely to struggle to 
manage their loans. Second, low-earnings programs where students borrow 
generate ongoing costs to taxpayers. Student loans from the Department 
are used to provide tuition revenue to the program. But if low-earning 
graduates repay using income driven repayment plans, then their 
payments will often be too low to pay down their principal balances 
despite spending years or even decades in repayment. As a result, a 
high share of the loans made to individuals in such programs would be 
likely to be eventually forgiven at taxpayer expense. If low-earning 
borrowers don't use income driven repayment plans, the RIA shows they 
are at higher risk of defaulting on their loans, which also tends to 
increase the costs of student loans to taxpayers.
    The Department would calculate both the D/E rates and the earnings 
premium measure using earnings data provided by a Federal agency with 
earnings data, which we propose to define in Sec.  668.2. The Federal 
agency with earnings data must have data sufficient to match with title 
IV, HEA recipients in the program and could include agencies such as 
the Treasury Department, including the Internal Revenue Service (IRS), 
the Social Security Administration (SSA), the Department of Health and 
Human Services (HHS), and the Census Bureau. If the Federal agency with 
earnings data does not provide earnings information necessary for the 
calculation of these metrics, we would not calculate the metrics and 
the program would not receive rates for the award year. Similarly, if 
the minimum number of completers required to calculate the D/E rates or 
earnings threshold metrics to be calculated is not met, the program 
would not receive rates for the award year. For a year for which the D/
E rates or earnings premium metric is not calculated, we believe it is 
logical for the program to retain the same status as under its most 
recently calculated results for purposes of determining whether the 
program leads to acceptable outcomes and whether current and 
prospective students should be alerted to those outcomes.

Calculating D/E Rates (Sec.  668.403)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add new Sec.  668.403 to 
specify the methodology the Department would use to calculate D/E 
rates.
    Section 668.403(a) would define the program's annual D/E rate as 
the completers' annual loan payment divided by their median annual 
earnings. The program's discretionary D/E rate would equal the 
completers' annual loan payment divided by their median adjusted annual 
earnings after subtracting 150 percent of the poverty guideline for the 
most recent calendar year for which annual earnings are obtained.
    Under Sec.  668.403(b), the Department would calculate the annual 
loan payment for a program by (1) Determining the median loan debt of 
the students who completed the program during the cohort period, based 
on the lesser of the loan debt incurred by each student, computed as 
described in Sec.  668.403(d), or the total amount for tuition and fees 
and books, equipment, and supplies for each student, less the amount of 
institutional grant or scholarship funds provided to that student; 
removing the highest loan debts for a number of students equal to those 
for whom the Federal agency with earnings data does not provide median 
earnings data; and calculating the median of the remaining amounts; and 
(2) Amortizing the median loan debt. The length of the amortization 
period would depend upon the credential level of the program, using a 
10-year repayment period for a program that leads to an undergraduate 
certificate, a post-baccalaureate certificate, an associate degree, or 
a graduate certificate; a 15-year repayment period for a program that 
leads to a bachelor's degree or a master's degree; or a 20-year 
repayment period for any other program. The amortization calculation 
would use an annual interest rate that is the average of the annual 
statutory interest rates on Federal Direct Unsubsidized Loans that were 
in effect during a period that varies based on the credential level of 
the program. For undergraduate certificate programs, post-baccalaureate 
certificate programs, and associate degree programs, the average 
interest rate would reflect the three consecutive award years, ending 
in the final year of the cohort period, using the Federal Direct 
Unsubsidized Loan interest rate applicable to undergraduate students. 
As an example, for an undergraduate certificate program, if the two-
year cohort period is award years 2024-2025 and 2025-2026, the interest 
rate would be the average of the interest rates for the years from 
2023-2024 through 2025-2026. For graduate certificate programs and 
master's degree programs, the average interest rate would reflect the 
three consecutive award years, ending in the final year of the cohort 
period, using the Federal Direct Unsubsidized Loan interest rate 
applicable to graduate students. For bachelor's degree programs, the 
average interest rate would reflect the six consecutive award years, 
ending in the final year of the cohort period, using the Federal Direct 
Unsubsidized Loan interest rate applicable to undergraduate students. 
For doctoral programs and first professional degree programs, the 
average interest rate would reflect the six consecutive award years, 
ending in the final year of the cohort period, using the Federal Direct 
Unsubsidized Loan interest rate applicable to graduate students.
    Under new Sec.  668.403(c), the Department would obtain program 
completers' median annual earnings from a Federal agency with earnings 
data for use in calculating the D/E rates.
    In determining the loan debt for a student under new Sec.  
668.403(d), the Department would include (1) The total amount of title 
IV loans disbursed to the student for enrollment in the program, less 
any cancellations or adjustments except for those related to false 
certification or borrower defense discharges and debt relief initiated 
by the Secretary as a result of a national emergency, and excluding 
Direct PLUS Loans made to parents of dependent students and Direct 
Unsubsidized Loans that were converted from TEACH Grants; (2) Any 
private education loans as defined in Sec.  601.2, including such loans 
made by the institution, that the student borrowed for enrollment in 
the program; and (3) The amount outstanding, as of the date the student 
completes the program, on any other credit (including any unpaid 
charges) extended by or on behalf of the institution for enrollment in 
any program that the student is obligated to repay after completing the 
program, including extensions of credit described in the definition of, 
and excluded from, the term ``private education loan'' in Sec.  601.2. 
The Department would attribute all loan debt incurred by the student 
for enrollment in any undergraduate

[[Page 32329]]

program at the institution to the highest credentialed undergraduate 
program subsequently completed by the student at the institution as of 
the end of the most recently completed award year prior to the 
calculation of the D/E rates. Similarly, we would attribute all loan 
debt incurred by the student for enrollment in any graduate program at 
the institution to the highest credentialed graduate program completed 
by the student at the institution as of the end of the most recently 
completed award year prior to the calculation of the D/E rates. The 
Department would exclude any loan debt incurred by the student for 
enrollment in programs at other institutions, except that the Secretary 
could choose to include loan debt incurred for enrollment in programs 
at other institutions under common ownership or control.
    Under new Sec.  668.403(e), the Department would exclude a student 
from both the numerator and the denominator of the D/E rates 
calculation if (1) One or more of the student's title IV loans are 
under consideration or have been approved by the Department for a 
discharge on the basis of the student's total and permanent disability; 
(2) The student enrolled full time in any other eligible program at the 
institution or at another institution during the calendar year for 
which the Department obtains earnings information; (3) For 
undergraduate programs, the student completed a higher credentialed 
undergraduate program at the institution subsequent to completing the 
program, as of the end of the most recently completed award year prior 
to the calculation of the D/E rates; (4) For graduate programs, the 
student completed a higher credentialed graduate program at the 
institution subsequent to completing the program, as of the end of the 
most recently completed award year prior to the calculation of the D/E 
rates; (5) The student is enrolled in an approved prison education 
program; (6) The student is enrolled in a comprehensive transition and 
postsecondary (CTP) program; or (7) The student died. For purposes of 
determining whether a student completed a higher credentialed 
undergraduate program, the department would consider undergraduate 
certificates or diplomas, associate degrees, baccalaureate degrees, and 
post-baccalaureate certificates as the ascending order of credentials. 
For purposes of determining whether a student completed a higher 
credentialed graduate program, the Department would consider graduate 
certificates, master's degrees, first professional degrees, and 
doctoral degrees as the ascending order of credentials.
    As further explained under ``Reasons'' below, to prevent privacy or 
statistical reliability issues, under Sec.  668.403(f) the Department 
would not issue D/E rates for a program if fewer than 30 students 
completed the program during the two-year or four-year cohort period, 
or the Federal agency with earnings data does not provide the median 
earnings for the program.
    For purposes of calculating both the D/E rates and the earnings 
threshold measure, the Department proposes to use a two-year or a four-
year cohort period similar to the 2014 Prior Rule. The proposed rule 
would, however, measure the earnings of program completers 
approximately one year later relative to when they complete their 
degree than under the 2014 Prior Rule. We would use a two-year cohort 
period when the number of students in the two-year cohort period is 30 
or more. A two-year cohort period would consist of the third and fourth 
award years prior to the year for which the most recent data are 
available at the time of calculation. For example, given current data 
production schedules, the D/E rates and earnings premium measure 
calculated to assess financial value starting in award year 2024-2025 
would be calculated in late 2024 or early in 2025. For most programs, 
the two-year cohort period for these metrics would be award years 2017-
2018 and 2018-2019 using the amount of loans disbursed to students as 
of program completion in those award years and earnings data measured 
in calendar years 2021 for award year 2017-2018 completers and 2022 for 
award year 2018-2019 completers, roughly 3 years after program 
completion.
    We would use a four-year cohort period to calculate the D/E rates 
and earnings thresholds measure when the number of students completing 
the program in the two-year cohort period is fewer than 30 but the 
number of students completing the program in the four-year cohort 
period is 30 or more. A four-year cohort period would consist of the 
third, fourth, fifth, and sixth award years prior to the year for which 
the most recent earnings data are available at the time of calculation. 
For example, for the D/E rates and the earnings threshold measure 
calculated to assess financial value starting in award year 2024-2025, 
the four-year cohort period would be award years 2015-2016, 2016-2017, 
2017-2018, and 2018-2019; and earnings data would be measured using 
data from calendar years 2019 through 2022.
    Similar to the 2014 Prior Rule, the cohort period would be 
calculated differently for programs whose students are required to 
complete a medical or dental internship or residency, and who therefore 
experience an unusual and unavoidable delay before reaching the 
earnings typical for the occupation. For this purpose, a required 
medical or dental internship or residency would be a supervised 
training program that (1) Requires the student to hold a degree as a 
doctor of medicine or osteopathy, or as a doctor of dental science; (2) 
Leads to a degree or certificate awarded by an institution of higher 
education, a hospital, or a health care facility that offers post-
graduate training; and (3) Must be completed before the student may be 
licensed by a State and board certified for professional practice or 
service. The two-year cohort period for a program whose students are 
required to complete a medical or dental internship or residency would 
be the sixth and seventh award years prior to the year for which the 
most recent earnings data are available at the time of calculation. For 
example, D/E rates and the earnings threshold measure calculated for 
award year 2024-2025 would be calculated in late 2024 or early 2025 
using earnings data measured in calendar years 2021 and 2022, with a 
two-year cohort period of award years 2014-2015 and 2015-2016. The 
four-year cohort period for a program whose students are required to 
complete a medical or dental internship or residency would be the 
sixth, seventh, eighth, and ninth award years prior to the year for 
which the most recent earnings data are available at the time of 
calculation. For example, the D/E rates and the earnings threshold 
measure calculated for award year 2024-2025 would be calculated in late 
2024 or early 2025 using earnings data measured in calendar years 2021 
and 2022, and the four-year cohort period would be award years 2012-
2013, 2013-2014, 2014-2015, and 2015-2016.
    The Department recognizes that some other occupations, such as 
clinical psychology, may require a certain number of post-graduate work 
hours, which might vary from State to State, before an individual fully 
matriculates into the profession, and that, during this post-graduate 
working period, a completer's earnings may be lower than are otherwise 
typical for individuals working in the same occupation. We would 
welcome public comments about data-informed ways to reliably identify 
such programs and occupations and determine the most appropriate time 
period for measuring earnings for these

[[Page 32330]]

programs. We are particularly interested in approaches that narrowly 
identify programs where substantial post-graduate work hours (that may 
take several years to complete) are required before a license can be 
obtained, and where earnings measured three years after completion are 
therefore unusually low relative to subsequent earnings.
    Reasons: The methodology we would use to calculate the D/E rates 
under the proposed regulations is largely similar to that of the 2014 
Prior Rule. We discuss our reasoning by subject area.
Minimum Number of Students Completing the Program
    As under the 2014 Prior Rule, the proposed regulations would 
establish a minimum threshold number of students who completed a 
program, or ``n-size,'' for D/E rates to be calculated for that 
program. Both the 2014 Prior Rule and the proposed regulations require 
a minimum n-size of 30 students completing the program, after 
subtracting the number of completers who cannot be matched to earnings 
data. However, some programs are relatively small in terms of the 
number of students enrolled and, perhaps more critically, in the number 
of students who complete the program. In many cases, these may be the 
very programs whose performance should be measured, as low completion 
rates may be an indication of poor quality. The 2019 Prior Rule also 
expressed concern with the 30-student cohort size requirement, stating 
that it exempted many programs at non-profit institutions while having 
a disparate impact on proprietary institutions.
    We considered and presented, during the negotiations that led to 
the 2014 Prior Rule, a lower n-size of 10. At that time the non-Federal 
negotiators raised several issues with the proposal to use a lower n-
size of 10. First, some of the negotiators questioned whether the D/E 
rates calculations using an n-size of 10 would be statistically valid. 
Further, they were concerned that reducing the minimum n-size to 10 
could make it too easy to identify particular individuals, putting 
student privacy at risk. These negotiators noted that other entities 
requiring these types of calculations used a minimum n-size of 30 to 
address these two concerns.
    Other non-Federal negotiators supported the Department's past 
proposal to reduce the minimum n-size from 30 to 10 students completing 
the program. They argued that the lower number would allow the 
Department to calculate D/E rates for more programs, which would 
decrease the risk that programs that serve students poorly are not held 
accountable. They argued that some programs have very low numbers of 
students who complete the program, not because these programs enroll 
small numbers of students, but because they do not provide adequate 
support or are of low quality and, as a result, relatively few students 
who enroll actually complete the program. They asserted that these 
poorly performing programs may never be held accountable under the D/E 
rates measure because they would not have a sufficient number of 
completers for the D/E rates to be calculated. For these reasons, these 
negotiators believed that the Secretary should calculate D/E rates for 
any program where at least 10 students completed the program during the 
applicable cohort period.
    As in our past analysis, we acknowledge the limitations of using a 
minimum n-size of 30 students. However, to protect the privacy of 
individuals who complete programs that enroll relatively few students, 
and to be consistent with past practice as well as existing regulations 
at Sec.  668.216, which governs institutional cohort default rates, we 
propose to retain the minimum n-size of 30 students who complete the 
program as we did in the 2014 Prior Rule. This is also consistent with 
IRS data policy. As further explained in our discussion of proposed 
Sec.  668.405, the IRS adds a small amount of statistical noise to 
earnings data for privacy protection purposes, which would be greater 
for n-sizes smaller than 30. We also note that the four-year cohort 
will allow the Department to determine D/E rates for programs that have 
at least 30 completers over a four-year cohort period for whom the 
Department obtains earnings data, which would help to reduce the number 
of instances in which rates could not be calculated because of the 
minimum n-size.
    As described in detail in the RIA, the Department estimates that 75 
percent of GE enrollment and 15 percent of GE programs would have 
sufficient n-size to have metrics computed with a two-year cohort. An 
additional 8 percent of GE enrollment and 11 percent of GE programs 
would be likely to have metrics computed using a four-year completer 
cohort. The comparable rates for eligible non-GE programs are 69 
percent of enrollment and 19 percent of programs with a n-size of 30 
covered by two-year cohort metrics, with the use of four-year cohort 
rates likely increasing these coverage rates of non-GE enrollment and 
programs by 13 and 15 percent, respectively.
Amortization
    As under the 2014 Prior Rule, the proposed regulations would use 
three different amortization periods, based on the credential level of 
the program for determining a program's annual loan payment amount. The 
schedule under the proposed regulations reflects that the regulations 
are an accountability tool to protect students and taxpayers from 
programs that leave the majority of their graduates with subpar early 
career earnings compared to those who have not completed postsecondary 
education or subpar early career earnings relative to their debts. This 
schedule would reflect the loan repayment options available under the 
HEA, which are available to borrowers based on the amount of their loan 
debt, and would account for the fact that borrowers who enrolled in 
higher-credentialed programs (e.g., bachelor's and graduate degree 
programs) are likely to have incurred more loan debt than borrowers who 
enrolled in lower-credentialed programs and, as a result, are more 
likely to select a repayment plan that would allow for a longer 
repayment period.
    We decided to choose 10 years as the shortest amortization period 
available to borrowers because that is the length of the standard 
repayment plan that is by default offered to borrowers. Moreover, FSA 
data show that the borrowers who have balances most likely to be 
associated with certificate programs are most likely to be making use 
of the 10-year standard plan. Even students who borrow to complete a 
short-term program are provided a minimum of 10 years to repay their 
student loan balances. Therefore, it would be inappropriate to assign 
an amortization period shorter than 10 years to students in such 
programs.
Loan Debt
    As under the 2014 Prior Rule, in calculating a student's loan debt, 
the Department would include title IV, HEA program loans and private 
education loans that the student obtained for enrollment in the 
program, less any cancellations or adjustments except for those related 
to false certification or borrower defense discharges and debt relief 
initiated by the Secretary as a result of a national emergency. We 
would not reduce debt to reflect these types of cancellation since they 
are unrelated to the value of the program under normal circumstances, 
and because including that debt would be a better reflection of how the 
program's costs affect students' financial outcomes in the absence of 
these relief programs.

[[Page 32331]]

For these purposes the amount of title IV, HEA loan debt would exclude 
Direct PLUS Loans made to parents of dependent students and Direct 
Unsubsidized Loans that were converted from TEACH Grants. The amount of 
a student's loan debt would also include any outstanding debt resulting 
from credit extended to the student by, or on behalf of, the 
institution (e.g., institutional financing or payment plans) that the 
student is obligated to repay after completing the program. Including 
both private loans and institutional loans, in addition to Federal loan 
debt, would provide the most complete picture of the financial burden a 
student has incurred to enroll in a program.
    Including private loans also ensures that an institution could not 
attempt to alter its D/E rates by steering students away from the 
Federal loan programs to a private option.
    The Department previously considered including Direct PLUS Loans 
made to parents of dependent students in the debt measure for D/E 
rates, on the basis that a parent PLUS loan is intended to cover costs 
related to education and associated with the dependent student's 
enrollment in an eligible program of study. Some non-Federal 
negotiators questioned the inclusion of parent PLUS loans, arguing that 
a dependent student does not sign the promissory note for a parent loan 
and is not responsible for repayment. Other non-Federal negotiators 
expressed concern that failing to include parent PLUS loans obtained on 
behalf of dependent students could incentivize institutions to counsel 
students away from Direct Subsidized and Unsubsidized Loans, and to 
promote more costly parent loans, in an attempt to evade accountability 
under the D/E rates metric. While we recognize these competing 
concerns, we believe that the primary purpose of the D/E rates is to 
indicate whether graduates of the program can afford to repay their 
educational debt. Repayment of PLUS loans obtained by a parent on 
behalf of a dependent student is ultimately the responsibility of the 
parent borrower, not the student. Moreover, the ability to repay parent 
PLUS debt depends largely upon the income of the parent borrower, who 
did not attend the program. We believe that including in a program's D/
E rates the parent PLUS debt obtained on behalf of dependent students 
would cloud the meaning of the D/E rates and would ultimately render 
them less useful to students and families. We remain concerned, 
however, about the potential for an institution to steer families away 
from less costly Direct Subsidized and Unsubsidized Loans towards 
parent PLUS in an attempt to manipulate its D/E rates, and we have 
addressed this concern, in part, by proposing changes to the 
administrative capability regulations at Sec.  668.16(h) that would 
require institutions to adequately counsel students and families about 
the most favorable aid options available to them. We welcome public 
comments on additional measures the Department could take to address 
this issue.
Loan Debt Cap
    We propose to cap loan debt for the D/E rates calculations at the 
net direct costs charged to a student, defined as the costs assessed to 
the student for enrollment in a program that are directly related to 
the academic program, minus institutional grants and scholarships 
received by that student. Under this calculation, direct costs include 
tuition and fees as well as books, equipment, and supplies. Although 
institutions in most cases cannot directly limit the amount a student 
borrows, institutions can exercise control over these types of direct 
costs for which a student borrows. The total of the student's assessed 
tuition and fees, and the student's allowance for books, supplies, and 
equipment would be included in the cost of attendance disclosed under 
proposed Sec.  668.43(d). The 2014 Prior Rule capped loan debt for D/E 
rates at the total direct costs using the same definition. In this 
rule, we further propose to subtract institutional grants and 
scholarships from the measure of direct costs to produce a measure of 
net direct costs. For purposes of the D/E rates, we propose to define 
institutional grants and scholarships as financial assistance that does 
not have to be repaid that the institution--or its affiliate--controls 
or directs to reduce or offset the original amount of a student's 
institutional costs. Upon further consideration and in the interest of 
fairness to institutions that provide substantial assistance to 
students, we believe it is necessary to account for institutional 
grants and scholarships to ensure that the amount of debt disclosed 
under the D/E rates accurately reflects the borrowing necessary for the 
student to finance the direct costs of the program.
Attribution of Loan Debt
    As under the 2014 Prior Rule, we propose that any loan debt 
incurred by a student for enrollment in undergraduate programs be 
attributed to the highest credentialed undergraduate program completed 
by the student at the institution, and any loan debt incurred for 
enrollment in graduate programs at an institution be attributed to the 
highest credentialed graduate program completed by the student. The 
undergraduate credential levels in ascending order would include 
undergraduate certificate or diploma, associate degree, bachelor's 
degree, and post-baccalaureate certificate. Graduate credential levels 
in ascending order would include graduate certificate (including a 
postgraduate certificate), master's degree, first-professional degree, 
and doctoral degree.
    We do not believe that undergraduate debt should be attributed to 
the debt of graduate programs in cases where students who borrow as 
undergraduates continue on to complete a graduate credential at the 
same institution, because the relationships between the coursework and 
the credential are different. The academic credits earned in an 
associate degree program, for example, are often necessary for and 
would be applied toward the credits required to complete a bachelor's 
degree program. It is reasonable then to attribute the debt associated 
with all of the undergraduate academic credit earned by the student to 
the highest undergraduate credential subsequently completed by the 
student. This reasoning does not apply to the relationship between 
undergraduate and graduate programs. Although a bachelor's degree might 
be a prerequisite to pursue graduate study, the undergraduate academic 
credits would not be applied toward the academic requirements of the 
graduate program.
    In attributing loan debt, we propose to exclude any loan debt 
incurred by the student for enrollment in programs at another 
institution. However, the Secretary could include loan debt incurred by 
the student for enrollment in programs at other institutions if the 
institution and the other institutions are under common ownership or 
control. The 2010 and 2014 Prior Rules included the same provision. As 
we noted previously, although we generally would not include loan debt 
from other institutions students previously attended, entities with 
ownership or control of more than one institution offering similar 
programs might otherwise be incentivized to shift students between 
those institutions to shield some portion of the loan debt from the D/E 
rates calculations. Including the provision that the Secretary may 
choose to include that loan debt should serve to discourage 
institutions from making these kinds of changes and would assist the

[[Page 32332]]

Department in holding such institutions accountable.
Exclusions
    Under the proposed regulations, we would exclude from the D/E rates 
calculations most of the same categories of students that we excluded 
under the 2014 Prior Rule, including students with one or more loans 
discharged or under consideration for discharge based on the borrower's 
total and permanent disability, students enrolled full-time in another 
eligible program during the year for which earnings data was obtained, 
students who completed a higher credentialed undergraduate or graduate 
program as of the end of the most recently completed award year prior 
to the D/E rates calculation, and students who have died. We believe 
the approach we adopted in the 2014 Prior Rule continues to be sound 
policy.
    Under these proposed regulations, we would also exclude students 
enrolled in approved prison education programs, as defined under 
section 484(t) of the HEA and 34 CFR 668.236. Employment options for 
incarcerated persons are limited or nonexistent, and Direct Loans are 
not available to them, so including these students in D/E rates would 
disincentivize the enrollment of incarcerated students and unfairly 
disadvantage institutions that may otherwise offer programs to benefit 
this population. The proposed regulations would also exempt 
comprehensive transition and postsecondary programs, as defined at 
Sec.  668.231. CTP programs are designed to provide integrated 
educational opportunities for students with intellectual disabilities, 
for whom certain requirements for title IV, HEA eligibility are waived 
or modified under subpart O of part 668. Unlike most eligible students, 
these students are not required to possess a high school diploma or 
equivalent, or to pass an ability-to-benefit test to establish 
eligibility for title IV, HEA funds. The earnings premium measure 
proposed in subpart Q is designed to compare postsecondary completers' 
earnings outcomes to the earnings of those with a high school diploma 
or equivalent but no postsecondary education. We believe that to judge 
a CTP program's earnings outcomes against the outcomes of individuals 
with a high school diploma or the equivalent would be an inherently 
flawed comparison, as students enrolled in a CTP program are not 
required to have a high school credential or equivalent. These students 
also are not eligible to obtain Federal student loans, which would 
render debt-to-earnings rates meaningless for these programs.
    Under the proposed regulations we would include students whose 
loans are in a military-related deferment. This is a change from the 
2014 Prior Rule. Although completers who subsequently choose to serve 
in the armed forces are demonstrably employed and may access military-
related loan deferments, and we believe that their earnings would 
likely raise the median income measured for the program, that does not 
eliminate the harm to them if their earnings do not otherwise support 
the debt they incurred. We believe that servicemembers should expect 
and receive equal consumer protections as those who enter other 
occupations.
    We continue to believe that we should not include the earnings or 
loan debt of students who were enrolled full time in another eligible 
program at the institution or at another institution during the year 
for which the Secretary obtains earnings information. These students 
are unlikely to work full time while in school and consequently their 
earnings would not be reflective of the program being assessed under 
the D/E rates. It would therefore be unfair to include these students 
in the D/E rates calculation.

Calculating Earnings Premium Measure (Sec.  668.404)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.404 to 
specify the methodology the Department would use to calculate the 
earnings premium measure. The Department would assess the earnings 
premium measure for a program by determining whether the median annual 
earnings of the title IV, HEA recipients who completed the program 
exceed the earnings threshold. The Department would obtain from a 
Federal agency with earnings data the most currently available median 
annual earnings of the students who completed the program during the 
cohort period. Using data from the U.S. Census Bureau, the Department 
would also calculate an earnings threshold, which would be the median 
earnings for working adults aged 25 to 34, who either worked during the 
year or indicated that they were unemployed when they were surveyed. 
The earnings threshold would be calculated based on the median for 
State in which the institution is located, or the national median if 
fewer than 50 percent of students in the program are located in the 
State where the institution is located during enrollment in the 
program. The Department would publish the state and national earnings 
thresholds annually in a notice in the Federal Register. We would 
exclude a student from the earnings premium measure calculation under 
the same conditions for which a student would be excluded from the D/E 
rates calculation under Sec.  668.403, including if (1) One or more of 
the student's title IV loans are under consideration, or have been 
approved, for a discharge on the basis of the student's total and 
permanent disability under 34 CFR 674.61, 682.402, or 685.212; (2) The 
student was enrolled full time in any other eligible program at the 
institution or at another institution during the calendar year for 
which the Department obtains earnings information; (3) For 
undergraduate programs, the student completed a higher credentialed 
undergraduate program subsequent to completing the program, as of the 
end of the most recently completed award year prior to the calculation 
of the earnings threshold measure; (4) For graduate programs, the 
student completed a higher credentialed graduate program subsequent to 
completing the program, as of the end of the most recently completed 
award year prior to the calculation of the earnings threshold measure; 
(5) The student is enrolled in an approved prison education program; 
(6) The student is enrolled in a comprehensive transition and 
postsecondary program; or (7) The student died. The Department would 
not issue the earnings premium measure for a program if fewer than 30 
students completed the program during the two-year or four-year cohort 
period. The Department also would not issue the measure if the Federal 
agency with earnings data does not provide the median earnings for the 
program, for example because exclusions or non-matches reduce the 
number of students available to be matched to earnings data to the 
point that the agency is no longer permitted to disclose median 
earnings due to privacy restrictions.
    Reasons: As discussed in ``Sec.  668.402 Financial value 
transparency framework,'' some programs with very poor labor market 
outcomes could potentially achieve passing D/E rates with low levels of 
loan debt, or because fewer than half of completers receive student 
loans. Such programs may not necessarily encumber students with high 
levels of debt but may nonetheless fail to leave students financially 
better off than had they not pursued a postsecondary education 
credential, especially given the financial and time costs for students. 
ED believes that a postsecondary program cannot be considered to lead 
to an acceptable earnings outcome if the median earnings of the 
program's completers do not, at

[[Page 32333]]

a minimum, exceed the earnings of those who only completed the 
equivalent of a secondary school education.\93\
---------------------------------------------------------------------------

    \93\ For further discussion of the earnings premium metric and 
the Department's reasons for proposing it, see above at 
``Background'' and at ``Financial value transparency scope and 
purpose (Sec.  668.401)'', and below at ``Gainful employment (GE) 
scope and purpose (Sec.  668.601)''. The discussion here 
concentrates on methodology.
---------------------------------------------------------------------------

    This concept that postsecondary education must entail academic 
rigor and career outcomes beyond what is delivered by high school is 
embedded in the student eligibility criteria in the HEA. Thus, 20 
U.S.C. 1001 states that an institution of higher education must only 
admit as regular students those individuals who have completed their 
secondary education or met specific requirements under 20 U.S.C. 
1091(d), which includes an assessment that they demonstrate the ability 
to benefit from the postsecondary program being offered. The 
definitions for a proprietary institution of higher education or a 
postsecondary vocational institution in 20 U.S.C. 1002 maintain the 
same requirement for admitting individuals who have completed secondary 
education. Similarly, there are only narrow exceptions for students 
beyond the age of compulsory attendance who are dually or concurrently 
enrolled in postsecondary and secondary education. The purpose of such 
limitations is to help ensure that postsecondary programs build skills 
and knowledge that extend beyond what is taught in high school.
    The Department thus believes it is reasonable that, if a program 
provides students an education that goes beyond the secondary level, 
students should be alerted in cases where their financial outcomes 
might not exceed those of the typical secondary school graduate. This 
does not mean that every individual who attends a program needs to earn 
more than a high school graduate. Instead, it requires only that at 
least half of program graduates show that they are earning as much or 
more than individuals who had never completed postsecondary education. 
We also note that the earnings premium is a conservative measure in 
that the program earnings measures only include students who complete 
the program of study, and do not include students who enrolled but 
exited without completing the program of study, as these students would 
in most cases have lower earnings than graduates. To provide 
consistency and simplicity, the program earnings information used to 
calculate the earnings premium measure would be the same as the 
earnings information used to determine D/E rates.
    The Department would compare the median earnings of the program's 
completers to the median earnings of adults aged 25 to 34, who either 
worked during the year or indicated they were unemployed (i.e., 
available and looking for work), with only a high school diploma or 
recognized equivalent in the State in which the institution is located 
while enrolled. The Department chose this range of ages to calculate 
the earnings threshold benchmark because it matches well the age 
students are expected to be three years after the typical student 
graduates (i.e., the year in which their earnings are measured under 
the rule) from the programs covered by this regulation. The average age 
three years after students graduate across all credential levels is 30 
years, and the interquartile range (i.e., from the program at the 25th 
percentile to the 75th percentile of average age) across all programs 
extends from 27 to 34 years of age. The 25 to 34 year age range 
encompasses the interquartile range for most credential types, with the 
lone exceptions being master's degrees, where the interquartile range 
of average ages when earnings are measured is 30 to 35, and doctoral 
programs, which range from 32 to 43 years old.\94\ Among these 
credential programs, students tend to be older than the high school 
graduates to which they are being compared.
---------------------------------------------------------------------------

    \94\ Graduate and Post-BA certificates, which make up 140 and 22 
programs of the over 26,000 programs with earnings data have 
interquartile ranges of 30 to 37 and 32 to 39 respectively.
---------------------------------------------------------------------------

    Because many programs are offered through distance education or 
serve students from neighboring States, if fewer than 50 percent of the 
students in a program are located in the State where the institution is 
located, the earnings premium calculation would compare the median 
earnings of the program's completers to the median earnings nationally 
for a working adult aged 25 to 34, who either worked during the year or 
indicated they were unemployed when interviewed, with only a high 
school diploma or the recognized equivalent. Although we recognize that 
some nontraditional learners attend and complete programs past age 34, 
either for retraining or to seek advancement within a current 
profession, we believe that the earnings premium measure would provide 
the most meaningful information to students and prospective students by 
illustrating the earnings outcomes of a program's graduates in 
comparison to others relatively early in their careers. As the 
Regulatory Impact Analysis explains, according to FAFSA data, the 
typical age of earnings measurement (three years after completion) for 
students across all program types is 30. This average varies only 
slightly across undergraduate programs: undergraduate certificate 
program graduates are an average of 30.6 years when their earnings are 
measured, associate degree graduates are 30.4, bachelor's degree 
graduates are 29.2, and all graduate credential graduates are older on 
average. Additionally, the ten highest-enrollment fields of study for 
undergraduate certificate programs--the credential level where the 
median earnings of programs are most likely to fall below the earnings 
threshold--all have a typical age at earnings measurement in the 25- to 
34-year-old range.
    We are aware that in some cases, earnings data for high school 
graduates to estimate an earnings threshold may not be as reliable or 
easily available in U.S. Territories, such as Puerto Rico. We welcome 
public comments on how to best determine a reasonable earnings 
threshold for programs offered in U.S. territories.
    In addition, we recognize that it may be more challenging for some 
programs serving students in economically disadvantaged locales to 
demonstrate that graduates surpass the earnings threshold when the 
earnings threshold is based on the median statewide earnings, including 
locales with higher earnings. We invite public comments concerning the 
possible use of an established list, such as a list of persistent 
poverty counties compiled by the Economic Development Administration, 
to identify such locales, along with comments on what specific 
adjustments, if any, the Department should make to the earnings 
threshold to accommodate in a fair and data-informed manner programs 
serving those populations.
    The Department chose to compute the earnings premium measure by 
comparing program graduates to those with only a secondary credential 
who are working or who reported themselves as unemployed, which means 
they do not currently have a job but report being available and looking 
for a position. By doing so, the threshold measure excludes individuals 
who are not in the labor force in calculating median high school 
graduate earnings. The Department believes this approach creates an 
appropriate comparison group for recent postsecondary program 
graduates, as we would anticipate that most graduates--especially those 
graduating from career training

[[Page 32334]]

programs--are likely employed or looking for work.

Process for Obtaining Data and Calculating D/E Rates and Earnings 
Premium Measure (Sec.  668.405)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.405 to 
establish the process under which the Department would obtain the data 
necessary to calculate the financial value transparency metrics.
    Under this proposed rule, the Department would use administrative 
data that institutions report to us to identify which students' 
information should be included when calculating the metrics established 
by this rule for each program. Institutions would be required to update 
or otherwise correct any reported data no later than 60 days after the 
end of an award year, in accordance with procedures established by the 
Department. We would use this administrative data to compile and 
provide to institutions a list of students who completed each program 
during the cohort period. Institutions would have the opportunity to 
review and correct completer lists. The finalized completer lists would 
then be used by the Department to obtain from a Federal agency with 
earnings data the median annual earnings of the students on each list; 
and to calculate the D/E rates and the earnings premium measure which 
we would provide to the institution. For each completer list the 
Department submits to the Federal agency with earnings data, the agency 
would return to the Department (1) The median annual earnings of the 
students on the list whom the Federal agency with earnings data matches 
to earnings data, in aggregate and not in individual form; and (2) The 
number, but not the identities, of students on the list that the 
Federal agency with earnings data could not match. If the information 
returned by the Federal agency with earnings data includes reports from 
records of earnings on at least 30 students, the Department would use 
the median annual earnings provided by the Federal agency with earnings 
data to calculate the D/E rates and earnings premium measure for each 
program. If the Federal agency with earnings data reports that it was 
unable to match one or more of the students on the final list, the 
Department would not include in the calculation of the median loan debt 
for D/E rates the same number of students with the highest loan debts 
as the number of students whose earnings the Federal agency with 
earnings data did not match. For example, if the Federal agency with 
earnings data is unable to match three students out of 100 students, 
the Department would order the 100 listed students by the amounts 
borrowed and exclude from the D/E rates calculation the students with 
the three largest loan debts to calculate the median program loan debt.
    Reasons: For the reasons discussed in Sec.  668.401 ``Scope and 
purpose,'' we intend to establish metrics that would assess whether a 
program leads to acceptable debt and earnings outcomes. As further 
discussed in Sec.  668.402 ``Financial value transparency framework,'' 
these metrics would include a program's D/E rates as well as an 
earnings premium measure. To the extent possible, in calculating these 
metrics the Department would rely upon data the institution is already 
required to report to us. As such, it would be necessary that current 
and reliable information be available to the Department. Institutions 
would therefore be required to update or otherwise correct any reported 
data no later than 60 days after the end of an award year, to ensure 
the accuracy of completers lists while allowing the Department to 
submit those lists to a Federal agency with earnings data in a timely 
manner.
    We believe that providing institutions the opportunity to review 
and correct completer lists will promote transparency and provide 
helpful insight from institutions, while ultimately yielding more 
reliable eligibility determinations based upon the most current and 
accurate debt and earnings data possible. We recognize that reviewing 
completer lists for each program could generate some administrative 
burden for institutions, but we have attempted to mitigate this burden 
by ensuring that the completer list review process is optional for 
institutions. The Department would assume the accuracy of a program's 
initial completer list unless the institution provides corrections 
using a process prescribed by the Secretary within the 60-day timeframe 
provided in these regulations.
    To safeguard the privacy of sensitive earnings data, the Federal 
agency with earnings data would not provide individual earnings data 
for each completer on the list to the Department. Instead, the Federal 
agency with earnings data would provide to the Department only the 
median annual earnings of the students on the list whom it matches to 
earnings data, along with the number of students on the list that it 
could not match, if any. This is in keeping with how the Department has 
received information on program and institutional earnings from other 
Federal agencies for years, as we have never obtained earnings 
information of individuals when using this approach.
    For purposes of determining the median loan debt to be used in the 
D/E rates calculation, the Department would remove the same number of 
students with the highest loan debts as the number of students whose 
earnings the Federal agency with earnings data did not match. In the 
absence of earnings data for specific borrowers, which would otherwise 
allow the Department to remove the loan debts specific to the borrowers 
whose earnings data could not be matched, we propose removing the 
highest loan debts to represent those borrowers because it is the 
approach to adjusting debt levels for unmatched individuals that is 
most favorable to institutions, yielding the lowest estimate of median 
debt for the subset of program graduates for whom earnings are observed 
that is consistent with the data.
    The proposed rule does not specify a source of data for earnings, 
but rather allows the Department flexibility to work with another 
Federal agency to secure data of adequate quality and in a form that 
adequately protects the privacy of individual graduates. The 
Department's goal is to evaluate programs, not individual students. The 
earnings data gathered for purposes of this proposed rule would not be 
used to evaluate individual graduates in any way. Moreover, the 
Department would be seeking aggregate statistical information from a 
Federal agency with earnings data for combined groups of students, and 
would not receive any individual data that associate identifiable 
persons with earnings outcomes. The Department will determine the 
specific source of earnings data in the future, potentially considering 
such factors as data availability, quality, and privacy safeguards.
    At this stage, however, the Department does have a preliminary 
preference regarding the source of earnings data. While the 2014 Prior 
Rule relied upon earnings data from the Social Security Administration, 
at this time we would prefer to use earnings data provided by the 
Internal Revenue Service (IRS). IRS now seems to be the highest quality 
data source available, and is the source used for other Department 
purposes such as calculating an applicant's title IV, HEA eligibility 
and determining a borrower's eligibility for income-driven student loan 
repayment plans. Moreover, the Department has successfully negotiated

[[Page 32335]]

agreements with the IRS to produce statistical information for the 
College Scorecard. Although the underlying data used by both agencies 
is based on IRS tax records, as an added privacy safeguard we 
understand that the IRS would use a privacy-masking algorithm to add 
statistical noise to its estimates before disclosing median earnings 
information to the Department.
    This statistical noise would take the form of a small adjustment 
factor designed to prevent disclosure of individual data. This 
adjustment factor can be positive or negative and tends to become 
smaller as the underlying number of individuals in the completion 
cohort in a program becomes larger. For a small number of programs, the 
adjustment factor could potentially affect whether some programs pass 
or fail the accountability metrics. The Department recognizes this 
creates a small risk of inaccurate determinations in both directions, 
including a very small likelihood that a program that would pass if its 
unadjusted median earnings data were used in calculating either D/E 
rates or the earnings premium. Using data on the distribution of noise 
in the IRS earnings figures used in the College Scorecard, we estimate 
that the probability that a program would be erroneously declared 
ineligible (that is, fail in 2 of 3 years using adjusted data when 
unadjusted data would result in failure for 0 years or 1 year) is less 
than 1 percent.
    Assuming that such statistical noise would be introduced, the 
Department plans to counteract this already small risk of improper 
classification in several ways. First, we include a minimum n-size 
threshold as discussed under proposed Sec.  668.403 to avoid disclosing 
median earnings information for smaller cohorts, where statistical 
noise would have a greater impact on the disclosed earnings measure. 
The n-size threshold effectively caps the influence of the noise on 
results under our proposed metrics. In addition, before invoking a 
sanction of loss of eligibility in the accountability framework 
described in proposed Sec.  668.603, we require that GE programs fail 
the accountability measures multiple times.
    Furthermore, elsewhere in the proposed rule, we establish an 
earnings calculation methodology that is more generous to title IV, HEA 
supported programs than what the Department adopted in the 2014 Prior 
Rule for GE programs. The proposed rule would measure the earnings of 
program completers approximately one year later (relative to when they 
complete their credential) than under the 2014 Prior Rule. This leads 
to substantially higher measured program earnings than under the 
Department's previous methodology--on the order of $4,000 (about 20 
percent) higher for GE programs with earnings between $20,000 and 
$30,000, which are the programs most at risk for failing the earnings 
premium threshold.\95\ The increase in earnings from this later 
measurement of income would provide a buffer more than sufficient to 
counter possible error introduced by the statistical noise added by the 
IRS. Additional adjustments would present unwelcome trade-offs, with 
little gain in protecting adequately performing programs in exchange 
for introducing another type of error. Adjusting earnings calculations 
to further reduce the low chance of programs failing the proposed 
metrics based on statistical noise would increase the risk of other 
kinds of errors, such as programs that should fail the proposed metrics 
appearing to pass based on an artificial increase in calculated 
earnings. On the other hand, and with respect to a related issue of 
earnings measurements, making special accommodations only for programs 
where under-reporting of earnings is suspected would differentially 
reward such programs and potentially create adverse incentives for 
programs to encourage such behavior. This could have the additional 
effect of inappropriately increasing public subsidies of such programs, 
as loan payments for program graduates would also be artificially 
reduced as a result of their lower reported earnings. We therefore do 
not believe it is necessary or appropriate to make other adjustments to 
the earnings calculations beyond those described above.
---------------------------------------------------------------------------

    \95\ This calculation is based on a comparison of (1) the 
earnings data released for GE programs in 2017 under the 2014 Prior 
Rule, inflation adjusted to 2019 dollars, to (2) earnings data for 
the subset of those GE programs still in existence, calculated using 
the methodology proposed in this NPRM.
---------------------------------------------------------------------------

    The Department also has gained a fresh perspective on earnings 
appeals in light of our experience, new research, and other 
considerations. In the 2014 Prior Rule the Department included an 
alternate earnings appeal to address concerns similar to those raised 
by some non-Federal negotiators in the 2022 negotiated rulemaking. The 
concerns were about whether programs preparing students to enter 
certain occupations, such as cosmetology, may have very low earnings in 
data obtained from Federal agencies because a substantial portion of a 
completer's income may derive from tips and gratuities that may be 
underreported or unreported to the IRS.
    Those arguments on unreported income have become less persuasive to 
the Department based upon further review of Federal requirements for 
the accurate reporting of income; consideration that IRS income data is 
used without adjustment for determining student and family incomes for 
purposes of establishing student title IV, HEA eligibility and 
determining loan payments under income-driven repayment plans; past 
data submitted as part of the alternate earnings appeals; and new 
research on the effects of tipping on possible debt-to-earnings 
outcomes. As a result of this review, we have concluded that it would 
not be appropriate to include a similar appeal process in this proposed 
rule.
    First, there is the issue of legal reporting requirements. The law 
requires taxpayers to report tipped income to the IRS. Failing to 
report all sources of the income to the IRS can lead to financial 
penalties and additional tax liability. And changes made in the 
American Rescue Plan Act lowered to $600 the reporting threshold for 
when a 1099-K is issued,\96\ which will result in more third-party 
settlement organizations issuing these forms. Because of these recent 
changes, the proposed use of earnings data provided directly by a 
Federal agency with earnings data would be more comprehensive and 
reliable than previously observed in the 2014 Prior Rule. This is not 
to deny that some fraction of income will be unreported despite legal 
duties to report, but instead to recognize as well that legal demands 
and other relevant circumstances have changed.
---------------------------------------------------------------------------

    \96\ https://www.govinfo.gov/content/pkg/PLAW-117publ2/html/PLAW-117publ2.htm.
---------------------------------------------------------------------------

    Moreover, income adjustments to IRS earnings are not used in other 
parts of the Department's administration of the title IV, HEA programs. 
IRS income and tax data are used to determine a student's eligibility 
for Federal benefits, including the title IV, HEA programs, and we 
believe it would be most appropriate and consistent to rely on IRS data 
when measuring the outcomes of those programs. In particular, under the 
Department's various income-driven repayment plans, student loan 
borrowers can use their reported earnings to the IRS to establish 
eligibility for loan payments calculated based on their reported 
earnings, and so the Department has an independent interest in the 
level of these earnings since they impact loan repayment. While 
institutions cannot directly compel graduates to properly report tipped 
income, they are nonetheless

[[Page 32336]]

uniquely positioned to educate their students on the importance of 
meeting their obligation to properly observe Federal tax filing 
requirements when they enter or reenter the work force. Title IV, HEA 
support for students and educational programs is in turn supported by 
taxpayers, and the Department has a responsibility to protect taxpayer 
interests when implementing the statute.
    Beyond those considerations, it is unlikely that any earnings 
appeal process would generate a better estimate of graduates' median 
earnings. To date, the Department has identified no other data source 
that could be expected to yield data of higher quality and reliability 
than the data available to the Department from the IRS. Alternative 
sources such as graduate earnings surveys would be more prone to issues 
such as low response rates and inaccurate reporting, could more easily 
be manipulated to mask poor program outcomes, and would impose 
significant administrative burden on institutions. One analysis of 
alternative earnings data, provided by cosmetology schools as part of 
the appeals process for GE debt-to-earnings thresholds under the 2014 
Prior Rule, found that the average approved appeal resulted in an 82 
percent increase in calculated earnings income relative to the numbers 
in administrative data.\97\ Results like that appear to be implausibly 
high, given our experience and other considerations that we offer above 
and below. Without relying too heavily on any one study, we can suggest 
at this stage that it seems likely that the use of alternative earnings 
estimates, typically generated from student surveys, could yield a 
substantial overestimate of income above that of unreported tips.\98\
---------------------------------------------------------------------------

    \97\ Stephanie Riegg Cellini and Kathryn J. Blanchard, ``Hair 
and taxes: Cosmetology programs, accountability policy, and the 
problem of underreported income,'' Geo. Wash. Univ. (Jan. 2022), 
www.peerresearchproject.org/peer/research/body/PEER_HairTaxes-Final.pdf.
    \98\ For further discussion on the Department's experience with 
alternate earnings appeals, see below at Sec.  668.603.
---------------------------------------------------------------------------

    Furthermore, the plausible scope of the unreported income issue 
should be kept in perspective. First of all, in many fields of work the 
question of unreported income is insubstantial. Tip income, for 
instance, certainly is not typical in every occupation and profession 
in which people work after graduating having received aid from title 
IV, HEA. In the GE context, the number of occupations related to GE 
programs where tipping is common seems far smaller than has been 
presented in the past. One public comment submitted in 2018 in response 
to the proposed recission of the 2014 Prior Rule noted that the only 
occupations in which there are GE programs where tipping might be 
occurring are in cosmetology, massage therapy, bartending, acupuncture, 
animal grooming, and tourism/travel services.\99\ While there are other 
types of occupational categories where tipping does occur, such as 
restaurant service, these are not areas where the students are being 
specifically trained to work in programs that might be eligible for 
title IV, HEA support. For instance, the GE programs related to 
restaurants are in culinary arts, where chefs are less likely to 
receive tips.
---------------------------------------------------------------------------

    \99\ www.regulations.gov/comment/ED-2018-OPE-0042-13794.
---------------------------------------------------------------------------

    Even in fields of work that involve title IV, HEA support and where 
one might suppose that unreported income is substantial, research will 
not necessarily support that guesswork. For example, recent research 
indicates that making reasonable adjustments to the earnings of 
cosmetology programs to account for tips would have minimal effects on 
whether a program passes the GE metrics. Looking at programs that 
failed the metrics in the 2014 Prior Rule for GE programs, researchers 
estimated that underreporting of tipped income likely constituted just 
8 percent of earnings and therefore would only lead to small changes in 
the number and percentage of cosmetology programs that pass or fail the 
2014 rule.\100\ To reiterate, the Department is interested in a 
reasonable assessment of available information without overreliance on 
any one piece of evidence. So, although the above study's estimate of 
only 8 percent underreporting is noteworthy for its small size, we are 
not convinced that it would be reasonable to convert that particular 
number into any flat rule related to disclosures, warnings, 
acknowledgments, or program eligibility.
---------------------------------------------------------------------------

    \100\ www.peerresearchproject.org/peer/research/body/PEER_HairTaxes-Final.pdf.
---------------------------------------------------------------------------

    Instead, we consider such studies alongside a range of other 
factors to reach decisions in this rulemaking. In particular, we note 
again the change in timing for measuring earnings from the 2014 Prior 
Rule that leads to an increase in earnings for all programs that is 
higher than this estimate of underreporting, as further explained in 
the discussion of proposed Sec.  668.403. Thus the proposed rule 
already includes safeguards against asserted underestimates of 
earnings. We also seek to avoid the perverse incentives that would be 
created by making the rule's application more lenient for programs in 
proportion to how commonly their graduates unlawfully underreport their 
incomes. We do not believe that taxpayer-supported educational programs 
should, in effect, receive credit when their graduates fail to report 
income for tax purposes. That position, even if it were fiscally 
sustainable, would incentivize institutions to discourage accurate 
reporting of earnings among program graduates--at the ultimate expense 
of taxpayers. Given the career training focus for these programs, we 
also believe that the institutions providing that training can 
emphasize the importance of reporting income accurately, not only as a 
legal obligation but also to ensure that long-term benefits from Social 
Security are maximized.
    In summary, the Department believes that the consistency and 
reliability benefits of using IRS earnings data would warrant reliance 
upon these average program earnings without further adjustments beyond 
those adopted in this proposed rule. This is the same approach used for 
the calculation of income--including tipped income that is lawfully 
reported to the IRS--for other title IV, HEA program administration 
purposes, such as determining eligibility for funds and the payment 
amounts under various income-driven repayment plans.

Determination of the Debt to Earnings Rates and Earnings Premium 
Measure (Sec.  668.406)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.406 to 
require the Department to notify institutions of their program value 
transparency metrics and outcomes and, in the case of a GE program, to 
notify the institution if a failing program would lose title IV, HEA 
eligibility under proposed Sec.  668.603. For each award year for which 
the Department calculates D/E rates and the earnings premium measure 
for a program, the Department would issue a notice of determination 
informing the institution of: (1) The D/E rates for each program; (2) 
The earnings premium measure for each program; (3) The Department's 
determination of whether each program is passing or failing, and the 
consequences of that determination; (4) For a non-GE program, whether 
the student acknowledgement would be required under proposed Sec.  
668.407; (5) For a GE program, whether the institution would be 
required to provide

[[Page 32337]]

the student warning under proposed Sec.  668.605; and (6) For a GE 
program, whether the program could become ineligible based on its final 
D/E rates or earnings premium measure for the next award year for which 
D/E rates or the earnings premium measure are calculated for the 
program.
    Reasons: Proposed Sec.  [thinsp]668.406 would establish the 
Department's administrative process to determine, and notify an 
institution of, a program's final financial value transparency 
measures. The notice of determination will inform the institution of 
its program outcomes so that it can provide prompt information to 
students, including warnings as required under proposed Sec.  668.605, 
and take actions necessary to improve programs with unacceptable 
outcomes.

Student Disclosure Acknowledgments (Sec.  668.407)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.407 to 
require acknowledgments from current and prospective students if an 
eligible non-GE program leads to high debt outcomes based on its D/E 
rates, to specify the content and delivery parameters of such 
acknowledgments, and to require students to provide the acknowledgments 
prior to the disbursement of title IV, HEA funds. Additional warning 
and acknowledgment requirements would also apply to GE programs at risk 
of a loss of title IV, HEA eligibility, as further detailed in proposed 
Sec.  668.605.
    Under proposed changes to Sec.  668.43, an institution would be 
required to distribute information to students and prospective 
students, prior to enrollment, about how to access a disclosure website 
maintained by the Secretary. The disclosure website would provide 
information about the program, including the D/E rates and earnings 
premium measure, when available. For eligible non-GE programs, for any 
year for which the Secretary notifies an institution that the eligible 
non-GE program is associated with relatively high debt burden for the 
year in which the D/E rates were most recently calculated by the 
Department, proposed Sec.  668.407 would require students to 
acknowledge viewing these informational disclosures prior to receiving 
title IV, HEA funds. This acknowledgment would be facilitated by the 
Department's disclosure website and required before the first time a 
student begins an academic term after the program has had an 
unacceptable D/E rate.
    In addition, an institution could not enroll, register, or enter 
into a financial commitment with the prospective student sooner than 
three business days after the institution distributes the information 
about the disclosure website maintained by the Secretary to the 
student. An institution could not disburse title IV, HEA funds to a 
prospective student enrolling in a program requiring an acknowledgment 
under this section until the student provides the acknowledgment. We 
would also specify that the acknowledgment would not otherwise mitigate 
the institution's responsibility to provide accurate information to 
students, nor would it be considered as evidence against a student's 
claim if the student applies for a loan discharge under the borrower 
defense to repayment regulations at 34 CFR part 685, subpart D.
    The Department is aware that in some cases, students may transfer 
from one program to another, or may not immediately declare a major 
upon enrolling in an eligible non-GE program. We welcome public 
comments about how to best address these situations with respect to 
acknowledgment requirements. The Department also understands that many 
students seeking to enroll in non-GE programs may place high importance 
on improving their earnings, and would benefit if the regulations 
provided for acknowledgements when a non-GE program is low-earning. We 
further welcome public comments on whether the acknowledgement 
requirements should apply to all programs, or to GE programs and some 
subset of non-GE programs, that are low-earning.
    The Department is also aware that some communities face unequal 
access to postsecondary and career opportunities, due in part to the 
lasting impact of historical legal prohibitions on educational 
enrollment and employment. Moreover, institutions established to serve 
these communities, as reflected by their designation under law, have 
often had lower levels of government investment. The Department 
welcomes comments on how we might consider these factors, in accord 
with our legal obligations and authority, as we seek to ensure that all 
student loan borrowers can make informed decisions and afford to repay 
their loans.
    Reasons: Through the proposed regulations the Department intends to 
establish a framework for financial value transparency for all 
programs, regardless of whether they are subject to the accountability 
framework for GE programs. To help achieve these goals, in proposed 
Sec.  668.407, we set forth acknowledgment requirements for students, 
which institutions that benefit from title IV, HEA must facilitate by 
providing links to relevant sources, based on the results of their 
programs under the metrics described in Sec.  668.402. To enhance the 
clarity of these proposed regulations, we discuss the warning 
requirements for GE programs separately under proposed Sec.  668.605.
    In the 2019 Prior Rule rescinding the GE regulation, the Department 
stated that it believed that updating the College Scorecard would be 
sufficient to achieve the goals of providing comparable information on 
all institutions to students and families as well as the public. While 
we continue to believe that the College Scorecard is an important 
resource for students, families, and the public, we do not think it is 
sufficient for ensuring that students are fully aware of the outcomes 
of the programs they are considering before they receive title IV, HEA 
funds to attend them. One consideration is that the number of unique 
visitors to the College Scorecard is far below that of the number of 
students who enroll in postsecondary education in a given year. In 
fiscal year 2022, we recorded just over 2 million visits overall to the 
College Scorecard. This figure includes anyone who visited, regardless 
of whether they or a family member were enrolling in postsecondary 
education. By contrast, more than 16 million students enroll in 
postsecondary education annually, in addition to the family members and 
college access professionals who may also be assisting many of these 
individuals with their college selection process. Second, research has 
shown that information alone is insufficient to influence students' 
enrollment decisions. For example, one study found that College 
Scorecard data on cost and graduation rates did not impact the number 
of schools to which students sent SAT scores.\101\ The authors found 
that a 10 percent increase in reported earnings increased the number of 
score sends by 2.4 percent, and the impact was almost entirely among 
well-resourced high schools and students. Third, the Scorecard is 
intentionally not targeted to a specific individual because it is meant 
to provide comprehensive information to anyone searching for a 
postsecondary education. By contrast, a disclosure would be a more

[[Page 32338]]

personalized delivery of information to a student because it would be 
based on the specific programs that they are considering. Requiring an 
acknowledgement under certain circumstances would also ensure that 
students see the information, which may or may not otherwise occur with 
the College Scorecard. Finally, we think the College Scorecard alone is 
insufficient to encourage improvements to programs solely through the 
flow of information indicated in the 2019 Final Rule. Posting the 
information on the Scorecard in no way guarantees that an institution 
would even be aware of the outcomes of their programs, and institutions 
have no formal role in acknowledging their outcomes. By contrast, with 
these proposed regulations institutions would be fully informed of the 
outcomes of all their programs and would also know which programs would 
be associated with acknowledgement requirements and which ones would 
not. The Department thus anticipates that these disclosures and 
acknowledgements will better achieve the goals of both delivering 
information to students and encouraging improvement than the approach 
outlined in the 2019 Rule did.
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    \101\ onlinelibrary.wiley.com/doi/abs/10.1111/ecin.12530.
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    Under the proposed regulations, the Department would not publish 
specific text that institutions would use to convey acknowledgment 
requirements to students. We believe institutions are well positioned 
to tailor communications about acknowledgment requirements in a manner 
that best meets the needs of their students, and institutions would be 
limited in their ability to circumvent the acknowledgement requirement 
because the Department's systems would not create disbursement records 
until the student acknowledges the disclosure through the website 
maintained by the Secretary. To enhance the clarity of these proposed 
regulations, we discuss the warning requirements for GE programs 
separately under proposed Sec.  668.605.
    Similar to the 2014 Prior Rule, requiring that at least three days 
must pass before the institution could enroll a prospective student 
would provide a ``cooling-off period'' for the student to consider the 
information provided through the disclosure website without immediate 
and direct pressure from the institution, and would also provide the 
student with time to consider alternatives to the program either at the 
same institution or at another institution.
    For both GE and non-GE programs, we propose to collect data, 
calculate results, and post results on both D/E and EP. That will make 
the information about costs, borrowing, and earnings outcomes widely 
available to the prospective students and the public. As outlined in 
subpart S, we use these same metrics to establish whether GE programs 
prepare students for gainful employment and are thus eligible to 
participate in Title IV, HEA programs, and due to the potential for 
loss of eligibility we require programs failing either metric to 
provide warnings and facilitate their students in acknowledging viewing 
the information before aid can be disbursed. For non-GE programs, we 
require students to acknowledge viewing the disclosure information when 
programs fail D/E, but not EP. While many non-GE students surely care 
about earnings, non-GE programs are more likely to have nonpecuniary 
goals. Requiring students to acknowledge low-earning information as a 
condition of receiving aid might risk conveying that economic gain is 
more important than nonpecuniary considerations. In contrast, students' 
ability to pursue nonpecuniary goals is jeopardized and taxpayers bear 
additional costs if students enroll in high-debt burden programs. 
Requiring acknowledgement of the D/E rates ensures students are alerted 
to risk on that dimension.

Reporting Requirements (Sec.  668.408)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.408 to 
establish institutional reporting requirements regarding Title IV-
eligible programs offered by the institution and students who enroll 
in, complete, or withdraw from an eligible such programs, and to define 
the timeframe for institutions to report this information.
    For each eligible program during an award year, an institution 
would be required to report: (1) Information needed to identify the 
program and the institution; (2) The name, CIP code, credential level, 
and length of the program; (3) Whether the program is programmatically 
accredited and, if so, the name of the accrediting agency; (4) Whether 
the program meets licensure requirements for all States in the 
institution's metropolitan statistical area, whether the program or 
prepares students to sit for a licensure examination in a particular 
occupation, the number of program graduates from the prior award year 
that take the licensure examination within one year (if applicable), 
and the number of program graduates that pass the licensure examination 
within one year (if applicable); (5) The total number of students 
enrolled in the program during the most recently completed award year, 
including both recipients and non-recipients of title IV, HEA funds; 
and (6) Whether the program is a medical or dental program whose 
students are required to complete an internship or residency.
    For each recipient of title IV, HEA funds, the institution would 
also be required to annually report at a student level: (1) The date 
each student initially enrolled in the program; (2) Each student's 
attendance dates and attendance status (e.g., enrolled, withdrawn, or 
completed) in the program during the award year; (3) Each student's 
enrollment status (e.g., full-time, three-quarter time, half-time, less 
than half-time) as of the first day of the student's enrollment in the 
program; (4) The total annual cost of attendance; (5) The total tuition 
and fees assessed for the award year; (6) The student's residency 
tuition status by State or region (such as in-state, in-district, or 
out-of-state); (7) The total annual allowance for books, supplies, and 
equipment; (8) The total annual allowance for housing and food; (9) The 
amount of institutional grants and scholarships disbursed; (10) The 
amount of other state, Tribal, or private grants disbursed; and (11) 
The amount of any private education loans disbursed, including private 
education loans made by the institution. In addition, if the student 
completed or withdrew from the program and ever received title IV, HEA 
assistance for the program, the institution would also be required to 
report: (1) The date the student completed or withdrew from the 
program; (2) The total amount, of which the institution is or should 
reasonably be aware, that the student received from private education 
loans for enrollment in the program; (3) The total amount of 
institutional debt the student owes any party after completing or 
withdrawing from the program; (4) The total amount of tuition and fees 
assessed the student for the student's entire enrollment in the 
program; (5) The total amount of the allowances for books, supplies, 
and equipment included in the student's title IV, HEA cost of 
attendance for each award year in which the student was enrolled in the 
program, or a higher amount if assessed the student by the institution 
for such expenses; and (6) The total amount of institutional grants and 
scholarships provided for the student's entire enrollment in the 
program. Institutions would also be required to report any additional 
information the Department may specify

[[Page 32339]]

through a notice published in the Federal Register.
    For GE programs, institutions would be required to report the above 
information, as applicable, no later than July 31 following the date 
these regulations take effect for the second through seventh award 
years prior to that date or, for medical and dental programs that 
require an internship or residency, July 31 following the date these 
regulations take effect for the second through eighth award years prior 
to that date. For eligible non-GE programs, institutions would have the 
option either to report as described above, or to initially report only 
for the two most recently completed award years, in which case the 
Department would calculate the program's transitional D/E rates and 
earnings premium measure based on the period reported. After this 
initial reporting, for each subsequent award year, institutions would 
be required to report by October 1 following the end of the award year, 
unless the Department establishes different dates in a notice published 
in the Federal Register. If, for any award year, an institution fails 
to provide all or some of the information described above, the 
Department would require the institution to provide an acceptable 
explanation of why the institution failed to comply with any of the 
reporting requirements.
    Reasons: Certain student-specific information is necessary for the 
Department to implement the provisions of proposed subpart Q, 
specifically to calculate the D/E rates and the earnings premium 
measure for programs under the program value transparency framework. 
This information is also needed to calculate many of the disclosures 
under proposed Sec.  668.43(d), including the completion rates, program 
costs, median loan debt, median earnings, and debt-to-earnings, among 
other disclosures. As discussed in ``Sec.  668.401 Scope and purpose,'' 
the proposed reporting requirements are designed, in part, to 
facilitate the transparency of program outcomes and costs by: (1) 
Ensuring that students, prospective students, and their families, the 
public, taxpayers, and the Government, and institutions have timely and 
relevant information about programs to inform student and prospective 
student decision-making; (2) Helping the public, taxpayers, and the 
Government to monitor the results of the Federal investment in these 
programs; and (3) Allowing institutions to see which programs produce 
exceptional results for students so that those programs may be 
emulated.
    The proposed regulations would require institutions to report the 
name, CIP code, credential level, and length of the program. Although 
program completion times can sometimes vary due to differences in 
student enrollment patterns, to provide the most meaningful information 
possible for prospective students, we refer in the proposed 
regulations, particularly in the reporting and disclosure requirements 
in Sec.  668.43 and Sec.  668.408, to the ``length of the program.'' 
The ``length of the program'' would be defined as the amount of time in 
weeks, months, or years that is specified in the institution's catalog, 
marketing materials, or other official publications for a student to 
complete the requirements needed to obtain the degree or credential 
offered by the program.
    In proposed additions to the general definitions at Sec.  668.2, we 
would establish separate definitions for ``CIP code'' and ``credential 
level.'' The proposed definition of ``CIP code'' largely mirrors the 
definition in the 2014 Prior Rule. The proposed definition of 
``credential level'' would also be similar to past definitions, and the 
proposed definition includes a listing of the credential levels for use 
in the definition of a program.
    Reporting whether a program is programmatically accredited along 
with the name of the relevant accrediting agency would allow the 
Department to include that information in disclosures. Clear and 
consistent information about programmatic accreditation would aid 
current and prospective students in assessing the value of the program 
and in comparing the program against others, and such information about 
programmatic accreditation is not readily available to students.
    Reporting whether a program meets relevant licensure requirements 
for the States in the institution's metropolitan statistical area or 
prepares students to sit for a licensure examination in a particular 
occupation would allow the Department to provide current and 
prospective students with invaluable information about the career 
outcomes for graduates of the program and support informed enrollment 
decisions. In recent years, some institutions have misrepresented the 
career and employment outcomes of programs, including the eligibility 
of program graduates to sit for licensure examinations, resulting in 
borrower defense claims.\102\ We remain concerned about the ongoing 
potential for such misrepresentations, and believe that reporting and 
disclosing information about a program's licensure outcomes--such as 
share of recent program graduates that sit for and pass licensure 
exams--will help to reduce the number of future borrower defense claims 
that are approved.
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    \102\ studentaid.gov/announcements-events/borrower-defense-update.
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    Reporting the total number of students enrolled in a program, 
including both recipients and non-recipients of title IV, HEA funds, 
would allow the Department to calculate and disclose the percentage of 
students who receive Federal student aid and Federal student loans. 
This information would assist current and prospective students in 
comparing programs and institutions and would assist in making better 
informed enrollment decisions.
    Reporting whether a program is a medical or dental program that 
includes an internship or residency is necessary because proposed Sec.  
668.403 would use a different cohort period in calculating the D/E 
rates for those programs. See ``Sec.  668.403 Calculating D/E rates'' 
for a discussion of why these programs would be evaluated differently.
    The dates of a student's attendance in the program and the 
student's attendance status (i.e., completed, withdrawn, or still 
enrolled) and enrollment status (i.e., full time, three-quarter time, 
half time, and less than half time) would be needed by the Department 
to attribute the correct amount of a student's title IV, HEA program 
loans that would be used in the calculation of a program's D/E rates. 
These items would also be needed to identify the program's former 
students for inclusion on the list submitted to a Federal agency with 
earnings data to determine the program's median annual earnings for the 
purpose of the D/E rates and earnings premium calculations, and the 
borrowers who would be considered in the calculation of the program's 
completion rate, withdrawal rate, loan repayment rate, median loan 
debt, and median earnings.
    We would require the amount of each student's private education 
loans and institutional debt, along with the student's title IV, HEA 
program loan debt, institutional grants and scholarships, and other 
government or private grants disbursed, to determine the debt portion 
of the D/E rates. We would also require institutions to report the 
total cost of attendance, the cost of tuition and fees, and the cost of 
books, supplies, and equipment to determine the program's costs. We 
would need both of these amounts to calculate the D/E rates because, as 
provided under proposed Sec.  668.403, in determining a program's 
median loan amount, each

[[Page 32340]]

student's loan debt would be capped at the lesser of the loan debt or 
the program costs, less any institutional grants and scholarships. We 
recognize that some institutions with higher overall tuition costs 
offer significant institutional financial assistance or discounts that 
reduce the net cost for students to enroll in their programs. Requiring 
institutions to report institutional grants and scholarships would 
allow the Department to take such financial assistance into 
consideration when measuring debt outcomes, would encourage 
institutions to provide financial assistance to students, and would 
ultimately result in a fairer metric and more consistent comparisons of 
the actual debt burdens associated with different programs.
    For GE programs, institutions would be required to initially report 
for the second through seventh prior award years, and for the second 
through eighth prior award years for medical and dental programs 
requiring an internship or residency. This reporting would ensure that 
the Department could calculate the D/E rates and the earnings premium 
measure under subpart Q and apply the eligibility outcomes under 
subpart S in as timely a manner as possible, thus protecting students 
and taxpayers through prompt oversight of failing GE programs. Much of 
the necessary information for GE programs would already have been 
reported to the Department under the 2014 Prior Rule, and as such we 
believe the added burden of this reporting relative to existing 
requirements would be reasonable. For example, the vast majority (88 
percent) of public institutions operated at least one GE program and 
thus have experience with similar data reporting for the subset of 
their students enrolled in certificate programs under the 2014 Prior 
Rule, and nearly half (47 percent) of private non-profit institutions 
did as well. Moreover, many institutions report more detailed 
information on the components of cost of attendance and other sources 
of financial aid in the federal National Postsecondary Student Aid 
Survey (NPSAS) administered by the National Center for Education 
Statistics. For example, 2,210 institutions provided very detailed 
student-level financial aid and other information as part of the 2017-
18 National Postsecondary Student Aid Study, Administrative Collection 
(NPSAS:18-AC) collection, including 74 percent of all public 
institutions and 37 percent of all private non-profit 
institutions.\103\ Since the latter are selected for inclusion randomly 
each NPSAS collection period, the number of institutions that have ever 
provided such data is much higher than this rate implies.
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    \103\ These tabulations compare the number of institutions 
providing enrollment lists in NPSAS 18-AC to the number of 
institutions in the 2019 Program Performance Data, described in the 
Regulatory Impact Analysis. The number of institutions represented 
in the final survey is lower. see Table B1 in Burns, R., Johnson, 
R., Lacy, T.A., Cameron, M., Holley, J., Lew, S., Wu, J., Siegel, 
P., and Wine, J. (2022). 2017-18 National Postsecondary Student Aid 
Study, Administrative Collection (NPSAS:18-AC): First Look at 
Student Financial Aid Estimates for 2017-18 (NCES 2021-476rev). U.S. 
Department of Education. Washington, DC: National Center for 
Education Statistics. Retrieved 1/30/2023 from nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2021476rev.
---------------------------------------------------------------------------

    The proposed financial value transparency framework entails added 
reporting burden for institutions relative to the 2019 Prior Rule and 
the 2014 Prior Rule for some additional data items and for students in 
programs that are not covered by the GE accountability framework. The 
Department proposes flexibility for institutions to avoid reporting 
data on students who completed programs in the past for non-GE 
programs, and instead to use data on more recent completer cohorts to 
estimate median debt levels. In part, this is intended to ease the 
administrative burden of providing this data for programs that were not 
covered by the 2014 Prior Rule reporting requirements, especially for 
the small number of institutions that may not previously have had any 
programs subject to these requirements.
    The debt-to-earnings rates are intended to capture whether program 
completers' debt levels are reasonable in light of their earnings 
outcomes. Since earnings are observed with a lag, the most recent 
year's D/E rates necessarily involve the earnings and debt levels of 
individuals completing at least five or six years earlier. For GE 
programs, where the measures affect program eligibility, the Department 
believes it is important that debt and earnings measures are based on 
the same group of students. It might be, for example, that more recent 
cohorts of students have higher borrowing levels due to changes to 
curriculum that raised the costs of instruction and, as a result, the 
cost of tuition. These changes would ideally be reflected in 
improvements in students' earnings as well, but the D/E rates might not 
reflect that if the earnings data used for D/E were based on the older 
cohorts while debt measures are based on a more recent cohort.
    For non-GE programs the transparency metrics do not affect a 
program's eligibility for Title IV, HEA programs. While it would be 
preferable to have more accurate information that is comparable across 
all programs to better support student choices, for non-GE programs the 
Department believes alleviating some institutional reporting burden 
justifies a temporary sacrifice in the quality of the D/E data reported 
during a transition period. For that reason, the Department proposes to 
offer institutions the option either to report past cohorts for 
eligible non-GE programs as otherwise required for GE programs, or to 
report for only the two most recently completed award years. If 
institutions opt to report only the most recently completed award years 
for an eligible non-GE program, we would calculate the program's 
transitional D/E rates and earnings premium based on the data reported. 
Transitional D/E rates would differ from those described in proposed 
Sec.  668.403 by only considering Federal loan debt (no private or 
institutional loans) and by not capping the total debt based on direct 
costs minus institutional scholarships. Further, this debt would 
pertain to recent completers rather than those whose median earnings 
are available. We believe that the transitional metric, though missing 
data elements, will provide useful information to institutions that 
could be used to enhance their program offerings and improve student 
outcomes until more comprehensive data are available.
    For those institutions that opt to or are required to complete the 
reporting on past cohorts, we recognize that the initial reporting 
deadline of July 31, 2024, may pose implementation challenges for 
institutions, who may experience difficulties compiling and reporting 
data within a month of the date these regulations become effective, 
particularly for institutions that offer many educational programs and 
may not have been subject to reporting under the 2014 Prior Rule or 
similar reporting related to the NPSAS. To assist institutions in 
preparing for this deadline and to ensure that institutions have 
sufficient time to submit their data for the first reporting period, 
the Department anticipates that, as with the 2014 Prior Rule, it would 
provide training in advance to institutions on the new reporting 
requirements, provide a format for reporting, and enable the 
Department's relevant systems to accept optional early reporting from 
institutions beginning several months prior to the July 31, 2024, 
deadline.
    We propose to include a provision similar to the one from the 2014 
Prior

[[Page 32341]]

Rule requiring an institution to provide the Secretary with an 
explanation of why it has failed to comply with any of the reporting 
requirements. Because the Department would use the reported information 
to calculate the debt and earnings measures and the transparency 
disclosures, it is essential for the Secretary to have information 
about why an institution may not be able to report the information.
    Some of the negotiators, particularly those representing 
postsecondary institutions, expressed unease that the proposed 
reporting may be burdensome. We understand these concerns, but we 
nonetheless believe that the benefits to students and to taxpayers 
derived from the reporting requirements under proposed subpart Q, which 
allow implementation of the proposed transparency and accountability 
frameworks, outweigh the costs associated with additional institutional 
burden. Institutions will also benefit from the reporting because the 
information would allow them to make targeted changes to improve their 
program offerings, and they would be able to promote their positive 
outcomes to potential students to assist in their recruiting efforts.
    Most importantly, the Department believes these added reporting 
requirements will benefit students and taxpayers by providing new and 
more accurate information to make well-informed postsecondary choices. 
Multiple studies have shown that students and families are often making 
their postsecondary choices without sufficient information due to 
confusing and misleading financial aid offers.\104\ The new reporting 
requirements will permit the Department to provide estimates of the net 
prices and total direct costs (tuition, fees, books, supplies, and 
equipment) and indirect costs students must pay to complete a program, 
and to tailor these estimates of yearly costs to students' financial 
background. Moreover, the data will allow estimates of the total amount 
students pay to acquire a degree, capturing variation in how long it 
takes for students to complete their degree. In some areas--including 
among graduate programs where borrowing levels have increased 
substantially in the last decade--this information will be the first 
systematic source of comparable data available for students and the 
general public to compare the costs and outcomes of different programs. 
This information should be beneficial to institutions as well, helping 
them to benchmark their tuition prices against similar programs at 
other institutions, and to keep their prices better aligned with the 
financial value their programs deliver for students.
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    \104\ www.newamerica.org/education-policy/policy-papers/decoding-cost-college/; https://www.gao.gov/products/gao-23-104708.
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Severability (Sec.  668.409)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.409 to 
establish severability protections ensuring that if any program 
accountability or transparency provision is held invalid, the remaining 
program accountability and transparency provisions, as well as other 
subparts, would continue to apply. Proposed Sec.  668.409 would operate 
in conjunction with the severability provision in proposed Sec.  
668.606, which is discussed below and any other applicable severability 
provision throughout the Department's regulations.
    Reasons: Through the proposed regulations we intend to (1) 
Establish measures that would distinguish programs that provide 
quality, affordable education and training to their students from those 
programs that leave students with unaffordable levels of loan debt in 
relation to their earnings or provide no earnings benefit from those 
who did not pursue a postsecondary degree or credential; and (2) 
Establish reporting and disclosure requirements that would increase the 
transparency of student outcomes so that accurate and comparable 
information is provided to students, prospective students, and their 
families, to help them make better informed decisions about where to 
invest their time and money in pursuit of a postsecondary degree or 
credential; the public, taxpayers, and the Government, to help them 
better safeguard the Federal investment in these programs; and 
institutions, to provide them meaningful information that they could 
use to improve student outcomes in these programs.
    We believe that each of the proposed provisions serves one or more 
important, related, but distinct, purposes. Each of the requirements 
provides value, separate from and in addition to the value provided by 
the other requirements, to students, prospective students, and their 
families; to the public; taxpayers; the Government; and to 
institutions. To best serve these purposes, we would include this 
administrative provision in the regulations to establish and clarify 
that the regulations are designed to operate independently of each 
other and to convey the Department's intent that the potential 
invalidity of any one provision should not affect the remainder of the 
provisions. Furthermore, proposed Sec.  668.409 would operate in 
conjunction with the severability provision in proposed Sec.  668.606 
regarding GE program accountability. For ease of reference, here we 
offer an illustrative discussion for both of those severability 
provisions.
    For example, under proposed subpart Q of part 668, a program must 
meet both the D/E rate and the earnings premium metric in order to pass 
the financial value transparency metrics. Each metric represents a 
distinctive measure of program quality, as we have explained elsewhere 
in this NPRM. Thus, if the D/E rate or the earnings premium metric is 
held invalid, the metric that was not held invalid could alone serve to 
help people distinguish, in its own distinctive way, programs that tend 
to provide relatively high quality and/or affordable education and 
training to their students from those programs that do not. 
Accordingly, the proposed rule does not provide that a program can pass 
the metrics by meeting only one of either the D/E metric or the 
earnings premium metric. The two metrics are aimed at distinct values, 
and they can operate independently of each other, in the sense that if 
one of these metrics is held invalid, the other metric could stand 
alone to help people distinguish programs on grounds that are relevant 
to many observers, applicable law, and sound policy. Although the 
Department believes that implementing both metrics is lawful and 
preferable for financial value transparency and for GE program 
accountability, implementing one or the other would be administrable 
and superior to implementing neither.
    As another example, proposed Sec.  668.605 would require 
institutions to provide various warnings to their students when a GE 
program fails the D/E rates or the earnings premium metric. If any or 
all of the student warning provisions are held invalid, the remainder 
of the rule can operate to provide measurements of financial value 
transparency even if there is no requirement that students must be 
warned when a GE program fails one of the metrics. The Department would 
retain other methods of disseminating information about GE and eligible 
non-GE programs, albeit methods that might not be as effective for and 
readily available to the relevant decision makers. Similarly, if a 
particular form of student warning is held invalid, the other warnings 
would still operate on their own to achieve the benefits of effectively 
informing as many students

[[Page 32342]]

as possible about a GE program's failing metrics.
    In addition, the Department's ability to evaluate GE programs for 
title IV eligibility can operate compatibly with a wide range of 
options for disclosures, warnings, and acknowledgments about programs--
and vice versa. Those information dissemination choices involve matters 
of degree that do not affect the operation of eligibility provisions. 
GE program eligibility can be determined without depending on one 
particular kind of information disclosure strategy, as long as the 
Department itself has the necessary information to make the eligibility 
determination. Likewise, a wide variety of valuable information can be 
disseminated in a variety of methods and formats for transparency 
purposes, regardless of how programs are evaluated for eligibility 
purposes.
    Even if the invalidation of one part of the proposed rule would 
preclude the best and most effective regulation in the Department's 
considered view, the Department also believes that a wide range of 
financial value transparency options and GE program accountability 
options would be compatible with each other, justified on legal and 
policy grounds compared to loss of the entire rule, and could be 
implemented effectively by the Department. The same principle applies 
to the relationship of the provisions of subparts Q and S of part 668 
to other subparts in this rule and throughout title 34 of the CFR, as 
reflected in the severability provision that will apply to all 
provisions in part 668 in July, 2023.\105\
---------------------------------------------------------------------------

    \105\ See 34 CFR 668.11 at 87 FR 65426, 65490 (Oct. 28, 2022).
---------------------------------------------------------------------------

Gainful Employment (GE) Scope and Purpose (Sec.  668.601)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add subpart S, which would 
apply to educational programs that are required under the HEA to 
prepare students for gainful employment in a recognized occupation and 
would establish rules and procedures under which we would determine 
program eligibility. Proposed Sec.  668.601 would establish this scope 
and purpose of the GE regulations in subpart S.
    Reasons: The HEA requires some programs and institutions--generally 
all programs at proprietary institutions and most non-degree programs 
at public or private nonprofit institutions--to prepare students for 
gainful employment in a recognized occupation in order to access the 
title IV, HEA Federal financial aid programs. For many years, however, 
the standards by which institutions could demonstrate compliance with 
those requirements were largely undefined. In 2010, the Department 
conducted a rulemaking and issued regulations that established such 
standards for GE programs, based in part on the debt that graduates 
incurred in attending the program, relative to the earnings they 
received after completion. Following a court challenge to the 2011 
Prior Rule and further negotiated rulemaking, the Department 
reevaluated and modified its position and it issued updated regulations 
in 2014 that, in part, omitted the GE metric that a district court had 
found inadequately reasoned and included a debt-to-earnings standard 
for GE programs. When the data were first released in January 2017, 
over 800 programs, collectively enrolling hundreds of thousands of 
students, did not pass the revised GE standards.
    In 2019, the Department rescinded the 2014 Prior Rule in favor of 
an alternate approach that relied upon providing more consumer 
information via the College Scorecard. As further explained in the 
discussion of proposed Sec.  668.401, we continue to believe that 
providing students with clear and accurate measures of the financial 
value of all programs is critical. Based, however, on studies of the 
College Scorecard's impact on higher education choices, and an 
extensive body of research on how to make consumer information most 
impactful, we propose several improvements involving disclosures and 
warnings to students to ensure they have this information, especially 
when enrolling in a program might harm them financially.
    For programs that are intended to prepare students for gainful 
employment in a recognized occupation, however, further steps beyond 
information provisions are necessary and appropriate. The proposed rule 
therefore defines the conditions under which a program prepares 
students for gainful employment in a recognized occupation, and 
accordingly determines eligibility for title IV, HEA program funds, 
based on the financial value metrics described in Sec.  668.402.
    The Department proposes additional scrutiny for these programs for 
several reasons. First, informational interventions have been shown to 
be effective in shifting postsecondary choices when designed well, but 
it is now reasonably clear that those interventions are insufficient to 
fully protect students from financial harm.\106\ The impact of 
information alone tends to be especially limited among more vulnerable 
populations, including groups that disproportionately enroll in gainful 
employment programs.\107\ Analyses in the RIA show that 17.7 percent of 
all borrowers, accounting for nearly 33,374 borrowers in recent 
cohorts, who are in low-earning or high-debt-burden GE programs are in 
default on their student loans three years after repayment entry 
(compared with 10.1 percent of students nationwide). Removing Federal 
aid eligibility for such programs is necessary to prevent low-
financial-value programs from continuing to harm these students--and 
from enjoying taxpayer support.
---------------------------------------------------------------------------

    \106\ Baker, D., Cellini, S., Scott-Clayton, J., & Turner, L. 
(2021) Why information alone is not enough to improve higher 
education outcomes. Brookings Institution. Washington, DC.
    \107\ Gurantz, O., Howell, J., Hurwitz, M., Larson, C., Pender, 
M. and White, B. (2021), A National-Level Informational Experiment 
to Promote Enrollment in Selective Colleges. J. Pol. Anal. Manage., 
40: 453-479. doi.org/10.1002/pam.22262; Hurwitz, M. and Smith, J. 
(2018), Student Responsiveness to Earnings Data in the College 
Scorecard. Econ Inq, 56: 1220-1243. doi.org/10.1111/ecin.12530.
---------------------------------------------------------------------------

    Second, the mission of gainful employment programs is to further 
students' career success. If such a program inflicts financial harm on 
its students, it is less likely that the value of the program can be 
redeemed by its performance in helping students achieve nonfinancial 
goals. In any event, this career focus is consistent with the different 
statutory definition of eligibility for such programs and the purposes 
of the relevant requirements for Federal support in title IV, HEA. As 
with other title IV, HEA educational programs, GE students are 
generally required to already possess a high school diploma or its 
equivalent. But unlike other title IV provisions, the statute's GE 
provisions also require that participating programs train students to 
prepare them for gainful employment in a recognized occupation.\108\ 
Otherwise, taxpayer support is not authorized.
---------------------------------------------------------------------------

    \108\ 20 U.S.C. 1002(b)(1)(A), (c)(1)(A). See also 20 U.S.C. 
1088(b)(1)(A)(i), which refers to a recognized profession.
---------------------------------------------------------------------------

    The relevant statutes thus indicate that GE programs are not meant 
to prepare postsecondary students for any job, irrespective of pay, 
debt burden, or qualifications. Instead, title IV's GE provisions 
indicate a purpose of Federal support for programs that actually train 
and prepare postsecondary students for jobs that they would be less 
likely to obtain without that training and preparation. Moreover, the 
recognized occupations for which GE programs must train and ``prepare'' 
postsecondary

[[Page 32343]]

students cannot fairly be considered ``gainful'' if typical program 
completers end up with more debt than they can repay absent additional 
Federal assistance. Likewise, the Department is convinced that programs 
cannot fairly be said to ``prepare'' postsecondary students for 
``gainful'' employment in recognized occupations if program completers' 
earnings fall below those of students who never pursue postsecondary 
education in the first place. Put simply, the HEA itself calls for 
special attention to GE programs when it comes to program eligibility. 
The relevant statutes and policy considerations may differ for 
transparency purposes, but, for GE program eligibility purposes, the 
Department must maintain certain limits on taxpayer support. We believe 
that, at minimum, it is permissible and reasonable for the Department 
to specify the eligibility standards for GE programs to include D/E 
rates and an earnings premium.
    Third, an expanding body of academic research suggests that 
additional attention is appropriate for GE programs. Studies have 
documented persistent problems including poor labor market outcomes, 
high levels of borrowing, high rates of default, and low loan repayment 
rates. For example, research has found that some postsecondary 
certificates have very low or even negative labor market returns for 
their graduates.\109\ This finding is echoed in the Department's 
Regulatory Impact Analysis, which shows that 23.1 percent of title IV, 
HEA enrollment in undergraduate certificate programs was in programs 
where the median earnings among graduates was less than that for high 
school graduates of a similar age. Studies have reported that students 
in programs at for-profit institutions, in particular, see much lower 
employment and earnings gains than students in programs at non-profit 
institutions, which is also shown in the Department's analysis.\110\ 
Moreover, multiple studies have concluded that, accounting for 
differences in student characteristics, borrower outcomes like 
repayment rates and the likelihood of default are worse in the 
proprietary sector.111 112 Finally, research indicates that 
Federal accountability efforts that deny Title IV, HEA eligibility to 
low-performing institutions can be effective in driving improved 
student outcomes, particularly for students who attend (or would have 
attended) for-profit colleges.113 114
---------------------------------------------------------------------------

    \109\ Clive Belfield and Thomas Bailey, ``The Labor Market 
Returns to Sub-Baccalaureate College: A Review,'' March 2017. 
Ccrc.tc.columbia.edu/media/k2/attachments/labor-market-returns-sub-baccalaureate-college-review.pdf.
    \110\ Stephanie Cellini and Nick Turner, ``Gainfully Employed?: 
Assessing the Employment and Earnings of For-Profit College Students 
Using Administrative Data,'' Journal of Human Resources (2019, vol. 
54, issue 2). Econpapers.repec.org/article/uwpjhriss/v_3a54_3ay_3a2019_3ai_3a2_3ap_3a342-370.htm. Cellini, S.R. and 
Koedel, C. (2017), The Case for Limiting Federal Student Aid to For-
Profit Colleges. J. Pol. Anal. Manage., 36: 934-942. https://doi.org/10.1002/pam.22008. Deming, D., Yuchtman, N., Abulafi, A., 
Goldin, C. & Katz, L. (2016). The Value of Postsecondary Credentials 
in the Labor Market: An Experimental Study. American Economic 
Review, 106 (3): 778-806. Armona, L., Chakrabarti, R., Lovenheim, M. 
(2022). Student Debt and Default: The Role of For-Profit Colleges. 
Journal of Financial Economics. 144(1) 67-92. Liu, V.Y.T., & 
Belfield, C. (2020). The Labor Market Returns to For-Profit Higher 
Education: Evidence for Transfer Students. Community College Review, 
48(2), 133-155. doi.org/10.1177/0091552119886659.
    \111\ David Deming, Claudia Goldin, and Lawrence Katz, ``The 
For-Profit Postsecondary School Sector: Nimble Critters or Agile 
Predators?'', Journal of Economic Perspectives (Volume 26, Number 1, 
Winter 2012). www.aeaweb.org/articles?id=10.1257/jep.26.1.139.
    \112\ Judith Scott-Clayton, ``What Accounts For Gaps in Student 
Loan Default, and What Happens After'', Evidence Speaks Reports 
(Volume 2, Number 57, June 2018). www.brookings.edu/research/what-accounts-for-gaps-in-student-loan-default-and-what-happens-after/.
    \113\ Stephanie Cellini, Rajeev Darolia, and Leslie Turner, 
``Where Do Students Go When For-Profit Colleges Lose Federal Aid?'', 
American Economic Journal: Economic Policy (Volume 12, Number 2, May 
2020). www.aeaweb.org/articles?id=10.1257/pol.20180265.
    \114\ Christopher Lau, ``Are Federal Student Loan Accountability 
Regulations Effective?'', Economics of Education Review (Volume 75, 
April 2020). www.sciencedirect.com/science/article/pii/S0272775719303796?via%3Dihub.
---------------------------------------------------------------------------

    We recognize that, since the prior rulemaking efforts in 2010, 
2014, and 2019, some institutions have made positive changes to their 
GE programs, and some with many poor performing programs closed. 
Nonetheless, the data highlighted in the RIA demonstrate that more 
improvement in the sector is needed: for example, in the most recent 
data available (covering graduates in award years 2016 and 2017), 
nearly one fourth of all federally supported students enrolled in GE 
programs are in programs that fail either the D/E or EP metrics. 
Establishing accountability provisions will both prevent students from 
enrolling in programs where poor financial outcomes are the norm and 
would deter future bad actors seeking to create new programs that 
poorly serve students to capture Federal student aid revenue.

Gainful Employment Criteria (Sec.  668.602)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to establish a framework to 
determine whether a GE program is preparing students for gainful 
employment in a recognized occupation and thus may access title IV, HEA 
funds based upon its debt-to-earnings and earnings premium outcomes. 
Within this framework, we would consider a program to provide training 
that prepares students for gainful employment in a recognized 
occupation if the program: (1) Does not lead to high debt-burden 
outcomes under the D/E rates measure; (2) Does not lead to low-earnings 
outcomes under the earnings premium measure; and (3) Is certified by 
the institution as included in the institution's accreditation by its 
recognized accrediting agency, or, if the institution is a public 
postsecondary vocational institution, the program is approved by a 
recognized State agency in lieu of accreditation.
    A GE program would, in part, demonstrate that it prepares students 
for gainful employment in a recognized occupation through passing D/E 
rates. The program would be ineligible if it fails the D/E rates 
measure in two out of any three consecutive award years for which the 
program's D/E rates are calculated. If it is not possible to calculate 
or issue D/E rates for a program for an award year, the program would 
receive no D/E rates for that award year and would remain in the same 
status under the D/E rates measure as the previous award year. For 
example, if a program failed the D/E rates measure in year 1, did not 
receive rates in year 2, passed the D/E rates measure in year 3, and 
failed the D/E rates measure in year 4, that program would be 
ineligible after year 4 because it failed the D/E rates measure in two 
out of three consecutive years for which D/E rates were calculated. 
This approach would avoid simply allowing a program to pass the D/E 
rates or earnings threshold premium measure when an insufficient number 
of students complete the program. For situations where it is not 
possible to calculate D/E rates for the program for four or more 
consecutive award years, the Secretary would disregard the program's D/
E rates for any award year prior to the four-year period in determining 
the program's eligibility.
    A GE program also would, in part, demonstrate that it prepares 
students for gainful employment in a recognized occupation through 
passing the earnings premium measure. The program would be ineligible 
if it fails the earnings premium measure in two out of any three 
consecutive award years for which the program's earnings premium is 
calculated. If it is not possible to calculate or publish the earnings

[[Page 32344]]

premium measure results for a program for an award year, the program 
would receive no result under the earnings threshold measure for that 
award year and would remain in the same status under the earnings 
threshold measure as the previous award year. For situations where it 
is not possible to calculate the earnings premium measure for the 
program for four or more consecutive award years, the Secretary would 
disregard the program's earnings premium for any award year prior to 
the four-year period in determining the program's eligibility.
    The D/E rates and earnings premium measures capture different 
dimensions of program performance, and function independently in 
determining continued eligibility for Title IV student aid programs. 
For a program to be considered to provide training that prepares 
students for gainful employment in a recognized occupation, it must 
neither be deemed a high-debt-burden program in two of three 
consecutive years in which rates are published, nor be deemed a low-
earnings program in two of three consecutive years in which rates are 
published.
    Reasons: The financial value transparency and GE program 
accountability framework would both rely upon the same metrics that are 
described in proposed Sec.  668.402. This framework would include two 
debt-to-earnings measures very similar to those used in the 2014 Prior 
Rule to assess the debt burden incurred by students who completed a GE 
program in relation to their earnings. This assessment would in part 
allow the Department to determine, consistent with the statute, whether 
a program is preparing students for gainful employment in a recognized 
occupation.
    Under the proposed regulations, the first D/E rate is the 
discretionary income rate, which would measure the proportion of annual 
discretionary income--that is, the amount of income above 150 percent 
of the Poverty Guideline for a single person in the continental United 
States--that students who complete the program are devoting to annual 
debt payments. The second rate is the annual earnings rate, which would 
measure the proportion of annual earnings that students who complete 
the program are devoting to annual debt payments. A program would pass 
the D/E rates measure by meeting the standards of either of the two 
metrics (the discretionary D/E rate or the annual D/E rate) as 
discussed in more detail under proposed Sec.  668.402. As we have 
discussed elsewhere in this NPRM, the Department cannot reasonably 
conclude that a program meets the statutory obligation to prepare 
students for gainful employment in a recognized occupation if the 
program leads to unacceptable debt outcomes by failing both of the D/E 
rates two out of three consecutive years in which the program is 
measured.
    While D/E rates would help identify GE programs that burden 
students who complete the programs with unsustainable debt, the D/E 
rates calculation does not, on its own, adequately capture poorly 
performing GE programs with low costs, or in which few or no students 
borrow. Such programs may not necessarily encumber completers with 
large debt loads, but the programs may nonetheless fail to yield 
sufficient employment outcomes to justify Federal investment in the 
program. Even small debt loads can be unsustainable for some borrowers, 
as demonstrated by the estimated default rates among programs that 
would pass the D/E rates metric but would fail the earnings premium 
metric. Again and as discussed elsewhere in this NPRM, the Department 
has concluded that a GE program does not prepare students for gainful 
employment if the median earnings of the program's completers (that is, 
more than half of students completing the program) do not exceed the 
typical earnings of those who only completed the equivalent of a 
secondary school education.
    The addition of the earnings premium metric to the D/E 
accountability framework of the 2014 Prior Rule is motivated by several 
considerations.\115\ First, there is increasing concern among the 
public that some higher education programs are not ``worth it'' and do 
not promote economic mobility. While the D/E measure identifies 
programs where debt is high relative to earnings, students and families 
use their time and their own money in addition to the amount they 
borrow to finance their studies. Several recent studies (referenced in 
the RIA) support adding an earnings premium metric to help ensure that 
students benefit financially from their career training studies.\116\ 
We also note in the RIA that programs with very low earnings, but low 
enough debt levels that they pass the D/E metric, nonetheless have very 
high default rates. In that sense, the earnings premium measure 
provides some added protection to borrowers with relatively low 
balances, but earnings so low that even low levels of debt payments are 
unaffordable. While the earnings premium provides additional protection 
to borrowers, it measures a distinct dimension of program performance--
i.e., the extent to which the program helps students attain a minimally 
acceptable level of earnings--from the D/E metrics.
---------------------------------------------------------------------------

    \115\ For further discussion of the earnings premium metric and 
the Department's reasons for proposing it, see above at [TK--
preamble general introduction, legal authority], at [TK--
transparency, around p.150], and at [TK--method for calculating 
metrics, around p.180]. The discussion here concentrates on GE 
program eligibility.
    \116\ See for example Jordan D. Matsudaira and Lesley J. Turner. 
``Towards a framework for accountability for federal financial 
assistance programs in postsecondary education.'' The Brookings 
Institution. (2020) www.brookings.edu/wp-content/uploads/2020/11/20210603-Mats-Turner.pdf; Stephanie R. Cellini and Kathryn J. 
Blanchard, ``Using a High School Earnings Benchmark to Measure 
College Student Success Implications for Accountability and 
Equity.'' The Postsecondary Equity and Economics Research Project. 
(2022). www.peerresearchproject.org/peer/research/body/2022.3.3-PEER_HSEarnings-Updated.pdf; and Michael Itzkowitz. ``Price to 
Earnings Premium: A New Way of Measuring Return on Investment in 
Higher Education.'' Third Way. (2020). https://www.thirdway.org/report/price-to-earnings-premium-a-new-way-of-measuring-return-on-investment-in-higher-ed.
---------------------------------------------------------------------------

    The earnings premium measure would address this issue by requiring 
the Department to determine whether the median annual earnings of the 
completers of a GE program exceeds the median earnings of students with 
at most a high school diploma or GED. Accordingly, the earnings premium 
measure would supplement the D/E rates measure by identifying programs 
that may pass the D/E rates measure because loan balances of completers 
are low but nonetheless do not provide students or taxpayers a return 
on the investment in career training.
    The Department proposes tying ineligibility to the second failure 
in any three consecutive award years of either the debt-to-earnings 
rates or the earnings premium measure because it prevents against one 
aberrantly low performance year resulting in the loss of title IV, HEA 
program fund eligibility. Additionally, we chose not to use a longer 
time horizon to avoid a scenario in which a prior result is no longer 
reflective of current performance of a program. A longer time horizon 
would also allow poorly performing programs to continue harming 
students and the integrity of the title IV, HEA programs.
    As under the 2014 Prior Rule, the Department proposes a third 
component to ensure that GE programs meet the statutory requirement of 
providing training that prepares students for gainful employment in a 
recognized occupation: that the program meets applicable accreditation 
or State authorizing agency standards for the approval of postsecondary 
vocational education. These accrediting agency and

[[Page 32345]]

State requirements are often gatekeeping conditions that a student must 
meet if they want to work in the occupation for which they are being 
prepared. For instance, many health care professions require completion 
of an approved program before a student can register to take a 
licensing examination. The Department cannot reasonably conclude that a 
program meets the statutory obligation to prepare graduates for gainful 
employment in a recognized occupation if the program lacks the 
necessary approvals needed for a student to have a possibility to work 
in that occupation.

Ineligible Gainful Employment Programs (Sec.  668.603)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.603 to 
define the process by which a failing GE program would lose title IV, 
HEA eligibility. If the Department determines that a GE program leads 
to unacceptable debt or earnings outcomes, as calculated in proposed 
Sec.  668.402 for the length of time specified in Sec.  668.602, the GE 
program would become ineligible for title IV, HEA aid. The ineligible 
GE program's participation in the title IV, HEA programs would end upon 
the institution notifying the Department that it has stopped offering 
the program; issuance of a new Eligibility and Certification Approval 
Report (ECAR) that does not include that program; the completion of a 
termination action of program eligibility under subpart G of part 668; 
or a revocation of program eligibility if the institution is 
provisionally certified. If the Department initiates a termination 
action against an ineligible GE program, the institution could appeal 
that action, with the hearing official limited to determining solely 
whether the Department erred in the calculation of the program's D/E 
rates or earnings premium measure. The hearing official could not 
reconsider the program's ineligibility on any other basis.
    Though not discussed in this section, we also propose in Sec.  
668.171 to add a new mandatory financial responsibility trigger that 
would require an institution to provide financial protection if 50 
percent of its title IV, HEA funds went to students enrolled in 
programs that are deemed failing under the metrics described in 
proposed Sec.  668.602.
    Proposed Sec.  668.603 would also establish a minimum period of 
ineligibility for GE programs that lose eligibility by failing the D/E 
rates or the earning premium measure in two out of three years, and for 
GE programs at risk of a loss of eligibility that an institution 
voluntarily discontinues. As under the 2014 Prior Rule, an institution 
could not seek to reestablish the eligibility of a GE program that lost 
eligibility until three years following the date the program lost 
eligibility under proposed Sec.  668.603. Similarly, an institution 
could not seek to reestablish eligibility for a failing GE program that 
the institution voluntarily discontinued, or to establish eligibility 
for a substantially similar program with the same 4-digit CIP prefix 
and credential level, until three years following the date the 
institution discontinued the failing program. Following this period of 
ineligibility, such a program would remain ineligible until the 
institution establishes the eligibility of that program through the 
process described in proposed Sec.  668.604(c).
    Reasons: For troubled GE programs that do not improve, the eventual 
loss of eligibility protects students by preventing them from incurring 
debt or using up their limited grant eligibility to enroll in programs 
that have consistently produced poor debt or earnings outcomes. 
Codifying in the regulations when and how the Department will end an 
ineligible GE program's participation in the title IV, HEA programs 
would provide additional clarity and transparency to institutions and 
the public as to the Department's administrative procedures.
    The paths to ineligibility listed in Sec.  668.603(a) represent the 
main ways that an academic program ceases participating in the title 
IV, HEA programs. Institutions can and of course do regularly cease 
offering programs, but do not always formally notify the Department 
when that occurs. The list of programs on an institution's ECAR serves 
as the main repository that tracks which eligible programs an 
institution offers, so removing a program from that document clearly 
establishes that it is no longer eligible for aid. In cases where an 
institution is provisionally certified the process for removing 
programs is more streamlined, as a provisional status indicates the 
Department has concerns about the institution's administration of the 
title IV, HEA programs. Finally, if none of these other events occur, 
the Department would initiate an action under part 668, subpart G, the 
section of the Department's regulations that governs the process for a 
limitation, suspension, or termination action. Given that a program 
becoming ineligible for title IV, HEA aid is a form of limitation, the 
Department believes that subpart G is the appropriate procedure to 
follow.
    As further described under the Financial Responsibility section of 
this proposed rule, the Department is also proposing to add a new 
mandatory trigger in Sec.  668.171 that would require the institution 
to provide financial protection to the Department if 50 percent of its 
title IV, HEA volume went to students enrolled in failing GE programs. 
This would ensure that taxpayers are protected while any ineligibility 
process continues in the instances in which the majority of an 
institution's aid dollars become ineligible in the next academic year, 
which could be substantially destabilizing. In addition, the 50 percent 
threshold would protect institutions from the requirement to provide 
financial protection to the Department in instances where only programs 
with very small title IV, HEA volume are at risk of aid ineligibility 
through failing the GE metrics.
    Proposed Sec.  668.603(b) would also clearly define the process and 
circumstances under which an institution could appeal a program 
eligibility termination action taken against an ineligible GE program. 
Specifically, the proposed regulations would allow appeals only on the 
basis that the Department erred in its calculation of the program's D/E 
rates or earnings threshold measure. As further discussed under 
proposed Sec.  668.405, this is a change from the 2014 Prior Rule, 
which provided more options for institutions to submit challenges and 
appeals during the process of establishing final GE program rates. 
However, these options added significant burden and complexity for 
institutions, including an alternative earnings appeal process that was 
partially invalidated in Federal litigation.\117\ As a result, the 
Department attempted to make case-by-case judgments about when reported 
earnings data should be replaced with data submitted by an institution. 
The prior appeals process ultimately resulted in delayed accountability 
for institutions and diminished protections for students and the 
public. Limiting appeals to errors of calculation would simplify the 
process and reduce administrative burden on the Department and 
institutions alike by focusing squarely on the circumstances most 
likely to support a prevailing appeal.
---------------------------------------------------------------------------

    \117\ Am. Ass'n of Cosmetology Schs. v. DeVos, 258 F. Supp. 3d 
50, 76-77 (D.D.C. 2017).
---------------------------------------------------------------------------

    Several additional considerations inform our decision to not 
include a

[[Page 32346]]

process for appealing the earnings data for programs.\118\ First, new 
research is now available. A 2022 study concluded that the alternate 
earnings appeals submitted to the Department claimed to show earnings 
that were implausibly high--on average, 73 percent higher than Social 
Security Administration (SSA) earnings data under the 2014 Prior Rule, 
and 82 percent higher for cosmetology programs. The study proceeded to 
report that the underreporting of tipped income for cosmetologists and 
hairdressers, based on estimates from IRS data, is likely just 8 
percent of SSA earnings.\119\ Again, the Department's goal is a 
reasonable assessment of available evidence and not overreliance on any 
one source. That said, numbers such as those above give us serious 
pause, combined with other considerations.
---------------------------------------------------------------------------

    \118\ For further discussion of unreported income, see above at 
[TK].
    \119\ The study is Stephanie Riegg Cellini and Kathryn J. 
Blanchard, ``Hair and taxes: Cosmetology programs, accountability 
policy, and the problem of underreported income,'' Geo. Wash. Univ. 
(Jan. 2022), www.peerresearchproject.org/peer/research/body/PEER_HairTaxes-Final.pdf. PEER_HairTaxes-Final.pdf 
(peerresearchproject.org). Note that tips included on credit card 
payments to a business are more likely to be reported, and it is 
reasonable to expect that many workers are complying with the law to 
include tips in their reported income.
---------------------------------------------------------------------------

    Those other considerations include the Department's observations of 
the information provided in the earlier alternate earnings appeals 
process, which likewise suggest that the appeals had little value in 
improving the assessment of whether programs' ``true'' debt-to-earnings 
(or earnings) levels met the GE criteria. We agree that the earnings 
reported in appeals submitted by institutions seem implausibly high. 
And although there might be more than one possible explanation for 
those results, such as the sequence in which appeals were processed, 
the uncertainties that surround such appeals present another reason 
against reinstituting them now. There was no simple or easily 
identifiable test for evaluating appeals, and therefore there is no 
easy way to evaluate the results in hindsight. In addition, 
institutions had incentives to collect and show data that cast their 
programs in the best light within the administrative proceedings, 
whatever the applicable standard for reviewing appeals. Those 
structural complications seem difficult to resolve.
    Moreover, offering those appeals certainly entailed costs for the 
Department and for others. The 341 appeals that were filed required 
substantial Department staff time to process. That administrative cost 
concern alone would not necessarily warrant a negative evaluation of an 
appeals process that had substantial and demonstrable value. However, 
given difficulties institutions experienced in obtaining and compiling 
earnings data, along with frequent issues involving statistical 
accuracy and student privacy due to small sample sizes, the Department 
has concluded that any evidentiary value afforded by the earnings 
appeals were more than outweighed by the administrative burden and 
costs incurred by both institutions and the Department.
    As well, we have reason to question the value of appeals to many 
potentially interested parties. The difference between the 882 programs 
for which institutions submitted notices of intent to appeal when 
compared to the 341 appeals that were actually submitted suggests that 
institutions may often have concluded that the alternative earnings 
appeal process did not warrant the necessary investment of time and 
effort--or perhaps the initially supposed difference in graduates' 
earnings was not as significant as anticipated. And in rescinding the 
2014 GE Prior Rule in 2019, the Department's reasoning focused on a 
deregulatory policy choice based on circumstances at that time rather 
than the desirability of appeals. In its brief discussion of unreported 
income in response to comments, the Department did not ascribe any 
value to the alternate earnings appeals process in addressing 
unreported income.\120\ In addition to the unreliability of the 
earnings appeals that were previously submitted, as further discussed 
in our analysis of proposed Sec.  668.405 above, we note again that IRS 
earnings are used in multiple ways within the Department's 
administration of the Federal student aid programs. Those uses include 
establishing student aid eligibility for grants and loans, and setting 
loan payment amounts when students enroll in income-driven loan 
repayment plans. We believe it is reasonable for us to use the same 
source for average program earnings for the metrics that we propose 
here.
---------------------------------------------------------------------------

    \120\ 84 FR 31392, 31409-10 (2019).
---------------------------------------------------------------------------

    We do propose a narrower and more objective form of appeal, 
however. As noted above, under this proposed rule an institution could 
only appeal a termination action if the Department erred in calculating 
a GE program's D/E rates or earnings premium. The appeal of the 
termination action would not include the underlying students included 
in the measures because institutions would already have an opportunity 
to correct the completer list they submit to the Department as 
described under proposed Sec.  668.405(b). The proposed regulations 
would also establish a three-year waiting period before an ineligible 
or voluntarily discontinued program could regain eligibility. This 
waiting period is intended to protect the interests of students, 
taxpayers, and the public by ensuring that institutions with failing or 
ineligible GE programs take meaningful corrective actions to improve 
program outcomes before seeking Federal support for duplicate or 
substantially similar programs using the same four-digit CIP prefix and 
credential level.
    The Department selected a three-year period of ineligibility 
because it most closely aligns with the ineligibility period associated 
with failing the Cohort Default Rate, which is the Department's 
longstanding primary outcomes-based accountability metric. Under those 
requirements, an institution that becomes ineligible for title IV, HEA 
support due to high default rates cannot reapply for approximately 
three award years.

Certification Requirements for GE Programs (Sec.  668.604)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.604 to 
require transitional certifications for existing GE programs, as well 
as certifications when seeking recertification or the approval of a new 
or modified GE program. An institution would certify that each eligible 
GE program it offers is approved, or is otherwise included in the 
institution's accreditation, by its recognized accrediting agency. 
Alternatively, if the institution is a public postsecondary vocational 
institution, it could certify that the GE program is approved by a 
recognized State agency for the approval of public postsecondary 
vocational education, in lieu of accreditation. Either certification 
would require the signature of an authorized representative of the 
institution and, for a proprietary or private nonprofit institution, an 
authorized representative of an entity with direct or indirect 
ownership of the institution if that entity has the power to exercise 
control over the institution.
    For each of its currently eligible GE programs, an institution 
would need to provide a transitional certification no later than 
December 31 of the year in which this regulation takes effect, as an 
addendum to the institution's PPA with the Department. Failure to 
complete the transitional certification would result in discontinued 
participation in the Title IV, HEA programs for the institution's

[[Page 32347]]

GE programs. Institutions would also be required to provide this 
certification when seeking recertification of eligibility for the title 
IV, HEA programs, and the Department would not recertify the GE program 
if the institution fails to provide the certification. A transitional 
GE certification would not be required if an institution makes a GE 
certification in a new PPA through the recertification process between 
July 1 and December 31 of the year in which this regulation takes 
effect. An institution must update its GE certification within 10 days 
if there are any changes in the approvals for a GE program, or other 
changes that make an existing certification no longer accurate, or risk 
discontinuation of title IV, HEA participation for that GE program.
    To establish eligibility for a GE program, the institution would be 
required to update the list of its eligible programs maintained by the 
Department to add that program. An institution may not update its list 
of eligible programs to include a GE program that was subject to a 
three-year loss of eligibility under Sec.  668.603(c) until that three-
year period expires. In addition, an institution may not update its 
list of eligible programs to add a GE program that is substantially 
similar to a failing program that the institution voluntarily 
discontinued or that became ineligible because of a failure to satisfy 
the required D/E rates, earnings premium measure, or both.
    Reasons: Through these certification requirements, institutions 
would be required to assess their programs to determine whether they 
meet these minimum standards. The Department cannot reasonably consider 
that a program meets the statutory obligation to prepare graduates for 
gainful employment in a recognized occupation if the program cannot 
meet the basic certification and licensure requirements for that 
occupation. We believe that any student attending a program that does 
not meet all applicable accreditation and State or Federal licensing 
requirements would experience difficulty or be unable to secure 
employment in the occupation for which he or she received training and, 
consequently, would likely struggle to repay the debt incurred for 
enrolling in that program. The certification requirements are intended 
to help prevent such outcomes by requiring the institution to 
proactively assess whether its programs meet those requirements and to 
affirm to the Department when seeking eligibility that the programs 
meet those standards. The certification requirements are therefore an 
appropriate condition that programs must meet to qualify for title IV, 
HEA program funds, as they address the concerns about employability 
outcomes underlying the gainful employment eligibility provisions of 
the HEA.
    As we have proposed in changes to Sec.  668.14, these 
certifications must be signed by an authorized representative of the 
institution and, for a proprietary or private nonprofit institution, an 
authorized representative of an entity with direct or indirect 
ownership of the institution if that entity has the power to exercise 
control over the institution. Because of these signature requirements, 
an institution would have to carefully assess whether each offered GE 
program meets the necessary requirements, and we expect that 
institutions would make this self-assessment in good faith and after 
appropriate due diligence.
    In addition, these certification requirements would help make 
certain that the Department has an accurate list of all GE programs 
offered by an institution, and that the list is regularly updated as 
the institution adds or subtracts programs. This accurate listing of 
programs will in turn ensure that the institution and the Department 
can provide required disclosures and warnings to students in a timely 
and effective manner.
    The certification requirements would also ensure that an 
institution cannot add a program that would be ineligible under the 
conditions in proposed Sec.  668.603.

Warnings and Acknowledgments (Sec.  668.605)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.605 to 
require notifications to current and prospective students who are 
enrolled in, or considering enrolling in, a GE program if that program 
could lose title IV, HEA eligibility based on its next published D/E 
rates or earnings premium; to specify the content and delivery 
requirements of such notifications; and to require students to 
acknowledge seeing the notifications when applicable before receiving 
Title IV aid. An institution would be required to provide a warning to 
students and prospective students for any year for which the Secretary 
notifies an institution that the program could become ineligible based 
on its final D/E rates or earnings premium measure for the next award 
year for which those metrics are calculated. The warning would be the 
only substantive content contained in these written communications. The 
proposed warning for prospective and current students would include a 
warning, as specified in a notice published in the Federal Register, 
that the program has not passed standards established by the U.S. 
Department of Education based on the amounts students borrow for 
enrollment in the program and their reported earnings; the relevant 
information to access a disclosure website maintained by the 
Department; and that the program could lose access to title IV, HEA 
funds in the subsequent award year. The warning would also include a 
statement that the student must acknowledge having seen the warning 
through the disclosure website before the institution may disburse any 
title IV, HEA funds. In addition, warnings provided to students 
enrolled in GE programs would include (1) A description of the academic 
and financial options available to continue their education in another 
program at the institution in the event that the program loses title 
IV, HEA eligibility, including whether the students could transfer 
academic credit earned in the program to another program at the 
institution and which course credit would transfer; (2) An indication 
of whether, in the event of a loss of eligibility, the institution will 
continue to provide instruction in the program to allow students to 
complete the program; (3) An indication of whether, in the event of a 
loss of eligibility, the institution will refund the tuition, fees, and 
other required charges paid to the institution for enrollment in the 
program; and (4) An explanation of whether, in the event that the 
program loses eligibility, the students could transfer credits earned 
in the program to another institution through an established 
articulation agreement or teach-out.
    In addition to providing the English-language warnings, the 
institution would be required to provide accurate translations of the 
English-language warning into the primary languages of current and 
prospective students with limited English proficiency.\121\ The 
delivery timeframe and procedure for required warnings would depend 
upon whether the intended recipient is a current or prospective 
student. For current students, an institution would be required to 
provide the warning in

[[Page 32348]]

writing to each student enrolled in the program no later than 30 days 
after the date of the Department's notice of determination, and to 
maintain documentation of its efforts to provide that warning. For 
prospective students, under proposed Sec.  668.605, an institution must 
provide the warning to each prospective student or to each third party 
acting on behalf of the prospective student at the first contact about 
the program between the institution and the student or third party by 
one of the following methods: (1) Hand-delivering the warning and the 
relevant information to access the disclosure website as a separate 
document to the prospective student or third party individually, or as 
part of a group presentation; (2) Sending the warning and the relevant 
information to access the disclosure website to the primary email 
address used by the institution for communicating with the prospective 
student or third party about the program, with the stipulation that the 
warning is the only substantive content in the email and that the 
warning must be sent by a different method of delivery if the 
institution receives a response that the email could not be delivered; 
or (3) Providing the warning and the relevant information to access the 
disclosure website orally to the student or third party if the contact 
is by telephone. In addition, an institution could not enroll, 
register, or enter into a financial commitment with the prospective 
student sooner than three business days after the institution 
distributes the warning to the student. An institution could not 
disburse title IV, HEA funds to a prospective student enrolling in a 
program requiring a warning under this section until the student 
provides the acknowledgment described in this section. We also specify 
that the provision of a student warning or the student's acknowledgment 
would not otherwise mitigate the institution's responsibility to 
provide accurate information to students, nor would it be considered as 
evidence against a student's claim if the student applies for a loan 
discharge under the borrower defense to repayment regulations at 34 CFR 
part 685, subpart D.
---------------------------------------------------------------------------

    \121\ Title VI of the Civil Rights Act of 1964 prohibits 
discrimination on the basis of race, color, or national origin by 
recipients of Federal financial assistance. It requires that 
recipients of Federal funding take reasonable steps to provide 
meaningful access to their programs or activities to individuals 
with limited English proficiency (LEP), which may include the 
provision of translated documents to people with LEP.
---------------------------------------------------------------------------

    Reasons: In proposed Sec.  668.605, we set forth warning and 
acknowledgment requirements that would apply to institutions based on 
the results of their GE programs under the metrics described in Sec.  
668.402. A program that fails the D/E rates or earnings premium measure 
is at elevated risk of losing access to the title IV, HEA programs. 
Providing timely and effective warnings to students considering or 
enrolled in such programs is especially critical in allowing students 
to make informed choices about whether to enroll or continue in a 
program for which expected financial assistance may become unavailable.
    In the 2019 Prior Rule rescinding the GE regulation, the Department 
stated that it believed that updating the College Scorecard would be 
sufficient to achieve the goals of providing comparable information on 
all institutions to students and families as well as the public. While 
we continue to believe that the College Scorecard is an important 
resource for students, families, and the public, we do not think it is 
sufficient for ensuring that students are fully aware of the outcomes 
of the programs they are considering before they receive title IV, HEA 
funds to attend them. One consideration is that the number of unique 
visitors to the College Scorecard is far below that of the number of 
students who enroll in postsecondary education in a given year. In 
fiscal year 2022, we recorded just over 2 million visits overall to the 
College Scorecard. This figure includes anyone who visited, regardless 
of whether they or a family member were enrolling in postsecondary 
education. By contrast, more than 16 million students enroll in 
postsecondary education annually, in addition to the number of family 
members and college access professionals who may also be assisting many 
of these individuals with their college selection process. Second, as 
noted in the discussion of proposed Sec.  668.401 and in the RIA, 
research has shown that information alone is insufficient to influence 
students' enrollment decision. For example, one study found that 
College Scorecard data on cost and graduation rates did not impact the 
number of schools to which students sent SAT scores.\122\ The authors 
found that a 10 percent increase in reported earnings increased the 
number of scores students sent to the school by 2.4 percent, though the 
impact was almost entirely among well-resourced high schools and 
students. Third, the Scorecard is intentionally not targeted to a 
specific individual because it is meant to provide comprehensive 
information to anyone searching for a postsecondary education. By 
contrast, a warning or disclosure would be a more personalized delivery 
of information to a student because it would be based on the programs 
that they are enrolled in or actively considering enrolling in. Making 
it a required disclosure would also ensure that students see the 
information, which may or may not otherwise occur with the College 
Scorecard. Finally, we think the College Scorecard alone is 
insufficient to encourage improvements to programs solely through the 
flow of information, in contrast to the 2019 Prior Rule. Posting the 
information on the Scorecard in no way guarantees that an institution 
would even be aware of the outcomes of their programs, and institutions 
have no formal role in acknowledging their outcomes. By contrast, with 
these proposed regulations institutions would be fully informed of the 
outcomes of all their programs and would also know which programs would 
be associated with warnings and which ones would not. The Department 
thus anticipates that these warnings would better achieve the goals of 
both getting information to students and encouraging improvement than 
did the approach outlined in the 2019 regulations. As further discussed 
in the Background section of this proposed rule, we believe that the 
approach taken with the 2019 Prior Rule does not adequately protect 
students from low-performing GE programs and that additional 
protections are needed to safeguard the interests of students and the 
public.
---------------------------------------------------------------------------

    \122\ Hurwitz, M. and Smith, J. (2018) Student Responsiveness to 
Earnings Data in the College Scorecard. Economic Inquiry, Vo. 56, 
Issue 2. https://doi.org/10.1111/ecin.12530.
---------------------------------------------------------------------------

    Under the proposed regulations, as under the 2014 Prior Rule the 
Department would publish the text that institutions would use for the 
student warning in a notice in the Federal Register to standardize the 
warning and ensure that the necessary information is adequately 
conveyed to students. The warning would alert both prospective and 
enrolled students that the program has not met standards established by 
the Department based on the amounts students borrow for enrollment in 
the program and their reported earnings and would also disclose that 
the program may lose eligibility for title IV, HEA program funds and 
would explain the implications of ineligibility. In addition, the 
warning would indicate the options that would be available to continue 
their education at the institution or at another institution, if the 
program loses its title IV, HEA program eligibility.
    Requiring that the warning be provided directly to a student, and 
that the student acknowledge having seen the warning, is intended to 
ensure that students receive and have the ability to act based on the 
information. Moreover, similar to the 2014 Prior Rule, requiring at 
least three days to have passed before the institution could enroll a 
prospective student would provide a ``cooling-off period'' for the 
student to

[[Page 32349]]

consider the information contained in the warning without immediate and 
direct pressure from the institution, and would also provide the 
student with time to consider alternatives to the program either at the 
same institution or at another institution. To ensure that current and 
prospective students can make enrollment decisions based upon timely 
and accurate information, the Department would require institutions 
otherwise obligated to provide a warning to provide a new warning if a 
student seeks to enroll more than 12 months after a previous warning 
was provided in a program that still remains at risk for a loss of 
eligibility. This 12-month window is longer than the 30-day window 
provided in the 2014 Prior Rule to reduce administrative burden for 
institutions while still providing subsequent warning for students 
after a sufficient time has elapsed. Providing the warnings on an 
annual basis also increases the likelihood that the warnings would 
include updated data and limit the chances of providing the exact same 
data a second time.

Severability (Sec.  668.606)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.606 to 
establish severability protections ensuring that if any GE provision is 
held invalid, the remaining GE provisions, as well as other subparts, 
would continue to apply.
    Reasons: Through the proposed regulations we intend to: (1) Define 
what it means for a program to provide training that prepares students 
for gainful employment in a recognized occupation; and (2) Establish a 
process that would allow the Department to assess and determine the 
eligibility of GE programs, based in part on the program accountability 
provisions in proposed subpart Q.
    We believe that each of the proposed provisions serves one or more 
important, related, but distinct, purposes. Each of the requirements 
provides value, separate from and in addition to the value provided by 
the other requirements, to students, prospective students, and their 
families; to the public; taxpayers; the Government; and to 
institutions. To best serve these purposes, we would include this 
administrative provision in the regulations to establish and clarify 
that the regulations are designed to operate independently of each 
other and to convey the Department's intent that the potential 
invalidity of any one provision should not affect the remainder of the 
provisions.
    Please see the discussion of Severability in Sec.  668.409 of this 
preamble for additional details about how the proposed provisions 
operate independently of each other for purposes of severability.

Date, Extent, Duration, and Consequence of Eligibility (Sec.  
600.10(c)(1)(v))

    Statute: See Authority for This Regulatory Action.
    Current Regulations: Current Sec.  600.10(c)(1) requires an 
institution to provide notice to the Department when expanding its 
participation in the title IV, HEA programs by adding new educational 
programs and identifies when an institution must first obtain approval 
for a new educational program before disbursing title IV, HEA program 
funds to students enrolled in the program.
    Proposed Regulations: We propose to add a new Sec.  600.10(c)(1)(v) 
to require an institution to provide notice to the Department when 
establishing or reestablishing the eligibility of a GE program if the 
institution is subject to any of the restrictions at proposed Sec.  
668.603 for failing GE programs. The institution would provide this 
notice by updating its application to participate in the title IV, HEA 
programs, as set forth in Sec.  600.21(a)(11).
    Reasons: Programs that lose eligibility under proposed subpart S 
would be subject to the restrictions in proposed Sec.  668.603, namely 
that an institution may not disburse title IV, HEA program funds to 
students enrolled in the ineligible program, nor may it seek to 
reestablish the eligibility of that program until the requisite period 
of ineligibility has elapsed. Proper enforcement of this provision 
necessitates conforming changes to Sec.  600.10(c) to require that the 
Department be informed of when an institution subject to the 
aforementioned restrictions intends to stand up a GE program either for 
the first time or following a period of ineligibility.

Updating Application Information (Sec.  600.21(a)(11))

    Statute: See Authority for This Regulatory Action.
    Current Regulations: Current Sec.  600.21(a)(11) requires an 
institution to report to the Department within 10 days certain changes 
to the institution's GE programs, including to a program's name or CIP 
code.
    Proposed Regulations: We propose to amend Sec.  600.21(a)(11)(v) to 
require an institution to report, in addition to the items currently 
listed, changes to a GE program's credential level. In addition, we 
propose to add paragraph (a)(11)(vi) to require an institution to 
report any changes to the GE certification status of a GE program under 
Sec.  668.604.
    Reasons: Current Sec.  600.21 requires institutions to update the 
Department regarding various changes affecting both institutional and 
program eligibility. We believe this to be the most effective mechanism 
for institutions to report information regarding GE programs that is 
critical for the Department to conduct proper monitoring and oversight 
of those programs. Accordingly, we are proposing conforming changes to 
Sec.  600.21, which would require institutions to report for any GE 
program, in addition to the items currently listed, any changes to the 
program's credential level or certification status pursuant to proposed 
Sec.  668.604. The Department would require institutions to report 
changes to a GE program's credential level because different credential 
levels would be considered distinct programs leading to different 
employment, earnings, and debt outcomes. We would require institutions 
to report changes in a GE program's certification status because the 
program becomes ineligible if it ceases to be included in the scope of 
an institution's accreditation.

General Definitions (Sec.  668.2)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: The current regulations at Sec.  668.2 define 
key terminology used throughout the student assistance general 
provisions in this part.
    Proposed Regulations: We propose to add new definitions to explain 
key terminology used in the financial value transparency provisions in 
proposed subpart Q and the GE program accountability provisions in 
proposed subpart S. These definitions would be as follows:
     Annual debt-to-earnings rate. The ratio of a program's 
typical annual loan payment amount to the median annual earnings of the 
students who recently completed the program. This measurement would be 
expressed as a percentage, and the Department would calculate it under 
the provisions of proposed Sec.  668.403.
     Classification of instructional program (CIP) code. A 
taxonomy of instructional program classifications and descriptions 
developed by the Department's National Center for Education Statistics 
(NCES). Specific

[[Page 32350]]

educational programs are classified using a six-digit CIP code.
     Cohort period. The set of award years used to identify a 
cohort of students who completed a program and whose debt and earnings 
outcomes are used to calculate D/E rates and the earnings threshold 
measure. The Department proposes to use a two-year cohort period to 
calculate the D/E rates and earnings threshold measure for a program 
when the number of students in the two-year cohort period is 30 or 
more. We would use a four-year cohort period to calculate the D/E rates 
and earnings thresholds measure when the number of students completing 
the program in the two-year cohort period is fewer than 30 but the 
number of students completing the program in the four-year cohort 
period is 30 or more. A two-year cohort period would consist of the 
third and fourth award years prior to the year for which the most 
recent data are available at the time of calculation. For example, 
given current data production schedules, the D/E rates and earnings 
premium measure calculated to assess financial value starting in award 
year 2024-2025 would be calculated in late 2024 or early in 2025. For 
most programs, the two-year cohort period for these metrics would be 
award years 2017-2018 and 2018-2019, and earnings data would be 
measured in calendar years 2021 and 2022. A four-year cohort period 
would consist of the third, fourth, fifth, and sixth award years prior 
to the year for which the most recent earnings data are available at 
the time of calculation. For example, for the D/E rates and the 
earnings threshold measure calculated to assess financial value 
starting in award year 2024-2025, the four-year cohort period would be 
award years 2015-2016, 2016-2017, 2017-2018, and 2018-2019; and 
earnings data would be measured using data from calendar years 2019 
through 2022. The cohort period would be calculated differently for 
programs whose students are required to complete a medical or dental 
internship or residency. For this purpose, a required medical or dental 
internship or residency would be a supervised training program that (A) 
Requires the student to hold a degree as a doctor of medicine or 
osteopathy, or as a doctor of dental science; (B) Leads to a degree or 
certificate awarded by an institution of higher education, a hospital, 
or a health care facility that offers post-graduate training; and
    (C) Must be completed before the student may be licensed by a State 
and board certified for professional practice or service. The two-year 
cohort period for a program whose students are required to complete a 
medical or dental internship or residency would be the sixth and 
seventh award years prior to the year for which the most recent 
earnings data are available at the time of calculation. For example, D/
E rates and the earnings threshold measure calculated for award year 
2025-2026 would be calculated in 2024; and the two-year cohort period 
is award years 2014-2015 and 2015-2016. The four-year cohort period for 
a program whose students are required to complete a medical or dental 
internship or residency would be the sixth, seventh, eighth, and ninth 
award years prior to the year for which the most recent earnings data 
are available at the time of calculation. For example, the D/E rates 
and the earnings threshold measure calculated for award year 2025-2026 
would be calculated in 2024, and the four-year cohort period would be 
award years 2012-2013, 2013-2014, 2014-2015, and 2015-2016.
     Credential level. The level of the academic credential 
awarded by an institution to students who complete the program. 
Undergraduate credential levels would include undergraduate certificate 
or diploma; associate degree; bachelor's degree; and post-baccalaureate 
certificate. Graduate credential levels would include graduate 
certificate, including a postgraduate certificate; master's degree; 
doctoral degree; and first-professional degree (e.g., MD, DDS, JD).
     Debt-to-earnings rates (D/E rates). The annual debt-to-
earnings rate and discretionary debt-to-earnings rate, as calculated 
under proposed Sec.  668.403.
     Discretionary debt-to-earnings rate. The percentage of a 
program's median annual loan payment compared to the median 
discretionary earnings (defined as median earnings minus 150 percent of 
the Federal Poverty Guideline for a single person, or zero if this 
difference is negative) of the students who completed the program.
     Earnings premium. The amount by which the median annual 
earnings of students who recently completed a program exceed the 
earnings threshold, as calculated under proposed Sec.  668.604. If the 
median annual earnings of recent completers is equal to the earnings 
threshold, the earnings premium is zero. If the median annual earnings 
of completers is less than the earnings threshold, the earnings premium 
is negative.
     Earnings threshold. The median annual earnings for an 
adult that either has positive annual earnings or is categorized as 
unemployed (i.e., is not working but is looking and available for work) 
at the time they are interviewed, aged 25 through 34, with only a high 
school diploma or recognized equivalent in the State in which the 
institution is located, or nationally if fewer than 50 percent of the 
students in the program are located in the State where the institution 
is located. The statistic would be determined using data from a Federal 
statistical agency that the Secretary deems sufficiently representative 
to accurately calculate the median earnings of high school graduates in 
each State, such as the American Community Survey administered by the 
U.S. Census Bureau. This earnings threshold is compared to the median 
annual earnings of students who recently completed the program to 
construct the earnings premium.
     Eligible non-GE program. For purposes of proposed subpart 
Q, an educational program other than a GE program offered by an 
institution and approved by the Secretary to participate in the title 
IV, HEA programs, identified by a combination of the institution's six-
digit Office of Postsecondary Education ID (OPEID) number, the 
program's six-digit CIP code as assigned by the institution or 
determined by the Secretary, and the program's credential level. For 
purposes of attributing coursework, costs, and student assistance 
received, all coursework associated with the program's credential level 
would be counted toward the program.
     Federal agency with earnings data. A Federal agency with 
which the Department would maintain an agreement to access data 
necessary to calculate median earnings for the D/E rates and earnings 
premium measures. The agency would need to have individual earnings 
data sufficient to match with title IV, HEA aid recipients who 
completed any eligible program during the cohort period. Specific 
Federal agencies with which partnerships may be possible include 
agencies such as the Treasury Department (including the Internal 
Revenue Service), the Social Security Administration (SSA), the 
Department of Health and Human Services (HHS), and the Census Bureau.
     GE program. An educational program offered under Sec.  
668.8(c)(3) or (d) and identified by a combination of the institution's 
six-digit Office of Postsecondary Education ID (OPEID) number, the 
program's six-digit CIP code as assigned by the institution or 
determined by the Secretary, and the program's credential level. The 
Department welcomes public comments about any potential advantages and 
drawbacks associated with defining a

[[Page 32351]]

GE program using the institution's eight-digit OPE ID number instead of 
the six-digit OPE ID number as proposed.
     Institutional grants and scholarships. Financial 
assistance that the institution or its affiliate controls or directs to 
reduce or offset the original amount of a student's institutional costs 
and that does not have to be repaid. Typical examples of this type of 
assistance would include grants, scholarships, fellowships, discounts, 
and fee waivers.
     Length of the program. The amount of time in weeks, 
months, or years that is specified in the institution's catalog, 
marketing materials, or other official publications for a student to 
complete the requirements needed to obtain the degree or credential 
offered by the program.
     Poverty Guideline. The Poverty Guideline for a single 
person in the continental United States as published by HHS.
     Prospective student. An individual who has contacted an 
eligible institution for the purpose of requesting information about 
enrolling in a program, or who has been contacted directly by the 
institution or by a third party on behalf of the institution about 
enrolling in a program.
     Student. For the purposes of proposed subparts Q and S, an 
individual who received title IV, HEA funds for enrolling in a GE 
program or eligible non-GE program.
     Title IV loan. A loan authorized under the William D. Ford 
Direct Loan Program (Direct Loan).
    Reasons: Current Sec.  668.2 defines key terminology used in the 
student assistance regulations but does not yet include definitions for 
the terminology listed above. Uniform usage of these terms would make 
it easier for institutions to understand the proposed standards and 
requirements for academic programs and for students and prospective 
students to understand the information about academic programs that the 
proposed regulations would provide. Our reasoning for proposing each 
definition is discussed in the section in which the defined term is 
first substantively used.

Institutional and Programmatic Information (Sec.  668.43)

    Statute: See Authority for This Regulatory Action.
    Current Regulations: Under current Sec.  668.43, institutions must 
make certain institutional information available to current and 
prospective students, such as the cost of attending the institution, 
refund and withdrawal policies, the academic programs offered by the 
institution, and accreditation and State approval or licensure 
information. An institution must also provide written notification to 
students if it determines that the program's curriculum does not meet 
the State educational requirements for licensure or certification in 
the State in which the student is located, or if the institution has 
not made a determination regarding whether the program's curriculum 
meets the State educational requirements for licensure or 
certification.
    Proposed Regulations: We propose to amend paragraph (a)(5)(v) to 
clarify the intent of this disclosure. Specifically, we propose to 
include language that would require a list of all States where the 
institution is aware that the program does and does not meet such 
requirements.
    Under proposed Sec.  668.43(d), the Department would establish a 
website for posting and distributing key information and disclosures 
pertaining to the institution's educational programs. An institution 
would provide such information as the Department prescribes through a 
notice published in the Federal Register for disclosure to prospective 
and enrolled students through the website. This information could 
include, but would not be limited to, (1) The primary occupations that 
the program prepares students to enter, along with links to 
occupational profiles on O*NET (www.onetonline.org) or its successor 
site; (2) The program's or institution's completion rates and 
withdrawal rates for full-time and less-than-full-time students, as 
reported to or calculated by the Department; (3) The length of the 
program in calendar time; (4) The total number of individuals enrolled 
in the program during the most recently completed award year; (5) The 
program's D/E rates, as calculated by the Department; (6) The program's 
earnings premium measure, as calculated by the Department; (7) The loan 
repayment rate as calculated by the Department for students or 
graduates who entered repayment on title IV loans; (8) The total cost 
of tuition and fees, and the total cost of books, supplies, and 
equipment, that a student would incur for completing the program within 
the length of the program; (9) The percentage of the individuals 
enrolled in the program during the most recently completed award year 
who received a title IV loan, a private education loan, or both; (10) 
The median loan debt of students who completed the program during the 
most recently completed award year, or the median loan debt for all 
students who completed or withdrew from the program during that award 
year, as calculated by the Department; (11) The median earnings, as 
provided by the Department, of students who completed the program or of 
all students who completed or withdrew from the program; (12) Whether 
the program is programmatically accredited and the name of the 
accrediting agency; (13) The supplementary performance measures in 
proposed Sec.  668.13(e); and (14) A link to the Department's College 
Navigator website, or its successor site or other similar Federal 
resource such as the College Scorecard. The institution would be 
required to provide a prominent link and any other information needed 
to access the website on any web page containing academic, cost, 
financial aid, or admissions information about the program or 
institution. The Department would have the authority to require the 
institution to modify a web page if the information about how to access 
the Department's website is not sufficiently prominent, readily 
accessible, clear, conspicuous, or direct. In addition, the Department 
would require the institution to provide the relevant information to 
access the website to any prospective student or third party acting on 
behalf of the prospective student before the prospective student signs 
an enrollment agreement, completes registration, or makes a financial 
commitment to the institution. The Department would further require 
that the institution provide the relevant information to access the 
website maintained by the Secretary to any enrolled title IV, HEA 
recipient prior to the start date of the first payment period 
associated with each subsequent award year in which the student 
continues enrollment at the institution. As further discussed under 
proposed Sec.  668.407, a student enrolling in a program that the 
Department has determined to be high-debt-burden or low-earnings 
through either the D/E rates or the earnings premium measure would 
receive a warning and would need to acknowledge seeing the warning 
before the institution disburses title IV, HEA funds.
    Reasons: We believe it is important for all programs that lead to 
occupations requiring programmatic accreditation or State licensure to 
meet their State's requirements because programs financed by taxpayer 
dollars should meet the minimum requirements for the occupation for 
which they prepare students as a safeguard for the financial investment 
in these programs, as would be required under our proposal to amend 
Sec.  668.14(b)(32). We also believe it is crucial to know which States 
consider these programs to be meeting

[[Page 32352]]

or not meeting such requirements because students have often enrolled 
in programs that do not meet the necessary requirements for employment 
in the State that they reside after completing the program. As further 
explained in Sec.  668.14(b), when institutions enter a written PPA 
with the Department they agree to meet the PPA's terms and conditions 
in order to participate in the title IV programs. Requiring 
institutions to have the necessary certifications or programmatic 
accreditation to meet their State's requirements for the programs they 
offer, and to disclose a list of all States where the institution is 
aware that the program does and does not meet such requirements as 
would be required under proposed Sec.  668.43(a)(5), would help 
students make a more informed decision on where to invest their time 
and money in pursuit of a postsecondary degree or credential.
    As discussed in ''Sec.  668.401 Scope and purpose,'' the proposed 
disclosures are designed to improve the transparency of student 
outcomes by: ensuring that students, prospective students, and their 
families, the public, taxpayers, and the Government, and institutions 
have timely and relevant information about educational programs to 
inform student and prospective student decision-making; helping the 
public, taxpayers, and the Government to monitor the results of the 
Federal investment in these programs; and allowing institutions to see 
which programs produce exceptional results for students so that those 
programs may be emulated.
    In particular, the proposed disclosures would provide prospective 
and enrolled students the information they need to make informed 
decisions about their educational investment, including where to spend 
their limited title IV, HEA program funds and use their limited title 
IV, HEA student eligibility. Prospective students trying to make 
decisions about whether to enroll in an educational program would find 
it useful to have easy access to information about the jobs that the 
program is designed to prepare them to enter, the likelihood that they 
will complete the program, the financial and time commitment they will 
have to make, their likely debt burden and ability to repay their 
loans, their likely earnings, and whether completing the program will 
provide them the requisite coursework, experience, and accreditation to 
obtain employment in the jobs associated with the program. The proposed 
disclosures would also provide valuable information to enrolled 
students considering their ongoing educational investment and post-
completion prospects. For example, we believe that disclosure of 
completion rates for full-time and less-than-full-time students would 
inform prospective and enrolled students as to how long it may take 
them to earn the credential offered by the program. Similarly, we 
believe that requiring institutions to disclose loan repayment rates 
would help prospective and enrolled students to better understand how 
well students who have attended the program before them have been able 
to manage their loan debt, which could influence their decisions about 
how much money they should borrow to enroll in the program.
    We believe providing these disclosures on a website hosted by the 
Department would provide consistency in how the information is 
calculated and presented and would aid current and prospective students 
in comparing different programs and institutions. To ensure that 
current and prospective students are aware of this information when 
making enrollment decisions, institutions would be required to provide 
a prominent link and any other needed information to access the website 
on any web page containing academic, cost, financial aid, or admissions 
information about the program or institution.

Initial and Final Decisions (Sec.  668.91)

    Statute: Section 487 of the HEA provides for administrative 
hearings in the event of a limitation, suspension, or termination 
action against an institution. See also Authority for This Regulatory 
Action.
    Current Regulations: Current Sec.  668.91 outlines certain 
parameters governing the Department's hearing official's initial 
decision in administrative hearings concerning fine, limitation, 
suspension, or termination proceedings against an institution or 
servicer. Section 668.91(a)(2) grants the hearing official latitude to 
decide whether the imposition of a fine, limitation, suspension, 
termination, or recovery the Department seeks is warranted. Current 
Sec.  668.91(a)(3) establishes exceptions to the general authority 
afforded to the hearing official to weigh the evidence and remedy in an 
administrative appeal, and sets required outcomes if certain facts are 
established, including (1) Employing or contracting with excluded 
parties under Sec.  668.14(b)(18); (2) Failure to provide a required 
letter of credit or other financial protection unless the institution 
demonstrates that the amount was not warranted; (3) Failure by an 
institution or third-party servicer to submit a required annual audit 
timely; and (4) Failure by an institution to meet the past performance 
standards of conduct at Sec.  668.15(c).
    Proposed Regulations: In new Sec.  668.91(a)(3)(vi), we propose 
additional circumstances in which the hearing official must rule in a 
specified manner. Specifically, we propose that a hearing official must 
terminate the eligibility of a GE program that fails to meet the D/E 
rates or earnings premium measure, unless the hearing official 
concludes there was a material error in the calculation of the metric.
    Reasons: Proposed Sec.  668.91(a)(3)(vi) is a conforming change to 
the measures at proposed Sec.  668.603 and would require that a hearing 
official terminate the eligibility of a GE program that fails to meet 
the D/E rates or earnings premium measure, unless the hearing official 
concludes there was a material error in the calculation of the metric. 
We believe it is important to clearly specify the consequences for 
failing the GE metrics, both to promote fair and consistent treatment 
for failing programs as well as to safeguard the interests of students 
and taxpayers. This limitation reflects the Department's determination 
about the required outcome in those circumstances, and the hearing 
official is bound to follow the regulations. The rationale for why we 
propose limiting this review is further explained in our discussion of 
proposed Sec.  668.603. The proposed regulations would protect students 
and taxpayers by foreclosing the possibility that an institution could 
obtain a less severe outcome such as a monetary fine that allows the GE 
program to remain eligible while continuing to leave unaddressed the 
conditions that led to the GE program's failure.
    In the interest of fairness and adequate process, proposed Sec.  
668.405 would provide institutions with an adequate opportunity to 
correct the list of completers that would be submitted to the Federal 
agency with earnings data to ensure that the debt and earnings metrics 
for each program are calculated based upon the most accurate and 
current information available. As noted in the discussion of proposed 
Sec.  668.405, we would not, however, consider challenges to the 
accuracy of the earnings data received from the Federal agency with 
earnings data, because such an agency would provide the Department with 
only the median earnings and the number of non-matches for a program, 
and would not disclose students' individual earnings data that would 
enable the Secretary to assess a challenge to reported earnings.

[[Page 32353]]

Financial Responsibility (Sec. Sec.  668.15, 668.23, and 668, Subpart L 
Sec. Sec.  171, 174, 175, 176 and 177) (Sec.  498(c) of the HEA)

    Authority for This Regulatory Action: Section 498 of the HEA 
requires institutions to establish eligibility to provide title IV, HEA 
funds to their students. The statute directs the Secretary of Education 
to, among other things, determine the financial responsibility of an 
institution that seeks to participate, or is participating in, the 
title IV, HEA student aid programs. To that end, the Secretary is 
directed to obtain third-party financial guarantees, where appropriate, 
to offset potential liabilities due to the Department.
    The Department's authority for this regulatory action derives 
primarily from the above statutory provision, which directs the 
Secretary to establish, make, promulgate, issue, rescind, and amend 
rules and regulations governing the manner of operations of, and 
governing the applicable programs administered by, the Department.

Factors of Financial Responsibility (Sec.  668.15)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.15 contains factors of 
responsibility for institutions participating in the title IV, HEA 
programs. However, most of these factors have been supplanted with 
requirements for institutional financial responsibility found at part 
668, subpart L--Financial Responsibility. An exception is that the 
factors at Sec.  668.15 have been applied to institutions undergoing a 
change in ownership.
    Proposed Regulations: The Department proposes to remove and reserve 
Sec.  668.15.
    Reasons: The factors stated in Sec.  668.15 have been supplanted 
with the later requirements that were added to part 668, subpart L--
Financial Responsibility, and became effective in 1998. Removing the 
factors from Sec.  668.15 would remove unnecessary text and streamline 
part 668. The factors that are currently applicable to institutions 
undergoing a change in ownership would be replaced with an updated and 
expanded list of factors in proposed Sec.  668.176, which would better 
reflect the Department's consideration of an institution's change in 
ownership application.

Compliance Audits and Audited Financial Statements (Sec.  668.23)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible. 
Sections 487 and 498 of the HEA direct the Secretary to obtain and 
review a financial audit of an eligible institution regarding the 
financial condition of the institution in its entirety, and a 
compliance audit of such institution regarding any funds obtained by it 
under this statute.
    Current Regulations: Section 668.23(a)(4) requires institutions not 
subject to the Single Audit Act, 31 U.S.C. chapter 75, to submit 
annually to the Department their compliance audit and audited financial 
statements no later than six months after the end of the institution's 
fiscal year.
    Proposed Regulations: We propose to amend Sec.  668.23(a)(4) to 
state that an institution not subject to the Single Audit Act must 
submit its compliance audit and its audited financial statements by the 
date that is the earlier of 30 days after the date of the auditor's 
report or 6 months after the last day of the institution's fiscal year.
    Reasons: The Department is concerned that the current deadlines for 
submitting audited financial statements or compliance audits used to 
annually assess an institution's financial responsibility do not 
provide timely notice to the Department about significant financial 
concerns, even when institutions are aware of these concerns for 
months. The sooner the Department is made aware of situations where an 
institution's financial stability is in question, the sooner the 
Department can address the institution's situation and mitigate 
potential impacts on the institution's students. This is especially the 
case when an institution's lack of financial stability is a signal of 
an imminent potential closure. Those negative impacts associated with 
institutional closure include disruption of the students' education, 
delay in completing their educational program, and the loss of academic 
credit upon transfer to another institution. In addition, many students 
abandon their educational journeys altogether when their institutions 
close. In a September 2021 report,\123\ the U.S. Government 
Accountability Office (GAO) found that 43 percent of borrowers whose 
colleges closed from 2010 through 2020 did not enroll in another 
institution or complete their program. As GAO noted, this showed that 
``closures are often the end of the road for a student's education.'' 
Furthermore, negative consequences of a school's closure not only 
impact students but have negative effects on taxpayers as a result of 
the Department's obligation to discharge student loan balances of 
borrowers impacted by the closure. The Department recently revised 
rules governing closed school discharges in final rules published in 
the Federal Register on November 1, 2022,\124\ increasing the need for 
financial protection when the Department is aware of potential and 
imminent closure. Finally, beyond student loan discharges, the 
Department often finds itself unable to collect any liabilities owed to 
the Federal government due to the insolvency of the closed institution. 
Obtaining financial surety prior to a closure would help to offset 
these types of liabilities.
---------------------------------------------------------------------------

    \123\ www.gao.gov/assets/gao-21-105373.pdf.
    \124\ 87 FR 65904.
---------------------------------------------------------------------------

    Receiving compliance audits and financial statements within 30 days 
of when the report was dated, if it is dated at least 30 days prior to 
the six-month deadline (which would then be the operative deadline), 
would allow the Department to conduct effective oversight, obtain 
financial protection, and ensure students have options for teach-out 
agreements once we are made aware of financial situations that may 
indicate a potential closure is imminent. In addition, earlier 
submission of an institution's audited financial statements could alert 
the Department more quickly of an institution's failure to meet the 90/
10 requirement, enabling prompt action to enforce those rules thereby 
protecting student and taxpayer interests.
    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible. 
Sections 487 and 498 of the HEA direct the Secretary to obtain and 
review a financial audit of an eligible institution regarding the 
financial condition of the institution in its entirety, and a 
compliance audit of such institution regarding any funds obtained by it 
under this statute.
    Current Regulations: Section 668.23(a)(5) refers to the audit 
submitted by institutions subject to the Single Audit Act as an audit 
conducted in accordance with the Office of Management and Budget (OMB) 
Circular A-133.
    Proposed Regulations: The Department proposes to amend Sec.  
668.23(a)(5) by replacing the outdated reference to the OMB Circular A-
133

[[Page 32354]]

with the current reference: 2 CFR part 200--Uniform Administrative 
Requirements, Cost Principles, And Audit Requirements For Federal 
Awards.
    Reasons: This change would update the regulation to include the 
appropriate cite for conducting audits of institutions subject to the 
Single Audit Act.
    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible. 
Sections 487 and 498 of the HEA direct the Secretary to obtain and 
review a financial audit of an eligible institution regarding the 
financial condition of the institution in its entirety, and a 
compliance audit of such institution regarding any funds obtained by it 
under this statute.
    Current Regulations: The requirement in current Sec.  668.23(d)(1) 
states that an institution's audited financial statements must disclose 
all related parties and a level of detail that would enable the 
Department to readily identify the related party. Such information may 
include, but is not limited to, the name, location and a description of 
the related entity including the nature and amount of any transactions 
between the related party and the institution, financial or otherwise, 
regardless of when they occurred.
    Proposed Regulations: The Department proposes to amend Sec.  
668.23(d)(1) to change the passage ``Such information may include. . 
.'' to ``Such information must include. . .''. The result of the 
proposal would require that institutions continue to include in their 
audited financial statements a disclosure of all related parties and a 
level of detail that would enable the Department to readily identify 
the related party. The proposed regulation would go on to state that 
the information must include, but would not be limited to, the name, 
location and a description of the related entity including the nature 
and amount of any transactions between the related party and the 
institution, financial or otherwise, regardless of when they occurred.
    The Department also proposes to amend Sec.  668.23(d)(1) to note 
that the financial statements submitted to the Department must be the 
latest complete fiscal year (or years, if there is a request for more 
than one year). We also propose that the fiscal year covered by the 
financial statements submitted must match the dates of the entity's 
annual return(s) filed with the Internal Revenue Service (IRS).
    Reasons: This change is necessary for the Department to ensure that 
it has greater understanding of an institution's related parties. The 
items being required here are basic identifying factors and provide the 
minimum level of information required for an understanding of the 
institution's situation.
    The proposed clarifications to the fiscal years covered by audited 
financial statements would serve two purposes. First, the requirement 
to submit financial statements for the latest completed fiscal year 
would ensure that we are receiving the most up-to-date information from 
an institution. This is particularly important for new institution 
submissions, which are already required to comply with these 
requirements under current Sec.  668.15, which we propose to remove and 
reserve in light of the new proposed Sec.  668.176. Second, the 
proposed requirement that the dates of the fiscal year for the 
financial statements submitted to the Department match those on the 
statements submitted to the IRS addresses a concern the Department has 
seen where institutions have adjusted their fiscal years to avoid 
submitting the most up-to-date financial information to the Department. 
This change would ensure the Department receives consistent and up-to-
date information, which is necessary for evaluating the financial 
health of institutions.
    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible. 
Sections 487 and 498 of the HEA direct the Secretary to obtain and 
review a financial audit of an eligible institution regarding the 
financial condition of the institution in its entirety, and a 
compliance audit of such institution regarding any funds obtained by it 
under this statute.
    Current Regulations: The current regulations do not address any 
special submission requirements for domestic or foreign institutions 
that are owned directly or indirectly by any foreign entity with at 
least a 50 percent voting or equity interest.
    Proposed Regulations: The Department proposes to add Sec.  
668.23(d)(2)(ii) to require that an institution, domestic or foreign, 
that is owned by a foreign entity holding at least a 50 percent voting 
or equity interest provide documentation of its status under the law of 
the jurisdiction under which it is organized, as well as basic 
organizational documents.
    Reasons: The proposed regulations would better equip the Department 
to obtain appropriate and necessary documentation from an institution 
which has a foreign owner or owners with 50 percent or greater voting 
or equity interest. Currently, the Department cannot always determine 
who is or was controlling an entity when it gets into financial 
difficulty or closes. This is exacerbated when the institution is 
controlled by a foreign entity. This proposed regulation would provide 
a clearer picture of the institution's legal status to the Department, 
as well as who exercises direct or indirect ownership over the 
institution. Knowing the legal owner is important for situations such 
as when we request financial protection, when we seek to collect an 
audit or program review liability, or when an institution closes.
    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible. 
Sections 487 and 498 of the HEA direct the Secretary to obtain and 
review a financial audit of an eligible institution regarding the 
financial condition of the institution in its entirety, and a 
compliance audit of such institution regarding any funds obtained by it 
under the statute.
    Current Regulations: None.
    Proposed Regulations: The Department proposes to add Sec.  
668.23(d)(5) which would require an institution to disclose in a 
footnote to its audited financial statement the amounts spent in the 
previous fiscal year on the following:
     Recruiting activities;
     Advertising; and
     Other pre-enrollment expenditures.
    Reasons: The Department has observed that some institutions spend 
institutional funds on student recruitment, advertising, and other pre-
enrollment expenditures in amounts greatly out of proportion to 
expenditures on instruction and instructionally related activities. We 
believe this type of spending pattern is a possible indicator of 
institutional financial instability. For example, an institution with a 
solid financial foundation will often spend institutional funds to add 
new instructional programs or improve existing ones. An institution 
would expect that such improvements or expansions would improve the 
future outlook for the institution. On the other hand, an institution 
feeling pressure due to a declining financial situation may spend 
excessive amounts of its

[[Page 32355]]

resources on recruitment, advertising, or other pre-enrollment 
expenditures to generate revenue in the short-term, at the possible 
detriment to the institution in the long-term. Requiring institutions 
to disclose amounts spent on these types of activities would provide 
the Department a more comprehensive view into the financial health and 
stability of institutions.

Financial Responsibility--General Requirements (Sec.  668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(b)(3)(i) states that an 
institution is not able to meet its financial or administrative 
obligations if it fails to make refunds under its refund policy or to 
return title IV, HEA program funds for which it is responsible.
    Proposed Regulations: In Sec.  668.171(b)(3), the Department 
proposes to add additional indicators. Proposed paragraph (b)(3)(i) 
states that an institution would not be financially responsible if it 
fails to pay title IV, HEA credit balances as required under current 
Sec.  668.164(h)(2). Proposed paragraph (b)(3)(iii) states that an 
institution would not be financially responsible if it fails to make a 
payment in accordance with an existing undisputed financial obligation 
for more than 90 days. Proposed paragraph (b)(iv) states that an 
institution would not be financially responsible if it fails to satisfy 
payroll obligations in accordance with its published payroll schedule. 
Lastly, proposed paragraph (b)(3)(v) states that an institution would 
not be financially responsible if it borrows funds from retirement 
plans or restricted funds without authorization.
    Reasons: An institution participating in the title IV, HEA programs 
acts as a fiduciary in its handling of title IV, HEA program funds on 
behalf of students. It thus has an obligation to abide by requirements 
to both return unused title IV, HEA funds and pay out credit balances 
to students. An institution's failure to pay a student funds belonging 
to that student is a strong indicator of the institution's lack of 
financial responsibility and stability. The Department is concerned 
that an institution that refuses to pay, or is unable to pay, credit 
balances owed to students may be holding onto them to address 
underlying financial concerns.
    The Department is generally concerned when an institution is not 
meeting its financial obligations. The additional indicators the 
Department proposes to add in Sec.  668.171(b)(3) all involve 
situations where an institution is not meeting its financial 
obligations, such as making payroll or payments on required debt 
agreements. To that end, monies that belong to and are owed to students 
are no different--they are obligations that must be fulfilled. Thus, 
the proposed regulation would expand the definition of not financially 
responsible to include the failure to pay title IV, HEA credit balances 
as required under current Sec.  668.164(h)(2).
    This change is also in keeping with recently finalized regulations 
relating to the requirement that postsecondary institutions of higher 
education obtain at least 10 percent of their revenue from non-Federal 
sources, also known as the 90/10 rule. In Sec.  668.28(a)(2)(ii)(B), 
proprietary institutions may not delay the disbursement of title IV, 
HEA funds to the next fiscal year to adjust their 90/10 rate.

Financial Responsibility--Mandatory Triggering Events (Sec.  668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(c) lists several mandatory 
triggering events impacting an institution's financial responsibility. 
These triggers were implemented in the 2019 Final Borrower Defense 
Regulations \125\ to reduce the impact of the prior triggers that had 
been implemented in the 2016 Final Borrower Defense Regulations.\126\ 
The current mandatory triggers are these instances:
---------------------------------------------------------------------------

    \125\ 84 FR 49788.
    \126\ 81 FR 75926.
---------------------------------------------------------------------------

     The institution incurs a liability from a settlement, 
final judgment, or final determination arising from an administrative 
or judicial action or proceeding initiated by a Federal or State 
entity;
     For a proprietary institution whose composite score is 
less than 1.5, there is a withdrawal of an owner's equity from the 
institution by any means, unless the withdrawal is a transfer to an 
entity included in the affiliated entity group on whose basis the 
institution's composite score was calculated; and as a result of that 
liability or withdrawal, the institution's recalculated composite score 
is less than 1.0, as determined by the Department;
     For a publicly traded institution--
     The U.S. Securities and Exchange Commission (SEC) issues 
an order suspending or revoking the registration of the institution's 
securities pursuant to Section 12(j) of the Securities and Exchange Act 
of 1934 (the ``Exchange Act'') or suspends trading of the institution's 
securities on any national securities exchange pursuant to Section 
12(k) of the Exchange Act; or
     The national securities exchange on which the 
institution's securities are traded notifies the institution that it is 
not in compliance with the exchange's listing requirements and, as a 
result, the institution's securities are delisted, either voluntarily 
or involuntarily, pursuant to the rules of the relevant national 
securities exchange;
     The SEC is not in timely receipt of a required report and 
did not issue an extension to file the report.
    If any of the mandatory triggering events occur, the Department 
would deem the institution to be unable to meet its financial or 
administrative obligations. Usually, this will result in the Department 
obtaining financial protection, generally a letter of credit, from the 
institution.
    Proposed Regulations: The Department proposes to amend Sec.  
668.171(c) with a more robust set of mandatory triggers. Proposed Sec.  
668.171(c) would keep or expand the existing mandatory triggers, change 
some existing discretionary triggers to become mandatory and add new 
mandatory triggers. We are also proposing to add new discretionary 
triggers, which are discussed separately in Sec.  668.171(d). As with 
the existing Sec.  668.171(c), if any of the mandatory trigger events 
occur, the Department would deem the institution as unable to meet its 
financial or administrative obligations and obtain financial 
protection. The proposed mandatory triggers are situations where:
     Under Sec.  668.171(c)(2)(i)(A), an institution or entity 
with a composite score of less than 1.5 is required to pay a debt or 
incurs a liability from a settlement, arbitration proceeding, or a 
final judgment in a judicial or administrative proceeding, and the debt 
or liability results in a recalculated composite score of less than 
1.0, as determined by the Department;
     Under Sec.  668.171(c)(2)(i)(B), the institution or entity 
is sued to impose an injunction, establish fines or penalties, or to 
obtain financial relief such as damages, in an action brought on or 
after July 1, 2024, by a Federal or State authority, or through a qui 
tam lawsuit in which the Federal government has intervened and the suit 
has been pending for at least 120 days;

[[Page 32356]]

     Under Sec.  668.171(c)(2)(i)(C), the Department has 
initiated action to recover from the institution the cost of 
adjudicated claims in favor of borrowers under the student loan 
discharge provisions in part 685, and including that potential 
liability in the composite score results in a recalculated composite 
score of less than 1.0, as determined by the Department;
     Under Sec.  668.171(c)(2)(i)(D), an institution that has 
submitted a change in ownership application and is required to pay a 
debt or incurs liabilities (from a settlement, arbitration proceeding, 
final judgment in a judicial proceeding, or a determination arising 
from an administrative proceeding), at any point through the end of the 
second full fiscal year after the change in ownership has occurred, 
would be required to post financial protection in the amount specified 
by the Department if so directed by the Department;
     Under Sec.  668.171(c)(2)(ii)(A) and (B), for a 
proprietary institution whose composite score is less than 1.5, or for 
any proprietary institution through the end of the first full fiscal 
year following a change in ownership, and there is a withdrawal of 
owner's equity by any means, including by declaring a dividend, unless 
the withdrawal is a transfer to an entity included in the affiliated 
entity group on whose basis the institution's composite score was 
calculated or the withdrawal is the equivalent of wages in a sole 
proprietorship or general partnership or a required dividend or return 
of capital and as a result the institution's recalculated composite 
score is less than 1.0, as determined by the Department;
     Under Sec.  668.171(c)(2)(iii), the institution received 
at least 50 percent of its title IV, HEA funding in its most recently 
completed fiscal year from gainful employment programs that are failing 
under proposed subpart S of part 668, as determined by the Department;
     Under Sec.  668.171(c)(2)(iv), the institution is required 
to submit a teach-out plan or agreement by a State or Federal agency, 
an accrediting agency, or other oversight body;
     Under Sec.  668.171(c)(2)(v), the institution is cited by 
a State licensing or authorizing agency for failing to meet that 
entity's requirements and that entity provides notice that it will 
withdraw or terminate the institution's licensure or authorization if 
the institution does not come into compliance with the requirement. 
Under current regulations, this is a discretionary trigger;
     Under Sec.  668.171(c)(2)(vi), at least 50 percent of the 
institution is owned directly or indirectly by an entity whose 
securities are listed on a domestic or foreign exchange and is subject 
to one or more actions or events initiated by the U.S. Securities and 
Exchange Commission (SEC) or by the exchange where the entity's 
securities are listed. Those actions or events are when:
    [ssquf] The SEC issues an order suspending or revoking the 
registration of any of the entity's securities pursuant to section 
12(j) of the Securities Exchange Act of 1934 (the ``Exchange Act'') or 
suspends trading of the entity's securities pursuant to section 12(k) 
of the Exchange Act;
    [ssquf] The SEC files an action against the entity in district 
court or issues an order instituting proceedings pursuant to section 
12(j) of the Exchange Act;
    [ssquf] The exchange on which the entity's securities are listed 
notifies the entity that it is not in compliance with the exchange's 
listing requirements, or its securities are delisted;
    [ssquf] The entity failed to file a required annual or quarterly 
report with the SEC within the time period prescribed for that report 
or by any extended due date under 17 CFR 240.12b-25; or
    [ssquf] The entity is subject to an event, notification, or 
condition by a foreign exchange or foreign oversight authority that the 
Department determines is the equivalent to the items listed above in 
the first four sub-bullets of this passage.
     Under Sec.  668.171(c)(2)(vii), a proprietary institution, 
for its most recently completed fiscal year, did not receive at least 
10 percent of its revenue from sources other than Federal education 
assistance as required under Sec.  668.28;
     Under Sec.  668.171(c)(2)(viii), the institution's two 
most recent official cohort default rates are 30 percent or greater 
unless the institution has filed a challenge, request for adjustment, 
or appeal and that action has reduced the rate to below 30 percent, or 
the action remains pending. Under current regulations, this is a 
discretionary trigger;
     Under Sec.  668.171(c)(2)(ix), the institution has lost 
eligibility to participate in another Federal education assistance 
program due to an administrative action against the institution;
     Under Sec.  668.171(c)(2)(x), the institution's financial 
statements reflect a contribution in the last quarter of the fiscal 
year and then the institution made a distribution during the first or 
second quarter of the next fiscal year and that action results in a 
recalculated composite score of less than 1.0, as determined by the 
Department;
     Under Sec.  668.171(c)(2)(xi), the institution or entity 
is subject to a default or other adverse condition under a line of 
credit, loan agreement, security agreement, or other financing 
arrangement due to an action by the Department;
     Under Sec.  668.171(c)(2)(xii), the institution makes a 
declaration of financial exigency to a Federal, State, Tribal or 
foreign governmental agency or its accrediting agency; or
     Under Sec.  668.171(c)(2)(xiii), the institution, or an 
owner or affiliate of the institution that has the power, by contract 
or ownership interest, to direct or cause the direction of the 
management of policies of the institution, files for a State or Federal 
receivership, or an equivalent proceeding under foreign law, or has 
entered against it an order appointing a receiver or appointing a 
person of similar status under foreign law.
    Reasons: In the current process, the Department determines annually 
whether an institution is financially responsible based on its audited 
financial statements along with enforcing the limited number of 
triggering events existing in current Sec.  668.171(c). The triggering 
events complement the annual financial composite score process by 
providing a stronger and more timely way to conduct regular and ongoing 
monitoring. Because composite scores are based upon an institution's 
audited financial statements, they are only produced once a year and 
are typically not calculated until many months after an institution's 
fiscal year ends. By contrast, institutions would have to report on 
triggering events on a much faster timeline, giving the Department more 
up-to-date information about situations that may appreciably change an 
institution's financial situation. The Department is concerned that the 
existing list of financial triggers, which were reduced in the 2019 
Final Borrower Defense Regulations, is insufficient to capture the full 
range of events that can represent significant and urgent threats to an 
institution's ability to remain financially responsible, putting 
students and taxpayer dollars at risk. The Department has seen where 
the existing regulatory mandatory triggers, with their inherent 
limitations, allow institutions with questionable financial stability 
to continue without activating a mandatory trigger which would have 
called for possible Departmental action. This includes several 
situations where the institution ultimately closed without the 
Department having any financial protection to offset liabilities, such 
as those related to closed school loan discharges for borrowers. When 
an

[[Page 32357]]

institution moves toward a status of financial instability or 
irresponsibility, the Department increases its oversight and, when 
necessary, obtains financial protection from the institution. These 
proposed mandatory triggers would remedy the inherent limitations in 
the current list of triggers and serve as a tool with which the 
Department can fulfill its oversight responsibility, thereby ensuring 
better protection for students and taxpayers.
    Under the proposed regulations, the Department would determine at 
the time a material action or triggering event occurs that the 
institution is not financially responsible and seek financial 
protection from that institution. The consequences of these actions and 
triggering events threaten an institution's ability to (1) meet its 
current and future financial obligations, (2) continue as a going 
concern or continue to participate in the title IV, HEA programs, and 
(3) continue to deliver educational services. In addition, these 
actions and events call into question the institution's ability or 
commitment to provide the necessary resources to comply with title IV, 
HEA requirements. The proposed triggers would bring increased scrutiny 
to institutions that have one or more indicators of impaired financial 
responsibility. That increased scrutiny would often lead to the 
Department obtaining financial protection from the institution. This 
financial protection, usually a letter of credit, funds put in escrow, 
or an offset of title IV, HEA funds, is important for the Department to 
protect the interests of students and taxpayers in the event of an 
institutional closure.
    In selecting mandatory triggers, the Department considered a 
variety of events and conduct that lead to financial risk. In 
particular, we looked for situations in which these events or conduct 
have resulted in significant impairment to an institution's financial 
health, and if the impairment is significant enough, closure of the 
institution. This has included some closures that were precipitous, 
harming both students and taxpayers.
    One category of mandatory triggers includes events or conduct where 
we have seen a significant destabilizing effect on an institution's 
financial health based upon past Department experience. These events 
are reflected in the mandatory triggers for debts and liabilities, 
judgments, governmental actions, SEC or regulator action(s) for public 
institutions, financial exigency, and receivership. Another category of 
mandatory triggers includes situations where institutional conduct 
might lead to loss of eligibility for title IV if not promptly 
remediated, such as high cohort default rates or failing 90/10, as well 
as situations involving the loss of access to other Federal educational 
assistance programs.
    We also considered situations for which we do not yet have 
historical experience, but which have the potential to have a similar 
negative financial effect. For example, the mandatory triggers related 
to borrower defense recoupment and a significant share of title IV, HEA 
program funds in a failing GE program or programs have not occurred in 
high numbers or have yet to occur, respectively, but they both 
represent situations in which there would be a known and quantifiable 
potential liability or loss in revenue that would likely result in 
significant impairment to an institution's financial health, and if the 
impairment is significant enough, closure of the institution. 
Discretionary triggers, by contrast, indicate elements of concern that 
merit a closer look but may not in all circumstances necessitate 
obtaining financial protection.
    Other mandatory triggers protect the Department's oversight 
capabilities. Triggers that fall into this category include, for 
example, situations where owners attempt to manipulate the 
institution's composite score by making contributions and then 
withdrawing the funds after the end of the fiscal year. Other triggers 
in this category include situations in which an outside investor or 
lender tries to discourage or hamper Department oversight by imposing 
conditions in financing agreements that trigger negative effects for 
the institution if the Department were to restrict title IV, HEA 
funding. Such situations are designed to do one of two things that 
weakens oversight. One is to discourage the Department from acting 
against an institution since the threat of financial impairment could 
cause an institution to become unstable and close, even if the 
Department's proposed action is less severe than that. The second is to 
make it easier for outside lenders to get paid as soon as an 
institution starts to face Department scrutiny. For instance, the 
Department has in the past seen institutions with financing 
arrangements that would make entire loans come due upon actions by the 
Department to delay aid disbursement through heightened cash 
monitoring. That allows lenders to get paid right away even while the 
Department determines if there are greater concerns that might 
otherwise merit obtaining financial protection. Making this type of 
trigger mandatory thus allows us to address both types of concerning 
reasons for using such restrictions in a financing arrangement.
    More detail on the individual mandatory triggers follows below.
    The Department proposes to amend Sec.  668.171(c)(2)(i)(A) by 
establishing a mandatory trigger for institutions with a composite 
score of less than 1.5 that are required to pay a debt or incur a 
liability from a settlement, arbitration proceeding, or final judgment 
in a judicial proceeding and that debt or liability occurs after the 
end of the fiscal year for which the Secretary has most recently 
calculated the institution's composite score, and as a result of that 
debt or liability, the recalculated composite score for the institution 
or entity is less than 1.0. The proposed trigger is similar to current 
Sec.  668.171(c)(2)(i)(A) but we propose to make two important changes. 
The first would expand the scope of the type of legal or administrative 
action to include arbitration proceedings. The Department is concerned 
that their current exclusion would miss an otherwise similar event that 
could represent a financial threat to an institution. The Department 
also proposes to simplify the way these proceedings are defined to 
eliminate the explanation for what constitutes a determination.
    When an institution is subject to the types of debts, liabilities, 
or losses covered under proposed Sec.  668.171(c)(2)(i)(A), it 
negatively impacts the institution's ability to direct resources to 
providing instruction and services to its students. This proposed 
trigger would focus on institutions that have already been identified 
as having a composite score that is less than passing. We would only 
seek financial protection from the institution when the institutional 
debt, liability or loss pushes the institution's recalculated composite 
score to less than 1.0, which is the already established threshold for 
a composite score to be considered failing. That financial protection 
would protect students from the results of negative consequences, 
including closure, that flows out of the institution being subject to 
these debts, liabilities, or losses.
    Proposed Sec.  668.171(c)(2)(i)(B) would establish a mandatory 
trigger for institutions or entities that are sued by a Federal or 
State authority, to impose an injunction, establish fines or penalties, 
or obtain financial relief such as damages or through a qui tam 
lawsuit. In the event of a qui tam lawsuit, this trigger would occur 
only once the Federal government has intervened. The trigger would take 
effect when the action has been pending for 120 days, or a qui tam has 
been pending

[[Page 32358]]

for 120 days following intervention, and no motion to dismiss has been 
filed, or if a motion to dismiss has been filed within 120 days and 
denied, upon such denial.
    Institutions subject to these types of actions are likely to have 
their financial stability negatively impacted. Institutions with 
triggering events described here are, in our view, at increased risk of 
possible closure. Financial protection would be obtained to offset the 
negative impacts of a possible closure placed upon students and 
taxpayers.
    A version of this trigger had been included in the 2016 final 
borrower defense regulations but was removed in the 2019 borrower 
defense final rule on the grounds that the Department wanted to focus 
on actual liabilities owed rather than theoretical amounts and to wait 
for lawsuits to be final before seeking to recover liabilities. 
However, as the Department continues to improve its work overseeing 
institutions of higher education, we are concerned that waiting until 
multi-year proceedings are final undermines the purpose of taking 
proactive actions to protect the Federal fiscal interest. The trigger 
as structured here is designed to capture lawsuits that indicate 
significant levels of action and government involvement. These are not 
particularly common, are not brought lightly, and only involve a non-
governmental actor if it is a qui tam lawsuit in which the Federal 
government has intervened. Moreover, the Department is concerned that 
waiting until the proceedings finish increases the risk that an 
institution that fails in an appeal would simply shut down immediately. 
By contrast, financial protection received can always be returned to 
the institution if the issues that necessitated it is resolved.
    The Department is proposing to add Sec.  668.171(c)(2)(i)(C) 
related to financial protection when the Department has adjudicated 
borrower defense claims in favor of borrowers and is seeking to recoup 
the cost of those discharges through an administrative proceeding. An 
institution would meet this trigger if a recalculated composite score 
that included this potential liability results in a composite score 
below 1.0.
    The structure of this trigger acknowledges the circumstances under 
which an institution could be subject to recoupment actions tied to 
approved borrower defense applications under the final rule published 
on November 1, 2022.\127\ Specifically, that rule establishes a single 
framework for reviewing all claims pending on July 1, 2023, or received 
on or after that date. This is different from prior borrower defense 
regulations, which apply different standards depending on a student 
loan's original disbursement date. That regulation states that an 
institution would not be subject to recoupment if the claim would not 
have been approved under the standard in effect at the time the loan 
was disbursed. Therefore, the trigger associated with approved borrower 
defense claims would not apply to claims that are approved but 
ineligible for recoupment under the new borrower defense regulation. 
Obtaining financial protection will help to ensure that there are 
institutional funds available to pay loan discharges if such discharges 
arise and are applicable, reducing the need for public funds to meet 
this obligation.
---------------------------------------------------------------------------

    \127\ 87 FR 65904.
---------------------------------------------------------------------------

    A similar trigger to this proposal was included in the 2016 Final 
Borrower Defense Regulations. That trigger was reduced in scope when 
financial responsibility standards were eliminated or lessened in the 
2019 Final Borrower Defense Regulations. The rationale for limiting 
this trigger in 2019 was to restrict this trigger to what, at that 
time, was considered ``known and quantifiable'' amounts. An example of 
a known and quantifiable trigger was an actual liability incurred from 
a lawsuit. A known and quantifiable trigger was one whose consequences 
posed such a severe and imminent risk (e.g., SEC or stock exchange 
actions) to the Federal interest that financial protection was 
warranted. This revised trigger would result in a known and 
quantifiable amount because the Department informs the institution of 
the amount of liability it is seeking when it initiates a recoupment 
action. The recalculation requirement also ensures that if the 
institution would still have a passing composite score, then they would 
not have to provide additional surety. For those that would have a 
failing score, this trigger simply ensures that if an institution does 
not prevail in any sort of recoupment action that the Department would 
have sufficient resources on hand to fulfill the liability. Absent this 
protection, there is a risk the institution would not have the 
resources to pay the liability by the time that proceeding is final.
    Further, proposed Sec.  668.171(c)(2)(i)(D) would apply to 
institutions undergoing a change in ownership for a period of time 
commencing with their approval to participate in the title IV, HEA 
programs through the end of the institution's second full fiscal year 
following certification. The Department proposes to add this condition 
because we are concerned that institutions may be in a vulnerable 
position in the period after a change in ownership as the new owners 
acclimate to managing the institution. Greater scrutiny of these 
situations is thus warranted.
    The Department proposes to move the current Sec.  
668.171(c)(1)(i)(B) and (ii) into a replacement of Sec.  
668.171(c)(2)(ii) to establish a mandatory trigger for institutions 
where an owner withdraws some amount of his or her equity in the 
institution when that institution has a composite score of less than 
1.5 (the threshold considered passing) and the withdrawal of equity 
results in a recalculated composite score of less than 1.0 (the 
threshold considered failing). This relocated trigger clarifies that 
this requirement would also apply to institutions undergoing a change 
in ownership for the year following that change. This trigger would 
apply to institutions that have a calculated composite score that is 
not passing and have already demonstrated some financial instability. 
This demonstration of financial instability creates a situation where 
the Department would obtain financial protection from an institution.
    The Department proposes to add Sec.  668.171(c)(2)(iii) to 
establish a mandatory trigger for institutions that received at least 
50 percent of its title IV, HEA program funds in its most recently 
completed fiscal year from gainful employment (GE) programs that are 
``failing.'' The 2016 Final Borrower Defense Regulations included a 
mandatory trigger linked to the number of students enrolled in failing 
GE programs. The 2019 Final Borrower Defense Regulations removed that 
trigger due to the regulations regarding GE programs being rescinded in 
a final rule published in the Federal Register on July 1, 2019.\128\ 
This trigger contained in this proposed rule would be linked to the 
implementation of regulations in part 668, subpart S, governing gainful 
employment programs. The Department would be able to obtain financial 
protection from an institution when its revenue is negatively impacted 
when the GE programs it offers fail the Department's GE metrics. The 
Department believes reinstating this trigger is necessary because the 
potential loss of revenue from failing GE programs would have a 
negative impact on the institution's overall financial stability when 
it represents such a significant share of the institution's revenue. 
The Department proposes the trigger occurring when 50 percent of an 
institution's title IV, HEA volume is in failing GE programs. The

[[Page 32359]]

Department uses percentage thresholds to require financial protection 
when there is more than an insignificant failure in compliance. For 
example, under 668.173(b), an institution fails to meet the reserve 
standards under Sec.  668.173(a)(3) if the institution failed to timely 
return unearned title IV, HEA funds for 5 percent or more students in a 
sample. In that circumstance, the financial protection is 25 percent of 
the total amount of unearned funds. For the failing GE programs, the 
Department determined that a 50 percent failure is reasonably related 
to the required financial protection of 10 percent of the institution's 
title IV, HEA funding because the institution is at risk of losing a 
majority of its title IV program revenue due to failure of some or all 
of its GE programs.
---------------------------------------------------------------------------

    \128\ 84 FR 31392.
---------------------------------------------------------------------------

    The Department proposes to add Sec.  668.171(c)(2)(iv) to establish 
a mandatory trigger for institutions required to submit a teach-out 
plan or agreement. This mandatory trigger was originally implemented in 
the 2016 Final Borrower Defense Regulations and was subsequently 
removed in the 2019 Final Borrower Defense Regulations. The rationale 
in 2019 was that teach-outs were primarily the jurisdiction of 
accrediting agencies. The Department stated in the discussion section 
of that final rule that accrediting agencies are required to approve 
teach-out plans at institutions under certain circumstances, which 
demonstrates how important these plans are to ensuring that students 
have a chance to complete their instructional program in the event 
their school closes. At that time, we sought to incentivize teach-outs, 
and determined that linking a teach-out to a financial trigger was not 
an incentive. However, the Department has not seen any evidence that 
the efforts to incentivize teach-out plans or agreements through 
accreditors has reduced the number of institutions that close without a 
teach-out plan or agreement in place. Instead, the Department continues 
to witness disruptive and ill-planned closures where the institution 
has not made any arrangements for where students might transfer and 
complete their programs. Even when the school survives after a teach-
out, the circumstances that could lead to such a request make it likely 
that the school's revenues will be significantly reduced and will be 
indicative of ongoing financial instability. We propose to re-implement 
this mandatory trigger so that we can obtain financial protection from 
institutions that are in this status. When an institutional closure is 
imminent, regardless if it is one location or the entire institution, 
obtaining financial protection from the institution as soon as possible 
is necessary to protect the interests of students who will be 
negatively affected by the closure. Financial protection is also 
necessary to protect the interests of taxpayers who would have to 
provide funds for costs and obligations emanating from the closure, 
e.g., payment of loan discharges. While a closed institution bears 
responsibility for reimbursing the Department for student loans 
discharged due to the closure, the actual recoupment of those funds 
takes place very rarely due to the institution ceasing to exist. This 
further illustrates the necessity for financial protection from 
institutions in this status.
    The Department proposes to add Sec.  668.171(c)(2)(v) by to 
establish a mandatory trigger for institutions cited by a State 
licensing or authorizing agency for failing to meet State or agency 
requirements when the agency provides notice that it will withdraw or 
terminate the institution's licensure or authorization if the 
institution does not take the steps necessary to come into compliance 
with that requirement. The 2016 Final Borrower Defense Regulations had 
a similar mandatory trigger to this proposed trigger. The 2019 Final 
Borrower Defense Regulations added the language stating that the 
authorizing agency would terminate the institution's licensure or 
authorization if the institution did not comply; however, the 2019 
Final Borrower Defense Regulations relegated this trigger to the 
discretionary category. We propose to keep the language added in the 
2019 Final Borrower Defense Regulations but recategorize this trigger 
as mandatory. State authorization, or similar authorization from a 
governmental entity, is a fundamental factor of institutional 
eligibility. If an institution loses that factor, it would lose the 
ability to participate in the title IV, HEA programs. That loss of 
eligibility would significantly increase the likelihood that an 
institution may close. The seriousness of that potential occurrence is 
so great that the Department does not believe there are circumstances 
where it would not be appropriate to request financial protection. 
Accordingly, we think this is more appropriate as a mandatory trigger 
rather than a discretionary one.
    The Department proposes to add Sec.  668.171(c)(2)(vi) to establish 
a mandatory trigger for institutions that are directly or indirectly 
owned at least 50 percent by an entity whose securities are listed on a 
domestic or foreign exchange and that entity is subject to one or more 
actions or events initiated by the U.S. Securities and Exchange 
Commission (SEC) or the exchange where the securities are listed. This 
mandatory trigger is, for the most part, in current regulation in Sec.  
668.171(c)(2). Our proposal would clarify that if the SEC files an 
action against the entity in district court or issues an order 
instituting proceedings pursuant to section 12(j) of the Exchange Act, 
that action would be a triggering event. The Department views either of 
these as actions we would take only when the SEC has identified and 
vetted serious issues, signaling increased risk to students attending 
those affected entities.
    We further clarify that ``exchanges'' includes both domestic and 
foreign exchanges where the entity's securities may be traded. We 
recognize that some entities owning schools have stocks that are traded 
on foreign exchanges, and we believe similar actions initiated in those 
foreign exchanges or foreign oversight authorities warrant equivalent 
treatment under these proposed regulations.
    The proposed trigger would enable the Department to obtain 
financial protection in situations where the SEC, a foreign or domestic 
exchange, or a foreign oversight authority, takes an action that 
potentially jeopardizes the institution's financial stability. This 
surety would protect the interests of the institution's students and 
the interests of taxpayers, both of whom can be negatively impacted by 
an institution's faltering financial stability.
    The Department proposes to add Sec.  668.171(c)(2)(vii) to 
establish a mandatory trigger for proprietary institutions where, in 
its most recently completed fiscal year, an institution did not receive 
at least 10 percent of its revenue from sources other than Federal 
educational assistance. The financial protection provided under this 
requirement will remain in place until the institution passes the 90/10 
revenue requirement for two consecutive fiscal years. A mandatory 
trigger linked to the 90/10 revenue requirement was included in the 
2016 Final Borrower Defense Regulations and it was reduced to a 
discretionary trigger in the 2019 Final Borrower Defense Regulations. 
Both of those triggers were linked to the then applicable rule which 
prohibited a proprietary institution from obtaining greater than 90 
percent of its revenue from the title IV, HEA programs. The American 
Rescue Plan of 2021 \129\ amended section 487(a) of the HEA requiring 
that proprietary institutions

[[Page 32360]]

derive not less than 10 percent of their revenue from non-Federal 
sources. Therefore, we propose to expand the 90/10 requirement to 
include all Federal educational assistance in the calculation as 
opposed to only including title IV, HEA assistance. An institution that 
fails the 90/10 requirement is at significant risk of losing its 
ability to participate in the title IV, HEA programs, which could put 
it in extreme financial jeopardy. Since the 90/10 requirement now 
includes all Federal educational assistance, it is possible that some 
institutions that previously met this threshold under the prior rule no 
longer would. The possibility for an increased number of institutions 
falling into this category warrants making this a mandatory trigger. 
Obtaining financial protection from an institution in this status is 
essential to protect students and taxpayers from an institution's 
potential loss of access to title IV, HEA funds and from a possible 
institutional closure and its negative consequences.
---------------------------------------------------------------------------

    \129\ www.congress.gov/bill/117th-congress/house-bill/1319/text.
---------------------------------------------------------------------------

    The Department proposes to add Sec.  668.171(c)(2)(viii) to 
establish a mandatory trigger for institutions whose two most recent 
official cohort default rates (CDR) are 30 percent or greater, unless 
the institution files a challenge, request for adjustment, or appeal 
with respect to its rates for one or both of those fiscal years; and 
that challenge, request, or appeal remains pending, results in reducing 
below 30 percent the official CDR for either or both of those years, or 
precludes the rates from either or both years from resulting in a loss 
of eligibility or provisional certification.
    This trigger was included as a mandatory trigger in the 2016 Final 
Borrower Defense Regulations, and it was reduced to a discretionary 
trigger in the 2019 Final Borrower Defense Regulations. The rationale 
in 2019 for categorizing this trigger as discretionary was based on the 
idea that it was more appropriate to allow the Department to review the 
institution's efforts to improve their CDR before obtaining financial 
protection. As part of that review, the Department would evaluate 
whether the institution had acted to remedy or mitigate the causes for 
its CDR failure or to assess the extent to which there were anomalous 
or mitigating circumstances precipitating this triggering event, before 
determining whether we needed to obtain financial protection. Part of 
that review was to include evaluating the institution's response to the 
triggering event to determine whether a subsequent failure was likely 
to occur, based on actions the institution is taking to mitigate its 
dependence on title IV, HEA funds. This included the extent to which a 
loss of title IV, HEA funds due to a CDR failure would affect its 
financial condition or ability to continue as a going concern, or 
whether the institution had challenged or appealed one or more of its 
default rates. We now propose to raise this trigger to the mandatory 
classification because of the serious consequences attached to CDRs at 
this level. Institutions with high CDRs are failing to meet the 
standards of administrative capability under Sec.  668.16(m). Further, 
institutions with high CDRs are subject to the following sanctions:
     An institution with a CDR of greater than 40 percent for 
any one year loses eligibility to participate in the Federal Direct 
Loan Program.
     An institution with a CDR of 30 percent or more for any 
one year must create a default prevention taskforce that will develop 
and implement a plan to address the institution's high CDR. That plan 
must be submitted to the Department for review.
     An institution with a CDR of 30 percent or more for two 
consecutive years must submit to the Department a revised default 
prevention plan and may be placed on provisional certification.
     An institution with a CDR of 30 percent or more for three 
consecutive years loses eligibility to participate in both the Direct 
Loan Program and in the Federal Pell Grant Program.
    Institutions subject to these sanctions will generally find 
themselves at risk of losing eligibility to participate in some title 
IV, HEA programs resulting in a decreased revenue flow. This 
circumstance is often a harbinger of an institution's financial 
distress and possible closure. Obtaining financial surety from an 
institution immediately after the institution finds itself in this 
status is necessary to offset any costs associated with an 
institutional closure and to alleviate any possible harm to students or 
taxpayers.
    The Department proposes to add Sec.  668.171(c)(2)(ix) to establish 
a mandatory trigger for institutions that have lost eligibility to 
participate in another Federal educational assistance program due to an 
administrative action against the school. This would be a new trigger 
not previously included in other regulations. The Department is aware 
of some institutions that have lost their eligibility to participate in 
Federal educational assistance programs overseen by agencies other than 
the Department. Institutions in that status have generally demonstrated 
some weakness or some area of noncompliance resulting in their loss of 
eligibility. That weakness or noncompliance may also be an indicator of 
the institution's lack of administrative capability to administer the 
title IV, HEA programs. Further, the institution will likely suffer 
some negative impact on its revenue flow linked to its loss of 
eligibility to participate in the program. In either or both events, we 
propose that the Department obtain financial protection from 
institutions in this category to protect students and taxpayers from 
any negative consequences, including the possible closure of the 
institution, associated with its loss of eligibility to participate in 
the educational assistance program.
    The Department proposes to add Sec.  668.171(c)(2)(x) to establish 
a mandatory trigger for institutions whose financial statements 
required to be submitted under Sec.  668.23 reflect a contribution in 
the last quarter of the fiscal year, and the institution then made a 
distribution during the first two quarters of the next fiscal year; and 
the offset of such distribution against the contribution results in a 
recalculated composite score of less than 1.0, as determined by the 
Department. This would be a new mandatory trigger. The Department has 
seen examples of institutions who seek to manipulate their composite 
score calculations by having a contribution made late in the fiscal 
year, raising the composite score for that fiscal year typically by 
enough so that it passes. However, the same institutions then make a 
distribution in the same or a similar amount early in the following 
fiscal year. This removes capital from the school and means that it is 
operating in a situation that may not demonstrate financial 
responsibility. With this proposal, we would obtain financial 
protection from an institution engaging in this pattern of behavior 
when that pattern results in a recalculated composite score of less 
than 1.0. Institutions engaging in this pattern of behavior generally 
do so to boost the apparent financial strength of the annual audited 
financial statements to avoid a failing composite score. Obtaining 
financial protection from institutions in this status is necessary to 
protect students and taxpayers from the negative consequences that can 
appear at institutions such as these.
    The Department proposes to add Sec.  668.171(c)(2)(xi) to establish 
a mandatory trigger for institutions that, as a result of Departmental 
action, the institution or any entity included in the financial 
statements submitted in the current or prior fiscal year is subject to 
a default or other adverse condition under a line of credit, loan 
agreement, security agreement, or other financing arrangement. This 
proposed mandatory

[[Page 32361]]

trigger is similar to an existing discretionary trigger, but the 
existing trigger discusses actions of creditors in general and does not 
separately address creditor events linked to Departmental actions. We 
propose to make this trigger mandatory due to the negative financial 
consequences that can follow instances when these actions occur. 
Actions like these negatively impact the resources an institution has 
available for normal institutional operations and in the worst cases, 
events like these can lead to the closure of an institution. It is 
important for the Department to be aware of institutions subject to 
creditor events linked to this trigger as soon as possible and to 
offset the financial instability created by this situation by obtaining 
financial protection.
    The Department proposes to add Sec.  668.171(c)(2)(xii) to 
establish a mandatory trigger for when an institution declares a state 
of financial exigency to a Federal, State, Tribal, or foreign 
governmental agency or its accrediting agency. Institutions 
experiencing substantial financial challenges sometimes make such 
declarations in an effort to justify significant changes to the 
institution, including elimination of academic programs and reductions 
of administrative or instructional staff. Although such declarations 
are typically not made unless the institution experiences severe 
financial hardship, in many cases threatening the institution's 
survival, the Department's regulations do not currently require an 
institution to report such status to the Department. The Department may 
not learn about an institution's financial challenges until an 
accrediting agency or governmental agency informs us or we learn of it 
from the media. This proposed trigger is necessary to ensure that the 
institution quickly informs the Department of any declaration of 
financial exigency and enables us to obtain financial protection to 
protect the interests of students and taxpayers.
    The Department proposes to add Sec.  668.171(c)(2)(xiii) to 
establish a mandatory trigger for when an institution is voluntarily 
placed, or is required to be placed, in receivership. We currently have 
little ability to act when an institution is in this situation, which 
indicates severe financial distress. This trigger would allow us 
greater ability to require financial protection while a receiver 
manages the funds. In recent years the Department has seen three high 
profile institutional failures where institutions entered into a 
receivership and the Department was unable to obtain sufficient 
financial protection before they closed.

Financial Responsibility--Discretionary Triggering Events (Sec.  
668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(d) contains several 
discretionary triggering events impacting an institution's financial 
responsibility. The current discretionary triggers are these instances:
     The institution is subject to an accrediting agency action 
that could result in a loss of institutional accreditation;
     The institution is found to have violated a provision or 
requirement in a security or loan agreement;
     The institution has a high dropout rate; The institution's 
State licensing or authorizing agency notifies the institution that it 
has violated a State licensing or authorizing agency requirement and 
that the agency intends to withdraw or terminate the institution's 
licensure or authorization if the institution does not take the steps 
necessary to come into compliance with that requirement;
     For its most recently completed fiscal year, a proprietary 
institution did not receive at least 10 percent of its revenue from 
sources other than title IV, HEA program funds; or
     The institution's two most recent official CDRs are 30 
percent or greater.
    Proposed Regulations: The Department proposes to amend Sec.  
668.171(d) to establish a stronger and more expansive set of 
discretionary triggering events that would assist the Department in 
determining if an institution is able to meet its financial or 
administrative obligations. This includes amending some existing 
triggers, moving some discretionary triggers into the list of mandatory 
triggers in paragraph (c) of this section, and adding new ones. Unlike 
the mandatory triggers, if any of the discretionary triggers occurs, 
the Department would determine if the event is likely to have a 
material adverse effect on the financial condition of the institution. 
If we make that determination, we would obtain financial protection 
from the institution. The proposed discretionary triggers are when:
     Under Sec.  668.171(d)(1), the institution's accrediting 
agency or a Federal, State, local or Tribal authority places the 
institution on probation, issues a show-cause order, or places the 
institution in a comparable status that poses an equivalent or greater 
risk to its accreditation, authorization, or eligibility;
     Under Sec.  668.171(d)(2)(i) and (ii), except as provided 
in proposed Sec.  668.171(c)(2)(xi), the institution is subject to a 
default or other condition under a line of credit, loan agreement, 
security agreement, or other financing arrangement; and a monetary or 
nonmonetary default or delinquency or other event occurs that allows 
the creditor to require or impose an increase in collateral, a change 
in contractual obligations, an increase in interest rates or payments, 
or other sanctions, penalties, or fees;
     Under Sec.  668.171(d)(2)(iii), except as provided in 
proposed Sec.  668.171(c)(2)(xi), any creditor of the institution or 
any entity included in the financial statements submitted in the 
current or prior fiscal year under Sec.  600.20(g) or (h), Sec.  
668.23, or subpart L of this part takes action to terminate, withdraw, 
limit, or suspend a loan agreement or other financing arrangement or 
calls due a balance on a line of credit with an outstanding balance;
     Under Sec.  668.171(d)(2)(iv), except as provided in 
proposed Sec.  668.171(c)(2)(xi), the institution or any entity 
included in the financial statements submitted in the current or prior 
fiscal year under 34 CFR 600.20(g) or (h), Sec.  668.23, or subpart L 
of this part enters into a line of credit, loan agreement, security 
agreement, or other financing arrangement whereby the institution or 
entity may be subject to a default or other adverse condition as a 
result of any action taken by the Department; or
     Under Sec.  668.171(d)(2)(v), the institution or any 
entity included in the financial statements submitted in the current or 
prior fiscal year under 34 CFR 600.20(g) or (h), Sec.  668.23, or this 
subpart L has a monetary judgment entered against it that is subject to 
appeal or under appeal;
     Under Sec.  668.171(d)(3), the institution displays a 
significant fluctuation in consecutive award years, or a period of 
award years, in the amount of Direct Loan or Pell Grant funds received 
by the institution that cannot be accounted for by changes in those 
title IV, HEA programs;
     Under Sec.  668.171(d)(4), an institution has high annual 
dropout rates, as calculated by the Department;
     Under Sec.  668.171(d)(5), an institution that is required 
to provide additional financial reporting to the Department due to a 
failure to meet the regulatory financial responsibility standards and 
has any of these

[[Page 32362]]

indicators: negative cash flows, failure of other liquidation ratios, 
cash flows that significantly miss projections, significant increased 
withdrawal rates, or other indicators of a material change in the 
institution's financial condition;
     Under Sec.  668.171(d)(6), the institution has pending 
claims for borrower relief discharges from students or former students 
and the Department has formed a group process to consider claims and, 
if approved, those claims could be subject to recoupment. Our goal is 
to determine if the pending claims for borrower relief, when considered 
along with any other financial triggers, pose any threat to the 
institution to the extent that a potential closure could result. If we 
believe such a threat exists, we would seek financial protection to 
protect the interests of the institution's students and the taxpayers;
     Under Sec.  668.171(d)(7), the institution discontinues 
academic programs that enroll more than 25 percent of students at the 
institution; Under Sec.  668.171(d)(8), the institution closes more 
than 50 percent of its locations, or closes locations that enroll more 
than 25 percent of its students. Locations for this purpose include the 
institution's main campus and any additional location(s) or branch 
campus(es) as described in Sec.  600.2;
     Under Sec.  668.171(d)(9), the institution is cited by a 
State licensing or authorizing agency for failing to meet requirements;
     Under Sec.  668.171(d)(10), the institution has one or 
more programs that has lost eligibility to participate in another 
Federal educational assistance program due to an administrative action;
     Under Sec.  668.171(d)(11), at least 50 percent of the 
institution is owned directly or indirectly by an entity whose 
securities are listed on a domestic or foreign exchange and the entity 
discloses in a public filing that it is under investigation for 
possible violations of State, Federal or foreign law.
     Under Sec.  668.171(d)(12), the institution is cited by 
another Federal agency and faces loss of education assistance funds if 
it does not comply with the agency's requirements.
    Reasons: The Department is concerned that there are many factors or 
events that are reasonably likely to, but would not in every case, have 
an adverse financial impact on an institution. Compared to the 
mandatory triggers where the impact of an action or event can be 
reasonably and readily assessed (e.g., where claims, liabilities, and 
potential losses are reflected in the recalculated composite score), 
the materiality or impact of the discretionary triggers is not as 
apparent and obtaining financial protection in every situation may not 
be appropriate. The Department would have to conduct a case-by-case 
review and analysis of the factors or events applicable to an 
institution to determine whether one or more of those factors or events 
has an adverse financial impact. In so doing, the Department may 
request additional information or clarification from the institution 
about the circumstances surrounding the factors or events under review. 
If we determine that the factors or events have a significant adverse 
effect on the institution's financial condition or operations, we would 
notify the institution of the reasons for, and consequences of, that 
determination. When an institution moves toward a status of financial 
instability or irresponsibility, it is necessary for the Department to 
be aware of that at the earliest possible time so that the situation 
can be addressed. These proposed discretionary triggers would be a tool 
with which the Department can pursue that charge.
    While there are existing discretionary triggers, the Department is 
concerned that the current regulations are too limiting. They exclude 
too many situations where institutions with questionable financial 
stability could continue to operate without a streamlined mechanism for 
the Department to receive additional financial protection. The current 
triggers also do not include certain events that may be precursors to 
later more concerning events, such as an institution first being placed 
on probation and then later having to show cause with an accreditation 
agency. Having these discretionary triggers occur earlier in what could 
end up being a series of events that results in an institution's 
impaired financial stability increases the likelihood that the 
Department would be able to obtain financial protection from 
institutions while they still possess the resources to comply.
    Absent stronger triggers, the Department is concerned that it will 
expose taxpayers to unnecessarily significant risk of uncompensated 
discharges tied to institutional closures or approved borrower defense 
claims. These new proposed triggers would also deter overly risky 
behavior, as institutions would know there is a possibility that they 
could be required to provide additional financial protection if they 
engage in behavior that leads to violating financing arrangements, an 
increase in borrower defense claims, or other actions that indicate 
broader financial problems with an institution.
    The Department proposes to amend Sec.  668.171(d)(1) by 
establishing a discretionary trigger for situations where the 
institution's accrediting agency or a Federal, State, local or Tribal 
authority places the institution on probation or issues a show-cause 
order or places the institution in a comparable status that poses an 
equivalent or greater risk to its accreditation, authorization, or 
eligibility. We further propose to expand this requirement to include 
compliance actions initiated by governmental oversight and authorizing 
agencies since their actions can be equally impactful on the 
institution's status. This proposal is similar to two separate triggers 
that currently exist, and which were implemented in the 2019 Final 
Borrower Defense Regulations. This proposal expands and strengthens the 
trigger to include institutions that are placed on probation by their 
accrediting agency. This proposal uses similar language to a trigger 
linked to accrediting agency actions that was implemented in the 2016 
Final Borrower Defense Regulations. The 2019 Final Borrower Defense 
Regulations kept accrediting agency actions as a discretionary trigger 
but eliminated probation as an action that would activate this trigger. 
We are now concerned that the existing trigger is too limited in 
considering the types of situations that represent significant concerns 
from accreditors, especially given the desire to request financial 
protection before an institution is on the brink of closure. It is not 
uncommon for institutions to be placed on probation before later ending 
up on show cause--the status that currently activates a discretionary 
trigger. Adding probation provides a path for the Department to take a 
closer look at an institution before it is at the most serious stage of 
accreditor actions. Institutions that are categorized by their 
accreditors as being on probation, having to show cause, or having 
their accreditation status placed at risk may be under stresses that 
would have a direct impact on their financial stability. The proposed 
trigger includes compliance actions initiated by governmental oversight 
or authorizing agencies. The current regulatory trigger, implemented in 
the 2019 Final Borrower Defense Regulations, is similar to this and is 
linked to a State licensing or authorizing agency taking action against 
the institution in which the agency will move to withdraw or terminate 
the institution's licensure or

[[Page 32363]]

authorization. The proposal would combine the actions taken by an 
accrediting agency and those taken by governmental oversight or 
authorization agencies into one discretionary trigger. Because this is 
a discretionary trigger, the Department would be able to examine why an 
institution is placed on probation or other statuses to determine if 
they do indicate severe enough situations that financial protection is 
warranted.
    The Department proposes to amend Sec.  668.171(d)(2) by 
establishing a discretionary trigger for situations where the 
institution is subject to a default or other condition under a line of 
credit, loan agreement, security agreement, or other financing 
arrangement; and a monetary or nonmonetary default or delinquency or 
other event occurs that allows the creditor to require or impose an 
increase in collateral, a change in contractual obligations, an 
increase in interest rates or payments, or other sanctions, penalties, 
or fees. This would capture situations that are similar to but not 
otherwise addressed by the mandatory trigger in proposed Sec.  
668.171(c)(2)(xi). This proposed discretionary trigger is similar to a 
discretionary trigger that was implemented in the 2016 Final Borrower 
Defense Regulations and was retained in the 2019 Final Borrower Defense 
Regulations. The proposed regulation would clarify that the rule 
includes not only the institution but also any entity included in the 
financial statements submitted in the current or prior fiscal year 
under Sec. Sec.  600.20(g) or (h), 668.23, or subpart L of part 668.
    The Department is concerned that the situations described in this 
trigger could result in an institution or associated entity suddenly 
needing to remove significant resources from the institution, such as 
to put up greater collateral or to address a sudden increase in the 
costs of servicing its debt. Such situations mean that an institution 
or associated entity that may have seemed financially responsible is 
now in a situation where they cannot afford their debt payments or may 
be at other risk of significantly negative financial outcomes. 
Moreover, including these items makes it possible for the Department to 
be aware earlier about the possible need for financial protection from 
the institution, improving our ability to protect students' and 
taxpayers' interests. However, given that institutions and their 
associated entities may have a significant number of creditors and 
contracts, we think it is prudent to treat this as a discretionary 
trigger so that the Department is able to better analyze the specific 
facts of the situation and then determine what degree of a threat to an 
institution's financial health it represents.
    The Department proposes to further amend Sec.  668.171(d)(2) by 
establishing a discretionary trigger for judgments awarding damages or 
other monetary relief that are subject to appeal or under appeal. Even 
if under appeal, such judgments against institutions or their owners 
should not be taken lightly because they may negatively impact the 
institution's financial strength in the future. Additionally, appeals 
of such judgments can and often do take years to resolve.
    In the event the Department determines that the potential liability 
resulting from the judgment against the institution or entity could 
have a significant adverse effect on the institution, the Department 
believes it should be able to take sensible steps to protect the 
Federal fiscal interest during the pendency of those proceedings.
    The Department proposes to amend Sec.  668.171(d)(3) to establish a 
discretionary trigger for situations where the institution displays a 
significant fluctuation in consecutive award years, or a period of 
award years, in the amount of Federal Direct Loan or Federal Pell Grant 
funds received by the institution that cannot be accounted for by 
changes in those title IV, HEA programs. This proposed discretionary 
trigger is similar to a discretionary trigger that was implemented in 
the 2016 Final Borrower Defense Regulations and was subsequently 
removed in the 2019 Final Borrower Defense Regulations. The rationale 
at that time for removing this trigger was that fluctuation in these 
program funds did not indicate financial instability at the 
institution. Additionally, we stated that linking Pell Grant 
fluctuations to a discretionary trigger would harm low-income students 
because it would discourage institutions from serving students who rely 
on Pell Grants. However, we have observed that significant increases or 
decreases in the volume of Federal funds may signal rapid contraction 
or expansion of an institution's operations that may either cause, or 
be driven by, negative turns in the institution's financial condition 
or its ability to provide educational services. A significant 
contraction in aid received may indicate that an institution is 
struggling to attract students and may be at risk of closure. On the 
other hand, an institution that grows rapidly may present risks that 
its growth will outpace its capacity to serve students well. In the 
past, the Department has seen situations, particularly among publicly 
traded private for-profit institutions, where institutions experienced 
hypergrowth, resulting in significant concerns about the value 
delivered, followed a few years later by a significant contraction, 
and, in some cases, closure. Being aware of this status at an earlier 
time than provided under current regulations allows us to seek 
financial protection from the institution when we determine that it is 
necessary to protect students' and taxpayers' interests. In evaluating 
this trigger again, we have come to disagree with the way we framed our 
concerns around the effect of this trigger on low-income students in 
the 2019 regulation. The institutions with the largest shares of Pell 
Grant recipients are open access institutions, meaning they accept any 
qualified applicant without consideration of that student's finances. 
The institutions with the lowest shares of low-income students, by 
contrast, tend to be the institutions that reject the most students and 
have the greatest financial resources. Because these aspects are core 
to an institution's structure and mission, we do not see a circumstance 
where this trigger might affect an institution's decision on the type 
of students to serve. We also believe that it is important to ensure 
that low-income students have access to educational options at 
financially stable institutions offering a high-quality education and 
are not attending schools that may be at risk of sudden closure.
    The Department proposes to amend Sec.  668.171(d)(5) to establish a 
discretionary trigger for when an institution is required to provide 
additional interim financial reporting to the Department due to a 
failure to meet the regulatory financial responsibility standards or 
due to a change in ownership and has any of these indicators: negative 
cash flows, failure of other liquidation ratios, cash flows that 
significantly miss projections, significant increased withdrawal rates, 
or other indicators of a material change in the institution's financial 
condition. This proposed discretionary trigger is new. It would only 
apply to those institutions that fail to meet the financial 
responsibility standards in subpart L of part 668 or experience a 
change in ownership. Additionally, one or more of the indicators 
mentioned in the proposed rule--negative cash flows, failure of other 
liquidation ratios, cash flows that significantly miss the projections 
submitted to the Department, withdrawal rates that increase 
significantly, or other indicators of a material change in the 
financial condition of the institution--would have to be present for 
the trigger

[[Page 32364]]

to apply. These indicators are of sufficient severity that it is 
important for the Department to examine the overall financial picture 
of the institution and determine if financial protection would be 
required to protect the interests of students and taxpayers.
    The Department proposes to amend Sec.  668.171(d)(6) to establish a 
discretionary trigger for when an institution has pending claims for 
borrower defense discharges from students or former students and the 
Department has formed a group process to consider claims. This would 
only apply in situations where, if approved, the institution might be 
subject to recoupment for some or all of the costs associated with the 
approved group claim. This proposed discretionary trigger is similar to 
a discretionary trigger that was implemented in the 2016 Final Borrower 
Defense Regulations and was subsequently removed in the 2019 Final 
Borrower Defense Regulations due to the burden placed on institutions 
with borrower defense claims, that were otherwise financially stable. 
At the time the Department argued that the amounts associated with an 
institution's borrower defense claims were estimates and could create 
false-positive outcomes resulting in a financially responsible 
institution having to inappropriately provide financial protection. 
Further, it was believed that this false-positive situation would 
impose a significant burden on the Department to monitor and analyze an 
institution that was financially responsible. However, we have 
reconsidered our position and adjusted the trigger to address some of 
our previously stated concerns. First, we have clarified that this 
trigger applies to group processes, not just decisions on individual 
claims. To date, groups of borrowers who have received loan discharges 
based upon borrower defense findings have been very large, representing 
tens of millions of dollars. The formation of the group process also 
occurs after the review of evidence and a response from the 
institution, so there is already some consideration of the relevant 
evidence before this trigger would potentially be met. Furthermore, 
this would be a discretionary trigger, so the Department would be 
required to assess to assess the institution's financial stability and 
determine if the borrower defense claims pose a threat to the 
institution's financial responsibility. That would mean that a group 
process involving a very small number of claims would be less likely to 
result in a request for financial protection, especially if the 
institution is large and otherwise financially stable. If it is 
determined that the group process is a real financial threat, it is 
only then that financial protection would be obtained from the 
institution. The Department believes it is important that institutions 
be held accountable when they take advantage of student loan borrowers. 
Unfortunately, the Department has often observed that an institution 
has closed long before a borrower defense process concludes. Asking for 
financial protection earlier in the process increases the likelihood 
that the Department would be able to offset losses from a group claim 
that is later approved.
    The Department intentionally limits this trigger to situations 
where there may be a recoupment action. The borrower defense rule 
published on November 1, 2022,\130\ notes that institutions would not 
be subject to recoupment in situations in which the claims would not 
have been approved under the standards in place when loans were first 
disbursed. Since the Department is concerned with whether an approved 
group claim could result in a significant liability for an institution 
that could create financial problems it would not be appropriate to 
have this trigger occur if the Department was not going to seek to 
recoup on that discharge if it is approved.
---------------------------------------------------------------------------

    \130\ 87 FR 65904.
---------------------------------------------------------------------------

    The Department proposes to add Sec.  668.171(d)(7) by establishing 
a discretionary trigger for when an institution discontinues academic 
programs that affect more than 25 percent of enrolled students. This 
would be a new discretionary trigger. The Department is concerned that 
ending programs that affect a significant share of enrollment may be a 
precursor to an overall closure of the entire institution. While the 
ending of any program that negatively impacts any students is a matter 
of concern for the Department, we propose that the cessation of a 
program or programs that enroll 25 percent of an institution's students 
is the threshold that we would evaluate the institution's financial 
stability to ensure the termination of the programs has not negatively 
impacted the institution's financial status.
    The goal of this trigger is to identify a situation in which the 
share of enrollment affected by a program or location closure is 
significant enough that it merits further institution-specific analysis 
to determine if the closure suggests a sufficiently large financial 
impairment where greater protection would be warranted. The Department 
chose this 25 percent threshold because we believe that could indicate 
a serious impairment to an institution's finances that merits a closer 
and case-by-case review. By way of example, we believe a threshold at 
this level would allow us to capture the situation where an institution 
closed all of its programs in a given degree level, only to later 
shutter the entire institution. As with other triggers, this ability to 
take a closer look is important because historically the Department has 
collected very little funds to offset the costs of closed school 
discharges after an institution goes out of business.
    The Department proposes to add Sec.  668.171(d)(8) by establishing 
a discretionary trigger for when an institution closes more than 50 
percent of its locations or closes locations that enroll more than 25 
percent of its students. Locations for this purpose include the 
institution's main campus and any additional location(s) or branch 
campus(es) as described in Sec.  600.2. This would be a new 
discretionary trigger. This proposed discretionary trigger is similar 
to the trigger linked to an institution terminating academic programs 
in that an institution closing locations in this number may be a 
harbinger of an imminent closure of the institution. The Department 
chose the threshold of more than 25 percent of enrolled students for 
the same reasons that it selected that level for the discontinuation of 
academic programs.
    This trigger considers closures both in terms of the number of 
campus closures as well as separately considering the amount of 
enrollment at locations. Both can be concerns. For instance, the 
Department has seen instances where an institution started closing a 
number of its additional locations before later shuttering its main 
campus. We propose the threshold of more than 50 percent of an 
institution's locations closing as that number of locations, regardless 
of the percentage of students impacted, may indicate an overall lack of 
financial stability. A negotiator in the negotiated rulemaking process 
stated that an institution may be strengthening its financial status by 
closing locations with zero or very low enrollment or usage. We 
acknowledge that and believe that our evaluation as a result of this 
proposed trigger would make that very determination. If an institution 
is made financially stronger, then financial protection would not be 
necessary but if the institution is made weaker by the closure of more 
than half of its locations, then we would obtain financial protection 
to ensure that students and taxpayers are protected in the event of an 
overall institutional closure. Similarly, this analysis could

[[Page 32365]]

consider if the locations being closed are in fact sizable sources of 
an institution's enrollment versus being small satellite locations.
    The Department proposes to add Sec.  668.171(d)(9) by establishing 
a discretionary trigger for when an institution is cited by a State 
licensing or authorizing agency for failing to meet requirements. This 
captures less severe circumstances related to States than are addressed 
under the mandatory triggers. This proposed trigger was originally 
implemented in the 2016 Final Borrower Defense Regulations. The 2019 
Final Borrower Defense Regulations kept the trigger but narrowed its 
scope to only be activated if the State licensing or authorizing agency 
stated that it intended to withdraw or terminate the licensure or 
authorization if the institution failed to take steps to comply with 
the requirement. The rationale at that time was that the trigger would 
be linked to a known and quantifiable event, in this case, the State 
agency's intent to withdraw or terminate the agency's licensure or 
authorization. Proposed Sec.  668.171(d)(9) would return to the 
original concept where the Department would be aware and be able to 
obtain financial protection if an institution is cited by its State 
licensing or authorizing agency. We have observed some institutions 
with this pattern of behavior that have been unable to correct the area 
of noncompliance and find its normal operations are more difficult to 
pursue. An institution's eligibility to administer the title IV, HEA 
programs is dependent on obtaining and maintaining authorization or 
licensure from the appropriate State agency in its State. When a State 
agency cites an institution, its continued eligibility may be in 
jeopardy. This proposed discretionary trigger would allow the 
Department to evaluate the situation and determine if the State action 
is of the magnitude that financial protection would be required. In 
worst case scenarios, findings and citations of this type are 
precursors to the institution losing its authorization or licensure and 
the subsequent loss of eligibility to administer the title IV, HEA 
programs. Such a loss would have a negative impact on the institution's 
overall financial stability requiring the Department to make a 
determination if obtaining financial protection for the institution is 
warranted to protect students' and taxpayers' interests.
    The Department proposes to add Sec.  668.171(d)(10) to establish a 
discretionary trigger for when an institution has one or more programs 
that has lost eligibility to participate in another Federal educational 
assistance program due to an administrative action. This would be a new 
discretionary trigger and complements the mandatory trigger that occurs 
if the institution loses eligibility for another Federal educational 
assistance program. Other Federal agencies administer educational 
assistance programs including the Departments of Veterans Affairs, 
Defense, and Health and Human Services. Currently, when an institution 
has lost its ability to participate in an educational program 
administered by another Federal agency due to an administrative action 
by that agency, the Department of Education lacks a regulatory 
mechanism to include this fact in consideration of the institution's 
overall financial status, despite the fact that losing eligibility for 
a Federal educational assistance program can have a very significant 
impact on a school's revenue and financial stability. This proposed 
trigger is necessary to allow the Department to make a determination if 
obtaining financial protection for institutions in this situation is 
warranted to protect students' and taxpayers' interests.
    The Department proposes to add Sec.  668.171(d)(11) to establish a 
discretionary trigger for when at least 50 percent of the institution 
is owned directly or indirectly by an entity whose securities are 
listed on a domestic or foreign exchange and the entity discloses in a 
public filing that it is under investigation for possible violations of 
State, Federal, or foreign law. This level of ownership is the 
threshold for blocking control over the institution's actions. This 
would be a new discretionary trigger. Institutions that find themselves 
in this category may have their normal operations and financial 
stability impacted negatively due to the public filing. In some 
scenarios, legal actions such as this may damage the institution's 
public reputation, thereby reducing the institution's enrollment, 
revenue, and profitability, which would result in the institution's 
financial stability being shaken. In worst case scenarios, these legal 
actions may result in the institution's closure and the ensuing 
negative consequences associated with closure. This proposed trigger is 
necessary to allow the Department to make a determination if obtaining 
financial protection for institutions facing legal actions such as this 
is warranted to protect students' and taxpayers' interests.
    The Department proposes to add Sec.  668.171(d)(12) to establish a 
discretionary trigger for when an institution is cited by another 
Federal agency for noncompliance with requirements associated with a 
Federal educational assistance program and that could result in the 
loss of Federal education assistance funds if the institution does not 
comply with the agency's requirements. An action by another Federal 
agency, such as the Department of Veterans Affairs placing an 
institution on probation, is a risk factor that could result in the 
loss of Federal funds. We propose this as a discretionary trigger since 
these actions may be fleeting.

Financial Responsibility--Recalculating the Composite Score (Sec.  
668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(e) states when the Department 
will recalculate an institution's composite score. Specifically, we 
recalculate an institution's most recent composite score by recognizing 
the actual amount of the institution's liability, or cumulative 
liabilities as defined in regulation, as an expense, or by accounting 
for the actual withdrawal, or cumulative withdrawals, of owner's equity 
as a reduction in equity. The current regulations account for those 
expenses and withdrawals as follows:
     For liabilities incurred by a proprietary institution:
    [ssquf] For the primary reserve ratio, increasing expenses and 
decreasing adjusted equity by that amount;
    [ssquf] For the equity ratio, decreasing modified equity by that 
amount; and
    [ssquf] For the net income ratio, decreasing income before taxes by 
that amount;
     For liabilities incurred by a non-profit institution;
    [ssquf] For the primary reserve ratio, increasing expenses and 
decreasing expendable net assets by that amount;
    [ssquf] For the equity ratio, decreasing modified net assets by 
that amount; and
    [ssquf] For the net income ratio, decreasing change in net assets 
without donor restrictions by that amount; and
     For the amount of owner's equity withdrawn from a 
proprietary institution--
    [ssquf] For the primary reserve ratio, decreasing adjusted equity 
by that amount; and
    [ssquf] For the equity ratio, decreasing modified equity by that 
amount.
    Proposed Regulations: The Department proposes to amend Sec.  
668.171(e) to expand when we would recalculate the institution's 
composite score. The proposed regulations would establish several 
mandatory triggers in

[[Page 32366]]

Sec.  668.171(c) that require a recalculation of the institution's 
composite score to determine if financial protection is required from 
the institution. The first of these triggers is found in proposed Sec.  
668.171(c)(2)(i)(A). It would require recalculation for institutions 
with a composite score of less than 1.5 (other than a composite score 
calculated as part of a change in ownership application) that are 
required to pay a debt or incur a liability from a settlement, 
arbitration proceeding, or a final judgment in a judicial proceeding. 
If the recalculated composite score for the institution or entity is 
less than 1.0 as a result of the debt or liability, the institution 
would be required to provide financial protection. The second mandatory 
trigger that would require recalculation is found in proposed Sec.  
668.171(c)(2)(i)(C) related to when the Department seeks to recoup the 
cost of approved borrower defense to repayment discharges. If the 
recalculated composite score for the institution or entity is less than 
1.0 as a result of the liability sought in recoupment, the institution 
would be required to provide financial protection. The third mandatory 
trigger that would require recalculation is in proposed Sec.  
668.171(c)(2)(ii), which would require recalculation for proprietary 
institutions with a composite score of less than 1.5 where there is a 
withdrawal of owner's equity by any means. If the withdrawal results in 
a recalculated composite score for the institution or entity that is 
less than 1.0, the institution would be required to provide financial 
protection. Under Sec.  668.171(e)(3), the composite score would also 
be recalculated in the case of a proprietary institution that has 
undergone a change in ownership where there is a withdrawal of owner's 
equity through the end of the institution's first full fiscal year. If 
the withdrawal results in a recalculated composite score for the 
institution or entity that is less than 1.0, the institution would be 
required to provide financial surety. The final mandatory trigger that 
would require a recalculation of an institution's composite score is 
found in proposed Sec.  668.171(c)(2)(x), which would require that any 
institution's composite score be recalculated when (1) its audited 
financial statements reflect a contribution in the last quarter of the 
fiscal year and (2) it makes a distribution during the first two 
quarters of the next fiscal year. If the offset of the distribution 
against the contribution results in a recalculated composite score of 
less than 1.0, the institution would be required to provide financial 
protection.
    Under proposed Sec.  668.171(e), we would adjust liabilities 
incurred by the entity who submitted its financial statements in the 
prior fiscal year to meet the requirements of Sec.  668.23, or in the 
year following a change in ownership, for the entity who submitted 
financial statements to meet the requirements of Sec.  600.20(g) as 
follows:
     For the primary reserve ratio, we propose to increase 
expenses and decrease the adjusted equity by that amount;
     For the equity ratio, we propose to decrease the modified 
equity by that amount; and
     For the net income ratio, we propose to decrease income 
before taxes by that amount.
    The proposed regulations under Sec.  668.171(e) would also clarify 
how liabilities would impact a nonprofit institution's composite score. 
We would adjust liabilities incurred by any nonprofit institution or 
entity who submitted its financial statements in the prior fiscal year 
to meet the requirements of Sec.  600.20(g), Sec.  668.23, or subpart L 
of part 668 and described in Sec. Sec.  668.171(c)(2)(i)(B) or (C) as 
follows:
     For the primary reserve ratio, we propose to increase 
expenses and decrease expendable net assets by that amount;
     For the equity ratio, we propose to decrease modified net 
assets by that amount; and
     For the net income ratio, we propose to decrease change in 
net assets without donor restrictions by that amount.
    The proposed regulations would also clarify how withdrawal of 
equity would impact a proprietary institution's composite score. If the 
withdrawal of equity occurred for an entity who submitted its financial 
statements in the prior fiscal year to meet the requirements of Sec.  
668.23, or in the year following a change in ownership, we would adjust 
the entity's composite score calculation as follows:
     For the primary reserve ratio, we propose to decrease 
adjusted equity by that amount; and
     For the equity ratio, we propose to decrease modified 
equity by that amount.
    For a proprietary institution that makes a contribution and 
distribution under proposed Sec.  668.171(c)(2)(x), we would adjust the 
composite score as follows:
     For the primary reserve ratio, we propose to decrease 
adjusted equity by the amount of the contribution; and
     For the equity ratio, we propose to decrease modified 
equity by the amount of the contribution.
    The proposed regulations would not modify the actual formula used 
to calculate the composite score.
    Reasons: Proposed Sec.  668.171(e) states how and when we would 
recalculate an institution's composite score based on certain mandatory 
triggers in proposed Sec.  668.171(c). The recalculation is performed 
to address liabilities incurred under proposed Sec.  
668.171(c)(2)(i)(A) and (C); withdrawals of an owner's equity under 
proposed Sec.  668.171(c)(2)(ii); and the accounting for contributions 
and distributions under proposed Sec.  668.171(c)(2)(x). The proposed 
regulations describe the specific adjustments to the primary reserve 
ratio, the equity ratio, and the net income ratio that would result 
from the identified triggers. The proposed regulations would clarify 
that the adjustment would be made in the financial statements of the 
entity that submitted the audited financial statements for the prior 
fiscal year, or the entity that submitted the audited financial 
statements to comply with the regulatory requirements for a materially 
complete application following a change of ownership.
    The multiple triggers identified in proposed Sec.  668.171(e) would 
all diminish the entity's cash position, and the Department would 
perform a recalculation of the composite score to determine to what 
extent the triggering event actually impacts the institution's 
composite score. If we determine that the recalculated composite score 
is less than 1.0, meaning it has failed, we would require the 
institution to provide financial protection. In addition, by making an 
adjustment to the prior year's financial statements, the institution 
would be relieved from submitting interim audited financial statements 
when one of the identified triggering events occurs. The Department 
believes that the triggers identified in proposed Sec.  668.171(e) that 
would require recalculation of the composite score (and which are 
described in Sec.  668.171(c)(2)(i)(A) & (C), (ii), and (x)) pose a 
serious threat to the institution's financial stability. The threat is 
such that we believe that when the triggering event occurs an immediate 
determination of how the institution's composite score is impacted by 
the event must be made. To wait for the annual submission of the 
institution's audited financial statements would allow an excessive 
amount of time to elapse before this determination could be made based 
on the annual submission. When an institution encounters one of the 
identified triggering events, the quick recalculation of the composite 
score will

[[Page 32367]]

inform us whether the triggering event has had minimal impact on the 
institution's financial stability or has had such a detrimental impact 
that financial protection becomes necessary to protect the interests of 
students and taxpayers.

Financial Responsibility--Reporting Requirements (Sec.  668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(f) lists the following 
conditions that must be reported to the Department under the existing 
financial responsibility reporting requirements:
     When an institution incurs a liability as described in 
Sec.  668.171(c)(2)(i)(A);
     When there is a withdrawal of an owner's equity as 
described in Sec.  668.171(c)(2);
     When an institution is subject to provisions relating to a 
publicly traded institution described in Sec.  668.171(c)(2)(i)(A);
     When an institution's accrediting agency has issued an 
order, that if not satisfied, could result in the loss of 
accreditation;
     When an institution is subject to the loan agreement 
provisions in Sec.  668.171(d)(2) and a loan violation occurs, the 
creditor waives the violation, or the credit imposes sanctions or 
penalties in exchange or as a result of granting the waiver;
     When an institution is informed that its State authorizing 
agency is terminating its authorization or licensure;
     When an institution is found to be non-compliant with the 
requirement that at least 10 percent of its revenues originate from 
non-title IV, HEA sources. The deadline for this notification is no 
later than 45 days after the end of the institution's fiscal year.
    Proposed Regulations: The Department proposes to amend Sec.  
668.171(f) by adding several new events to the existing reporting 
requirements and expanding others. These events must be generally 
reported generally no later than 10 days following the event. 
Institutions would notify the Department of these events by sending an 
email to: [email protected].
    Under proposed Sec.  668.171(f), the reportable events are 
situations where:
     The institution incurs a liability described in proposed 
Sec.  668.171(c)(2)(i)(A);
     The institution is served with a complaint stating that 
the institution is being sued. An updated notice would be required 
after the lawsuit has been pending for 120 days;
     The institution receives a civil investigative demand, 
subpoena, request for documents or information, or other formal or 
informal inquiry from any government entity;
     As described in proposed Sec.  668.171(c)(2)(ii), there is 
a withdrawal of an owner's equity;
     As described in proposed Sec.  668.171(c)(2)(x), the 
institution makes a contribution in the last quarter of its fiscal year 
and makes a distribution in the first or second quarter of the 
following fiscal year;
     As described in proposed Sec. Sec.  668.171(c)(2)(vi) and 
in (d)(11), the institution is subject to the provisions related to a 
publicly listed entity;
     The institution is subject to any action by an accrediting 
agency, or a Federal, State, local, or Tribal authority, that is either 
a mandatory or discretionary trigger;
     As described in proposed Sec.  668.171(c)(2)(xi), the 
institution is subject to actions initiated by a creditor of the 
institution;
     As described in proposed Sec.  668.171(d)(2), the 
institution is subject to provisions related to a default, delinquency, 
or creditor event;
     As described in proposed Sec.  668.171(c)(2)(vii), the 
institution fails the non-Federal funds provision. This notification 
deadline would be 45 days after the end of the institution's fiscal 
year;
     An institution or entity has submitted an application for 
a change in ownership under 34 CFR 600.20 that is required to pay a 
debt or incurs a liability from a settlement, arbitration proceeding, 
final judgment in a judicial proceeding, or a determination arising 
from an administrative proceeding described in proposed Sec.  
668.171(c)(2)(i)(B) or (C). This reporting requirement is applicable to 
any action described herein occurring through the end of the second 
full fiscal year after the change in ownership has occurred.;
     As described in proposed Sec.  668.171(d)(7), the 
institution discontinues academic programs that enrolled more than 25 
percent of students;
     The institution declares a state of financial exigency to 
a Federal, State, Tribal, or foreign governmental agency or its 
accrediting agency;
     The institution, or an owner or an affiliate of the 
institution that has the power, by contract or ownership interest, to 
direct or cause direction of the management of policies of the 
institution, files for a State or Federal receivership, or an 
equivalent proceeding under foreign law or is subject to an order 
appointing a receiver, or appointing a person of similar status under 
foreign law;
     The institution closes more than 50 percent of its 
locations or closes locations that enroll more than 25 percent of its 
students. Locations for this purpose include the institution's main 
campus and any additional location(s) or branch campus(es) as described 
in Sec.  600.2;
     The institution is directly or indirectly owned at least 
50 percent by an entity whose securities are listed on a domestic or 
foreign exchange, and the entity discloses in a public filing that it 
is under investigation for possible violations of State, Federal or 
foreign law.
     The institution fails to meet any of the standards in 
proposed Sec.  668.171(b).
    We also propose to remove current Sec.  668.171(f)(3)(i)(A) which 
provides that the institution may demonstrate that the reported 
withdrawal of owner's equity was used exclusively to meet tax 
liabilities of the institution or liabilities of the institution's 
owners that result from income derived from the institution.
    Reasons: Implementation of the proposed reportable events would 
make the Department more aware of instances that may impact an 
institution's financial responsibility or stability. The proposed 
reportable events are linked to the financial standards in Sec.  
668.171(b) and the proposed financial triggers in Sec.  668.171(c) and 
(d) where there is no existing mechanism for the Department to know 
that a failure or a triggering event has occurred. Notification 
regarding these events would allow the Department to initiate actions 
to either obtain financial protection, or determine if financial 
protection is necessary, to protect students from the negative 
consequences of an institution's financial instability and possible 
closure. A school closure can have severe negative consequences for 
students including disruption of their education, delay in completing 
their educational program, and a loss of academic credit upon transfer. 
Furthermore, negative consequences of a school's closure not only 
impact students but have negative effects on taxpayers as a result of 
the Department's obligation to pay student loan discharges of borrowers 
impacted by the closure and our inability to collect liabilities owed 
to the Federal

[[Page 32368]]

government due to the insolvency of the closed institution.
    Current Sec.  668.171(f)(3)(i)(A) provides that the institution may 
demonstrate that the reported withdrawal of owner's equity was used 
exclusively to meet tax liabilities of the institution or its owners 
for income derived from the institution. We propose to remove this 
provision because taxation, whether it is an individual or 
institutional liability, is not significantly different from other 
liabilities borne by the individual or institution. Therefore, we do 
not see the necessity to treat taxation differently when examining a 
withdrawal of owner's equity for financial responsibility purposes.
Directed Questions
    We request that commenters submit feedback through the comment 
process about the requirement under proposed Sec.  668.171(f)(1)(iii) 
that an institution must report to the Department when it receives a 
civil investigative demand, subpoena, request for documents or 
information, or other formal or informal inquiry from any government 
entity (local, State, Tribal, Federal, or foreign). As proposed, Sec.  
668.171(f)(1)(iii) is a reporting requirement only and is not included 
as a mandatory triggering event in Sec.  668.171(c) nor as a 
discretionary triggering event in Sec.  668.171(d). We believe that an 
institution subject to an action or actions described here must alert 
the Department so that we can consider these actions in any compliance 
activity we undertake. We are especially interested in receiving input 
as to whether an investigation as described in Sec.  668.171(f)(1)(iii) 
warrants inclusion in final regulations as either a mandatory or 
discretionary financial trigger. If inclusion would be warranted, we 
would ask for suggestions regarding what actions associated with the 
investigation would have to occur to initiate the financial trigger. We 
also request commenters provide any other information, thoughts, or 
opinions on this issue.

Financial Responsibility--Public Institutions (Sec.  668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(g) states what a public 
domestic or foreign institution must do to be considered financially 
responsible. These requirements include notifying the Department that 
the institution is designated a public institution by the appropriate 
foreign or domestic government entity.
    Proposed Regulations: The Department proposes to amend Sec.  
668.171(g) by adding paragraph (g)(1)(ii), which would also require a 
public institution to provide to the Department a letter from an 
official of the government entity or other signed documentation 
acceptable to the Department. The letter or documentation must state 
that the institution is backed by the full faith and credit of the 
government entity. The Department also proposes similar amendments to 
paragraph (g)(2)(ii) which is applicable to foreign institutions. We 
propose to add paragraph (g)(2)(iv) which would subject a foreign 
institution to the mandatory triggers described in paragraph (c) of 
this section, and the discretionary triggers described in paragraph (d) 
of this section where the Department has determined that the triggering 
event would have significant adverse effect on the financial condition 
of the institution. The Secretary would treat the foreign public 
institution subject to these triggers in the same way as a domestic 
public institution, which could include heightened cash monitoring or 
provisional certification.
    Reasons: The Department has long held that public institutions 
establish financial responsibility because of having full faith and 
credit backing by their State or appropriate government entity. That 
backing means that if the institution were to run into financial 
trouble the State or appropriate government entity is able to step in 
and provide the necessary financial support. As a result, the 
Department does not typically collect surety from a public institution. 
However, the current regulations do not explicitly require a 
demonstration of full faith and credit backing by public institutions. 
That creates a risk that an institution could be deemed public but not 
actually have the inherent financial backing needed to assuage concerns 
if the institution were to face financial troubles. The proposed change 
to Sec.  668.171(g) would allow the Department to secure a document 
guaranteeing that the public institution is backed by the full faith 
and credit of the relevant government entity. This change would ensure 
that we can collect any liability from the entity making the guarantee, 
thereby protecting taxpayers and students.

Financial Responsibility--Audit Opinions and Disclosures (Sec.  
668.171)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.171(h) states that even if an 
institution meets all of the financial responsibility factors listed in 
at Sec.  668.171(b), the Department does not consider the institution 
to be financially responsible if the institution's audited financial 
statements include an opinion that was adverse, qualified, disclaimed, 
or the financial statements contain a disclosure in the notes that 
there is substantial doubt about the institution's ability to continue 
as a going concern. The Department may determine whether the 
aforementioned opinions have a significant bearing on the institution's 
financial condition or whether the going concern issues have been 
alleviated and may then act on that determination and obtain financial 
protection from the institution.
    Proposed Regulations: The Department proposes to amend Sec.  
668.171(h) to clarify that an institution would not be considered 
financially responsible, even if all financial responsibility factors 
in Sec.  668.171(b) are met, if the notes to the institution's or 
entity's audited financial statements include a disclosure about the 
institution or entity's diminished liquidity, ability to continue 
operations, or ability to continue as a going concern. If we determine 
that the auditor's adverse, qualified, or disclaimed opinion does not 
have significant bearing on the institution's financial condition, we 
may decide that the institution is financially responsible. Similarly, 
if we determine that the institution has alleviated the condition(s) in 
the disclosure (diminished liquidity, ability to continue operations, 
or ability to continue as a going concern), we may decide the 
institution is financially responsible. The Department would determine, 
on its own, whether these issues are alleviated even when the 
disclosure states that alleviation has been completed.
    Reasons: The Department must have the ability to make its own 
determination regarding any issues that impact an institution's 
diminished liquidity, ability to continue operations, or ability to 
continue as a going concern. In these cases, the Department seeks 
financial statement disclosures whereby auditors agree with the 
institution's plan to address such issues or note that the institution 
has successfully addressed them. However, the Department would 
determine, on its own, if the issues identified by the

[[Page 32369]]

auditor have been alleviated by the institution.

Financial Responsibility--Past Performance (Sec.  668.174)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.174 states that an institution is 
not financially responsible if it has been limited, suspended, 
terminated, or entered into a settlement agreement to resolve any of 
those actions initiated by the Department or a guaranty agency. 
Further, the regulations state that the institution is not financially 
responsible if the institution has an audit finding in either of its 
two most recent compliance audits, or a Departmental program review 
finding for its current fiscal year or the prior two fiscal years, that 
resulted in the institution being required to repay an amount greater 
than five percent of the title IV, HEA program funds received during 
the year covered by that audit or program review. Also, an institution 
is not financially responsible if it is cited during the preceding five 
years for not submitting on-time, acceptable compliance audits and 
financial statements. Finally, an institution is not financially 
responsible if it has failed to satisfactorily resolve any compliance 
problems identified in an audit or program review.
    Proposed Regulations: The Department proposes to amend Sec.  
668.174(a) to clarify that the time period that the Department would 
evaluate for purposes of determining if the institution had a program 
review finding resulting in a requirement to repay an amount greater 
than five percent of title IV, HEA program funds received, is the 
institution's fiscal year in which the Department issued a report, 
including a Final Program Review Determination (FPRD) report, and the 
two prior fiscal years, regardless of the years covered by the report.
    Reasons: This clarification would address confusion about whether 
the period for past performance relates to the period in which the 
conduct that gives rise to the past performance finding or the date of 
issuance of the FPRD. Because it can take some time to issue a Program 
Review Report (PRR) and finalize it into an FPRD, the proposed 
amendment would clarify that the time period for past performance does 
not refer to when the finding occurred, but to when we issue the FPRD 
that establishes the liability for that finding. When financial 
protection is required under any provision of subpart L, including this 
section, each requirement for financial protection is separate.

Financial Responsibility--Past Performance (Sec.  668.174)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: None.
    Proposed Regulations: The Department proposes to add Sec.  
668.174(b)(3) to state that an institution is not financially 
responsible if an owner who exercises substantial control, or the 
owner's spouse, has been in default on a Federal student loan, 
including parent PLUS loans, in the preceding five years, unless--
     The defaulted Federal student loan has been fully repaid 
and five years have elapsed since the repayment in full;
     The defaulted Federal student loan has been approved for, 
and the borrower is in compliance with, a rehabilitation agreement and 
has been current for five consecutive years; or
     The defaulted Federal student loan has been discharged, 
canceled or forgiven by the Department.
    Reasons: Defaulting on a Federal student loan is a serious failure 
of financial responsibility that relates to the title IV, HEA programs. 
The Department holds school owners to a higher standard than we hold 
students, and we expect school owners to be more financially 
responsible than the students who attend their schools. A student or 
parent borrower may immediately reestablish eligibility to receive an 
award under the Title IV, HEA program by rehabilitating, consolidating, 
or repaying defaulted Federal student loans in full, but this is not an 
appropriate standard to apply to a school's owner. The Department 
proposes to apply a higher standard to school owners who have defaulted 
on a Federal student loan to ensure they have established a long-term 
track record of loan repayment and financial responsibility before the 
Department would consider the school owner financially responsible 
under the past performance regulations in Sec.  668.174. This proposed 
regulation would ensure that school owners cannot buy their way out of 
a past performance violation related to their own Federal student loan 
default(s) by merely rehabilitating their defaulted Federal student 
loans or repaying them in full.
    This regulation would apply to Federal student loans, including 
parent PLUS loans, borrowed by a school owner and by a school owner's 
spouse. This regulation would recognize that a school owner should be 
aware that a spouse is in default on a Federal student loan and the 
regulation holds the school owner responsible for the spouse's Federal 
student loan default. However, the regulation would also recognize that 
a school owner is not responsible for managing the family budgets of 
all of their family members, as that term is defined in Sec.  
600.21(f), nor for ensuring that all of their family members repay 
their Federal student loans.

Financial Responsibility--Alternative Standards and Requirements (Sec.  
668.175)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.175(c) explains how an institution 
that has failed the financial responsibility requirements under the 
general standards and provisions at Sec.  668.171 can qualify under an 
alternate standard. One of the requirements an institution must meet is 
to not have an audit opinion that is adverse, qualified or disclaimed 
or that includes a disclosure stating that there is substantial doubt 
about the institution's ability to continue as a going concern as 
described under Sec.  668.171(h).
    Proposed Regulations: Under proposed Sec.  668.175(c), the 
Department would clarify that a disclosure, as required under the 
applicable accounting or auditing standards, about the institution's 
liquidity, ability to continue operations, or ability to continue as a 
going concern, places the institution in the status of not being 
financially responsible. We would then require the institution to 
pursue an alternate standard of financial responsibility to comply with 
the associated regulatory requirements under Sec.  668.175. Proposed 
Sec.  668.175(f) would further clarify that an institution which is not 
financially responsible could be permitted to participate in the title 
IV, HEA programs under a provisional certification for no more than 
three consecutive years and providing the Department an irrevocable 
letter of credit for an amount determined by the Department. This 
requirement would not apply to public institutions. Institutions would 
be required to remedy the issue(s) that gave rise to the failure of 
financial responsibility.

[[Page 32370]]

    Reasons: This proposed amendment to Sec.  668.175(c) clarifies that 
an auditor's disclosure may include not only a disclosure expressing 
doubt about the institution's ability to continue as a going concern 
but may also include a disclosure about the institution's liquidity or 
its ability to continue operations. An audit disclosure such as this 
would demonstrate that the institution is not financially responsible, 
and we would obtain financial protection. When financial protection is 
required under any provision of subpart L, including this section, each 
requirement for financial protection is separate. Additionally, the 
proposed regulation clarifies that an institution that is not 
financially responsible due to noncompliance with the requirements 
under Sec.  668.171(b)(2) or (3) must remedy those areas of 
noncompliance in order to demonstrate compliance with financial 
responsibility requirements rather than rely upon other alternatives.
    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.175(f) permits an institution that 
is not financially responsible to participate in title IV, HEA programs 
under a provisional certification, as long as it (1) Provides the 
Department an irrevocable letter of credit that is acceptable and 
payable to the Secretary, or other financial protection, for an amount 
determined by the Department that is not less than 10 percent of the 
title IV, HEA program funds received by the institution during its most 
recently completed fiscal year, except that this requirement does not 
apply to a public institution that the Department determines is backed 
by the full faith and credit of the State; (2) Demonstrates that it was 
current on its debt payments and has met all of its financial 
obligations, for its two most recent fiscal years; and (3) Complies 
with the provisions under the zone alternative.
    Proposed Regulations: The Department proposes to add a condition in 
Sec.  668.175(f)(2)(ii) that would require an institution to remedy the 
issue(s) that gave rise to its failure under Sec.  668.171(b)(2) and 
(3).
    Reasons: This proposed amendment is consistent with the proposed 
amendments to Sec.  668.175(c) because it would help to ensure that an 
institution that is not financially responsible due to failing to meet 
the requirements under Sec.  668.171(b)(2) or (3) must remedy those 
areas of noncompliance in order to participate in the title IV, HEA 
programs under a provisional certification. This proposed language 
replaces the current language in Sec.  668.175(f)(2)(ii) which states 
that an institution pursuing this avenue must demonstrate it was 
current on debt payments and met all financial obligations. The 
proposed language clarifies that all factors stated in 668.171(b)(2) 
and (3), which include being current on debt payments and meeting 
financial obligations, must have been remedied to the Department's 
satisfaction for the purpose of obtaining provisional certification.

Financial Responsibility--Change in Ownership Requirements (Sec.  
668.176)

    Statute: Section 498(c) of the HEA directs the Secretary to 
determine whether institutions participating in, or seeking to 
participate in, the title IV, HEA programs are financially responsible.
    Current Regulations: Section 668.15 originally established the 
financial responsibility requirements for all institutions 
participating, or seeking to participate, in the title IV, HEA 
programs. In 1997, subpart L was implemented and established revised 
financial responsibility factors for institutions participating in the 
title IV HEA programs but did not address the factors that would 
specifically be applied to institutions undergoing a change in 
ownership. The Department continued to apply the financial 
responsibility rules still existing in Sec.  668.15 to change in 
ownership situations even though those regulations were not specific to 
such institutions.
    Proposed Regulations: The Department proposes to remove Sec.  
668.15 and reserve that section. We propose to redesignate current 
Sec.  668.176 as Sec.  668.177. The proposed new Sec.  668.176 would 
contain all updated financial responsibility requirements applicable to 
institutions undergoing a change in ownership.
    Under proposed Sec.  668.176(b), an institution undergoing a change 
in ownership would be required, as a part of their materially complete 
application, to submit audited financial statements of the 
institution's new owner's two most recently completed fiscal years 
prior to the change in ownership. These statements must be prepared and 
audited at the highest level of unfractured ownership (meaning 100 
percent direct or indirect ownership of the institution) or at the 
level required by the Department. If the institution's new owner does 
not have two years of acceptable audited financial statements, or in 
circumstances where no new owner obtains control, but the combined new 
ownership exceeds the ownership share of the existing ownership, the 
institution would have to provide financial protection in the form of a 
letter of credit or cash to the Department in the amount of 25 percent 
of the title IV, HEA program funds received by the institution during 
its most recently completed fiscal year.
    Under proposed Sec.  668.176(b)(3), an institution must demonstrate 
it is a financially responsible. To comply with this requirement a for-
profit institution would be required to:
     Demonstrate it has not had operating losses in either or 
both of its two latest fiscal years that in sum, result in a decrease 
in tangible net worth exceeding 10 percent of the institution's 
tangible net worth at the beginning of the first year of the two-year 
period. The Department may calculate an operating loss for an 
institution by excluding prior period adjustments and the cumulative 
effect of changes in accounting principle;
     Demonstrate it has, for its two most recent fiscal years, 
a positive tangible net worth. In applying this standard, a positive 
tangible net worth occurs when the institution's tangible assets exceed 
its liabilities;
     Document it has a passing composite score and meets the 
other financial requirements of part 668, subpart L for its most 
recently completed fiscal year.
    To demonstrate it is financially responsible, a nonprofit 
institution would be required to:
     Demonstrate it has, at the end of its two most recent 
fiscal years, positive net assets without donor restrictions. The 
Department proposes to exclude all related party receivables/other 
assets from net assets without donor restrictions and all assets 
classified as intangibles in accordance with the composite score;
     Document it has not had an excess of net assets without 
donor restriction expenditures over net assets without donor 
restriction revenues over both of its two latest fiscal years that 
results in a decrease exceeding 10 percent in either the net assets 
without donor restrictions from the start to the end of the two-year 
period or the net assets without donor restriction in either one of the 
two years;
     Document it has a passing composite score and meets the 
other financial requirements of part 668, subpart L for its most 
recently completed fiscal year.
    Under proposed Sec.  668.176(b)(4), a for-profit or nonprofit 
institution that is not financially responsible under proposed Sec.  
668.176(b)(3) would be required to

[[Page 32371]]

provide financial protection in the form of a letter of credit or cash 
in an amount that is not less than 10 percent of the prior year's title 
IV, HEA funding or an amount determined by the Department, and follow 
the zone requirements in Sec.  668.175(d).
    Proposed Sec.  668.176(c) would allow the Department to determine 
that the institution is not financially responsible following a change 
in ownership if the amount of debt assumed to complete the change in 
ownership requires payments (either periodic or balloon) that are 
inconsistent with available cash to service those payments based on 
enrollments for the period prior to when the payment is or will be due. 
An institution in this status would be required to provide financial 
protection in the form of a letter of credit or cash in an amount that 
is not less than 10 percent of the prior year's title IV, HEA funding 
or an amount determined by the Department, and follow the zone 
requirements in Sec.  668.175(d).
    Under proposed Sec.  668.176(d), to meet the requirements for a 
temporary provisional PPA following a change in ownership, as described 
in Sec.  600.20(h)(3)(i), the Department would continue to require a 
proprietary or nonprofit institution to provide us with a same day 
balance sheet for a proprietary institution or a statement of financial 
position for a nonprofit institution. As part of the same day balance 
sheet or statement of financial position, the institution would be 
required to include a disclosure that includes all related-party 
transactions and such details that would enable the Department to 
identify the related party.
    If the institution fails to meet the requirements in proposed Sec.  
668.176(d)(1)(i), the institution would be required to provide 
financial protection in the form of a letter of credit or cash to the 
Department in the amount of at least 25 percent of the title IV, HEA 
program funds received by the institution during its most recently 
completed fiscal year, or an amount determined by the Department, and 
would be required to follow the zone requirements of Sec.  668.175(d).
    For a public institution, the institution would be required to have 
its liabilities backed by the full faith and credit of a State, or by 
an equivalent governmental entity, or follow the requirements of this 
section for a proprietary or nonprofit institution.
    Reasons: Current regulations related to the assessment of financial 
responsibility for institutions undergoing a change in ownership are 
spread out across Sec.  668.15 and subpart L of part 668, where the 
composite score rule resides. The result of having requirements in 
multiple places is that it is not easy to identify which elements from 
across both sections apply to institutions undergoing a change in 
ownership. We are proposing to consolidate and revise the section to 
align with the Department's current practice in processing and applying 
financial responsibility factors to change in ownership applications. 
When financial protection is required under any provision of subpart L, 
including this section, each requirement for financial protection is 
separate. The proposed new regulatory section states with a new level 
of clarity exactly what institutions would have to do to demonstrate 
financial responsibility when undergoing a change in ownership.
    We additionally propose a change with respect to how the Department 
would test the financial responsibility of an institution undergoing a 
change in ownership. Under current regulations, we primarily evaluate 
the entity acquiring the institution by examining its same day balance 
sheet or statement of financial position. If the new owner does not 
have two years of audited financial statements, but has one year of 
audited financial statements, we require financial protection at an 
amount that would be a least 10 percent of the institution's title IV, 
HEA volume. This is the same minimum amount the Department chooses for 
institutions that seek the provisional certification alternative in 
Sec.  668.175(f) for an institution that is failing to meet the 
standards of financial responsibility. Under the proposed regulations, 
we would test the new owner's financial statements and would require 
financial protection if those financial statements fail financial 
responsibility standards as part of the change in ownership application 
rules in Sec.  600.20(g). To make that determination we would evaluate 
the composite score or other financial factors on those financial 
statements.
    In addition, the minimum financial protection for the failure to 
meet the financial responsibility standards for the submission of the 
same day balance sheet or statement of financial protection for 
compliance with Sec.  600.20(h) would be increased from the current 10 
percent to 25 percent. We chose this amount because it is what we 
commonly require for a new owner who does not have two years of 
financial statements and we think the associated risk levels are 
similar.
    The Department's interest in establishing a clear picture of an 
institution's ownership is crucial to our making determinations on the 
financial stability of the institution as it emerges from the change in 
ownership. During this period of change, it is imperative that we are 
able to obtain a level of financial protection sufficient enough to 
protect the students who are impacted by the change in ownership, if 
necessary. It is also important to protect the interests of the 
taxpayers as we extend the institution's eligibility to participate in 
the title IV, HEA programs under the new owner's control. When 
financial protection is required under any provision of subpart L, 
including this section, each requirement for financial protection is 
separate.
    This proposal would also address challenges we have encountered in 
evaluating the financial statements of institutions undergoing changes 
in ownership, including by clarifying that financial statements must be 
provided at the level of highest unfractured ownership (meaning 100 
percent direct or indirect ownership of the institution) or at the 
level determined by the Department; clarifying how a situation where no 
individual new owner obtains control, but the combined ownership of the 
new owners is equal to or exceeds the ownership share of the existing 
ownership will be handled, and clarifying what institutions undergoing 
a change in ownership must do to receive a temporary provisional PPA 
following the change in ownership. This proposed rule would enable us 
to ensure that entities acquiring an eligible institution demonstrate 
that they are financially responsible by the mechanisms detailed in 
this proposed regulation or provide financial protection. The proposed 
approach provides a more predictable and robust examination of 
financial responsibility for changes in ownership.

Standards of Administrative Capability (Sec.  668.16)

Administrative Capability--Financial Aid Counseling (Sec.  668.16(h))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: The current regulations under Sec.  668.16(h) 
require that, for an institution to be administratively capable, the 
institution must provide adequate financial aid counseling to eligible 
students who apply for title IV, HEA program assistance. In determining 
whether an institution provides adequate counseling, the Department 
considers whether its counseling includes

[[Page 32372]]

information regarding the source and amount of each type of aid 
offered, and the method by which aid is determined and disbursed, 
delivered, or applied to a student's account. The institution must also 
provide counseling that includes the rights and responsibilities of the 
student with respect to enrollment at the institution and receipt of 
financial aid. This information includes the institution's refund 
policy, the requirements for treatment of title IV, HEA program funds 
when a student withdraws under Sec.  668.22, its standards of 
satisfactory progress, and other conditions that may alter the 
student's aid package.
    Proposed Regulations: The Department proposes to amend paragraph 
Sec.  668.16(h) to include the details of what should be included in 
the financial aid communications given to students. We are also 
proposing to require clear and accurate information about financial 
aid, alongside existing requirements around what constitutes adequate 
financial aid counseling. We propose that financial aid counseling and 
financial aid communications advise students and families to accept the 
most beneficial types of financial assistance available to them. We 
further propose to establish requirements with respect to financial aid 
counseling and communications as follows:
     We propose to require that institutions provide 
information regarding the cost of attendance of the institution, 
including the individual components of those costs and a total of the 
estimated costs that will be owed directly to the institution, for 
students, based on their enrollment status and attendance.
     Currently the regulation requires the source and amount of 
each type of aid offered. We propose to add to this provision that each 
source of aid, which could include Title IV, HEA assistance, private 
loans, income-share agreements, and tuition payment plans, be separated 
by the type of the aid and whether it must be earned or repaid.
     We propose to require that institutions provide 
information regarding the net price, as determined by subtracting the 
amount of each type of aid offered from the cost of attendance.
     Currently the regulation requires financial aid counseling 
to include the method by which aid is determined and disbursed, 
delivered, or applied to a student's account. We propose to add to this 
provision that the counseling must also include instructions and 
applicable deadlines for accepting, declining, or adjusting award 
amounts.
    Reasons: The Department proposes amendments to the requirement to 
provide adequate financial aid counseling under Sec.  668.16(h) because 
we want to ensure that students understand the cost of attendance for 
the program, including costs charged directly by the institution, and 
the financial aid offered by an institution. The Department already 
requires institutions to provide adequate financial aid counseling to 
their students, but we realize that some financial aid offers may be 
confusing. Providing students with unclear, confusing, or misleading 
financial aid offers can undo the benefits of financial aid counseling 
and result in a student being unable to apply the concepts explained 
through financial aid counseling to their own financial situation. This 
in turn jeopardizes their ability to make an informed decision whether 
to enroll in a given program and how much to borrow in student loans.
    The requirements added into this section thus establish 
requirements for what would be considered sufficiently clear 
communication, including on financial aid offers. These changes 
emphasize areas where the Department has seen problematic materials in 
the past, such as aid offers that fail to explain the full cost of 
attendance or use confusing terminology that makes it difficult to tell 
whether or not the aid being offered to the student must be repaid. The 
items included in these proposed regulations are also informed by the 
Department's experience in crafting a model financial aid offer, known 
as the College Financing Plan to address one aspect of financial aid 
communications. The College Financing Plan reflects feedback from 
consumer testing and an emphasis on clarity and is used by roughly half 
of institutions. Some of the items included in these proposed rules are 
already included in the College Financing Plan and, as such, using the 
College Financing Plan would be one way for institutions to ensure they 
meet some of the standards we propose here.

Administrative Capability--Debarment or Suspension (Sec.  668.16(k))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: Current regulations under Sec.  668.16(k) 
require that for an institution to be administratively capable, it is 
not, and does not have any principal or affiliate of the institution 
(as those terms are defined in 2 CFR parts 180 and 3485) that is 
debarred or suspended under Executive Order 12549 or the Federal 
Acquisition Regulations (FAR), 48 CFR part 9, subpart 9.4. Section 
668.16(k) also requires that the institution not engage in any activity 
that is a cause under 2 CFR 180.700 or 180.800, as adopted at 2 CFR 
3485.12, for debarment or suspension under Executive Order 12549 or the 
FAR, 48 CFR part 9, subpart 9.4.
    Proposed Regulations: We propose to maintain the current 
requirements and add new requirements under a revised Sec.  
668.16(k)(2) that would prohibit an institution from having any 
principal or affiliate of the institution (as those terms are defined 
in 2 CFR parts 180 and 3485), or any individual who exercises or 
previously exercised substantial control over the institution as 
defined in Sec.  668.174(c)(3), who has been:
     Convicted of, or has pled nolo contendere or guilty to, a 
crime involving the acquisition, use, or expenditure of Federal, State, 
Tribal, or local government funds, or administratively or judicially 
determined to have committed fraud or any other material violation of 
law involving those funds.
     Is a current or former principal or affiliate (as those 
terms are defined in 2 CFR parts 180 and 3485), or any individual who 
exercises or exercised substantial control as defined in Sec.  
668.174(c)(3), of another institution whose misconduct or closure 
contributed to liabilities to the Federal government in excess of 5 
percent of that institution's title IV, HEA program funds in the award 
year in which the liabilities arose or were imposed.
    Reasons: The Department proposes amendments to Sec.  668.16(k)(2) 
to improve institutional oversight of the individuals that are hired to 
make significant decisions that could have an impact on the 
institution's financial stability and its administration of title IV, 
HEA funds. Institutions participating in the title IV, HEA programs 
have a fiduciary responsibility to safeguard title IV, HEA funds and 
ensure those funds are used to benefit students and must meet all 
applicable statutory and regulatory requirements. An institution's 
ability to meet these responsibilities is impaired if a principal, 
employee, or third-party servicer of the institution committed fraud 
involving Federal, State, or local funds, or engaged in prior conduct 
that caused a loss to the Federal Government.
    A similar risk occurs if one of the aforementioned individuals has 
been convicted of, or had pled nolo

[[Page 32373]]

contendere or guilty to, a crime, involving the acquisition, use, or 
expenditure of a Federal agency or State, Tribal, or local government. 
To mitigate this risk, we are adding this component to the 
administrative capability standards. We expect institutions to 
thoroughly examine the background of its principals, employees, 
affiliates, and third-party servicers as part of this compliance. We 
believe the school must take action or risk being deemed 
administratively incapable.

Administrative Capability--Negative Actions (Sec.  668.16(n))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: Current regulations under Sec.  668.16(n) 
provide that an institution is administratively capable if it does not 
otherwise appear to lack the ability to administer title IV, HEA 
programs competently.
    Proposed Regulations: We propose to add a new Sec.  668.16(n) to 
require that an institution has not been subject to a significant 
negative action, or a finding by a State or Federal agency, a court or 
an accrediting agency where the basis of the action is repeated or 
unresolved, such as non-compliance with a prior enforcement order or 
supervisory directive, and the institution has not lost eligibility to 
participate in another Federal educational assistance program due to an 
administrative action against the institution. We propose to 
redesignate current Sec.  668.16(n) as proposed Sec.  668.16(v).
    Reasons: The Department proposes that an institution is not 
administratively capable if it has been subject to a significant 
negative action or a finding by a State or Federal agency, a court or 
an accrediting agency where the basis of the action is repeated or 
unresolved, such as non-compliance with a prior enforcement order or 
supervisory directive, and the institution has not lost eligibility to 
participate in another Federal educational assistance program due to an 
administrative action against the institution. Sec.  668.16(n). Such 
measures are an indication of potentially serious problems with the 
institution's administrative functions. Adding this proposed section 
would provide the Department the ability to consider whether those 
circumstances warrant compliance actions and better align the oversight 
work across the regulatory triad of States, the Federal government, and 
accreditation agencies. Examples include provisionally recertifying the 
institution with applicable conditions on its eligibility, obtaining 
protection against potential losses to the government, placing an 
institution on a different method of payment (such as heightened cash 
monitoring), or terminating title IV, HEA eligibility due to negative 
actions of an outside public agency. For example, if the United States 
Department of Veterans Affairs (VA) took a significant negative action 
against an institution and that institution lost its ability to 
participate in the VA education and training benefits programs, the 
Department could use the VA's determination as a factor in assessing an 
institution's administrative capability. This would more clearly 
establish a link between administrative capability and when another 
Federal agency has revoked an institution's eligibility for one or more 
of their programs. Other examples are when a State levies sanctions 
against an institution or an accrediting agency places an institution 
on probation, or its equivalent, based on an ongoing consumer 
protection issue.

Administrative Capability--High School Diploma (Sec.  668.16(p))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: Current regulations under Sec.  668.16(p) 
provide that an institution must develop and follow procedures to 
evaluate the validity of a student's high school completion if the 
institution or the Department has reason to believe that the high 
school diploma is not valid or was not obtained from an entity that 
provides secondary school education.
    Proposed Regulations: We propose to maintain the current 
requirement that an institution must develop and follow adequate 
procedures to evaluate the validity of a student's high school 
completion if the institution or the Department has reason to believe 
that the high school diploma is not valid or was not obtained from an 
entity that provides secondary school education. We propose to update 
the references to high school completion in the current regulation to 
high school diploma.
    Under proposed Sec.  668.16(p)(1) we would add requirements for 
adequate procedures to evaluate the validity of a student's high school 
diploma when the institution or the Secretary has reason to believe 
that the high school diploma is not valid or was not obtained from an 
entity that provides secondary school education to include the 
following:
     Obtaining documentation from the high school that confirms 
the validity of the high school diploma, including at least one of the 
following: a transcript, written descriptions of course requirements, 
or written and signed statements by principals or executive officers at 
the high school attesting to the rigor and quality of coursework at the 
high school;
     If the high school is regulated or overseen by a State 
agency, Tribal agency, or Bureau of Indian Education, confirming with 
or receiving documentation from that agency that the high school is 
recognized or meets requirements established by that agency; and
     If the Secretary has published a list of high schools that 
issue invalid high school diplomas, confirming that the high school 
does not appear on that list.
    Under proposed Sec.  668.16(p)(2) a high school diploma would not 
be valid if it:
     Did not meet the applicable requirements established by 
the appropriate State agency, Tribal agency, or Bureau of Indian 
Education in the State where the high school is located and, if the 
student does not attend in-person classes, the State where the student 
was located at the time the diploma was obtained.
     Has been determined to be invalid by the Department, the 
appropriate State agency in the State where the high school was 
located, or through a court proceeding.
     Was obtained from an entity that requires little or no 
secondary instruction or coursework to obtain a high school diploma, 
including through a test that does not meet the requirements for a 
recognized equivalent of a high school diploma under Sec.  600.2.
     Was obtained from an entity that maintains a business 
relationship or is otherwise affiliated with the eligible institution 
at which the student is enrolled and that entity is not accredited.
    Reasons: Ensuring that students have a valid high school diploma is 
a critical part of maintaining integrity in the title IV, HEA financial 
aid programs. Failure to ensure that a student is qualified to train at 
a postsecondary level often results in students withdrawing from 
institutions after incurring significant debt and investing time and 
personal resources. The Department has seen multiple leaders of 
institutions face significant financial liabilities and even jail time 
for receiving Federal aid for students who did not have a valid high 
school diploma. However, the Department believes that the existing 
requirements for an institution to have

[[Page 32374]]

procedures in place to evaluate the validity of a high school diploma 
may not be sufficient. These proposed regulations would provide 
institutions with additional information if necessary to determine the 
validity of a high school diploma when the institution or the Secretary 
has reason to believe that the high school diploma is not valid or was 
not obtained from an entity that provides secondary school education.
    With regard to how these proposed requirements would apply to 
certain private religious secondary schools, as noted in Sec.  
668.16(p)(1)(ii), the process of confirming or receiving documentation 
from the State or Tribal agency or the Bureau of Indian Education only 
applies to high schools that are regulated or overseen by one of those 
entities. Moreover, the proposed requirements establishing when a high 
school diploma is not considered valid in Sec.  668.16(p)(2)(i) note 
that the school would have to meet applicable requirements established 
by the State or Tribal agency or the Bureau of Indian Education. If 
those entities do not have applicable requirements for the type of 
school in question, then the diplomas awarded by the school would not 
be considered invalid simply for that reason. The institution would 
still need to ensure that the diploma meets the other requirements of 
668.16(p)(2).
    The approach in this NPRM addresses concerns raised during 
negotiated rulemaking that private secondary schools with a 
demonstrated ability to prepare students for success in title IV, HEA 
institutions would be considered to not offer valid diplomas simply 
because they are not regulated by a State. If private secondary schools 
are not subject to State agency oversight, then the requirement to 
receive documentation from a State agency would not apply.
    In conducting its oversight activities, the Department has seen an 
increase in institutions directing students to questionable entities to 
obtain diplomas and institutions accepting questionable diplomas 
without conducting a proper review of the issuing entity. These actions 
not only undermine the integrity of the title IV, HEA programs, but 
also cause undue harm to students who are not actually prepared to 
succeed at the postsecondary level. These amendments would protect 
students, postsecondary institutions, and the taxpayer investment in 
postsecondary education by ensuring adequate standards are in place for 
institutions to evaluate high school diplomas.

Administrative Capability--Career Services (Sec.  668.16(q))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.16(q) to 
determine if an institution is providing adequate career services to 
eligible students who receive title IV, HEA program assistance. In 
making this determination, the Department would consider:
     The share of students enrolled in programs designed to 
prepare students for gainful employment in a recognized occupation.
     The number and distribution of career services staff.
     The career services the institution promises to its 
students.
     The presence of institutional partnerships with recruiters 
and employers who regularly hire graduates of the institution.
    Reasons: Students regularly indicate on surveys \131\ that getting 
a job is one of their top reasons for pursuing postsecondary education. 
While there are many non-financial benefits to education beyond high 
school, being able to find a job is critical for many students who have 
to repay debt they acquired to attend a program. Many programs 
explicitly market their offerings with employment in mind, telling 
students about the services they will help provide for students to find 
a job, the connections with employers, and the alignment of curricula 
with employer needs, to identify a few examples. The Department 
proposes to require adequate career counseling services under new Sec.  
668.16(q) because we believe it is critical that institutions have 
sufficient career services to help their students find jobs and make 
good on any commitments conveyed about this kind of assistance they can 
provide. We are not proposing any required ratios for the number of 
career services staff, but rather proposed Sec.  669.16(q) would ensure 
that institutions have established a connection between the commitments 
they make to students and the services they actually provide.
---------------------------------------------------------------------------

    \131\ ``Why Higher Ed?'' available at
    stradaeducation.org/report/why-higher-ed/.
---------------------------------------------------------------------------

    Finally, we believe that when appropriate, an institution should 
establish or develop partnerships with recruiters and employers. 
Institutions that make commitments about employment and do not provide 
career services or do not have established partnerships with recruiters 
and employers may leave students unprepared to enter the job market and 
obtain employment upon completion. Students expect to have access to 
career services as promised as they transition from their programs into 
the workforce. An institutions failure to provide such career services 
may indicate a lack of administrative capability.

Administrative Capability--Accessible Clinical or Externship 
Opportunities (Sec.  668.16(r))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: None.
    Proposed Regulations: The Department proposes to add a new Sec.  
668.16(r) to require that an institution provide students with 
geographically accessible clinical, or externship opportunities related 
to and required for completion of the credential or licensure in a 
recognized occupation within 45 days of the successful completion of 
other required coursework.
    Reasons: We propose to require institutions to provide accessible 
clinical or externship opportunities related to relevant credentialing 
or licensure requirements under proposed Sec.  668.16(r) because we are 
aware through program reviews and student complaints that some 
institutions do not make such opportunities broadly accessible to 
students, even when students are required to complete an externship or 
clinical to earn a degree or certificate. In these cases, students may 
be left to identify their own clinicals or externships. We are also 
aware of numerous instances where students have been offered a clinical 
or externship that is geographically distant and inaccessible from the 
student's location. We are aware of other instances where the work 
performed at the clinical or externship offered by an institution does 
not assist the student in meeting the requirements for credentialing or 
licensure. Therefore, the Department proposes these amendments to 
require institutions to provide geographically accessible clinical or 
externship opportunities related to and required for completion of the 
credential or licensure related to their program. An institution would 
be considered in compliance with this provision if a student turns down 
the offer of the externship or clinical opportunity so long as the 
opportunity offered otherwise meets the requirements of this section.

[[Page 32375]]

Administrative Capability--Disbursing Funds (Sec.  668.16(s))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.16(s) to 
require that an institution disburse funds to students in a timely 
manner that would best meet the students' needs. The Secretary would 
not consider the manner of disbursements to be consistent with 
students' needs, if, among other conditions:
     The Secretary is aware of multiple verified and relevant 
student complaints.
     The institution has high rates of withdrawal attributable 
to delays in disbursements.
     The institution has delayed disbursements until after the 
withdrawal date requirements in Sec.  668.22(b) and (c).
     The institution has delayed disbursements with the effect 
of ensuring an institution passes the 90/10 ratio.
    Reasons: By law, students have a right to receive their Federal 
financial aid including amounts in excess of the cost of direct 
expenses, such as tuition and fees. When a student does not receive 
their funds in a timely manner, they may struggle to stay enrolled due 
to an inability to cover costs like food, housing, and transportation. 
They may also struggle to succeed in a course because of an inability 
to purchase required textbooks. Students may also accrue expenses which 
may affect their ability to remain in school, and ultimately graduate. 
Failing to disburse financial aid in a timely manner thus results in an 
institution holding on to funds that are not theirs for longer than is 
appropriate resulting in a detriment to its students. Therefore, the 
Department proposes that an institution would not be considered 
administratively capable if the Secretary determines that the 
institution failed, including for reasons related to the use of a 
third-party servicer, to disburse funds to students in a timely manner 
that will best meet the student's needs.

Administrative Capability--Gainful Employment (Sec.  668.16(t))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: None.
    Proposed Regulations: The Department proposes to add a new Sec.  
668.16(t). The Department considers an institution to be 
administratively capable if it offers GE programs subject to part 668 
subpart S and at least half of its total title IV, HEA funds in the 
most recent award year are not from programs that are failing under 
part 668 subpart S, and at least half of its full-time equivalent title 
IV, HEA receiving students are not enrolled in programs that are 
failing under part 668 subpart S.
    Reasons: The proposed gainful employment regulations in subpart S 
of part 668 would operate on a programmatic basis. This would allow the 
Department to identify situations where specific offerings at an 
institution may not provide sufficient financial value. However, when a 
majority of an institution's title IV, HEA funds and enrollment is in 
failing GE programs, those results would indicate a more widespread and 
systemic set of concerns that is not limited to individual programs. 
This would allow the Department to take additional steps to increase 
its oversight of these institutions, such as placing them on a 
provisional PPA.
    Accordingly, the Department proposes that an institution that 
obtains most of its revenue from, or enrolls most of its Title IV-
eligible students in, failing GE programs would lack administrative 
capability.

Administrative Capability--Misrepresentation (Sec.  668.16(u))

    Statute: Section 498(a) of the HEA grants the Secretary the 
authority to establish requirements postsecondary institutions must 
follow to prove that they are administratively capable.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  668.16(u) to 
prohibit an institution from engaging in misrepresentation, as defined 
in 34 CFR part 668, subpart F, or aggressive and deceptive recruitment 
tactics or conduct, as defined in 34 CFR part 668, subpart R.
    Reasons: The Department proposes administrative capability 
requirements about an institutions' misrepresentation under Sec.  
668.16(u) because of the detrimental effects such activity could have 
on students and the risks it poses to taxpayers. Current Sec.  668.71 
defines ``misrepresentation'' as any false, erroneous or misleading 
statement an eligible institution or one of its representatives makes 
directly or indirectly to a student. The definition of ``aggressive and 
deceptive recruitment tactics or conduct'' appears in our final rule 
published in the Federal Register on November 1, 2022.\132\ Activities 
that we consider misrepresentation and aggressive recruitment increase 
risk to students and taxpayers, specifically with respect to borrower 
defense claims. The student is often left with a worthless degree, 
certificate, or credential as a result of institutional 
misrepresentation or aggressive recruitment into a program with 
questionable earnings and employment outcomes, and student's debt may 
be discharged under an approved borrower defense claim. The Department 
proposes to incorporate these as practices prohibited in the standards 
of administrative capability. Doing so ensures there is greater 
alignment between our administrative capability requirements and the 
standards that relate to other oversight and enforcement work.
---------------------------------------------------------------------------

    \132\ 87 FR 65904.
---------------------------------------------------------------------------

Certification Procedures (Sec. Sec.  668.2, 668.13, 668.14)

General Definitions (Sec.  668.2)

    Statute: Section 410 of the General Education Provisions Act (GEPA) 
grants the Secretary authority to make, promulgate, issue, rescind, and 
amend rules and regulations governing the manner of operations of, and 
governing the applicable programs administered by, the Department. This 
authority includes the power to promulgate regulations relating to 
programs that we administer, such as the title IV, HEA programs that 
provide Federal loans, grants, and other aid to students, whether to 
pursue eligible non-GE programs or GE programs. Moreover, section 414 
of the Department of Education Organization Act (DEOA) authorizes the 
Secretary to prescribe those rules and regulations that the Secretary 
determines necessary or appropriate to administer and manage the 
functions of the Secretary or the Department.
    Current Regulations: None.
    Proposed Regulations: We propose to adopt OMB's definition of a 
``metropolitan statistical area'' in our regulations. Under the 
proposed definition, a ``metropolitan statistical area'' would mean a 
core area containing a substantial population nucleus, together with 
adjacent communities having a high degree of economic and social 
integration with that core.\133\
---------------------------------------------------------------------------

    \133\ www.census.gov/programs-surveys/metro-micro/about.html.
---------------------------------------------------------------------------

    Reasons: This added definition is necessary given other changes in 
this section that set requirements for clock

[[Page 32376]]

hours, credit hours, or the equivalent based upon where the institution 
is physically located or where the students it serves work. To that 
end, we would define ``metropolitan statistical area'' as part of the 
proposed requirements in Sec.  668.14(b)(26)(ii)(B) to determine the 
minimum number of clock hours, credit hours, or the equivalent required 
for training in the recognized occupation in a State in which the 
institution is not located. Our proposed changes would reference the 
institution's metropolitan statistical area in one of three scenarios 
in which the minimum number of clock hours, credit hours, or the 
equivalent required for training in the recognized occupation for which 
the program prepares the student could be determined by a State in 
which the institution is not located. We choose to include a State 
other than the institution's home State when determining a program's 
licensure and accreditation requirements because we understand that 
some students may not currently reside in the State in which the 
institution is located or have plans to reside in a different State 
from which the institution is located. Institutions may also be located 
near borders with other States. Thus, we want institutions to have the 
flexibility to determine the State in which the student would need to 
meet licensure and accreditation requirements. Specifically, for a 
program offered within the same metropolitan statistical area as the 
institution's home State, we would look for a majority of students that 
upon enrollment in the program during the most recently completed award 
year stated in writing which State they intended to work in within the 
metropolitan statistical area. Using the New York metropolitan area as 
an example, if a student attended school in Connecticut but had plans 
to work in New York after graduation, we would permit the institution 
to use New York's minimum number of clock hours, credit hours, or the 
equivalent required for training in the recognized occupation to meet 
our licensure and accreditation requirements.

Period of Participation (Sec.  668.13(b)(3))

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
HEA section 498(g)(1) outlines timing limitations on the certification 
renewal process.
    Current Regulations: Current Sec.  668.13(b)(3) specifies the 
period of participation for which a postsecondary institution may 
participate in the title IV, HEA programs. If the Secretary does not 
grant or deny certification within 12 months of the expiration of its 
current period of participation, the institution is automatically 
granted renewal of certification, which may be provisional.
    Proposed Regulations: We propose to eliminate current Sec.  
668.13(b)(3) that automatically grants an institution renewal of 
certification if the Secretary does not grant or deny certification 
within 12 months of the expiration of its current period of 
participation.
    Reasons: As part of the 2020 final rule for Distance Education and 
Innovation,\134\ the Department believed automatically granting an 
institution renewal of certification after 12 months would encourage 
prompt processing of applications, timely feedback to institutions, 
proper oversight of institutions, and speedier remedies for 
deficiencies identified. However, since then, the Department has 
realized that giving ourselves a time constraint negatively impacts our 
most important goal, program integrity. In fact, a premature decision 
to grant or deny a certification application when unresolved issues 
remain under review creates substantial negative consequences for 
students, institutions, taxpayers, and the Department.
---------------------------------------------------------------------------

    \134\ 85 FR 54742.
---------------------------------------------------------------------------

    Institutions that remain on month-to-month approval for an extended 
period of time are typically undergoing extensive investigation. Month-
to-month participation beyond the current maximum period of one year 
would allow the Department additional time to investigate issues more 
fully and would maintain institutions in a month-to-month status while 
the Department completes its review. If we are forced to issue a 
decision under a limited timetable, we are likely to put the 
institution on a provisional certification for one year, which adds 
burden for both institutions and the Department. For example, if we 
place the institution on one-year provisional certification, the 
institution would need to start the recertification process all over 
again after nine months. The result is more overall work than simply 
keeping the institution in a month-to-month status while any issues 
related to the institution are reviewed by the Department.
    Eliminating this provision would allow the Department to take the 
necessary time to investigate institutions thoroughly prior to deciding 
whether to grant or deny a certification application and ensure 
institutions are approved only when they comply with Federal rules. 
Ultimately, the Department, institutions, students, and taxpayers 
benefit from the Department having the necessary time to thoroughly 
review each application and make an informed decision that protects 
students and taxpayers from high-risk institutions.

Provisional Certification (Sec.  668.13(c))

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV HEA programs. 
Section 498(h) of the HEA discusses provisional certification of 
institutional eligibility to participate in the title IV, HEA programs. 
This provisional certification can occur for up to one year if the 
institution is seeking initial certification; and for up to three years 
if the institution's administrative capability and financial 
responsibility are being determined for the first time, there is a 
change of ownership, or the Department determines that an institution 
seeking to renew its certification is in an administrative or financial 
condition that may jeopardize its ability to perform its financial 
responsibilities.
    Current Regulations: Current Sec.  668.13(c)(1)(i)(C) includes a 
list of circumstances in which the Department may provisionally certify 
a participating institution. These include circumstances where the 
Department is certifying a participating institution that--
     Is applying for a certification and meets the standards 
for an institution to participate in any title IV, HEA program;
     The Secretary determines has jeopardized its ability to 
perform its financial responsibilities by not meeting the factors of 
financial responsibility under Sec.  668.15 and subpart L or the 
standards of administrative capability under Sec.  668.16; and
     Has had its participation limited or suspended by the 
Department under subpart G, or voluntarily enters into provisional 
certification.
    The Department may also provisionally certify an institution under 
current Sec.  668.13(c)(1)(i)(D) if the institution seeks a renewal of 
participation in a Title IV, HEA program after the expiration of a 
prior period of participation in that program. Under current Sec.  
668.13(c)(1)(i)(F) an institution may be provisionally certified if the 
institution is a participating institution that has been provisionally 
recertified under the automatic recertification

[[Page 32377]]

requirement in current Sec.  668.13(b)(3). Current Sec.  
668.13(c)(1)(ii) provides that a proprietary institution's 
certification automatically becomes provisional at the start of a 
fiscal year after it did not derive at least 10 percent of its revenue 
for its preceding fiscal year from sources other than Title IV, HEA 
program funds, as required under Sec.  668.14(b)(16). Current Sec.  
668.13(c)(2) specifies the maximum period for which an institution, 
provisionally certified by the Department, may participate in a title 
IV, HEA program, except as provided in 668.13(c)(3) and (4). Under this 
paragraph a provisionally certified institution's period of 
participation expires:
     Not later than the end of the first complete award year 
following the date on which the Secretary provisionally certified the 
institution under paragraph (c)(1)(i)(A) of this section.
     Not later than the end of the third complete award year 
following the date on which the Secretary provisionally certified the 
institution under paragraphs (c)(1)(i)(B), (C), and (D) or paragraph 
(c)(1)(ii) of this section.
     If the Secretary provisionally certified the institution 
under paragraph (c)(1)(i)(E) of this section, no later than 18 months 
after the date that the Secretary withdrew recognition from the 
institution's nationally recognized accrediting agency.
    Proposed Regulations: Under Sec.  668.13(c)(1), the Department 
proposes to amend existing conditions and add new conditions for when 
an institution may be provisionally certified. Under Sec.  
668.13(c)(2), the Department proposes to add a new time frame for when 
an institution's provisionally certified status would expire. The 
Department also proposes to make a few technical corrections and 
replace outdated cross references with descriptions on what is being 
referenced in Sec.  668.13(c)(1) and Sec.  668.13(c)(2).
    In Sec.  668.13(c)(1)(i)(C), we propose to revise the existing 
language to specify the Department's provisional certification of an 
institution that is not only a participating institution, but an 
institution applying for a renewal certification that fits one of the 
three circumstances previously included in current Sec.  
668.13(c)(1)(i)(C). We also propose to replace current Sec.  
668.13(c)(1)(i)(F) with a new condition in which the Secretary may 
provisionally certify an institution if the Secretary has determined 
that the institution is at risk of closure. In Sec.  
668.13(c)(1)(i)(G), we propose to add another new condition in which 
the Secretary may provisionally certify an institution if it is 
permitted to use the provisional certification alternative under 
subpart L. We propose to revise and redesignate current Sec.  
668.13(c)(1)(ii) as proposed Sec.  668.13(c)(1)(iii). In redesignated 
Sec.  668.13(c)(1)(iii), we propose to amend ``Title IV, HEA program 
funds'' as ``Federal educational assistance funds'' to conform with the 
2022 final rule for 90/10.\135\ We propose to add a new Sec.  
668.13(c)(1)(ii) that provides that an institution's certification 
would become provisional upon notification from the Secretary, if the 
institution either triggers one of the financial responsibility events 
under Sec.  668.171(c) or (d) and, as a result, the Secretary requires 
the institution to post financial protection; or any owner or interest 
holder of the institution with control over that institution, as 
defined in Sec.  600.31, also owns another institution with fines or 
liabilities owed to the Department and is not making payments in 
accordance with an agreement to repay that liability.
---------------------------------------------------------------------------

    \135\ 87 FR 65426.
---------------------------------------------------------------------------

    The Department also proposes to add subpart L as an exception to 
Sec.  668.13(c)(2). In addition, we propose to replace the cross 
reference of ``paragraph (c)(1)(i)(A)'' in Sec.  668.13(c)(2)(i) with 
``for its initial certification.'' We also propose to redesignate 
current Sec.  668.13(c)(2)(ii) as Sec.  668.13(c)(2)(iii). We propose a 
new Sec.  668.13(c)(2)(ii) to state that a provisionally certified 
institution's period of participation would expire no later than the 
end of the second complete award year following the date on which the 
Secretary provisionally certified an institution for reasons related to 
substantial liabilities owed or potentially owed to the Department for 
borrower defense to repayment or false certification discharges, or for 
other consumer protection concerns as identified by the Secretary. We 
consider consumer protection concerns as instances where an institution 
may create a high-risk situation for students, such as by misleading 
students about educational programs, institutions falsely certifying 
students' eligibility to receive a loan, or an institution being at 
risk of closure. Note that institutions would not automatically lose 
title IV eligibility if they are found to have consumer protection 
concerns.
    Reasons: In Sec.  668.13(c)(1)(i)(C), the Department proposes to 
clarify, consistent with its current practice, that the Secretary may 
provisionally certify an institution that is not meeting the 
requirements for financial responsibility and administrative capability 
or is subject to an action under subpart G. The reference to subpart G 
as currently written does not clearly separate subpart G from the 
requirements for financial responsibility and administrative 
capability, and so our proposed changes would clarify that subpart G is 
not a required element for provisional certification, but rather a 
separate and independent basis for provisional certification. In 
addition, we propose to remove the language in existing Sec.  
668.13(c)(1)(i)(F) because it is related to the automatic certification 
requirement in Sec.  668.13(b)(3) the Department is proposing to 
eliminate. In its place, we propose to add a new condition to Sec.  
668.13(c)(1)(i)(F) that would allow the Secretary the option to place 
an institution on provisional status if the Department has determined 
the institution is at risk of closure. This proposed condition aligns 
with additional conditions the Department proposes to add to 
provisionally certified schools at risk of closure in Sec.  668.14 and 
would make it easier to apply conditions, such as prohibiting 
transcript withholding, if the Secretary is concerned about the 
institution's viability. Institutional closures create significant 
disruption for students and the Department, which often leave students 
no choice but to restart their education. In addition, students often 
lose credits when transferring to another institution because teach-out 
plans were not in place, resulting in significant liabilities tied to 
closed school discharges. In fact, a GAO report stated that students 
who transferred lost an estimated 43 percent of their credits. However, 
that differed greatly across types of colleges.\136\ Students 
transferring among for-profit colleges lost an average of 83 percent of 
their credits, compared to a loss of 50 percent and 37 percent for 
transfers among non-profit and public colleges, respectively. Thus, it 
is imperative for the Department to address risks associated with 
institutions that are at risk of closure before they close, including 
by encouraging more orderly closures, increasing the possibility of 
financial protection for both the Department and students, and support 
students during this difficult transition. As stated during 
negotiations, the Department would notify the institution when it has 
determined that the school is at risk for closure and provisionally 
certify it. In addition, we propose to add a new condition in Sec.  
668.13 (c)(1)(i)(G) in which the Secretary may provisionally certify an 
institution if it is permitted to

[[Page 32378]]

use the provisionally certified alternative under subpart L. The 
provisional certification alternative in subpart L is not dependent on 
an initial application, a change of ownership, reinstatement or a 
recertification, but permits an institution that is not financially 
responsible to participate in the title IV, HEA programs under a 
provisional certification for no more than three consecutive years.
---------------------------------------------------------------------------

    \136\ GAO Report, GAO-17-574, ``Students Need More Information 
to Help Reduce Challenges in Transferring College Credits,'' Aug. 
14, 2017. www.gao.gov/products/gao-17-574.
---------------------------------------------------------------------------

    The Department proposes new language in Sec.  668.13(c)(1)(ii) 
designed to better protect students and taxpayers by placing certain 
high-risk institutions under provisional status. It also aligns the 
certification procedures regulations with other changes being made to 
financial responsibility in other parts of this NPRM. Institutions are 
currently placed on provisional status for a variety of reasons, 
including changes in ownership, late submission of compliance audits, 
and State or accreditor actions. The Department believes it is 
appropriate to additionally place an institution under provisional 
status when an institution lacks financial responsibility or any owner 
or interest holder of the institution with control over that 
institution owns or owned another institution with fines or liabilities 
owed to the Department. Placing an institution under provisional 
certification for these reasons provides the Department the ability to 
closely monitor that institution and it allows us to impose conditions 
in a PPA to address our concerns (e.g., by limiting the growth in an 
institution if it is subject to an adverse condition by a creditor that 
indicates the institution may be at risk of closure).
    The Department proposes to add subpart L in Sec.  668.13(c)(2) to 
provide a provisional certification alternative that is not currently 
reflected in Sec.  668.13(c). Unlike Sec.  668.13(c), the alternative 
is not dependent on an initial application, change of ownership, 
reinstatement, or recertification.
    Proposed Sec.  668.13(c)(2)(ii), would require institutions 
exhibiting consumer protection concerns to recertify within two years. 
The Department believes this proposed language would ensure more 
frequent oversight of institutions and would allow the Department to 
reassess any problems regularly. While there are many consumer 
protection concerns the Department would reassess institutions for, we 
are particularly interested in reassessing changes of ownership with 
new owners who have never operated a school, as well as where there has 
been an approved conversion from proprietary to nonprofit status, for 
any continued involvement after the change in ownership with prior 
owners that show signs of possible prohibited insider advantage. As 
stated in a December 2020 GAO report \137\ on for-profit college 
conversions, it is imperative for the Department to develop and 
implement procedures to monitor newly converted colleges. Proposed 
Sec.  668.13(c)(2)(ii) would particularly help with changes in 
ownership as it would require reassessment of provisionally certified 
institutions that have significant consumer protection concerns by the 
end of their second year of receiving certification.
---------------------------------------------------------------------------

    \137\ GAO Report, GAO-21-89, ``Higher Education: IRS and 
Education Could Better Address Risks Associated with Some For-Profit 
College Conversions'', Dec. 31, 2020. www.gao.gov/products/gao-21-89.
---------------------------------------------------------------------------

    The December 2020 GAO report \138\ identified 59 changes of 
ownership from a for-profit entity to a nonprofit entity, which 
involved 20 separate tax-exempt organizations, between January 2011 and 
August 2020. Notably, one chain included 13 separate institutions that 
closed prior to the Department deciding whether to approve the 
requested conversion to nonprofit status. Three-fourths of the 
institutions were sold to a formerly for-profit entity (or nonprofit 
affiliate of a for-profit entity) that had no previous experience 
operating an institution of higher education, increasing the risk that 
an institution would not be well-managed, or might be on shaky 
financial footing that depends upon unrealistic assumptions about 
enrollment growth or profitability, or that is unable to deliver an 
educational experience to students that has been promised. This is the 
type of population of new owners we would reassess more frequently. 
Without prior experience, we are not confident these owners would know 
how to properly administer the title IV, HEA programs. For instance, 
one of the most high-profile college failures in the last several years 
involved an owner that had no prior experience running a postsecondary 
institution. On the other hand, one-third of the institutions had what 
GAO termed ``insider involvement'' in the purchasing of the nonprofit 
organization (i.e., someone from the former for-profit owner was 
involved in the nonprofit purchaser, as well), suggesting greater risk 
of impermissible benefits to those insiders. We would reassess prior 
owners that show signs of possible prohibited insider advantage because 
``insider involvement'' is typically done for an owner's own financial 
benefit and not necessarily as a benefit for students.
---------------------------------------------------------------------------

    \138\ Ibid.
---------------------------------------------------------------------------

Directed Question

    We seek feedback from commenters about whether to maintain the 
proposed two-year limit or extend recertification to no more than three 
years for provisionally certified schools with major consumer 
protection issues. Both approaches would operate as maximum lengths, 
allowing the Department to certify individual institutions for shorter 
periods of time. We want to further consider whether two years is long 
enough to evaluate how well the institution has addressed consumer 
protection issues. If the Department makes a recertification decision 
before it has enough information, it could mean not taking a fully 
informed action when the institution reaches its recertification or 
taking a premature action to deny recertification to an institution 
that is making a real effort to improve. Since continuing to let an 
institution operate for longer could result in significant increases in 
the total amount of potential liabilities, we are especially interested 
to receive feedback from commenters.

Supplementary Performance Measures (Sec.  668.13(e))

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
This includes the requirement for institutions to enter a written PPA 
with the Department.
    Current Regulations: Current Sec.  668.13 stipulates certain 
procedures governing the Department's determination to certify an 
institution's eligibility to participate in the title IV, HEA programs 
or condition the institution's participation.
    Proposed Regulations: We propose to add paragraph (e) to establish 
supplementary performance measures the Department may consider in 
determining whether to certify or condition the participation of the 
institution. Under proposed Sec.  668.13(e), when making certification 
decisions, we could assess and consider (1) the institution's 
withdrawal rate, defined as the percentage of students in the 
enrollment cohort who withdrew from the institution within 100 percent 
or 150 percent of the published length of the program; (2) D/E rates of 
programs offered by the institution, if applicable; (3) Earnings 
premium measures of programs offered by the institution, if applicable; 
(4) the amounts the institution spent on instruction/

[[Page 32379]]

instructional activities, academic support, and support services, and 
the amounts spent on recruiting activities, advertising, and other pre-
enrollment expenditures, as provided through a disclosure in the 
institution's required audited financial statements required under 
Sec.  668.23; and (5) the licensure pass rate of programs offered by 
the institution that are designed to meet educational requirements for 
a specific professional license or certification that is required for 
employment in an occupation, if the institution is required by an 
accrediting agency or State to report licensure passage rates.
    Reasons: Metrics such as withdrawal rates, D/E rates, earnings 
premium measures, and spending on instruction, student support, and 
recruitment, can provide the Department useful information regarding 
the value of an institution's educational offerings and the outcomes 
students experience. To safeguard the interests of students and 
taxpayers, we believe it is important that the Department consider this 
information when making decisions about whether to certify or condition 
an institution's title IV, HEA participation. Codifying these 
supplemental performance measures would also provide additional clarity 
and transparency to institutions regarding the types of information the 
Department will likely consider when making certification decisions.

Signing a Program Participation Agreement (Sec.  668.14(a))

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
This includes the requirement for institutions to enter a written PPA 
with the Department. HEA section 498(e) specifies that the Secretary 
may, to the extent necessary to protect the financial interest of the 
United States, require financial guarantees from an institution 
participating or seeking to participate in a title IV, HEA program, or 
from one or more individuals who exercise substantial control over the 
institution.
    Current Regulations: Current Sec.  668.14(a) states that an 
institution may participate in any title IV, HEA program, other than 
the LEAP and NEISP programs, only if the institution enters a written 
PPA with the Secretary. A PPA conditions the initial and continued 
participation of an eligible institution in any title IV, HEA program 
upon compliance with the conditions specified in the PPA.
    Proposed Regulations: The Department proposes to add a new 
paragraph in current Sec.  668.14 that would specify who must sign an 
institution's PPA. The Department proposes new Sec.  668.14(a)(3), 
which would state that an institution's PPA must be signed by an 
authorized representative of the institution. Proprietary or private 
nonprofit institutions would also be required to have an authorized 
representative of an entity with direct or indirect ownership sign the 
PPA if that entity has the power to exercise control over the 
institution. The Secretary would consider the following as examples of 
circumstances in which an entity has such power--
     If the entity has at least 50 percent control over the 
institution through direct or indirect ownership, by voting rights, or 
by its right to appoint board members to the institution or any other 
entity, whether by itself or in combination with other entities or 
natural persons with which it is affiliated or related, or pursuant to 
a proxy or voting or similar agreement.
     If the entity has the power to block significant actions.
     If the entity is the 100 percent direct or indirect 
interest holder of the institution.
     If the entity provides or will provide the financial 
statements to meet any of the requirements of Sec.  600.20(g) or (h), 
or Sec.  668 subpart L.
    Reasons: Electronic Announcement (EA) GENERAL 22-16 updated PPA 
signature requirements for entities exercising substantial control over 
non-public institutions of higher education.\139\ To protect taxpayers 
and students, the Department believes that entities that exert control 
over institutions should assume responsibility for institutional 
liabilities. Requiring owner entities to sign the PPA and assume such 
liability provides protection in the event that an institution fails to 
pay its liabilities, which has been a recurring problem when 
institutions close, particularly those that close precipitously. While 
EA GENERAL 22-16 used a rebuttable presumption, here we propose 
language in Sec.  668.14(a)(3) that would not only require a 
representative of the institution to sign a PPA, but also an authorized 
representative of an entity with direct or indirect ownership or 
control of non-public institutions. The difference is we would then be 
able to require these signatures in all situations that meet the 
regulatory threshold, rather than on a case-by-case basis using the 
rebuttable presumption.
---------------------------------------------------------------------------

    \139\ Updated Program Participation Agreement Signature 
Requirements for Entities Exercising Substantial Control Over Non-
Public Institutions of Higher Education, fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2022-03-23/updated-program-participation-agreement-signature-requirements-entities-exercising-substantial-control-over-non-public-institutions-higher-education.
---------------------------------------------------------------------------

    When an institution closes, the Department often struggles to 
access funds from the closing institution to pay its liabilities. This 
is particularly troublesome knowing that some entities that own the 
institution continue to operate or have the resources to repay the 
liabilities. In the event of closure, this protection would allow the 
Department to ensure owner entities with at least a 50 percent interest 
in the institution are liable for taxpayer losses that may be incurred 
by the institution. Since owning more than 50 percent is considered a 
simple majority, we believe this is a suitable percent to use as the 
threshold. As discussed in our Final Rule for closed school 
discharges,\140\ section 438 of the HEA states that the Secretary must 
subsequently pursue any claim available to such borrower (who received 
a closed school discharge) against the institution and its affiliates 
and principals or settle the loan obligation pursuant to the financial 
responsibility authority under subpart 3 of part H. Consequently, we 
would pursue affiliates and principals, along with the institution, to 
settle the loan obligation associated with a closed school discharge. 
Specifically, we would consider owner entities with at least a 50 
percent interest in the institution to be among those considered to be 
affiliates or principals.
---------------------------------------------------------------------------

    \140\ 87 FR 65904.
---------------------------------------------------------------------------

Entering Into a Program Participation Agreement (Sec.  668.14(b)(5), 
(17), (18), (26))

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
This includes the requirement for institutions to enter a written PPA 
with the Department. HEA section 498(c) outlines the criteria used to 
determine whether an institution demonstrates financial responsibility.
    Current Regulations: Current Sec.  668.14(b)(5) states that by 
entering into a PPA, an institution agrees that it will comply with the 
provisions of Sec.  668.15 relating to factors of financial 
responsibility. Current Sec.  668.14(b)(17)

[[Page 32380]]

states that the Secretary, guaranty agencies and lenders as defined in 
Sec.  682, nationally recognized accrediting agencies, the Secretary of 
Veterans Affairs, State agencies recognized under Sec.  603 for the 
approval of public postsecondary vocational education, and State 
agencies that legally authorize institutions and branch campuses or 
other locations of institutions to provide postsecondary education, 
have the authority to share with each other any information pertaining 
to the institution's eligibility for or participation in the title IV, 
HEA programs or any information on fraud and abuse. Current Sec.  
668.14(b)(18)(ii) states that an institution will not knowingly 
contract with an institution or third-party servicer that has been 
terminated under section 432 of the HEA for a reason involving the 
acquisition, use, or expenditure of Federal, State, or local government 
funds, or an institution or third-party servicer that has been 
administratively or judicially determined to have committed fraud or 
any other material violation of law involving Federal, State, or local 
government funds. Current Sec.  668.14(b)(18)(iii)(B) states that an 
institution will not knowingly contract with or employ any individual, 
agency, or organization that has been administratively or judicially 
determined to have committed fraud or any other material violation of 
law involving Federal, State, or local government funds. Current Sec.  
668.14(b)(26)(i) states that if an educational program offered by the 
institution is required to prepare a student for gainful employment in 
a recognized occupation, the institution must demonstrate a reasonable 
relationship between the length of the program and entry level 
requirements for the recognized occupation for which the program 
prepares the student. In current Sec.  668.14(b)(26)(i)(A) and (B), the 
Secretary considers the relationship to be reasonable if the number of 
clock hours provided in the program does not exceed the greater of one 
hundred and fifty percent of the minimum number of clock hours required 
for training in the recognized occupation for which the program 
prepares the student, or the minimum number of clock hours required for 
training in the recognized occupation for which the program prepares 
the student as established in a State adjacent to the State in which 
the institution is located.
    Proposed Regulations: The Department proposes to add three new 
paragraphs in Sec.  668.14(b), amend one paragraph due to other changes 
made in the financial responsibility regulations, and amend the program 
length requirements of GE programs. We also propose to add language to 
extend to all federal agencies the authority to share with each other 
any information pertaining to the institution's eligibility for or 
participation in the title IV, HEA programs or any information on 
fraud, abuse, or other violations of law.
    The Department proposes to amend current Sec.  668.14(b)(5) to 
refer to all factors of financial responsibility in an expanded subpart 
L, instead of the current mention of Sec.  668.15, the text of which is 
being deleted with the section reserved. In Sec.  668.14(b)(17), the 
Department proposes to broaden the reference of ``the Secretary of 
Veterans Affairs'' to ``Federal agencies'' and add State attorneys 
general to the list of entities authorized to share information with 
each other. Additionally, we propose to add ``or other violations of 
law are included within the fraud and abuse purposes of this 
information-sharing provision. In Sec.  668.14(b)(18), the Department 
proposes to restructure the language to clarify the requirements for 
contracting and employing an individual, agency, or organization. In 
Sec.  668.14(b)(18)(ii)(C), the Department proposes for an institution 
to not knowingly contract with any institution, third-party servicer, 
individual, agency, or organization that has, or whose owners, officers 
or employees have, been judicially determined to have committed fraud 
or had participation in the title IV programs terminated, certification 
revoked, or application for certification or recertification for 
participation in the title IV programs denied. This would include any 
individuals who exercised substantial control by ownership interest or 
management over the institution, third-party servicer, agency, or 
organization that has had its participation in title IV programs 
terminated or revoked, or its certification or recertification denied. 
We also propose to add to the list of reasons in which an institution 
or third-party servicer may be terminated from participating in the 
title IV, HEA programs. Specifically, we propose to add that an 
institution may not have owners, officers, or employees of the 
institution or its third-party servicer that have exercised substantial 
control over an institution, or a direct or indirect parent entity of 
an institution that owes a liability for a violation of a title IV, HEA 
program, requirement and is not making payments in accordance with an 
agreement to repay that liability. The Department also proposes for an 
institution to not knowingly contract with or employ any individual, 
agency, or organization that has been, or whose officers or employees 
have been, ten-percent-or-higher equity owners, directors, officers, 
principals, executives, or contractors at an institution in any year in 
which that institution incurred a loss of Federal funds in excess of 5 
percent of the institution's annual title IV, HEA program funds.
    The Department proposes to make several revisions in Sec.  
668.14(b)(26) regarding an educational program offered by an 
institution that is required to prepare a student for gainful 
employment in a recognized occupation. Namely, in new Sec.  
668.14(b)(26)(ii), we propose to limit the number of hours in gainful 
employment programs to the greater of the required minimum number of 
clock or credit hours as established by the State in which the 
institution is located, if the State has established such a 
requirement, or as established by any Federal agency or the 
institution's accrediting agency.
    If certain criteria are met, then a program may instead be limited 
to another State's required minimum number of clock hours, credit 
hours, or the equivalent required for training in the recognized 
occupation for which the program prepares the student. Another State's 
requirements could only be used if the institution can demonstrate 
that:
     A majority of students resided in that other State while 
enrolled in the program during the most recently completed award year;
     A majority of students who completed the program in the 
most recently completed award year were employed in that State; or
     The other State is part of the same metropolitan 
statistical area as the institution's home State and a majority of 
students, upon enrollment in the program during the most recently 
completed award year, stated in writing that they intended to work in 
that other State.
    For any programmatic and licensure requirements that come from a 
State other than the home State, the institution must provide 
documentation of the State meeting one of the three qualifying 
requirements listed above and the documentation provided must be 
substantiated by the certified public accountant who prepares the 
institution's compliance audit report as required under Sec.  668.23.
    Reasons: Current Sec.  668.14(b)(5) refers to a legacy section of 
the General Provisions (Sec.  668.15) that would be reserved under 
these proposed regulations. Accordingly, in signing a

[[Page 32381]]

PPA, an institution would now agree to comply with the provisions of 
subpart L of part 668 (instead of Sec.  668.15 as is currently 
required), where all requirements related to financial responsibility 
would now be located.
    The Department's proposed changes to Sec.  668.14(b)(17) broadening 
the list of entities authorized to share information related to an 
institution's eligibility for or participation in the title IV, HEA 
programs to include all Federal agencies, as well as State attorneys 
general, would create an improved accountability structure. Many 
Federal agencies provide student assistance and are in possession of 
information potentially relevant to the Department's oversight of 
institutions' participation in the title IV, HEA programs. This is 
especially the case where such information indicates that an 
institution is in a tenuous financial position or in danger of closing. 
Likewise, the addition of State attorneys general to the list of 
entities included in information-sharing related to title IV, HEA 
participation would codify in regulation access to one of the best 
outside sources of knowledge available to the Department about 
activities that may be detrimental to program integrity or the 
interests of students. States play an important role in oversight of 
institutions, and we believe the actions of attorneys general, 
especially where fraud or abuse are suspected, and where an institution 
is in imminent danger of closing, are of primary interest to the 
Department in meeting its responsibilities to oversee the title IV, HEA 
programs and protect the interests of students. Evidence generated from 
State attorneys general has enabled the Department to conduct a more 
thorough and rigorous review of borrower defense claims against 
institutions such as Corinthian Colleges, Inc., ITT Technical Institute 
(ITT), the Court Reporting Institute, Minnesota School of Business and 
Globe University, and Westwood College.\141\ In several of these 
instances, State attorneys general submitted internal company 
documents, presentations, emails, and memos that assisted in 
establishing that these institutions engaged in misrepresentations. The 
financial implications on borrowers of approved borrower defense claims 
are significant. For example, the approval of 18,000 borrower defense 
claims for individuals who attended ITT resulted in borrowers receiving 
100 percent of their loans discharged, which amounted to approximately 
$500 million in relief.\142\ Thus, State attorneys general have been an 
invaluable source of evidence for many of the Department's approvals of 
borrower defense claims and we anticipate they will continue to be an 
important source of evidence. Not only would adding State attorneys 
general to the list of entities included in information-sharing related 
to title IV, HEA participation formalize an existing relationship that 
has greatly facilitated the Department's oversight activities and 
granting of relief to borrowers, it would make possible an exchange of 
information (applicable to all entities listed in Sec.  668.14(b)(17)) 
that is mutually beneficial to the oversight activities of all 
involved. Lastly, the addition in Sec.  668.14(b)(17) of fraud, abuse, 
and other violations of law in the type of information that may be 
shared among listed entities recognizes the need for the Department, 
specifically the Office of the Inspector General, to be informed 
whenever such activity is suspected and would establish in regulation a 
protocol for that to occur.
---------------------------------------------------------------------------

    \141\ U.S. Department of Education press releases: www.ed.gov/news/press-releases/education-department-approves-415-million-borrower-defense-claims-including-former-devry-university-students; 
www.ed.gov/news/press-releases/department-education-approves-borrower-defense-claims-related-three-additional-institutions.
    \142\ U.S. Department of Education press release: www.ed.gov/news/press-releases/department-education-announces-approval-new-categories-borrower-defense-claims-totaling-500-million-loan-relief-18000-borrowers?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=.
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    In Sec.  668.14(b)(18), the Department proposes to separate the 
employee and contractor requirements between two romanettes because 
although they have similar requirements, it reads clearer when 
splitting them into two paragraphs and eliminates the duplication that 
previously occurred when additional criteria was added. Current 
regulations found in Sec.  668.14(b)(18)(ii) prohibit institutions from 
contracting with other institutions or third-party servicers that have 
been terminated from participation in title IV, HEA programs for a 
reason involving the acquisition, use, or expenditure of Federal, 
State, or local government funds, or that have been administratively or 
judicially determined to have committed fraud or any other material 
violation of the law involving Federal, State, or local government 
funds. The regulations are silent on the principals of such entities 
except to the extent that current Sec.  668.14(b)(18)(iii) prohibits an 
institution from contracting with or employing any individual, agency, 
or organization that has been, or whose officers or employees have been 
convicted of or pled nolo contendere to a crime involving the use or 
expenditure of Federal, State, or local government funds or has been 
administratively determined to have committed fraud or any other 
material violation of law involving Federal, State, or local government 
funds. In conducting oversight activities, the Department has become 
aware of individuals involved with the administration of title IV, HEA 
programs who, though not convicted of a crime or determined to have 
committed fraud involving public funds, have nevertheless been 
principally involved in the operation of institutions that have unpaid 
liabilities assessed against them. These individuals often contract 
with another institution or third-party servicer who have been 
terminated from participation in title IV, HEA, or whose owners, 
officers, or employees had substantial control over an institution that 
still owes a liability to the Department for a title IV, HEA violation 
that is not being repaid. In addition, we also propose language that 
would ensure that institutions may not employ or contract with owners 
or officers from an institution that incurred a loss of Federal funds 
in excess of 5 percent of the institution's annual title IV, HEA 
volume. In both cases, the Department is concerned that allowing such 
individuals to continue to work with title IV, HEA funds presents an 
ongoing risk to the integrity of the programs and could result in 
additional future liabilities.
    The proposed changes in Sec.  668.14(b)(26) address concerns the 
Department has about institutions offering programs tied to licensure 
that are longer than required by their State, which results in those 
students using up more of their lifetime eligibility for Pell Grants or 
other Federal financial aid, potentially making it harder for them to 
pursue later training. Longer programs associated with State minimum 
licensure requirements are more likely to result in higher debt and a 
longer period of enrollment without requisite career benefits. To that 
end, we propose changes to Sec.  668.14(b)(26) that would limit the 
occasions when an institution can offer a GE program that requires 
students to complete more hours than are required by the institution's 
State for licensure or certification purposes. Such a change ensures 
that students will still obtain the necessary hours that the State 
requires so that they will be able to work in a given profession but 
protects against accumulation of student debt and usage of a student's 
lifetime limits for title IV, HEA financial assistance that go beyond 
that required point. The current regulations, which permit an

[[Page 32382]]

institution to offer a program that includes the greater of 150 percent 
of the hours required by the State in which the institution is located, 
or the minimum hours required by an adjacent State, have led to 
situations where institutions have offered more hours than were 
necessary for a student to become licensed in the State where the 
institution was located, even when the adjacent State that had a 
requirement for a greater number of hours was many miles away and 
students were unlikely to seek to become employed there.
    Our proposed changes in Sec.  668.14(b)(26)(ii)(A) would generally 
allow for programs to be at least as long as required by the State in 
which the institution is located but allow for exceptions under Sec.  
668.14(b)(26)(ii)(B). Namely, the institution would be permitted to 
offer a longer program that fulfills another State's greater minimum 
requirements if an institution can demonstrate that a majority of 
students resided in that State while enrolled in the program during the 
most recently completed award year, were employed in such a State 
during the most recently completed award year after completing the 
program, or affirmed in writing upon enrollment that they intended to 
work in such a State, as long as the State was in the same metropolitan 
statistical area as the institution. In other words, if one of the 
exception criteria is met, the institution could increase the minimum 
number of hours in the program to align with the required number of 
hours in the State where students reside, were employed, or intend to 
be employed. We included ``credit hours, or the equivalent'' to codify 
our current policy that a program with credit hours must perform a 
conversion to ensure that the converted hours in the program do not 
exceed the minimum requirements for the State. Furthermore, to improve 
the integrity and accuracy of the information supporting an exception, 
our proposed changes in Sec.  668.14(b)(26)(ii)(B) would add a required 
auditor attestation of the institution's documentation that a majority 
of the students in its program have a relationship with another State 
that meets one of the aforementioned exemption criteria. In the three 
paragraphs under proposed Sec.  668.14(b)(26)(ii)(B), we also added 
timeframes that reflect the most current information that an 
institution could reasonably be expected to have in its possession.
    Notably, these changes leave untouched many existing provisions of 
the current regulatory requirement in Sec.  668.14(b)(26). This 
includes that the language only applies to programs that are required 
to prepare a student for gainful employment in a recognized occupation, 
that the institution establishes the need for the training, and the 
concept that there be a reasonable relationship between the length of 
the program and the requirements for working in the occupation for 
which the student is being prepared.

Entering Into a Program Participation Agreement (Sec.  668.14(b)(32-
34))

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
This includes the requirement for institutions to enter a written PPA 
with the Department. HEA section 498(c) outlines the criteria used to 
determine whether an institution demonstrates financial responsibility.
    Current Regulations: None.
    Proposed Regulations: The Department proposes to add three 
additional new paragraphs to Sec.  668.14(b). We propose Sec.  
668.14(b)(32) to require that in each State in which the institution is 
located or in which students enrolled by the institution are located, 
as determined at the time of initial enrollment in accordance with 
Sec.  600.9(c)(2), the institution must determine that each program 
eligible for title IV, HEA program funds--
     Is programmatically accredited if the State or a Federal 
agency requires such accreditation, including as a condition for 
employment in the occupation for which the program prepares the 
student, or is programmatically pre-accredited when programmatic pre-
accreditation is sufficient according to the State or Federal agency;
     Satisfies the applicable educational prerequisites for 
professional licensure or certification requirements in the 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; and
     Complies with all State consumer protection laws related 
to closure, recruitment, and misrepresentations, including both 
generally applicable State laws and those specific to educational 
institutions.
    The Department also proposes for Sec.  668.14(b)(33) to state that 
an institution will not withhold transcripts or take any other negative 
action against a student related to a balance owed by the student that 
resulted from an error in the institution's administration of the title 
IV, HEA programs, any fraud or misconduct by the institution or its 
personnel, or returns of funds under the Return of Title IV Funds 
process under Sec.  668.22 unless the balance owed was the result of 
fraud on the part of the student. We propose for Sec.  668.14(b)(34) to 
state that an institution will not maintain policies and procedures to 
encourage, or condition institutional aid, including income-share 
agreements, tuition payment plans, or other student benefits in a 
manner that induces, a student to limit the amount of Federal student 
aid, including Federal loan funds, that the student receives. The 
institution may provide a scholarship, however, on the condition that a 
student forego borrowing if the amount of the scholarship -provided is 
equal to or greater than the amount of Federal loan funds that the 
student agrees not to borrow.
    Reasons: Proposed Sec.  668.14(b)(32) would require that an 
institution offering a program that leads to an occupation meet all 
applicable requirements, particularly if a program needs to meet 
programmatic accreditation or has licensure requirements in order for 
program graduates to qualify to work in that occupation. We are aware 
of institutions enrolling students in programs that do not meet such 
requirements. Students in these programs often find themselves 
struggling to find employment and owing student loans on credentials 
that do not qualify them to work in the occupations for which they were 
trained. Thus, this additional requirement would further protect 
students so that they do not waste their time and money on programs 
that will not qualify them for licensure or certification in an 
occupation in that State. The proposed regulations would also further 
strengthen protection of the financial investment that taxpayers are 
making in education so that Federal funds are not expended on programs 
that will not qualify a student for licensure or certification.
    To operate legally in a State, an institution is already required 
to comply with that State's authorization requirements, including any 
State consumer protection requirements. For an institution covered by a 
State authorization reciprocity agreement to be considered legally 
offering postsecondary distance education in a State, it is subject to 
any limitations in that agreement and to any State requirements not 
relating to authorization of distance education.

[[Page 32383]]

    The additional requirement of Sec.  668.14(b)(32)(iii) specifies 
that an institution would have to make a determination that each of its 
programs eligible for title IV, HEA program funds comply with all of a 
State's consumer protection laws related to closure, recruitment, and 
misrepresentations, including both generally applicable State laws and 
those specific to educational institutions. In crafting this language, 
the Department is balancing the goals of ensuring that institutions 
have a reasonable path to offer distance education to students who do 
not reside within their borders while ensuring that States have the 
ability to protect their students if an institution located in another 
State tries to take advantage of students or is at risk of closure. We 
are concerned about past situations in which States have raised 
concerns about institutions that are physically located outside of its 
borders and taking advantage of students while the State is limited in 
its ability to apply its own consumer protection laws in these areas to 
protect its residents. That can hamper State efforts to try and step in 
and help students if there is evidence that an out-of-State school is 
taking advantage of students. It can also minimize the ability of 
students to access tuition recovery funds to repay any tuition paid out 
of pocket. Our proposed approach intentionally only applies to laws in 
three areas: closure, recruitment, and misrepresentation. These are the 
three areas where the Department has historically incurred the greatest 
expenses from student loan discharges related to either closed schools 
or borrower defense. This includes instances where closed institutions 
left students with no path to complete a credential, cases where 
students were pressured into enrollment, and cases where institutions 
misled students about key elements of the education. At the same time, 
this language would not apply to other types of laws that may represent 
significant variation across States in ways that would make it harder 
for an institution to operate through a reciprocity agreement. This 
includes tuition refund policies, rules on site visits, and State-
specific outcomes metrics.
    While crafting this proposed requirement we recognize that there is 
a great diversity in the types of different consumer protection laws 
and the benefits they can provide students. Therefore, we seek feedback 
on the best way to construct this requirement so that students are 
protected, financially and otherwise, without creating unnecessary 
burden on institutions.
    Furthermore, we propose a PPA requirement in Sec.  668.14(b)(33) 
that prohibits institutions from withholding transcripts as a means of 
forcing a student to pay a balance on their account if the balance was 
created because the institution made an administrative error with 
respect to the student's title IV, HEA funds, if the balance otherwise 
results from the institution's fraud or misconduct, or if the balance 
results solely from returns of title IV, HEA funds under the Return of 
Title IV Funds requirements under Sec.  668.22. We have seen instances 
where institutions have improperly calculated a student's aid and, 
after correcting the error and returning title IV, HEA funds back to 
the Department, the institutions bill the student for those amounts. 
Additionally, following the conclusion of negotiated rulemaking, the 
Department performed a comprehensive analysis of the impact of the 
CARES Act waiver of returns of funds under Return of Title IV Funds 
requirements on a student's likelihood to immediately re-enroll 
following the withdrawal. The results of this analysis suggest that 
students who qualified for the CARES Act waiver of returns of funds 
under the Return of Title IV process were more likely to re-enroll in 
the following semester at either their current or a new postsecondary 
institution. Given this analysis, the stated concerns of negotiators 
regarding the practice of transcript withholding, and several recent 
policy reports 143 144 regarding the negative consequences 
for students related to transcript withholding, we also believe that 
transcript withholding and debt collection procedures are inappropriate 
in cases where account balances or other debts to the institution 
result solely from the Return of Title IV Funds process. Institutional 
tuition refund policies often stop providing refunds to students sooner 
than the point at which institutions no longer have to return title IV, 
HEA aid from a student who withdrew during a term. The result is that 
many students who withdraw after tuition refund periods are over are 
frequently left with significant balances owed to the institution 
simply because they withdrew from the institution and were subject to 
the mandated Return of Title IV funds process. An institution taking 
further negative action against a student in those circumstances could 
exacerbate a situation that was already difficult for the student. In 
all these circumstances, holding transcripts or taking other negative 
actions against the student make it more difficult for the student to 
re-enroll or transfer credit to another institution. Thus, in these 
circumstances we believe that withholding transcripts for additional 
charges is counterproductive and inappropriate. The proposed 
regulations would benefit students by not allowing institutions to 
withhold transcripts from them when it was the institution's own 
actions (whether unintentional or through fraud or other malfeasance) 
or the Return of Title IV Funds process that resulted in an 
unanticipated charge. Furthermore, as mentioned during negotiations, 
the Department oversees the administration of title IV, HEA funds on 
students' behalf; however, separate from title IV, HEA, the student has 
an agreement with the institution. Title IV Funds calculations and 
institutional errors, misconduct, and fraud related to the awarding or 
disbursement of title IV, HEA funds. Note that if an institution is 
provisionally certified, we may apply other conditions that are 
necessary or appropriate to the institution, including, but not limited 
to releasing holds on student transcripts if the institution is at risk 
of closure, is teaching out or closing, or is not financially 
responsible or administratively capable.
---------------------------------------------------------------------------

    \143\ Ithaka S+R. (2021). Stranded Credits: A Matter of Equity. 
www.sr.ithaka.org/publications/stranded-credits-a-matter-of-equity/.
    \144\ Consumer Financial Protection Bureau (Fall 2022). 
Supervisory Highlights Student Loan Servicing Special Edition, 8-9. 
www.files.consumerfinance.gov/f/documents/cfpb_student-loan-servicing-supervisory-highlights-special-edition_report_2022-09.pdf.
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    We propose a PPA condition in Sec.  668.14(b)(34) that would 
address a problem where institutions may prevent students from taking 
out Federal financial aid that students are entitled to through various 
inducements, incentives, or unnecessarily burdensome barriers. The last 
category includes setting up hurdles such as requiring the completion 
of unnecessary or duplicative forms. We believe it is critical that 
students be able to access all the Federal aid to which they are 
entitled, especially to afford necessities like food and housing. We 
would, however, make an exception for cases where the institution 
offers institutional scholarships of the same or greater amounts as the 
Direct Loan funds for which the student would otherwise be eligible to 
borrow. In such situations the student would still have access to, and 
be able to receive, the full amount of funding for which the school 
determined was needed. We believe this exception would promote greater 
affordability and potentially leave students less indebted at 
graduation, while still ensuring that the students

[[Page 32384]]

have funds to pay for educational expenses.
    Note that this proposed provision that would prevent institutions 
from establishing obstacles or inducements against borrowing is 
distinct from and would not impact an institution's ability to refuse 
to originate a student's Direct Loan under Sec.  685.301(a)(8). Under 
those regulations, an institution may refuse to originate or reduce the 
amount of a student's Direct Loan if the reason for that action is 
documented and provided to the borrower in writing, and if the 
institution makes such determinations on a case-by-case basis, 
maintains documentation of each decision, and does not engage in any 
pattern or practice that results in a denial of a borrower's access to 
Direct Loans because of the borrower's race, gender, color, religion, 
national origin, age, disability status, or income. The proposed 
restriction is on institutional policies or practices designed to limit 
borrowing generally, not specific refusals for individual students that 
are documented and made solely on a case-by-case basis.

Conditions That May Apply to Provisionally Certified Institutions 
(Sec.  668.14(e)).

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
HEA section 498(c) outlines the criteria used to determine whether an 
institution has met the standards of financial responsibility. HEA 
section 498(d) authorizes the Secretary to establish reasonable 
procedures and requirements to ensure that institutions are 
administratively capable. HEA section 498(h) discusses provisional 
certification of institutional eligibility to participate in the title 
IV, HEA programs. HEA section 498(k) outlines the treatment of teach-
outs.
    Current Regulations: Current Sec.  668.14(e) states that a PPA 
becomes effective on the date that the Secretary signs the agreement.
    Proposed Regulations: We propose to redesignate current Sec.  
668.14(e) as Sec.  668.14(h). The Department also proposes to add a new 
paragraph (e) that outlines a non-exhaustive list of conditions that we 
may opt to apply to provisionally certified institutions. We propose 
for institutions at risk of closure to submit an acceptable teach-out 
plan or agreement to the Department, the State, and the institution's 
recognized accrediting agency. We also propose that institutions at 
risk of closure must submit an acceptable records retention plan that 
addresses title IV, HEA records, including but not limited to student 
transcripts, and evidence that the plan has been implemented, to the 
Department. We also propose for an institution at risk of closure that 
is teaching out, closing, or that is not financially responsible or 
administratively capable, to release holds on student transcripts. 
Other conditions for institutions that are provisionally certified 
would include--
     Restrictions or limitations on the addition of new 
programs or locations;
     Restrictions on the rate of growth, new enrollment of 
students, or Title IV, HEA volume in one or more programs;
     Restrictions on the institution providing a teach-out on 
behalf of another institution;
     Restrictions on the acquisition of another participating 
institution, which may include, in addition to any other required 
financial protection, the posting of financial protection in an amount 
determined by the Secretary but not less than 10 percent of the 
acquired institution's Title IV, HEA volume for the prior fiscal year;
     Additional reporting requirements, which may include, but 
are not limited to, cash balances, an actual and protected cash flow 
statement, student rosters, student complaints, and interim unaudited 
financial statements;
     Limitations on the institution entering into a written 
arrangement with another eligible institution or an ineligible 
institution or organization for that other eligible institution or 
ineligible institution or organization to provide between 25 and 50 
percent of the institution's educational program under Sec.  668.5(a) 
or (c);
     For an institution alleged or found to have engaged in 
misrepresentations to students, engaged in aggressive recruiting 
practices, or violated incentive compensation rules, requirements to 
hire a monitor and to submit marketing and other recruiting materials 
(e.g., call scripts) for the review and approval of the Secretary.
    Reasons: We propose new language under Sec.  668.14(e), and to 
redesignate current Sec.  668.14(e) as Sec.  668.14(h). The Department 
proposes a non-exhaustive list of conditions in new paragraph (e) to 
ensure greater monitoring and oversight on provisionally certified 
institutions where we may already have concerns. This non-exhaustive 
list of conditions would allow the Department to formalize tools that 
are currently available but are not typically used. The list of 
conditions we have included proactively address some of the issues we 
have seen with some provisionally certified institutions, namely those 
at risk of closure, those that are teaching out or closing, and those 
that are not financially responsible or administratively capable. We 
propose a non-exhaustive list because we do not want to foreclose any 
current flexibility that we have with respect to monitoring 
provisionally certified institutions and we will publish updates to the 
list as needed. The proposed Sec.  668.14(e)(2) respond to concerns 
regarding transcript withholding we heard during negotiations. Several 
negotiators stated that students of color are disproportionately unable 
to access their transcripts due to transcript withholding. In addition, 
one negotiator stated that if an institution was being considered as a 
risk for closure, most students would want to transfer institutions, 
but transcript holds for certain amounts would negatively impact a 
student's ability to transfer to another institution. Accordingly, we 
have expanded the provisional conditions related to transcript 
withholding to increase students' access to their educational records 
at institutions with risk of closure or institutions that are not 
financially responsible or administratively capable. Moreover, we 
believe the other conditions under proposed paragraph (e) for 
institutions at risk of closure would better protect students from 
sudden closures that often leave them without opportunities to complete 
their credentials or to transfer to another institution. As described 
in a GAO report,\145\ school closures derail the education of many 
students, leaving them with loans but no degree. In fact, college 
closure represented the end of many borrowers' educational pursuits. 
Forty-three percent of borrowers enrolled at a college that closed did 
not complete their program or continue their education by transferring 
to another college.
---------------------------------------------------------------------------

    \145\ GAO Report, GAO-21-105373, ``Many Impacted Borrowers 
Struggled Financially Despite Being Eligible for Loan Discharges'', 
Sept. 30, 2021. www.gao.gov/products/gao-21-105373.
---------------------------------------------------------------------------

    The proposed restrictions and limitations are directed at 
institutions we already have significant concerns with. These proposed 
conditions would make it easier to manage the size of a risky 
institution and ensure that it does not keep growing when it may be in 
dire straits. Specifically, we propose expressly providing the 
authority to limit the addition of new programs and locations, 
including in cases where we have concerns about an institution's 
ability to adequately administer aid for

[[Page 32385]]

the programs they currently offer. In addition, we propose expressly 
authorizing restrictions on the rate of growth, new enrollment of 
students, or Title IV, HEA volume in one or more programs. Such 
restrictions would help the Department manage an institution's risk of 
imminent closure and mitigate the resulting harms to students.
    We also propose prohibiting provisionally certified institutions to 
provide a teach-out on behalf of another institution. As GAO 
found,\146\ some borrowers who transfer after a school closure end up 
at a school that later shuts its doors as well. From 2014 through 2020, 
nearly 11,500 borrowers transferred from a closing college to another 
college that subsequently closed, accounting for about 5 percent of 
borrowers affected by closures in that time. The government's interest 
is to provide students the best possible chance of finishing their 
education, and this could be substantially more challenging for 
students if they transfer to institutions that are not providing 
adequate academic resources, are not financially stable, are subject to 
State or accrediting agency actions or program review findings, or 
generally lack administrative capability. We propose to expressly 
authorize the Department to prevent institutions in these situations 
from acquiring other institutions or participating in teach-outs of 
closing institutions to limit risk to students. We also propose 
allowing for additional reporting requirements, which may include, but 
are not limited to, cash balances, an actual and protected cash flow 
statement, student rosters, student complaints, and interim unaudited 
financial statements to monitor the institution's progress. In 
addition, we propose allowing limitations on written arrangements in 
which another eligible institution or ineligible organization would 
provide more than 25 percent of a program because we are concerned 
about institutions outsourcing their education to unregulated companies 
or to other institutions. As indicated in DCL (GEN-22-07),\147\ the 
Department is aware of several arrangements between eligible 
institutions and ineligible entities that have exceeded the regulatory 
limitations in Sec.  668.5. For example, the Department has witnessed 
cases where a program was offered in its entirety by an ineligible 
entity, but the program was inaccurately represented as being offered 
by the eligible institution for the primary purpose of obtaining title 
IV, HEA funds for an otherwise ineligible program.
---------------------------------------------------------------------------

    \146\ Ibid.
    \147\ www.fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2022-06-16/written-arrangements-between-title-iv-eligible-institutions-and-ineligible-third-party-entities-providing-portion-academic-program.
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    Furthermore, we are concerned with institutions that engage in 
misrepresentation and aggressive recruitment because often these 
programs are not what they advertise, and consequently this increases 
the likelihood of students filing a borrower defense to repayment or 
false certification claim. As defined in subpart F of part 668, 
misrepresentation includes false, erroneous, or misleading statements, 
by an eligible institution, one of its representatives, or any 
ineligible institution, organization, or person with whom the eligible 
institution has an agreement to provide educational programs, or to 
provide marketing, advertising, recruiting, or admissions services made 
directly or indirectly to a student, prospective student, or any member 
of the public, or to an accrediting agency, to a State agency, or to 
the Secretary. An eligible institution has engaged in aggressive and 
deceptive recruitment tactics or conduct when the institution itself, 
one of its representatives, or any ineligible institution, 
organization, or person with whom the eligible institution has an 
agreement to provide educational programs, marketing, advertising, lead 
generation, recruiting, or admissions services, engages in one or more 
of the prohibited practices in Sec.  668.501. We propose that an 
institution alleged or found to have misrepresented students, engaged 
in aggressive recruiting practices, or that has violated incentive 
compensation rules, may be required to hire a monitor and submit 
marketing and other recruiting materials (e.g., call scripts) for the 
Department to review and approve. We included the hiring of a monitor 
as a possible requirement because we believe a monitor would help us 
get information that we do not readily get from audits. Conditions for 
institutions that undergo a change in ownership seeking to convert from 
a for-profit to a nonprofit institution (Sec.  668.14(f)).
    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
HEA section 498(i) outlines the treatment of changes of ownership.
    Current Regulations: Current Sec.  668.14(f) states that except as 
provided in current paragraphs Sec.  668.14(g) and (h), the Secretary 
terminates a PPA through the proceedings in subpart G of part 668.
    Proposed Regulations: We propose to redesignate current Sec.  
668.14(f) as Sec.  668.14(i). The Department proposes to add a new 
paragraph (f) that outlines conditions that would be applied to 
institutions that undergo a change in ownership seeking to convert from 
a for-profit institution to a nonprofit institution. The first 
condition we propose is for the institution to continue to meet the 
revenue percentage requirements under Sec.  668.28(a) until the 
Department has accepted, reviewed, and approved the institution's 
financial statements and compliance audits that cover two complete 
consecutive fiscal years in which the institution meets the 
requirements of Sec.  668.14(b)(16) under its new ownership, or until 
the Department approves the institution's request to convert to 
nonprofit status, whichever is later. The second condition we propose 
is for the institution to continue to meet the GE requirements of 
subpart S of part 668 until we have accepted, reviewed, and approved 
the institution's financial statements and compliance audits that cover 
two complete consecutive fiscal years under its new ownership, or until 
we approve the institution's request to convert to a nonprofit 
institution, whichever is later. The third condition we propose is for 
the institution to submit regular and timely reports on agreements 
entered with a former owner of the institution or a natural person or 
entity related to or affiliated with the former owner of the 
institution, so long as the institution participates as a nonprofit 
institution. In our fourth condition, we propose to prohibit an 
institution from advertising that it operates as a nonprofit 
institution for the purposes of title IV, HEA until the Department 
approves the institution's request to convert to a nonprofit 
institution. We also propose to apply any other conditions the 
Secretary deems appropriate to serve the interests of students and 
taxpayers and ensure compliance from institutions.
    Reasons: We propose new language under Sec.  668.14(f), thus the 
current Sec.  668.14(f) would be redesignated as Sec.  668.14(i). 
Proposed Sec.  668.14(f) expands on recent changes made to Sec.  
600.31(d)(7), particularly on the Department's belief that it is 
reasonable to require institutions seeking to convert from for-profit 
to nonprofit status to continue to meet all the requirements applicable 
to for-profit colleges for the later of two complete consecutive years 
under the new ownership or until the Department approves the 
institution's request to convert to nonprofit status. The conversion 
from a for-profit to a nonprofit institution is among the

[[Page 32386]]

riskier types of transactions we review, and we want to make certain 
that these transitions are not being made to evade financial 
consequences or federal oversight for the school, such as failures of 
the 90/10 rule or the proposed gainful employment requirements in this 
NPRM. As explained in the recent final rule \148\ regarding changes in 
ownership (CIOs), a 2020 GAO report noted that of 59 CIOs (involving 20 
separate transactions) involving a conversion from a for-profit entity 
to a nonprofit entity, one entire chain that comprised 13 separate 
institutions was granted temporary continued access to title IV, HEA 
aid but ceased operations prior to the Department reaching a decision 
on whether to approve the requested conversion to nonprofit status. 
Three-fourths of these CIOs involved sales to a nonprofit entity that 
had not previously operated an institution of higher education, a 
particular challenge given that many of the institutions involved in 
these CIOs had a history of lawsuits, settlements, and investigations 
into the practices of the underlying institutions that suggested 
students were not being served well. One-third of these CIOs had what 
GAO termed ``insider involvement'' in the purchasing of the nonprofit 
organization (i.e., someone from the former for-profit ownership was 
also involved with the nonprofit purchaser), suggesting greater risk of 
impermissible benefits to those insiders. Altogether, the 59 
institutions that underwent a change in ownership resulting in a 
conversion received more than $2 billion in taxpayer-financed Federal 
student aid in Award Year 2018-19. Given the potential risk in such 
transactions, we want to ensure that they occur in a way that protects 
students, the Department, and taxpayers. The conditions in proposed 
Sec.  668.14(f) include complying with 90/10 and gainful employment 
requirements for the later of two years or until the Department 
approves the institution's request to convert to non-profit status. 
This ensures there is no change in oversight of 90/10 until a CIO has 
been thoroughly reviewed and approved. In addition, we believe it is 
necessary for an institution to submit agreements with the former owner 
of the institution to assess whether former owners are improperly 
benefitting from those agreements.\149\ These concerns are detailed in 
final regulations related to change in ownership procedures that were 
published in the Federal Register on October 28, 2022, and include 
ensuring that the institution is operating as a nonprofit for the 
purposes of title IV aid and ensuring that the institution's revenues 
are not impermissibly benefiting the prior owner or other parties.\150\ 
Lastly, we believe that if an institution's website or other public 
information describes its ownership structure as private, the 
institution should identify whether it participates in title IV, HEA 
programs as a nonprofit institution or a proprietary institution for 
clarity as we would consider an institution to be a for-profit 
institution until we have reviewed and approved the institution's 
application for nonprofit college status.
---------------------------------------------------------------------------

    \148\ 87 FR 65426.
    \149\ GAO Report, GAO-21-89, ``Higher Education: IRS and 
Education Could Better Address Risks Associated with Some For-Profit 
College Conversions'', Dec. 31, 2020. www.gao.gov/products/gao-21-89.
    \150\ 87 FR 65426.
---------------------------------------------------------------------------

    This list of conditions under proposed Sec.  668.14(f) would 
address the interim period during which the Department is determining 
whether the institution seeking to convert from a for-profit 
institution to a nonprofit institution would be considered as a 
nonprofit institution for title IV, HEA purposes. The Department does 
not take a position regarding an institution being designated a 
501(c)(3) tax-exempt status by the IRS. However, the institution would 
have to refrain from identifying itself as a nonprofit institution in 
any advertising publications or other notifications until the 
Department recognizes and approves the change of status. In other 
words, if the Department has not approved the institution as a non-
profit for purposes of the federal student aid programs, then it cannot 
mislead prospective students or misrepresent itself as a ``nonprofit 
institution'' in the context of title IV, HEA aid. Using the term 
nonprofit prematurely could potentially confuse students and the public 
who may interpret nonprofit as the Department having granted the 
institution nonprofit status under its regulations, which would not be 
accurate. Thus, as the institution would still be considered a for-
profit entity during this interim period, reporting requirements for 
the for-profit entity would continue to apply.

Conditions for Initially Certified Nonprofit Institutions, or 
Institutions That Have Undergone a Change of Ownership and Seek To 
Convert to Nonprofit Status (Sec.  668.14(g)).

    Statute: HEA section 498 requires the Secretary to determine the 
process through which a postsecondary institution applies to the 
Department certifying that it meets all applicable statutory and 
regulatory requirements to participate in the title IV, HEA programs. 
HEA section 498(i) outlines the treatment of changes of ownership.
    Current Regulations: Current Sec.  668.14(g) states conditions when 
an institution's PPA automatically expires.
    Proposed Regulations: We propose to redesignate current Sec.  
668.14(g) as Sec.  668.14(j). The Department proposes to add a new 
paragraph (g) that outlines conditions for initially certified 
nonprofit institutions, or institutions that have undergone a change of 
ownership and seek to convert to nonprofit status, which would apply 
upon initial certification or following the change in ownership. The 
first condition we propose is for the institution to submit reports on 
accreditor and State authorization agency actions and any new servicing 
agreements within 10 business days of receipt of the notice of the 
action or of entering into the agreement, as applicable. This condition 
would continue to apply until (1) the Department has accepted, 
reviewed, and approved the institution's financial statements and 
compliance audits that cover two complete consecutive fiscal years 
following initial certification, (2) two complete fiscal years after a 
change in ownership, or (3) until the Department approves the 
institution's request to convert to nonprofit status, whichever is 
later. Note that accreditors are already obligated to tell the 
Department about actions related to the institutions they accredit. 
Accreditors currently use the Database of Accredited Postsecondary 
Institutions and Programs (DAPIP) to submit these reports, but in 
proposed Sec.  668.14(g) the institution, irrespective of what the 
accreditor does, would report this information to Department staff. The 
second condition we propose is for the institution to submit a report 
and copy of the communications from the IRS (Internal Revenue Service) 
or any State or foreign country related to tax-exempt or nonprofit 
status within 10 business days of receipt so long as the institution 
participates as a nonprofit institution. We also propose to apply any 
other conditions that the Secretary deems appropriate.
    Reason: We propose new language under Sec.  668.14(g), thus the 
current Sec.  668.14(g) would be redesignated as Sec.  668.14(j). In 
proposed Sec.  668.14(g) the Department would be more hands-on with 
initially certified nonprofit institutions and institutions that have 
undergone a change of ownership and seek to convert to nonprofit status 
by helping them familiarize themselves with the Federal financial aid 
programs.

[[Page 32387]]

With respect to proposed Sec.  668.14(g) we believe it is important to 
obtain reports on accreditor and State authorization agency actions and 
any new servicing agreements quickly because we need access to the 
information to better assess the strength of the institution and 
confirm that it is complying with the requirements of the other members 
of the triad. The proposed language in Sec.  668.14(g) would require 
institutions to report more information to the Department from 
accreditors, States, and the IRS ensures that the Department is made 
aware of any likely oversight actions by other key entities. This is an 
improvement over current conditions in which reporting may be irregular 
and is not required of institutions. Moreover, as part of GAO's report 
addressing risks associated with some for-profit college conversions, 
GAO recommended the IRS collect information that would enable the 
agency to systematically identify tax-exempt colleges with a for-profit 
history for audit and other compliance activities.\151\ In the same GAO 
report, GAO recommended that the Department develop and implement 
monitoring procedures for staff to review the audited financial 
statements of all newly converted nonprofit colleges for the risk of 
improper benefit. We believe that looking over an institution's 
correspondence with the IRS would help us monitor institutions for any 
improper benefits from their conversions to nonprofit status.
---------------------------------------------------------------------------

    \151\ Ibid.
---------------------------------------------------------------------------

Ability To Benefit

    The Committee reached consensus on the Department's proposed 
regulations on ATB. The Department has published the proposed ATB 
amendatory language without substantive alteration to the agreed-upon 
proposed regulations.

General Definitions (Sec.  668.2)

    Statute: Section 484(d)(2) of the HEA defines ``eligible career 
pathway program.''
    Current Regulations: None.
    Proposed Regulations: We propose to adopt almost the entire 
statutory definition of an ``eligible career pathway program'' in our 
regulations. Under the proposed definition, an ``eligible career 
pathway program'' would mean a program that combines rigorous and high-
quality education, training, and other services that--
     Align with the skill needs of industries in the economy of 
the State or regional economy involved;
     Prepare an individual to be successful in any of a full 
range of secondary or postsecondary education options, including 
apprenticeships registered under the Act of August 16, 1937 (commonly 
known as the ``National Apprenticeship Act''; 50 Stat. 664, chapter 
663; 29 U.S.C. 50 et seq.);
     Include counseling to support an individual in achieving 
the individual's education and career goals;
     Include, as appropriate, education offered concurrently 
with and in the same context as workforce preparation activities and 
training for a specific occupation or occupational cluster;
     Organize education, training, and other services to meet 
the particular needs of an individual in a manner that accelerates the 
educational and career advancement of the individual to the extent 
practicable;
     Enable an individual to attain a secondary school diploma 
or its recognized equivalent, and at least one recognized postsecondary 
credential; and
     Help an individual enter or advance within a specific 
occupation or occupational cluster.
    Reasons: This definition is in large part a duplication of the 
statute, which requires that students accessing title IV, HEA aid 
through ATB be enrolled in eligible career pathway programs. The 
Department has proposed to exclude the statutory definition's cross-
reference to apprenticeship programs, which reads in the statute as 
``(referred to individually in this chapter as an `apprenticeship', 
except in section 171);'' \152\ because we do not discuss 
apprenticeships elsewhere in part 668.
---------------------------------------------------------------------------

    \152\ This reference to ``section 171'', may have been intended 
as a reference to section 171 of the Workforce Innovation and 
Opportunity Act, Public Law 113-128, which is classified to section 
3226 of Title 29, Labor. Neither the National Apprenticeship Act nor 
the HEA contains a section 171.
---------------------------------------------------------------------------

Student Eligibility--General (Sec.  668.32)

    Statute: Section 484(d) of the HEA establishes the student 
eligibility requirement for students who are not high school graduates.
    Current Regulations: Current Sec.  668.32(e)(2) states that a 
student is eligible to receive title IV, HEA aid if the student has 
obtained a passing score specified by the Secretary on an independently 
administered test in accordance with subpart J of the student 
assistance general provisions. Subpart J delineates the process for 
approval of the independently administered tests and the specifications 
of passing scores, among other criteria.
    Current Sec.  668.32(e)(3) states that a student is eligible to 
receive title IV, HEA aid if he or she is enrolled in an eligible 
institution that participates in a State ``process'' that is approved 
by the Secretary under subpart J of part 34.
    Current Sec.  668.32(e)(5) provides that a student is eligible for 
title IV, HEA aid if the institution determines that the student could 
benefit from the education offered based on satisfactory completion of 
225 clock hours or six semester, trimester, or quarter hours that are 
applicable toward a degree or certificate offered by the institution.
    Proposed Regulations: Throughout Sec. Sec.  668.32(e)(2), (3) and 
(5), we propose changes that clarify the differences between 
eligibility for students who enrolled before July 1, 2012, and students 
who enrolled on or after that date.
    We propose to amend Sec.  668.32(e)(2), by allowing for student 
eligibility for title IV, HEA aid if a student has obtained a passing 
score specified by the Secretary on an independently administered test 
in accordance with subpart J of this part, and either under proposed 
Sec.  668.32(e)(2)(i) was first enrolled in an eligible program before 
July 1, 2012; or under proposed Sec.  668.32(e)(2)(ii) is enrolled in 
an eligible career pathway program as defined in section 484(d)(2) on 
the HEA.
    We propose to amend Sec.  668.32(e)(3) by allowing for student 
eligibility for title IV, HEA aid if a student is enrolled in an 
eligible institution that participates in a State process approved by 
the Secretary under subpart J of this part, and either was first 
enrolled in an eligible program before July 1, 2012; or (ii) is 
enrolled in an eligible career pathway program as defined in section 
484(d)(2) of the HEA.
    We propose to amend Sec.  668.32(e)(5), by allowing for student 
eligibility for title IV, HEA aid if it has been determined by the 
institution that the student has the ability to benefit from the 
education or training offered by the institution based on the 
satisfactory completion of six semester hours, six trimester hours, six 
quarter hours, or 225 clock hours that are applicable toward a degree 
or certificate offered by the institution, and either: (i) was first 
enrolled in an eligible program before July 1, 2012; or (ii) is 
enrolled in an eligible career pathway program as defined in section 
484(d)(2) of the HEA.
    Reasons: These are technical changes. Section 309(c), Division F, 
title III of the 2011 amendments to the HEA (Pub. L. 112-74), allows 
students who were enrolled prior to July 1, 2012, to continue to be 
eligible for title IV, HEA aid under the previous ability to benefit 
alternatives. The Department discussed the amendment in Dear Colleague 
Letter

[[Page 32388]]

GEN-12-09 (June 28, 2012),\153\ where we explained that the new 
provision in the 2014 amendments did not affect the eligibility of 
students first enrolled in an eligible program or registered to attend 
an eligible institution prior to July 1, 2012.
---------------------------------------------------------------------------

    \153\ ifap.ed.gov/dear-colleague-letters/06-28-2012-gen-12-09-subjecttitle-iv-eligibility-students-without-valid-high.
---------------------------------------------------------------------------

    The 2014 amendments to the HEA, enacted on December 16, 2014 (Pub. 
L. 113-235), amended section 484(d) to allow a student who does not 
have a high school diploma or its recognized equivalent, or who did not 
complete a secondary school education in a homeschool setting, to be 
eligible for title IV, HEA aid through the three ATB alternatives 
discussed in the Background section of this NPRM, but only if the 
student is enrolled in an eligible career pathway program. These 
technical changes to the regulatory text would further clarify how 
student eligibility applies in each case.

Approved State Process (Sec.  668.156)

    Statute: Section 484(d)(1)(A)(ii) of the HEA states that a non-high 
school graduate shall be determined as having the ability to benefit 
from the education or training in accordance with such process as the 
State prescribes.
    Current Regulations: Section 668.156(a) provides that the State 
process is one of the ATB alternatives. Under this section, if a State 
wishes the Department to consider its State process, that State must 
list all of the institutions that will participate in the State 
process.
    Section 668.156(b) requires that if a State wishes the Department 
to consider its state process, the State submit a success rate for non-
high school graduates that is within 95 percent of the success rate of 
students with high school diplomas. The method for calculating the 
success rate is described in Sec.  668.156(h) and (i).
    Section 668.156(c) requires that the participating institution 
provide certain services to each student admitted through the State 
process, which generally include orientation, assessment of the 
student's existing capabilities, tutoring, counseling, and follow-up by 
teachers and counselors regarding student performance.
    Section 668.156(d) requires that if a State wishes the Department 
to consider its State process, a State monitor each participating 
institution on an annual basis, prescribe corrective action for 
noncompliant institutions, and terminate the participation of an 
institution that refuses or fails to comply. Section 668.156(e) 
requires the Secretary to respond to a State's application within six 
months or the application is automatically approved. Section 668.156(f) 
stipulates that the State process can be approved for up to five years.
    Section 668.156(g) provides the Secretary with the authority to 
withdraw the State process if the State violates any part of Sec.  
668.156. This provision also provides the State with an appeal process.
    Proposed Regulations: The Department proposes to restructure the 
section and add several new provisions to Sec.  668.156.
    In Sec.  668.156(a)(1) we propose to update the regulations to 
include the six-credit hour ATB alternative in section 
484(d)(1)(A)(iii). Currently the regulations list only the test 
alternative and the State process.
    Under Sec.  668.156(a)(2) we propose that a State, in its 
application for the State process:
     List all institutions that would be eligible to 
participate in the State process.
     Describe the requirements that participating institutions 
must meet to offer eligible career pathway programs under that process.
     Certify that each proposed eligible career pathway program 
meets the definition under Sec.  668.2 and documentation requirements 
under Sec.  668.157 as of the submission date of the application.
     List the criteria used to determine student eligibility in 
the State process.
     Exclude from participation in the State process any 
institution that has a withdrawal rate that exceeds 33 percent of the 
institution's undergraduate regular students. Institutions must count 
all regular students who were enrolled during the latest completed 
award year, except those students who withdrew from, dropped out of, or 
were expelled and received a refund of 100 percent of their tuition and 
fees.
    In Sec.  668.156(a)(3) we propose that the Secretary would verify 
that a sample of eligible career pathway programs offered by 
institutions participating in the State process meet the definition of 
an eligible career pathway program.
    We propose to separate the State process application into the 
initial application process, as described under Sec.  668.156(b), and a 
subsequent application process, as described under Sec.  668.156(e). 
All applications, whether initial or subsequent, would comply with 
requirements under Sec.  668.156(a). In both the initial and subsequent 
applications, we propose to remove the services required under current 
Sec.  668.156(c), and instead those services would largely appear under 
the definition of an eligible career pathway program in proposed Sec.  
668.157.
    In Sec.  668.156(b)(1) we propose that a State's initial 
application may be approved for two years if the State satisfies 
requirements under proposed Sec.  668.156(a), discussed above, and 
proposed Sec. Sec.  668.156(c) and (d), which are discussed later in 
this section. Under proposed Sec.  668.156(b)(2), the States would be 
required to agree not to exceed enrollment under the State process of 
more than 25 students or one percent of the enrollment, whichever is 
greater, at each participating institution.
    In Sec.  668.156(c)(1) we propose that institutions must adhere to 
the student eligibility requirements under Sec.  668.32 for access to 
title IV, HEA aid. We also propose that States must ensure monitoring 
of the institutions that fall within the State process and take 
appropriate action in response to that monitoring, including:
     On an annual basis, monitoring each participating 
institution's compliance with the State process, including the success 
rate requirement;
     Requiring corrective action if an institution is found to 
be noncompliant with the State process;
     Providing participating institutions up to three years to 
come into compliance with the success rate if, in the State's 
subsequent application for continued participation of the State 
process, an institution fails to achieve the success rate required 
under proposed Sec.  668.156(e)(1) and (f); and
     Requiring termination of a participating institution from 
the State process if there is a refusal or failure to comply.
    Proposed Sec.  668.156(d) simply redesignates the current Sec.  
668.156(e), with the language otherwise unchanged.
    We propose to outline the new subsequent application process under 
the new Sec.  668.156(e). Each participating institution would be 
required to calculate a success rate for non-high school graduates that 
is within 85 percent of the success rate of students with high school 
diplomas. We would require the State to continue to comply with 
proposed Sec. Sec.  668.156(a) and (c)(related to the contents of the 
application and monitoring requirements for the State). We would 
require the State to report information about participating students in 
eligible career pathway programs, including disaggregated by race, 
gender, age, economic circumstances, and educational attainment, 
related to their enrollment and success. Current Sec.  668.156(d), 
which relates to the

[[Page 32389]]

Secretary's approval of the State process application, would continue 
to apply.
    We propose several changes from current regulations under Sec.  
668.156:
     The success rate would be 85 percent. Currently it is 95 
percent.
     The success rate would be calculated and reported 
separately for every institution. Currently the success rate combines 
all institutional data into one calculation.
     The success rate for participating institutions would 
compare non-high school graduates to high school graduates in the same 
programs. Currently the regulation compares non-high school graduates 
to high school graduates in any program.
    Current Sec.  668.156(i), which states that the success rate would 
be based on the last award year for which data are available during the 
last two completed award years before the application is submitted, 
would be redesignated as proposed Sec.  668.156(g)(1). The Department 
proposes to remove the requirement that the data come from the last two 
completed award years. The Department also proposes to add a new Sec.  
668.156(g)(2), to allow that if no students enroll through the State 
process during the initial approval, we would extend the approval for 
one additional year.
    The Department also proposes under Sec.  668.156(h) to require 
States to submit reports on their process in accordance with deadlines 
and procedures established in a notice published in the Federal 
Register. Proposed Sec.  668.156(i), which states that the maximum 
length of the State process approval is five years, is simply 
redesignated from current Sec.  668.156(f), which includes the same 
maximum length.
    Finally, proposed Sec.  668.156(j)(1) clarifies that the Secretary 
would withdraw approval of the State process for violation of the terms 
of Sec.  668.156 or for the submission of inaccurate information. 
Proposed Sec.  668.156(j)(1)(i) would provide that this withdrawal of 
approval occurs if the State fails to terminate an institution from 
participation in the State process after its failure to meet the 
success rate. However, proposed Sec.  668.156(j)(1)(ii) would provide 
that, under exceptional circumstances determined by the Secretary, the 
State process can be approved once for a 2-year period. If more than 50 
percent of participating institutions across all States do not meet the 
85 percent success rate requirement, proposed Sec.  668.156(j)(1)(iii) 
provides that the Secretary may lower the success rate to no less than 
75 percent for two years. Current Sec.  668.156(g)(2) would be 
redesignated as proposed Sec.  668.156(j)(2) and would state that the 
Secretary provides the State an opportunity to contest a finding that 
the State process violated the requirements of the section or that the 
information submitted was inaccurate. Under proposed Sec.  
668.156(j)(3), we propose that if the Secretary's termination of a 
State process is upheld after the appeal, the State cannot reapply to 
the Department for approval of a State process for five years.
    Reasons: The change made to proposed Sec.  668.156(a)(1) is a 
technical update to include the six-credit hour or recognized 
equivalent alternative as defined in section 484(d)(1)(A)(iii) of the 
HEA so that the list of alternatives in regulation is complete.
    Proposed Sec.  668.156(a)(2) describes documentation that would be 
required in both the initial and subsequent applications. The 
requirement to provide a list of participating institutions in proposed 
Sec.  668.156(a)(2)(i) aligns with the current regulation. In Sec.  
668.156(a)(2)(ii), we propose to require a list of standards that 
participating institutions must meet to offer an eligible career 
pathway program under the State process as an alternative to including 
the list of particular services that must be required of institutions 
under current Sec.  668.156(c). We believe that the eligible career 
pathway program definition we propose to add to the regulations 
includes substantially similar types of services; and cross-referencing 
to that list would provide more clarity to the field about how the 
State process connects to the definition of an eligible career pathway 
program. We also propose under Sec.  668.156(a)(2)(iii) to require 
institutions to certify that the eligible career pathway program 
offered by participating institutions under the State process meets the 
regulatory definition and documentation requirements. This 
certification would provide greater assurances to the Department that 
institutions are compliant with the statutory requirements for ability 
to benefit, provide greater certainty that students utilizing ability 
to benefit would receive the support services they need to succeed, and 
would protect taxpayers from investing Federal financial aid dollars in 
programs that do not meet the intended requirements. For those reasons, 
we believe that the Secretary need only approve a sample of eligible 
career pathway programs. To better understand the State process as it 
relates to students, and to ensure that States have a process 
sufficiently rigorous to comply with the law, the Department requires 
that student eligibility criteria be outlined in all applications, as 
described under proposed Sec.  668.156(a)(2)(iv). This would also 
provide deeper insights into the landscape of programming that States 
and institutions are providing to students who have not earned a high 
school diploma or equivalent. Proposed Sec.  668.156(a)(2)(v) would 
require that all institutions listed for the first time on an 
application not have a withdrawal rate of over 33 percent as a consumer 
protection. This is similar to the current administrative capability 
regulations in Sec.  668.16(l), which apply to all institutions seeking 
initial certification to participate in the Federal aid programs. We 
believe that students who have not yet earned a high school diploma or 
equivalent require substantial supports to ensure they are able to 
succeed. As we noted when we added the withdrawal rate measure as an 
eligibility requirement, the Secretary believes that these rates are 
appropriate measures of an institution's past administrative 
performance, and that withdrawal rates are a function of overall 
institutional performance and the support services that are provided to 
students. The Department proposes under Sec.  668.156(e)(1) to move the 
success rate calculation (the outcome metric) to the subsequent 
application, since we recognize that before the State process is in 
place, it is unlikely the State or its institutions would have 
calculated a rate and may not even have enrolled students through 
ability to benefit. The Department is aware that this challenge has 
kept many States from being able to submit a complete State process 
application and believes this change would provide States with 
sufficient time to make the success rate calculation.
    Proposed Sec.  668.156(b) describes the initial application 
process. Currently, the regulations require the success rate to be 
included as a part of States' first application to the Secretary. No 
currently approved State has provided the success rate as a part of its 
application. The current success rate formula outlined in current Sec.  
668.156(h) does not take into account eligible career pathway programs, 
therefore, it has been difficult for the Department to provide a 
consistent application to States. Further, many States would not be 
able to complete the success rate calculation unless participating 
institutions have their own funds to enroll non-high school graduates 
under a State process for at least a year. The current regulation at 
Sec.  668.156(b)(1) references students it admits ``under that 
process'', meaning that

[[Page 32390]]

participating institutions must be enrolling non-high school graduates 
into programs prior to their application to the Department, which is 
very difficult for institutions without funds to support such students. 
Therefore, the Department proposes to give States more time in their 
State process to gather the necessary data to calculate the success 
rate after students become eligible for Title IV, HEA aid.
    In proposed Sec.  668.156(b)(2), the Department initially proposed 
to the Committee a one percent cap on enrollment through the State 
process at each participating institution. This cap is intended to 
serve as a guardrail against the rapid expansion of eligible career 
pathway programs. We believe these protections are particularly 
important because the required success metric is no longer included at 
the initial application of a State process. A committee member believed 
the cap on enrollment in the initial phase would restrict enrollment at 
smaller institutions and suggested that the cap be established as the 
greater of a one percent on enrollment or 25 students at each 
participating institution. The Committee adopted that committee 
member's suggestion.
    Proposed Sec.  668.156(c) generally incorporates current Sec.  
668.156(d), in that it would require the State to ensure annual 
monitoring, corrective action, and termination of institutions that 
refuse or fail to comply with the State process. Proposed Sec.  
668.156(c)(1) simply conveys that States and participating institutions 
must comply with title IV, HEA student eligibility requirements. We 
propose to add Sec.  668.156(c)(4), which would allow an institution 
that does not meet the success rate requirements up to three years to 
come back into compliance. This would provide some latitude to States 
to ensure that the failure to meet the success rate requirement is not 
due just to a single-year variation and would grant institutions some 
time to demonstrate improved outcomes, while ensuring that institutions 
that continue to miss the required rate are not permitted to 
participate in the State process indefinitely. In Sec.  668.156(c)(6), 
we propose to prohibit an institution that has been terminated from the 
State process from participating for at least five years after the 
action because we believe that is a reasonable amount of time for the 
institution to rectify issues before returning to the State process. 
This timeline also mirrors the proposed limitation in Sec.  
668.156(j)(1)(v) that limits a State for which the Secretary has 
withdrawn approval of the State process from reapplying for a State 
process for at least five years after the withdrawal.
    Proposed Sec.  668.156(e) establishes the requirements for the 
subsequent application. During the negotiations, the Department 
originally wanted to maintain the 95 percent success rate requirement 
established in current regulations. However, the Department ultimately 
accepted a committee member's recommendation of lowering the success 
rate from 95 percent to 85 percent in proposed Sec.  668.156(e)(1) 
because the member believed that 95 percent is too difficult to 
achieve. The Department views this change as necessary to achieve 
consensus, and notes all of the other guardrails and consumer 
protections that would be put in place under the proposed changes to 
Sec.  668.156, which would ensure adequate student protections are in 
place even with a lower success rate. The new proposed protections 
include withdrawal rate considerations, caps on initial enrollment, 
review of a sample of eligible career pathway programs during the 
application review to ensure that they meet the requirements in the 
regulations, enhanced reporting by States, and expanded Departmental 
authority to terminate a State process and bar participation for five 
years. The Department also notes that, given an absence of existing 
data to either support or contradict the 95 percent success rate, there 
is limited information with which to consider this requirement; to that 
end, we invite commenters to submit additional information about the 
success rates of ATB students to further inform this rulemaking. 
Proposed Sec.  668.156(e)(3) would require that States report on the 
demographic information of participating students and on their outcomes 
because the Department seeks to implement section 484(d) of the HEA, 
which requires the Department to take into account the cultural 
diversity, economic circumstances, and educational preparation of the 
populations served by the institutions. The Department also believes 
that ensuring diversity, disaggregating data to assess the outcomes of 
all students and student subgroups and promoting equitable success for 
students are critical goals and central to the purpose of the title IV, 
HEA programs.
    The overall structure of the success rate calculation under 
proposed Sec.  668.156(f) is based in large part on the success rate 
formula in current Sec.  668.156(h). Due to the implementation of the 
eligible career pathway programs as a requirement for students that 
fulfill an ATB alternative, not reflected in the current regulations, 
we believe that it is necessary to further clarify the comparison 
groups for the formula. In particular, proposed Sec.  668.156(f) would 
clarify that the success rate must be calculated for each participating 
institution, rather than as an overall number for the State. We also 
believe this would be better for States because if one institution 
continually fails to produce the required success rate, that specific 
institution would be removed from the State process without risking the 
termination of the entire State process and every participating 
institution that falls under that process. Proposed Sec.  668.156(f)(1) 
would compare students in the same programs because we believe it would 
yield more relevant outcomes data about specific programs. Currently 
students in the State process are compared to all high school graduates 
in any program, even if they were not programs that students admitted 
through the State process engaged in. We do not believe the comparison 
is targeted enough to yield data that States, participating 
institutions, or the Department could use in making determinations 
about the State process.
    We propose to provide participating institutions two years of 
initial approval, so they have sufficient time to collect data needed 
to calculate and report the success rate. Accordingly, we propose to 
revise Sec.  668.156(g)(1) to reflect that the data used in calculating 
the success rate must be from the prior award year, rather than from 
either of the two prior award years. We also recognize that some States 
may not see significant enrollment, and in fact, may have years in 
which no ATB student enrolls in an eligible career pathway program. 
Accordingly, in proposed Sec.  668.156(g)(2), we would provide those 
States with a one-year extension to the initial approval to allow for 
more time to enroll students to calculate a success rate.
    To have sufficient access to relevant and timely data about the 
State process, and to provide for adequate oversight of States' efforts 
and the outcomes at their participating institutions, proposed Sec.  
668.156(h) would require States to submit reports in accordance with 
processes laid out in a Federal Register notice. This would also aid us 
in monitoring areas where policy changes may be needed to better 
support States, institutions, and ATB students.
    Finally, proposed Sec.  668.156(j) would grant the Secretary the 
authority to rescind a State process approval and would grant the State 
an appeal process. There was already similar language in current Sec.  
668.156(g) but we believe that the proposed language provides a

[[Page 32391]]

clearer framework. Furthermore, similar enforcement and due process 
requirements are included throughout other parts of the Department's 
regulations. Among the changes from current regulations, the Department 
proposes in Sec.  668.156(j)(1)(iii) to clarify that the Secretary may 
lower the success rate to not less than 75 percent in the event that 
more than 50 percent of participating institutions across all States 
fail the 85 percent success rate requirement. Given that there is 
little information available about the current success rates of ATB 
students, we believe that this ability to lower the requirement if most 
institutions are unable to meet the requirement would provide some 
ability for the Department to act in the event a change in the standard 
is needed. This may also account for years in which external 
circumstances, like those seen during the pandemic, may necessitate a 
system-wide accommodation. The Department believes that, by setting a 
floor of not less than 75 percent, proposed Sec.  668.156(j) would 
still protect ATB students from poor-performing institutions and ensure 
they have access to quality opportunities.
Directed Questions
    The Committee reached consensus on the Department's proposed 
regulations on ATB. The Department has published the proposed ATB 
amendatory language without substantive alteration to the agreed-upon 
proposed regulations. We would like additional feedback on the 
regulations to further inform the rulemaking process.
    We propose a success rate calculation under proposed Sec.  
668.156(f) and would like to receive public comments specific to this 
success rate calculation) to further inform this rulemaking. We 
specifically request comments on the proposed 85 percent threshold, the 
comparison groups in the calculation, the components of the 
calculation, and whether the success rate itself is an appropriate 
outcome indicator for the State process as well as any other 
information, thoughts, or opinions on the success rate calculation. For 
more information on Sec.  668.156(f), please see the information 
discussed previously in this section and also the current regulations 
in Sec.  668.156(h). You can also review the proposed regulatory 
language.

Eligible Career Pathway Program (Sec.  668.157)

    Statute: Section 484(d)(2) of the HEA defines an eligible career 
pathway program.
    Current Regulations: None.
    Proposed Regulations: The Department proposes to create new Sec.  
668.157 in subpart J. This section would dictate the documentation 
requirements for eligible career pathway programs for submission to the 
Department for approval as a title IV, HEA eligible program. In 
proposed Sec.  668.157(a)(1) an institution would demonstrate to the 
Secretary that a student is enrolled in an eligible career pathway 
program by documenting that the student has enrolled in or is receiving 
all three of the following elements simultaneously--
     An eligible postsecondary program as defined in Sec.  
668.8;
     Adult education and literacy activities under the 
Workforce Innovation and Opportunity Act as described in Sec.  463.30 
that assist adults in attaining a secondary school diploma or its 
recognized equivalent and in the transition to postsecondary education 
and training; and
     Workforce preparation activities as described in Sec.  
463.34.
    In proposed Sec.  668.157(a)(2) an institution would demonstrate to 
the Department that a student is enrolled in an eligible career pathway 
program by documenting that the program aligns with the skill needs of 
industries in the State or regional labor market in which the 
institution is located, based on research the institution has 
conducted, including--
     Government reports identifying in-demand occupations in 
the State or regional labor market;
     Surveys, interviews, meetings, or other information 
obtained by the institution regarding the hiring needs of employers in 
the State or regional labor market; and
     Documentation that demonstrates direct engagement with 
industry;
    In proposed Sec.  668.157(a)(3) through (a)(6), an institution 
would demonstrate to the Department that a student is enrolled in an 
eligible career pathway program by documenting the following:
     The skill needs described in proposed Sec.  668.157(a)(2) 
align with the specific coursework and postsecondary credential 
provided by the postsecondary program or other required training;
     The program provides academic and career counseling 
services that assist students in pursuing their credential and 
obtaining jobs aligned with the skill needs described in proposed Sec.  
668.157(a)(2), and identifies the individuals providing the career 
counseling services;
     The appropriate education is offered, concurrently with 
and in the same context as workforce preparation activities and 
training for a specific occupation or occupational cluster through an 
agreement, memorandum of understanding, or some other evidence of 
alignment of postsecondary and adult education providers that ensures 
the secondary education is aligned with the students' career 
objectives; and
     The program is designed to lead to a valid high school 
diploma as defined in Sec.  668.16(p) or its recognized equivalent.
    Under Sec.  668.157(b) we propose that, for career pathway programs 
that do not enroll students through a State process as defined in Sec.  
668.156, the Secretary would verify the eligibility of eligible career 
pathway programs for title IV, HEA program purposes pursuant to 
proposed Sec.  668.157(a). Under proposed Sec.  668.157(b), we would 
also provide an institution with the opportunity to appeal any adverse 
eligibility decision.
    Reasons: Currently, we do not approve individual career pathway 
programs and have provided minimal guidance on documentation 
requirements. The Department is aware of compliance and program 
integrity concerns with programs that claim to offer an eligible career 
pathway program but do not offer all the required components. While the 
Department believes that many institutions have made a good-faith 
effort to comply with the statutory definition, we believe it is 
necessary to establish baseline requirements in regulation to curtail 
bad actors' efforts to provide subpar programming. These baseline 
requirements would also support good actors by providing further 
regulatory clarity to support their efforts, weeding out subpar 
eligible career pathway programs, and steering students towards 
eligible career pathway programs with better outcomes.
    This new section provides a reasonable baseline for documentation 
requirements and allows the Department to better enforce the eligible 
career pathway program statutory requirement through approval of all 
eligible career pathway programs that enroll students through the six-
credit and ATB test options. We received a suggestion from a committee 
member to better align eligible career pathway programs with integrated 
education and training programs. Proposed Sec.  668.157(a)(1) would do 
this by referring to adult education and literacy programs, activities, 
and workforce preparation activities described under the Workforce 
Innovation and Opportunity Act (WIOA) implementing regulations (Sec.  
463.30 and Sec.  463.34).
    In proposed Sec.  668.157(a)(2), we clarify that the eligible 
career pathway program

[[Page 32392]]

would have to align with the skill and hiring needs of the industry. By 
proposing that there be direct interaction by the institution with a 
government source and that the collaboration is supported by other 
means that demonstrate engagement with industry, we believe that 
institutions would produce stronger analyses and demonstrate clearer 
connections with the workforce needs of their communities. Proposed 
Sec.  668.157(a)(3) supports the language in proposed Sec.  
668.157(a)(2) by mandating that the coursework and postsecondary 
credential would also have to align to these industry needs. We believe 
this would provide for further connections between students' academic 
and career needs, and ultimately would help to ensure that students are 
able to obtain a career in their intended field.
    The documentation required under proposed Sec.  668.157(a)(4) is 
similar to section 484(d)(2)(C) of the HEA, which requires academic and 
career counseling. Proposed Sec.  668.157(a)(5), which also largely 
mirrors section 484(d)(2)(D) of the HEA, proposes further requirements 
regarding evidence of coordination to ensure better alignment of adult 
education with post-secondary education. The language in proposed Sec.  
668.157(a)(5) would not require an institution to develop a new adult 
education curriculum to offer an eligible career pathway program, as it 
would allow for workforce preparation activities and training to be 
offered through an agreement, memorandum of understanding, or some 
other evidence of alignment. The documentation proposed under Sec.  
668.157(a)(6) reflects the statutory requirement in section 484 of the 
HEA that requires the program to lead to a valid high school diploma 
for ATB students.
    Under proposed Sec.  668.157(b), we would review and approve every 
eligible career pathway program that enrolls students through means 
other than exclusively the State process. This is to ensure that the 
programs comply with the regulatory definition and documentation 
requirements. By requiring this verification, the Department would be 
able to address existing issues by which some programs may have failed 
to meet statutory requirements and have still received aid for ATB.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether this regulatory action is ``significant'' 
and, therefore, subject to the requirements of the Executive Order and 
subject to review by 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 proposed regulatory action will have an annual effect on the 
economy of more than $100 million because the proposed Financial Value 
Transparency and GE provisions of the regulations alone could impact 
transfers between postsecondary institutions, the Federal Government, 
and borrowers in excess of this amount. Annualized transfers between 
borrowers and the Federal Government are estimated to be $1.1 billion 
at a 7 percent discount rate and $1.2 billion at a 3 percent discount 
rate in reduced Pell Grants and loan volume. This analysis also 
estimates additional annualized transfers of $836 million (at a 3 
percent discount rate; $823 million at 7 percent discount rate) among 
institutions as students shift programs and estimated annualized 
paperwork and compliance burden of $115.1 million (at a 3 percent 
discount rate; $118 million at a 7 percent discount rate) are also 
detailed in this analysis Therefore, this proposed action is 
economically significant and subject to review by OMB under section 
3(f)(1) of Executive Order 12866. We therefore have assessed the 
potential costs and benefits, both quantitative and qualitative, of 
this proposed regulatory action and have determined that the benefits 
would justify the costs.
    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 on 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 proposed 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 proposed 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, summarize the key provisions, present a detailed 
analysis of the Financial Value Transparency and GE provisions of the 
proposed regulation, discuss the potential costs and benefits, estimate 
the net budget impacts and paperwork burden as required by the 
Paperwork Reduction Act, discuss distributional consequences, and 
discuss regulatory alternatives we considered. The

[[Page 32393]]

Financial Value Transparency and GE provisions are the most 
economically substantial components of the package, so we include a 
much more detailed quantitative analysis of these components than the 
others and focus on the budget impact of these provisions. For the 
purposes of the analysis contained in this RIA, we combine the 
Financial Value Transparency and GE parts of the regulation. However, 
we do present many results separately for eligible non-GE programs 
(only subject to programmatic reporting and acknowledgment 
requirements) and GE programs (additionally subject to ineligibility 
and warnings about eligibility). Economic analysis for the proposed 
Financial Responsibility, Administrative Capability, Certification 
Procedures, and Ability to Benefit rules are presented separately.
    The proposed Financial Value Transparency and GE regulations aim to 
generate benefits to students, postsecondary institutions, and the 
Federal government primarily by shifting students from low financial 
value to higher financial value programs or, in some cases, from low-
financial-value postsecondary programs to non-enrollment.\154\ This 
shift would be due to improved and standardized market information 
about all postsecondary programs, allowing for better decision making 
by students, prospective students, and their families; the public, 
taxpayers, and the government; and institutions. Furthermore, the 
proposed GE regulations aim to improve program quality by directly 
eliminating the ability of low-financial-value programs to participate 
in the title IV, HEA programs. Our analysis concludes that this 
enrollment shift and improvement in program quality would result in 
higher earnings for students, which would generate additional tax 
revenue for the Federal, State, and local governments. Students would 
also likely benefit from lower accumulated debt and lower risk of 
default. The primary costs of the proposed regulations would be the 
additional reporting required by institutions, the time necessary for 
students to acknowledge having seen program information and warnings, 
and additional spending at institutions that accommodate students that 
would otherwise attend failing programs. We anticipate that the 
proposed regulations would also generate substantial transfers, 
primarily in the form of title IV, HEA aid shifting between students, 
postsecondary institutions, and the Federal government. Based on our 
analysis, we conclude that the benefits outweigh the costs.
---------------------------------------------------------------------------

    \154\ We use the phrase ``low-financial-value'' at various 
points in the RIA to refer to low-earning or high-debt-burden 
programs that fail debt-to-earnings and earnings premium metrics.
---------------------------------------------------------------------------

    The proposed regulatory actions related to Financial 
Responsibility, Administrative Capability, and Certification Procedures 
would provide benefits to the Department by strengthening our ability 
to conduct more proactive and real-time oversight of institutions of 
higher education. Specifically, under the Financial Responsibility 
regulations, the Department would be able to more easily obtain 
financial protection that can be used to offset the cost of discharges 
when an institution closes or engages in behavior that results in 
approved defense to repayment claims. The proposed changes to the 
Certification Procedures would allow the Department more flexibility to 
increase its scrutiny of institutions that exhibit concerning signs, 
including by placing them on provisional status or adding conditions to 
their program participation agreement. For Administrative Capability, 
we propose to expand the requirements to address additional areas of 
concern that could indicate severe or systemic administrative issues in 
properly managing the title IV, HEA programs, such as failing to 
provide adequate financial aid counseling including clear and accurate 
communications or adequate career services. Enhanced oversight ability 
would better protect taxpayers and help students by dissuading 
institutions from engaging in overly risky behavior or encouraging 
institutions to make improvements. These benefits would come at the 
expense of some added costs for institutions to acquire additional 
financial protection or potentially shift their behavior. The 
Department believes these benefits of improved accountability would 
outweigh those costs. There could also be limited circumstances in 
which an institution that was determined to lack financial 
responsibility and required to provide financial protection could 
choose to cease participating in the Federal aid programs instead of 
providing the required financial protection. The Department believes 
this would be most likely to occur in a situation in which the 
institution was already facing severe financial instability and on the 
verge of abrupt closure. In such a situation, there could be transfers 
from the Department to borrowers that occur in the form of a closed 
school loan discharge, though it is possible that the amount of such 
transfers is smaller than what it would otherwise be as the institution 
would not be operating for as long a period of time as it would have 
without the request for additional financial protection. However, the 
added triggers are intended to catch instances of potential financial 
instability far enough in advance to avoid an abrupt closure.
    Finally, the ability-to-benefit regulations would provide much-
needed clarity on the process for reviewing and approving State 
applications to offer a pathway into title IV, HEA aid for individuals 
who do not have a high school diploma or its recognized equivalent. 
Although States would incur costs in pursuing the application proposed, 
for this population of students, the proposed regulations would provide 
students with more opportunities for success by facilitating States' 
creation and expansion of options.

1. Need for Regulatory Action

Summary
    The title IV, HEA student financial assistance programs are a 
significant annual expenditure by the Federal government. When used 
well, Federal student aid for postsecondary education can help boost 
economic mobility. But the Department is concerned that there are too 
many instances in which the financial returns of programs leave 
students with debt they cannot afford or with earnings that leave 
students no better off than similarly aged students who never pursued a 
postsecondary education.
    The Department is also concerned about continued instances where 
institutions shut down without sufficient protections in place and with 
no prior notice for students, including instances where they do so 
without identifying alternative options for students to continue their 
education. For instance, one study found that 70 percent of students--
more than 100,000 students--affected by a closure between July 2004 and 
June 2020 were subjected to a sudden closure where there was minimal 
notice and no teach out agreement in place.\155\ Many of the students 
affected by such closures may obtain a closed school discharge, but 
even that financial assistance cannot make up for lost time invested in 
a program or out of the labor force or any out-of-pocket payments made. 
Significant shares of such students also no longer continue any sort of 
postsecondary program. This same

[[Page 32394]]

study found that less than half of students reenrolled after they 
experienced a closure and students who went through an abrupt closure 
had significantly worse reenrollment and completion outcomes. Taxpayers 
are also often left to bear the costs of student loan discharges 
because existing regulations lack sufficient mechanisms for the 
Department to seek financial protection from an institution before it 
suddenly closes. Having tools for obtaining stronger upfront protection 
is particularly important because many of the institutions that close 
suddenly exhibited a series of warning indicators in the weeks, months, 
and years leading up to their shuttering. Thus, while the Department 
would not have been able to anticipate the exact date an institution 
would cease operating, greater regulatory flexibility would have 
allowed the Department to act faster to obtain taxpayer protection, 
more closely monitor or place conditions on the institution, and gain 
additional protection for students such as a teach-out plan or 
agreement that would allow them to transfer and continue their 
education. Going forward this flexibility could have a deterrent effect 
to dissuade institutions from engaging in some of the risky and 
questionable behavior that ultimately led to their closure.
---------------------------------------------------------------------------

    \155\ https://nscresearchcenter.org/wp-content/uploads/SHEEO-NSCRCCollegeClosuresReport.pdf.
---------------------------------------------------------------------------

    We have also found during program reviews that there are 
institutions receiving title IV, HEA aid that lack the administrative 
capability necessary to successfully serve students. Some of these 
indicators of a lack of administrative capability can involve direct 
negative effects on students, such as having insufficient resources to 
deliver on promises made about career services and externships, or 
controls that are insufficient to ensure students' high school diplomas 
(or equivalent credentials) are legitimate--a key criterion for title 
IV, HEA student eligibility that may otherwise result in students 
taking on aid when they are not set up to succeed academically. In 
other situations, institutions may employ individuals who in the past 
exerted control at another institution that was found to have 
significant problems with the administration of the title IV, HEA 
student aid programs, which raises the concern that the institution may 
engage in the same conduct as the institution where the individual was 
previously involved, including mismanagement, misrepresentations, or 
other risky behaviors.
    The Department is also concerned that, in the past, institutions 
have shown significant signs of problems yet remained fully certified 
to participate in the Federal student aid programs. Existing 
regulations do not fully account for the range of scenarios that might 
indicate risk to institutions or students. For instance, current 
regulations do not allow the Department to address how conditions 
placed on an institution's financing might affect their ability to have 
the funds necessary to keep operating or how outside investors might 
affect the health of an institution if those outside investors start to 
face their own financial struggles. The current regulations also limit 
the Department's ability to take swift action to limit the effects of 
an institution's closure on taxpayers and students. In the past, a lack 
of financial protection in place prior to an institutional closure has 
resulted in large amounts of closed school loan discharges that are not 
otherwise reimbursed by the institution. Moreover, borrowers whose 
institutions close while they are enrolled have high rates of student 
loan default. In addition to expanding the Department's capacity to act 
in such situations, the proposed changes to the regulation would help 
students by dissuading the riskier behavior by an institution that 
could result in a closure and by ensuring that more closures do not 
occur in an abrupt fashion with no plans for where students can 
continue their programs.
    The proposed regulations would provide stronger protections for 
current and prospective students of programs where typical students 
have high debt burdens or low earnings. Under a program-level 
transparency and accountability framework, the Department would assess 
a program's debt and earnings outcomes based on debt-to-earnings (D/E) 
and earnings premium (EP) metrics. The regulations would require 
institutions to provide current and prospective students with a link to 
a Department website disclosing the debt and earnings outcomes of all 
programs, and students enrolling in non-GE programs that have failed 
debt-to-earnings metrics must acknowledge they have viewed the 
information prior to disbursing title IV, HEA funds. GE programs that 
consistently fail to meet the performance metrics would become 
ineligible for title IV, HEA funds. The proposed regulations would also 
expand the Department's authority to require financial protection when 
an institution starts to exhibit problems instead of waiting until it 
is too late to protect students and taxpayers. This proactive 
accountability would be buttressed by proposed changes to the way the 
Department certifies institutional participation in the title IV, HEA 
programs to ensure that it can monitor institutions more easily and 
effectively if they start to show signs of problems. The proposed 
approach would help the Department better target its oversight to 
institutions that exhibit a greater risk to students and taxpayers 
instead of simply allowing them to receive substantial sums of Federal 
resources with minimal scrutiny every year. By identifying additional 
indicators that an institution is not administratively capable of 
participating in the aid programs, the proposed regulations would 
enable the Department to step in and exert greater oversight and 
accountability over an institution before it is too late.
    The proposed regulations would, therefore, strengthen 
accountability for postsecondary institutions and programs in several 
critical ways. All institutions would be required to provide students a 
link to access information about debt and earnings outcomes. Non-GE 
programs not meeting the D/E standards would need to have students 
acknowledge viewing this information before receiving aid, and career 
training programs failing either the D/E or EP metrics would need to 
warn students about the possibility that they would lose eligibility 
for federal aid. Some institutions would have to improve their 
offerings or lose access to Federal aid. Concerning behavior would be 
more likely to result in required financial protection or other forms 
of oversight. As a result, students and taxpayers would have greater 
assurances that their money is spent at institutions that deliver value 
and merit Federal support.
    The Financial Value Transparency and GE provisions in subparts Q 
and S of the proposed regulations are intended to address the problem 
that many programs are not delivering sufficient financial value to 
students and taxpayers, and students and families often lack the 
information on the financial consequences of attending different 
programs needed to make informed decisions about where to attend. These 
issues are especially prevalent among programs that, as a condition of 
eligibility for title IV, HEA program funds, are required by statute to 
provide training that prepares students for gainful employment in a 
recognized occupation. Currently, many of these programs leave the 
typical graduate with unaffordable levels of loan debt in relation to 
their income, earnings that are no greater than what they would 
reasonably expect to receive if they had not attended the program, or 
both.
    Through this regulatory action, the Department proposes to 
establish: (1) A

[[Page 32395]]

Financial Value Transparency framework that would increase the quality, 
availability, and salience of information about the outcomes of 
students enrolled in all title IV, HEA programs and (2) an 
accountability framework for GE programs that would define what it 
means to prepare students for gainful employment in a recognized 
occupation by establishing standards by which the Department would 
evaluate whether a GE program remains eligible for title IV, HEA 
program funds. As noted in the preamble to this NPRM, there are 
different statutory grounds for the proposed transparency and 
accountability frameworks.
    The transparency framework (subpart Q and Sec.  668.43) would 
establish reporting and disclosure requirements that would increase the 
transparency of student outcomes for all programs. This would ensure 
that the most accurate and comparable information possible is 
disseminated to students, prospective students, and their families to 
help them make better informed decisions about where to invest their 
time and money in pursuit of a postsecondary degree or credential. 
Institutions would be required to provide information about program 
characteristics, outcomes, and costs and the Department would assess a 
program's debt and earnings outcomes based on debt-to-earnings and 
earnings premium metrics, using information reported by institutions 
and information otherwise obtained by the Department. The proposed rule 
would seek to ensure information's salience to students by requiring 
that institutions provide current and prospective students with a link 
to view cost, debt, and earnings outcomes of their chosen program on 
the Department's website. For non-GE programs failing the debt-to-
earnings metrics, the Department would require an acknowledgement that 
the enrolled or prospective student has viewed the information, prior 
to disbursing title IV, HEA funds. Further, the website would provide 
the public, taxpayers, and the Government with relevant information to 
help understand the outcomes of the Federal investment in these 
programs. Finally, the transparency framework would provide 
institutions with meaningful information that they can use to improve 
the outcomes for students and guide their decisions about program 
offerings.
    The accountability framework (subpart S) would define what it means 
to prepare students for gainful employment by establishing standards 
that assess whether typical students leave programs with reasonable 
debt burdens and earn more than the typical worker who completed no 
more education than a high school diploma or equivalent. Programs that 
repeatedly fail to meet these criteria would lose eligibility to 
participate in title IV, HEA student aid programs.
Overview of Postsecondary Programs Supported by Title IV, HEA
    Under subpart Q, we propose, among other things, to assess debt and 
earnings outcomes for students in all programs participating in Title 
IV, HEA programs, including both GE programs and eligible non-GE 
programs. Under subpart S, we propose, among other things, to establish 
title IV, HEA eligibility requirements for GE programs. In assessing 
the need for these regulatory actions, the Department analyzed program 
performance. The Department's analysis of program performance is based 
on data assembled for all title IV, HEA postsecondary programs 
operating as of March 2022 that also had completions reported in the 
2015-16 and 2016-17 award years. This data, referred to as the ``2022 
Program Performance Data (2022 PPD),'' is described in detail in the 
``Data Used in this RIA'' section below, though we draw on it in this 
section to describe outcome differences across programs.
    Table 1.1 reports the number of programs and average title IV, HEA 
enrollment for all institutions in our data for AY 2016 and 2017. 
Throughout this RIA, we provide analysis separately for programs that 
would be affected only by subpart Q (eligible non-GE programs) and 
those that would additionally be affected by subpart S (GE programs).

  Table 1.1--Combined Number of Title IV Eligible Programs and Title IV
   Enrollment by Control and Credential Level Combining GE and Non-GE
------------------------------------------------------------------------
                                                     Number of
                                         -------------------------------
                                             Programs        Enrollees
------------------------------------------------------------------------
Public:
    UG Certificates.....................          18,971         869,600
    Associate's.........................          27,312       5,496,800
    Bachelor's..........................          24,338       5,800,700
    Post-BA Certs.......................             872          12,600
    Master's............................          14,582         760,500
    Doctoral............................           5,724         145,200
    Professional........................             568         127,500
    Grad Certs..........................           1,939          41,900
                                         -------------------------------
        Total...........................          94,306      13,254,700
Private, Nonprofit:
    UG Certificates.....................           1,387          77,900
    Associate's.........................           2,321         266,900
    Bachelor's..........................          29,752       2,651,300
    Post-BA Certs.......................             629           7,900
    Master's............................          10,362         796,100
    Doctoral............................           2,854         142,900
    Professional........................             493         130,400
    Grad Certs..........................           1,397          35,700
                                         -------------------------------
        Total...........................          49,195       4,109,300
Proprietary:
    UG Certificates.....................           3,218         549,900
    Associate's.........................           1,720         326,800
    Bachelor's..........................             963         675,800

[[Page 32396]]

 
    Post-BA Certs.......................              52             800
    Master's............................             478         240,000
    Doctoral............................             122          54,000
    Professional........................              32          12,100
    Grad Certs..........................             128          10,800
                                         -------------------------------
        Total...........................           6,713       1,870,100
Foreign Private:
    UG Certificates.....................              28             100
    Associate's.........................              18             100
    Bachelor's..........................           1,228           5,500
    Post-BA Certs.......................              27             <50
    Master's............................           3,075           9,000
    Doctoral............................             793           2,800
    Professional........................             104           1,500
    Grad Certs..........................              77           1,500
                                         -------------------------------
        Total...........................           5,350          20,400
Foreign For-Profit:
    UG Certificates.....................               1             <50
    Master's............................               6             200
    Doctoral............................               4           1,900
    Professional........................               7          11,600
                                         -------------------------------
        Total...........................              18          13,700
Total:
    UG Certificates.....................          23,605       1,497,500
    Associate's.........................          31,371       6,090,700
    Bachelor's..........................          56,281       9,133,200
    Post-BA Certs.......................           1,580          21,400
    Master's............................          28,503       1,805,800
    Doctoral............................           9,497         346,800
    Professional........................           1,204         283,100
    Grad Certs..........................           3,541          89,900
                                         -------------------------------
        Total...........................         155,582      19,268,200
------------------------------------------------------------------------
Note: Counts are rounded to the nearest 100.

    There are 123,524 degree programs at public or private non-profit 
institutions (hereafter, ``eligible non-GE programs'' or just ``non-GE 
programs'') in the 2022 PPD that would be subject to the proposed 
transparency regulations in subpart Q but not the GE regulations in 
subpart S. These programs served approximately 16.3 million students 
annually who received title IV, HEA aid, totaling $25 billion in grants 
and $61 billion in loans. Table 1.2 displays the number of non-GE 
programs by two-digit CIP code, credential level, and institutional 
control in the 2022 PPD. Two-digit CIP codes aggregate programs by 
broad subject area. Table 1.3 displays enrollment of students receiving 
title IV, HEA program funds in non-GE programs in the same categories.
BILLING CODE 4000-01-P

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[[Page 32398]]


    GE programs are non-degree programs, including diploma and 
certificate programs, at public and private non-profit institutions and 
nearly all educational programs at for-profit institutions of higher 
education regardless of program length or credential level.\156\ Common 
GE programs provide training for occupations in fields such as 
cosmetology, business administration, medical assisting, dental 
assisting, nursing, and massage therapy. There were 32,058 GE programs 
in the 2022 PPD.\157\ About two-thirds of these programs are at public 
institutions, 11 percent at private non-profit institutions, and 21 
percent at for-profit institutions. These programs annually served 
approximately 2.9 million students who received title IV, HEA aid in AY 
2016 or 2017. The Federal investment in students attending GE programs 
is significant. In AY 2022, these students received approximately $5 
billion in Federal Pell grant funding and approximately $11 billion in 
Federal student loans. Table 1.4 displays the number of GE programs 
grouped by two-digit CIP code, credential level, and institutional 
control in the 2022 PPD. Table 1.5 displays enrollment of students 
receiving title IV, HEA program funds in GE programs in the same 
categories.
---------------------------------------------------------------------------

    \156\ ``For-profit'' and ``proprietary'' are used 
interchangeably throughout the text. Foreign schools are schools 
located outside of the United States at which eligible U.S. students 
can use federal student aid.
    \157\ Note that the 2022 PPD will differ from the universe of 
programs that are subject to the proposed GE regulations for the 
reasons described in more detail in the ``Data Used in this RIA'' 
section, including that the 2022 PPD includes programs defined by 
four-digit CIP code while the rule would define programs by six-
digit CIP code.
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[[Page 32399]]


[GRAPHIC] [TIFF OMITTED] TP19MY23.004

BILLING CODE 4000-01-C
    Tables 1.6 and 1.7 show the student characteristics of title IV, 
HEA students in non-GE and GE programs, respectively, by institutional 
control, predominant degree of the institution, and credential level. 
In all three types of control, the majority of students served by the 
programs are female students. At public non-GE programs, 58 percent of 
students received a Pell Grant, 31 percent are 24 years or older, 36 
percent are independent, and 43 percent non-white. At not-for-profit 
non-GE programs, 43 percent of students received a Pell Grant, 37 
percent are 24 years or older, 44 percent are independent, and 43 
percent are non-white. The average public GE program has 68 percent of 
its students ever received Pell, 44 percent are 24 years or older, 50 
percent are independent, and 46 percent are non-white. At for-profit GE 
programs, 67 percent of students received a Pell Grant, 66 percent are 
24 years or older, 72 percent are independent, and 59 percent are non-
white.

 Table 1.6--Characteristics of Non-GE Students by Control, Predominant Degree, and Credential Level (Enrollment-
                                                    Weighted)
----------------------------------------------------------------------------------------------------------------
                                                                  Percent of students who are . . .
                                       Average EFC -------------------------------------------------------------
                                                      Age 24+      Male        Pell      Non-white   Independent
----------------------------------------------------------------------------------------------------------------
Public:
    Less-Than 2-Year:
        Associate's.................         5,700        36.4        37.2        73.8         41.8         41.7
        Bachelor's..................        10,600        59.4        40.6        54.0         37.4         62.6
        Master's....................         8,700        71.8        34.7        36.1         27.7         81.5
    2-Year:
        Associate's.................         5,800        29.6        37.5        74.1         49.3         34.8
        Bachelor's..................         9,300        48.3        41.3        69.4         40.3         55.6
        Master's....................         7,600        79.6        37.4        52.2         63.7         90.9
        Professional................         5,800       100.0        33.3        33.3  ...........        100.0
    4-Year or Above:
        Associate's.................         7,600        36.5        37.8        67.0         39.7         42.2
        Bachelor's..................        16,600        24.0        43.3        47.3         39.8         27.0
        Master's....................        11,900        60.6        35.9        32.9         40.2         72.7

[[Page 32400]]

 
        Doctoral....................        10,400        69.9        41.4        28.0         44.1         84.1
        Professional................         7,800        55.7        48.4        10.8         37.1         91.7
    Total:
        Total.......................        11,300        30.5        40.2        57.8         43.2         35.6
Private, Nonprofit:
    Less-Than 2-Year:
        Associate's.................         2,600        64.6        33.8        89.7         65.9         74.8
        Bachelor's..................         9,100        65.8        37.1        67.0         62.6         70.0
        Master's....................         9,200        52.2        30.7        37.7         56.3         61.4
        Doctoral....................         5,500        24.7        14.6        32.1         41.2         58.5
        Professional................         4,600        52.0        54.6         1.9         39.6         97.1
    2-Year:
        Associate's.................         6,300        47.4        34.8        72.4         52.2         53.6
        Bachelor's..................         8,300        60.7        40.7        68.3         51.4         64.8
        Master's....................         9,600        86.5        34.0        28.9         69.9         89.2
        Doctoral....................         9,600        81.3        26.4        14.6         62.5        100.0
    4-Year or Above:
        Associate's.................         6,800        54.9        34.6        70.2         49.3         60.5
        Bachelor's..................        17,600        23.2        39.9        48.9         40.2         26.1
        Master's....................        13,100        67.3        35.3        25.0         45.9         78.0
        Doctoral....................        12,200        69.4        41.1        17.7         49.7         87.1
        Professional................         9,200        57.2        48.8        10.1         43.0         89.1
    Total:
        Total.......................        15,400        37.3        39.0        43.3         42.6         43.5
----------------------------------------------------------------------------------------------------------------
Note: Average EFC values rounded to the nearest 100. Credential levels with very few programs and most table
  elements missing are suppressed.


         Table 1.7--Characteristics of GE Students by Control, Predominant Degree, and Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                  Percent of students who are . . .
                                       Average EFC -------------------------------------------------------------
                                                      Age 24+      Male        Pell      Non-white   Independent
----------------------------------------------------------------------------------------------------------------
Public:
    Less-Than 2-Year:
        UG Certificates.............         4,500        45.5        37.5        76.5         42.4         53.1
        Post-BA Certs...............         6,300        75.9        30.4        57.9  ...........         78.2
        Grad Certs..................         8,100        57.1        16.7        57.5         32.1         65.2
    2-Year:
        UG Certificates.............         6,100        41.9        37.8        70.3         50.9         46.8
        Post-BA Certs...............        10,800        47.2        23.7        58.4  ...........         59.5
        Grad Certs..................         7,600        89.7        68.1        68.9         50.6         89.7
    4-Year or Above:
        UG Certificates.............        23,300        28.5        41.6        36.8         32.3         31.8
        Post-BA Certs...............        11,500        60.5        31.6        35.9  ...........         71.3
        Grad Certs..................        10,700        69.8        30.1        39.2         36.2         79.0
    Total:
        Total.......................         7,100        43.7        37.6        68.3         45.7         49.8
Private, Nonprofit:
    Less-Than 2-Year:
        UG Certificates.............         4,900        48.3        36.6        80.2         63.7         58.3
        Post-BA Certs...............        15,600        51.0        59.2         3.3  ...........         65.3
        Grad Certs..................         7,600        28.2        38.7         3.1         47.2         62.1
    2-Year:
        UG Certificates.............         3,300        61.0        21.1        83.2         56.3         73.8
        Post-BA Certs...............        10,100        94.8        28.4        53.7  ...........         94.8
        Grad Certs..................        26,700        89.5        10.5        19.3        100.0        100.0
    4-Year or Above:
        UG Certificates.............        10,500        37.4        35.8        66.4         65.8         42.1
        Post-BA Certs...............        14,200        60.1        31.8        36.0  ...........         68.5
        Grad Certs..................        11,500        70.8        32.8        29.8         44.5         80.3
    Total:
        Total.......................         8,300        55.1        32.3        60.6         57.3         64.2
Proprietary:
    Less-Than 2-Year:
        UG Certificates.............         3,900        45.7        31.5        82.4         63.0         56.5
        Associate's.................         5,900        56.6        32.2        80.6         63.2         63.7
        Bachelor's..................         4,200        54.2        36.9        86.5         83.3         57.3

[[Page 32401]]

 
        Post-BA Certs...............         9,100        70.7        44.7        36.8  ...........         77.2
        Master's....................         9,200        85.4        26.7        32.2         62.1         90.4
        Doctoral....................         9,800        98.6        19.2        32.0         47.6         99.7
        Professional................        14,100        84.7        19.5        30.5         54.2        100.0
        Grad Certs..................         6,200        64.6         7.7        63.9          6.6         67.4
    2-Year:
        UG Certificates.............         4,800        48.4        39.8        77.8         64.2         57.1
        Associate's.................         5,700        51.8        33.3        77.8         60.6         58.1
        Bachelor's..................         7,900        61.6        42.7        70.5         65.0         67.9
        Post-BA Certs...............        13,400        86.4        25.0        39.4  ...........         86.4
        Master's....................         7,100        82.3        42.1        31.0         65.1         89.5
        Doctoral....................             0         0.0         0.0       100.0  ...........          0.0
        Professional................         5,700        71.6        46.0        14.6         36.7         99.0
        Grad Certs..................         3,700        64.8        32.4         0.0         24.3         67.6
    4-Year or Above:
        UG Certificates.............         5,400        77.7        22.1        76.2         55.4         84.3
        Associate's.................         5,400        75.4        31.9        76.1         57.2         82.7
        Bachelor's..................         9,700        75.2        40.7        64.2         54.6         78.8
        Post-BA Certs...............         7,500        84.6        28.5        54.7  ...........         92.3
        Master's....................        11,300        82.3        30.2        38.8         58.0         85.8
        Doctoral....................        19,800        92.9        30.0        25.2         57.9         95.2
        Professional................         7,100        89.0        25.7        47.1         34.1         93.2
        Grad Certs..................        11,900        88.6        27.1        38.2         63.2         90.7
    Total:
        Total.......................         7,700        66.1        34.7        67.3         58.8         72.4
----------------------------------------------------------------------------------------------------------------
Note: EFC values rounded to the nearest 100.

Outcome Differences Across Programs
    A large body of research provides strong evidence of the many 
significant benefits that postsecondary education and training 
provides, both private and social. Private pecuniary benefits include 
higher wages and lower risk of unemployment.\158\ Increased educational 
attainment also provides private nonpecuniary benefits, such as better 
health, job satisfaction, and overall happiness.\159\ Social benefits 
of increases in the number of individuals with a postsecondary 
education include productivity spillovers from a better educated and 
more flexible workforce,\160\ increased civic participation,\161\ and 
improvements in health and well-being for the next generation.\162\ 
Improved productivity and earnings increase tax revenues from higher 
earnings and lower rates of reliance on social safety net programs. 
Even though the costs of postsecondary education have risen, there is 
evidence that the average financial returns to graduates have also 
increased.\163\
---------------------------------------------------------------------------

    \158\ Barrow, L., & Malamud, O. (2015). Is College a Worthwhile 
Investment? Annual Review of Economics, 7(1), 519-555.
    Card, D. (1999). The causal effect of education on earnings. 
Handbook of labor economics, 3, 1801-1863.
    \159\ Oreopoulos, P., & Salvanes, K.G. (2011). Priceless: The 
Nonpecuniary Benefits of Schooling. Journal of Economic 
Perspectives, 25(1), 159-184.
    \160\ Moretti, E. (2004). Workers' Education, Spillovers, and 
Productivity: Evidence from Plant-Level Production Functions. 
American Economic Review, 94(3), 656-690.
    \161\ Dee, T.S. (2004). Are There Civic Returns to Education? 
Journal of Public Economics, 88(9-10), 1697-1720.
    \162\ Currie, J., & Moretti, E. (2003). Mother's Education and 
the Intergenerational Transmission of Human Capital: Evidence from 
College Openings. The Quarterly Journal of Economics, 118(4), 1495-
1532.
    \163\ Avery, C., and Turner, S. (2013). Student Loans: Do 
College Students Borrow Too Much-Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
---------------------------------------------------------------------------

    However, there is also substantial heterogeneity in earnings and 
other outcomes for students who graduate from different types of 
institutions and programs. Table 1.8 shows the enrollment-weighted 
average borrowing and default by control and credential level. Mean 
borrowing amounts are for title IV recipients who completed their 
program in AY 2016 or 2017, with students who did not borrow counting 
as having borrowed $0. For borrowing, our measure is the average for 
each institutional control type and credential level combination of 
program average debt. For default, our measure is, among borrowers 
(regardless of completion status) who entered repayment in 2017, the 
fraction of borrowers who have ever defaulted three years later. The 
cohort default rate measure follows the methodology for the official 
institutional cohort default rate measures calculated by the 
Department, except done at the program level. Though average debt tends 
to be higher for higher-level credential programs, default rates tend 
to be lower. At the undergraduate level, average debt is much lower for 
public programs than private non-profit and for-profit programs and 
default rates are lower for public and non-profit programs than those 
at for-profit institutions.

     Table 1.8--Average Debt and Cohort Default Rate, by Control and
                 Credential Level (Enrollment-Weighted)
------------------------------------------------------------------------
                                  Average debt       Cohort default rate
------------------------------------------------------------------------
Public:

[[Page 32402]]

 
    UG Certificates.........                 5,759                  16.9
    Associate's.............                 5,932                  17.4
    Bachelor's..............                17,935                   7.6
    Post-BA Certs...........                 7,352                   2.3
    Master's................                29,222                   2.9
    Doctoral................                71,102                   2.9
    Professional............               124,481                   0.8
    Grad Certs..............                24,883                   2.5
Private, Nonprofit:
    UG Certificates.........                 9,367                  12.0
    Associate's.............                16,445                  14.9
    Bachelor's..............                20,267                   7.3
    Post-BA Certs...........                 9,497                   2.8
    Master's................                40,272                   2.9
    Doctoral................               128,998                   2.3
    Professional............               151,473                   1.3
    Grad Certs..............                40,732                   2.4
Proprietary:
    UG Certificates.........                 8,857                  14.2
    Associate's.............                18,766                  15.3
    Bachelor's..............                29,038                  12.4
    Post-BA Certs...........                15,790                  16.9
    Master's................                39,507                   4.1
    Doctoral................                99,422                   4.4
    Professional............                96,836                   0.7
    Grad Certs..............                47,803                   3.9
Foreign Private:
    UG Certificates.........                   (*)                   0.0
    Associate's.............                   (*)                   (*)
    Bachelor's..............                17,074                   7.0
    Post-BA Certs...........                   (*)                   (*)
    Master's................                40,432                   2.0
    Doctoral................                22,600                   3.5
    Professional............               247,269                   3.1
    Grad Certs..............               284,200                   0.2
Foreign For-Profit:
    Master's................                   (*)                   0.0
    Doctoral................                84,200                   1.4
    Professional............               280,667                   1.3
------------------------------------------------------------------------
* Cell suppressed because it based on a population of fewer than 30.

    Table 1.9 shows median earnings ($2019) for graduates (whether or 
not they borrow) along these same dimensions. Similar patterns hold for 
earnings, with lower earnings in proprietary programs than in public 
and non-profit programs for almost all types of credential level.

   Table 1.9--Enrollment-Weighted Average of Program Median Earnings 3
     Years After Program Completion, by Control and Credential Level
------------------------------------------------------------------------
                                                      Median earnings 3
                                                         years after
                                                         completion
------------------------------------------------------------------------
Public:
    UG Certificates...............................                33,400
    Associate's...................................                34,400
    Bachelor's....................................                46,100
    Post-BA Certs.................................                45,600
    Master's......................................                66,600
    Doctoral......................................                83,500
    Professional..................................                91,300
    Grad Certs....................................                71,500
Private, Nonprofit:
    UG Certificates...............................                26,200
    Associate's...................................                35,700
    Bachelor's....................................                48,800
    Post-BA Certs.................................                61,600
    Master's......................................                68,600
    Doctoral......................................                86,200

[[Page 32403]]

 
    Professional..................................                88,200
    Grad Certs....................................                74,800
Proprietary:
    UG Certificates...............................                25,400
    Associate's...................................                34,600
    Bachelor's....................................                45,600
    Post-BA Certs.................................                43,500
    Master's......................................                59,300
    Doctoral......................................                78,000
    Professional..................................                49,200
    Grad Certs....................................                52,200
Foreign Private:
    UG Certificates...............................  ....................
    Associate's...................................  ....................
    Bachelor's....................................                 8,200
    Post-BA Certs.................................  ....................
    Master's......................................                38,600
    Doctoral......................................  ....................
    Professional..................................                88,400
    Grad Certs....................................                15,100
Foreign For-Profit:
    Master's......................................  ....................
    Doctoral......................................                65,900
    Professional..................................               100,400
------------------------------------------------------------------------
Note: Values rounded to the nearest 100.

    A growing body of research, described below, shows that differences 
in institution and program quality are important contributors to the 
variation in borrowing and earnings outcomes described above. That is, 
differences in graduates' outcomes across programs are not fully (or 
primarily) explained by the characteristics of the students that 
attend. Differences in program quality--measured by the causal effect 
of attending the program on its students' outcomes--are important.\164\ 
It is, therefore, important to provide students with this information 
and to hold programs accountable for poor student debt and earnings 
outcomes. Research reviewed below also shows that GE programs are the 
programs least likely to reliably provide an adequate return on 
investment, from the perspective of both the student and society. These 
findings imply that aggregate student outcomes--including their 
earnings and likelihood of positive borrowing outcomes--would be 
improved by limiting students enrollment in low-quality programs.
---------------------------------------------------------------------------

    \164\ Black, Dan A., and Jeffrey A. Smith. ``Estimating the 
returns to college quality with multiple proxies for quality.'' 
Journal of Labor Economics 24.3 (2006): 701-728.
    Cohodes, Sarah R., and Joshua S. Goodman. ``Merit aid, college 
quality, and college completion: Massachusetts' Adams scholarship as 
an in-kind subsidy.'' American Economic Journal: Applied Economics 
6.4 (2014): 251-285.
    Andrews, Rodney J., Jing Li, and Michael F. Lovenheim. 
``Quantile treatment effects of college quality on earnings.'' 
Journal of Human Resources 51.1 (2016): 200-238.
    Dillon, Eleanor Wiske, and Jeffrey Andrew Smith. ``The 
consequences of academic match between students and colleges.'' 
Journal of Human Resources 55.3 (2020): 767-808.
---------------------------------------------------------------------------

    A recent study computed productivity--value-added per dollar of 
social investment--for 6,700 undergraduate programs across the United 
States.\165\ Value-added in that study was measured using both private 
(individual earnings) and social (working in a public service job) 
notions of value. A main finding was that productivity varied widely 
even among institutions serving students of similar aptitude, 
especially at less selective institutions. That is, a dollar spent 
educating students does much more to increase lifetime earnings 
potential and public service at some programs than others. The author 
concludes that ``market forces alone may be too weak to discipline 
productivity among these schools.''
---------------------------------------------------------------------------

    \165\ Hoxby, C.M. 2019. The Productivity of US Postsecondary 
Institutions. In Productivity in Higher Education, C.M. Hoxby and 
K.M. Stange(eds). University of Chicago Press: Chicago, 2019.
---------------------------------------------------------------------------

    The finding of substantial variation in student outcomes across 
programs serving similar students or at similar types of institutions 
or in similar fields has been documented in many other more specific 
contexts. These include community colleges in California,\166\ public 
two- and four-year programs in Texas,\167\ master's degree programs in 
Ohio,\168\ law and medical schools, and programs outside the United 
States.\169\ Variation in institutional and program performance is a 
dominant feature of postsecondary education in the United States.\170\
---------------------------------------------------------------------------

    \166\ Carrell, S.E. & M. Kurleander. 2019. Estimating the 
Productivity of Community Colleges in Paving the Road to Four-Year 
College Success. In Productivity in Higher Education, C.M. Hoxby and 
K.M. Stange(eds). University of Chicago Press: Chicago, 2019.
    \167\ Andrews, R.J., & Stange, K.M. (2019). Price regulation, 
price discrimination, and equality of opportunity in higher 
education: Evidence from Texas. American Economic Journal: Economic 
Policy, 11.4, 31-65.
    Andrews, R.J., Imberman, S.A., Lovenheim, M.F. & Stange, K. M. 
(2022), ``The returns to college major choice: Average and 
distributional effects, career trajectories, and earnings 
variability,'' NBER Working Paper w30331.
    \168\ Minaya, V., Scott-Clayton, J. & Zhou, R.Y. (2022). 
Heterogeneity in Labor Market Returns to Master's Degrees: Evidence 
from Ohio. (EdWorkingPaper: 22-629). Retrieved from Annenberg 
Institute at Brown University: doi.org/10.26300/akgd-9911.
    \169\ Hastings, J.S., Neilson, C.A. & Zimmerman, S.D. (2013), 
``Are some degrees worth more than others? Evidence from college 
admission cutoffs in Chile,'' NBER Working Paper w19241.
    \170\ A recent overview can be found in Lovenheim, M. and J. 
Smith. 2023. Returns to Different Postsecondary Investments: 
Institution Type, Academic Programs, and Credentials. In Handbook of 
the Economics of Education Volume 6, E. Hanushek, L. Woessmann, and 
S. Machin (Eds). New Holland.

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

[[Page 32404]]

    The wide range of performance across programs and institutions 
means that prospective students face a daunting information problem. 
The questions of where to go and what to study are key life choices 
with major consequences. But without a way to discern the differences 
between institutions through comparable, reliably reported measures of 
quality, students may ultimately have to rely on crude signals about 
the caliber of education a school offers.
    Recent evidence demonstrates that information about colleges, 
delivered in a timely and relevant way, can shape students' choices. 
Students at one large school district were 20 percent more likely to 
apply to colleges that have information listed on a popular college 
search tool, compared with colleges whose information is not displayed 
on the tool. A particularly important finding of the study is that for 
Black, Hispanic, and low-income students, access to information about 
local public four-year institutions increases overall attendance at 
such institutions. This, the author argues, suggests ``that students 
may have been unaware of these nearby and inexpensive options with high 
admissions rates.'' \171\
---------------------------------------------------------------------------

    \171\ Mulhern, Christine. ``Changing college choices with 
personalized admissions information at scale: Evidence on 
Naviance.'' Journal of Labor Economics 39.1 (2021): 219-262.
---------------------------------------------------------------------------

    This evidence reveals both the power of information to shape 
student choices at critical moments in the decision process and how a 
patchwork of information about colleges maybe result in students 
missing out on opportunities. Given the variation in quality across 
programs apparent in the research evidence outlined above, these missed 
opportunities can be quite costly.
    Unfortunately, the general availability of information does not 
always mean students are able to find and use it. Indeed, evidence on 
the initial impact of the Department's College Scorecard college 
comparison tool found minimal effects on students' college choices, 
with any possible effects concentrated among the highest achieving 
students.\172\ But the contrast between these two pieces evidence, one 
where information affects college choices and one where it doesn't, is 
instructive: while students generally must seek out the College 
Scorecard during their college search process, the college search tool 
from the first study delivers information to students as they are 
taking other steps through the tool, from requesting transcripts and 
recommendation letters to submitting applications. And it tailors that 
information to the student, providing information about where other 
students from the same high school have gone to college and their 
outcomes there. Accordingly, there is some basis to believe that 
personalized information delivered directly to students at key decision 
points from a credible source can have an impact.
---------------------------------------------------------------------------

    \172\ Hurwitz, Michael, and Jonathan Smith. ``Student 
responsiveness to earnings data in the College Scorecard.'' Economic 
Inquiry 56.2 (2018): 1220-1243.
---------------------------------------------------------------------------

    To that end, the transparency component of these regulations 
attempts not only to improve the quality of information available to 
students (by newly collecting key facts about colleges), but also its 
salience, relevance, and timing. Because this information would be 
delivered directly to students about the college for which they are 
finalizing their financial aid packages, students would be likely to 
see it and understand its credibility at a time when they are likely to 
find it useful for deciding. Better still, the information would not be 
ambiguous when the message is most critical: if a school is 
consistently failing to put graduates on better financial footing, 
students would receive a clear indication of that fact before they make 
a financial commitment.
    Still, the market-disciplining role of accurate information does 
not always suffice. Such mechanisms may decrease, but not eliminate, 
the chance that students will make suboptimal choices. The Department 
has concluded that regulation beyond information provision alone is 
warranted due to evidence, reviewed below, that such regulations could 
reduce the risk that students and taxpayers put money toward programs 
that will leave them worse off. Program performance is particularly 
varied and problematic among the non-degree certificate programs 
offered by all types of institutions, as well as at proprietary degree 
programs. These are the places where concerns about quality are at 
their height, especially given the narrower career-focused nature of 
the credentials offered in this part of the system.
    Certificate programs are intended to prepare students for specific 
vocations and have, on average, positive returns relative to not 
attending college at all. Yet this aggregate performance masks 
considerable variability: certificate program outcomes vary greatly 
across programs, States, fields of study, and institutions,\173\ and 
even within the same narrow field and within the same institution.\174\ 
Qualitative research suggests some of this outcome difference stems 
from factors that providers directly control, such as how they engage 
with industry and employers in program design and whether to 
incorporate opportunities for students to gain relevant workforce 
experience during the program.\175\ Unfortunately, many of the most 
popular certificate programs do not result in returns on investment for 
students who complete the program. An analysis of programs included in 
the 2014 GE rule found that 10 of the 15 certificate programs with the 
most graduates have typical earnings of $18,000 or less, well below 
what a typical high school graduate would earn.\176\
---------------------------------------------------------------------------

    \173\ Aspen Institute. 2015. From College to Jobs: Making Sense 
of Labor Market Returns to Higher Education. Washington, DC. 
www.aspeninstitute.org/publications/labormarketreturns/.
    \174\ Much of the research is summarized in Ositelu, M.O., 
McCann, C. & Laitinen, A. 2021. The Short-term Credential Landscape. 
New America: Washington DC. www.newamerica.org/education-policy/repoerts/the-short-term-credentials-landscape.
    \175\ Soliz, A. 2016. Preparing America's Labor Force: Workforce 
Development Programs in Public Community Colleges, (Washington, DC: 
Brookings, December 9, 2016), www.brookings.edu/research/preparing-americas-labor-force-workforce-development-programs-in-public-community-colleges/.
    \176\ Aspen Institute. 2015. From College to Jobs: Making Sense 
of Labor Market Returns to Higher Education. Washington, DC. 
www.aspeninstitute.org/publications/labormarketreturns.
---------------------------------------------------------------------------

    The proposed GE rule would subject for-profit degree programs to 
the proposed transparency framework in Sec.  668.43, the transparency 
framework in subpart Q, and the GE program-specific eligibility 
requirements in subpart S. This additional scrutiny, based in the 
requirements of the HEA, is warranted because for-profit programs have 
demonstrated particularly poor outcomes, as was shown in Tables 1.8 and 
1.9 above. A large body of research provides causal evidence on the 
many ways students at for-profit colleges are at an economic 
disadvantage upon exiting their institutions. This research base 
includes studies showing that students who attend for-profit programs 
are significantly more likely to suffer from poor employment 
prospects,\177\ low earnings,\178\ and loan repayment

[[Page 32405]]

difficulties.\179\ Students who transfer into for-profit institutions 
instead of public or nonprofit institutions face significant wage 
penalties.\180\ In some cases, researchers find similar earnings or 
employment outcomes between for-profit and not-for-profit associate and 
bachelor degree programs.\181\ However, students pay and borrow more to 
attend for-profit degree programs, on average.\182\ That means their 
overall earnings return on investment is worse. This evidence of 
lackluster labor market outcomes accords with the growing evidence that 
many for-profit programs may not be preparing students for careers as 
well as comparable programs at public institutions. A 2011 GAO report 
found that, for nine out of 10 licensing exams in the largest fields of 
study, graduates of for-profit institutions had lower passage rates 
than graduates of public institutions.\183\ This lack of preparation 
may not be surprising, as many for-profit institutions devote more 
resources to recruiting and marketing than to instruction or student 
support services. A 2012 investigation by the U.S. Senate Committee on 
Health, Education, Labor and Pensions (Senate HELP Committee) found 
that almost 23 percent of revenues at proprietary institutions were 
spent on marketing and recruiting but only 17 percent on 
instruction.\184\ The report further found that at many institutions, 
the number of recruiters greatly outnumbered the career services and 
support services staff.
---------------------------------------------------------------------------

    \177\ Deming, D.J., Yuchtman, N., Abulafi, A., Goldin, C., & 
Katz, L.F. (2016). The Value of Postsecondary Credentials in the 
Labor Market: An Experimental Study. American Economic Review, 
106(3), 778-806.
    \178\ Cellini, S.R. & Chaudhary, L. (2014). The Labor Market 
Returns to a For-Profit College Education. Economics of Education 
Review, 43, 125-140.
    \179\ Armona, L., Chakrabarti, R., & Lovenheim, M.F. (2022). 
Student Debt and Default: The Role of For-Profit Colleges. Journal 
of Financial Economics, 144(1), 67-92.
    \180\ Liu, V. Y.T. & Belfield, C. (2020). The labor market 
returns to for-profit higher education: Evidence for transfer 
students. Community College Review, 48(2), 133-155.
    \181\ Lang, K., & Weinstein, R. (2013). The Wage Effects of Not-
For-Profit and For-Profit Certifications: Better Data, Somewhat 
Different Results. Labour Economics, 24, 230-243.
    \182\ Cellini, S.R. & Darolia, R. (2015). College costs and 
financial constraints. In B. Hershbein & K. Hollenbeck (Ed.). 
Student Loans and the Dynamics of Debt (137-174). Kalamazoo, MI: 
W.E. Upjohn Institute for Employment Research.
    Cellini, S.R., & Darolia, R. (2017). High Costs, Low Resources, 
and Missing Information: Explaining Student Borrowing in the For-
Profit Sector. The ANNALS of the American Academy of Political and 
Social Science, 671(1), 92-112.
    \183\ Postsecondary Education: Student Outcomes Vary at For-
Profit, Nonprofit, and Public Schools (GAO-12-143), GAO, December 7, 
2011.
    \184\ For Profit Higher Education: The Failure to Safeguard the 
Federal Investment and Ensure Student Success, Senate HELP 
Committee, July 30, 2012.
---------------------------------------------------------------------------

    Particularly strong evidence comes from a recent study that found 
that the average undergraduate certificate-seeking student that 
attended a for-profit institution did not experience any earnings gains 
relative to the typical worker in a matched sample of high school 
graduates. They also had significantly lower earnings gains than 
students who attended certificate programs in the same field of study 
in public institutions.\185\ Furthermore, the earnings gain for the 
average for-profit certificate-seeking student was not sufficient to 
compensate them for the amount of student debt taken on to attend the 
program.\186\ At the same time, research also shows substantial 
variation in earnings gains from title IV, HEA-eligible undergraduate 
certificate programs by field of study,\187\ with students graduating 
from cosmetology and personal services programs in all sectors 
experiencing especially poor outcomes.\188\
---------------------------------------------------------------------------

    \185\ Cellini, S.R., & Turner, N. (2019). Gainfully Employed? 
Assessing the Employment and Earnings of For-Profit College Students 
using Administrative Data. Journal of Human Resources, 54(2), 342-
370.
    \186\ Ibid.
    \187\ Lang, K., & Weinstein, R. (2013). The Wage Effects of Not-
For-Profit and For-Profit Certifications: Better Data, Somewhat 
Different Results. Labour Economics, 24, 230-243.
    \188\ Dadgar, M., & Trimble, M.J. (2015). Labor Market Returns 
to Sub-Baccalaureate Credentials: How Much Does a Community College 
Degree or Certificate Pay? Educational Evaluation and Policy 
Analysis, 37(4), 399-418.
---------------------------------------------------------------------------

Consequences of Attending Low Financial Value Programs
    Attending a postsecondary education or training program where the 
typical student takes on debt that exceeds their capacity to repay can 
cause substantial harm to borrowers. For instance, high debt may cause 
students to delay certain milestones; research shows that high levels 
of debt decreases students' long-term probability of marriage.\189\ 
Being overburdened by student payments can also reduce the likelihood 
that borrowers will invest in their future. Research shows that when 
students borrow more due to high tuition, they are less likely to 
obtain a graduate degree \190\ and less likely to take out a mortgage 
to purchase a home after leaving college.\191\
---------------------------------------------------------------------------

    \189\ Gicheva, D. (2016). Student Loans or Marriage? A Look at 
the Highly Educated. Economics of Education Review, 53, 207-2016.
    \190\ Chakrabarti, R., Fos, V., Liberman, A. & Yannelis, C. 
(2020). Tuition, Debt, and Human Capital. Federal Reserve Bank of 
New York Staff Report No. 912.
    \191\ Mezza, A., Ringo, D., Sherlund, S., & Sommer, K. (2020). 
``Student Loans and Homeownership,'' Journal of Labor Economics, 
38(1): 215-260.
---------------------------------------------------------------------------

    Unmanageable debt can also have adverse financial consequences for 
borrowers, including defaulting on their student loans. For those who 
do not complete a degree, more student debt may raise the probability 
of bankruptcy.\192\ Borrowers who default on their loans face 
potentially serious repercussions. Many aspects of borrowers' lives may 
be affected, including their ability to sign up for utilities, obtain 
insurance, or rent an apartment.\193\ The Department reports loans more 
than 90 days delinquent or in default to the major national credit 
bureaus, and being in default has been shown to be correlated with a 
50-to-90-point drop in borrowers' credit scores.\194\ A defaulted loan 
can remain on borrowers' credit reports for up to seven years and lead 
to higher costs that make insurance, housing, and other services and 
financial products less affordable and, in some cases, harm borrowers' 
ability to get a job.\195\ Borrowers who default lose access to some 
repayment options and flexibilities. At the same time, their balances 
become due immediately, and their accounts become subject to 
involuntary collections such as wage garnishment and redirection of 
income tax refunds toward the outstanding loan.\196\
---------------------------------------------------------------------------

    \192\ Gicheva, D. & Thompson, J. (2015). The effects of student 
loans on long-term household financial stability. In B. Hershbein & 
K. Hollenbeck (Ed.). Student Loans and the Dynamics of Debt (137-
174). Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.
    \193\ studentaid.gov/manage-loans/default.
    \194\ Blagg, K. (2018). Underwater on Student Debt: 
Understanding Consumer Credit and Student Loan Default. Urban 
Institute Research Report.
    \195\ Elliott, D. & Granetz Lowitz, R. (2018). What Is the Cost 
of Poor Credit? Urban Institute Report.
    Corbae, D., Glover, A. & Chen, D. (2013). Can Employer Credit 
Checks Create Poverty Traps? 2013 Meeting Papers, No. 875, Society 
for Economic Dynamics.
    \196\ studentaid.gov/manage-loans/default.
---------------------------------------------------------------------------

    Research shows that borrowers who attend for-profit colleges have 
higher student loan default rates than students with similar 
characteristics who attend public institutions.\197\ Furthermore, most 
of the rise in student loan default rates from 2000 to 2011 can be 
traced to increases in enrollment in for-profit institutions and, to a 
lesser extent, two-year public institutions.\198\
---------------------------------------------------------------------------

    \197\ Deming, D., Goldin, C., & Katz, L. (2012). The For-Profit 
Postsecondary School Sector: Nimble Critters or Agile Predators? 
Journal of Economic Perspectives, 26(1), 139-164.
    Hillman, N.W. (2014). College on Credit: A Multilevel Analysis 
of Student Loan Default. Review of Higher Education 37(2), 169-195.
    \198\ Looney, A., & Yannelis, C. (2015). A Crisis in Student 
Loans? How Changes in the Characteristics of Borrowers and in the 
Institutions They Attended Contributed to Rising Loan Defaults. 
Brookings Papers on Economic Activity, 2, 1-89.
---------------------------------------------------------------------------

    Low loan repayment also has consequences for taxpayers. Calculating 
the precise magnitude of these costs will require decades of realized 
repayment

[[Page 32406]]

periods for millions of borrowers. However, Table 1.10 shows estimates 
of the share of disbursed loans that will not be repaid based on 
simulated debt and earnings trajectories at each program in the 2022 
PPD under the proposed income-driven repayment plan announced in 
January 2023.\199\ These estimates incorporate the subsidy coming from 
the features of the repayment plan itself (capped payments, 
forgiveness), not accounting for default or delinquency. Starting with 
the median earnings and debt at each program, the Department simulated 
typical repayment trajectories for each program with data available for 
both measures.
---------------------------------------------------------------------------

    \199\ https://www.ed.gov/news/press-releases/new-proposed-regulations-would-transform-income-driven-repayment-cutting-undergraduate-loan-payments-half-and-preventing-unpaid-interest-accumulation.
---------------------------------------------------------------------------

    Using U.S. Census Bureau (Census) microdata on earnings and family 
formation for a nationally representative sample of individuals, the 
Department projected the likely repayment experience of borrowers at 
each program assuming all were enrolled in the Proposed Revised Pay as 
You Earn (REPAYE) repayment plan (which can be found at 88 FR 
1894).\200\ Starting from the median earnings level of each program, 
the projections incorporate the estimated earnings growth over the life 
course through age sixty for individuals starting from the same 
earnings level in a given State. The projections also include likely 
spousal earnings, student debt, and family size of each borrower (also 
derived from the Census data), which makes it possible to calculate the 
total amount repaid by borrowers under each plan when paying in full 
each month (even if that means making a payment of $0). The simulation 
incorporates different demographic and income groups probabilistically 
due to important non-linearities in plan structure.
---------------------------------------------------------------------------

    \200\ These estimates of the subsidy rate are not those used in 
the budget and do not factor in take-up. Rather, they show the 
predicted subsidy rates under the assumption that all students are 
enrolled in Proposed REPAYE.
---------------------------------------------------------------------------

    Table 1.10 shows that, among all programs, students that attend 
those that fall below the proposed debt-to-earnings standard are 
consistently projected to pay back less on their loans, in present 
value terms, than they took out.\201\ This is true regardless of 
whether a program is in the public, private nonprofit, or proprietary 
sector. The projected repayment ratio is even lower for programs that 
only fail the EP measure because at very low earnings levels, students 
are expected to make zero-dollar payments over extended periods of 
time.
---------------------------------------------------------------------------

    \201\ As explained in more detail later, the Department computed 
D/E and EP metrics only for those programs with 30 or more students 
who completed the program during the applicable two-year cohort 
period--that is, those programs that met the minimum cohort size 
requirements.

  Table 1.10--Predicted Ratio of Dollars Repaid to Dollars Borrowed by
                       Control and Passage Status
------------------------------------------------------------------------
                                                     Predicted repayment
                                                    ratio under proposed
                                                           REPAYE
------------------------------------------------------------------------
Public:
    No D/E or EP data.............................                  0.53
    Pass..........................................                  0.72
    Fail D/E (regardless of EP)...................                  0.29
    Fail EP only..................................                  0.13
Private, Nonprofit:
    No D/E or EP data.............................                  0.69
    Pass..........................................                  0.96
    Fail D/E (regardless of EP)...................                  0.38
    Fail EP only..................................                  0.19
Proprietary:
    No D/E or EP data.............................                  0.41
    Pass..........................................                  0.79
    Fail D/E (regardless of EP)...................                  0.26
    Fail EP only..................................                  0.07
Total:
    No D/E or EP data.............................                  0.57
    Pass..........................................                  0.77
    Fail D/E (regardless of EP)...................                  0.30
    Fail EP only..................................                  0.12
------------------------------------------------------------------------

    Our analysis, provided in more detail in ``Analysis of the 
Regulations,'' shows that for many GE programs, the typical graduate 
earns less than the typical worker with only a high school diploma or 
has debt payments that are higher than is considered manageable given 
typical earnings. As we show below, high rates of student loan default 
are especially common among GE programs that are projected to fail 
either the D/E rates or the earnings premium metric. Furthermore, low 
earnings can cause financial trouble in aspects of a graduate's 
financial life beyond those related to loan repayment. In 2019, US 
individuals between 25 and 34 who had any type of postsecondary 
credential reported much higher rates of material hardship if their 
annual income was below the high school earnings threshold, with those 
below the threshold reporting being food insecure and behind on bills 
at more than double the rate of those with earnings above the 
threshold.\202\
---------------------------------------------------------------------------

    \202\ These findings come from ED's analysis of the 2019 Survey 
of Income and Program Participation. This analysis compares 
individuals with annual income below the 2019 U.S. national median 
income for individuals with a high school degree aged 25-34 who had 
positive earnings or reported looking for work in the previous year, 
according to the Census Bureau's American Community Survey (ACS).
---------------------------------------------------------------------------

    In light of the low earnings, high debt, and student loan repayment 
difficulties for students in some GE programs, the Department has 
identified a risk that students may be spending their time and money 
and taking on Federal debt to attend programs that do not provide 
sufficient value to justify these costs. While even very good programs 
will have some students who struggle to

[[Page 32407]]

obtain employment or repay their student loans, the proposed metrics 
identify programs where the majority of students experience adverse 
financial outcomes upon completion.
    Although enrollment in for-profit and sub-baccalaureate programs 
has declined following the Great Recession, past patterns suggest 
that--absent regulatory action--future economic downturns could reverse 
this trend. For-profit institutions are more responsive than public and 
nonprofit institutions to changes in economic conditions \203\ and 
during the COVID-19 pandemic, it was the only sector to see increases 
in student enrollment.\204\ Additionally, research shows that 
reductions in State and local funding for public higher education 
institutions tend to shift college students into the for-profit 
sector.\205\ During economic downturns, this response is especially 
relevant since State and local funding is procyclical, falling during 
recessions even as student demand is increasing.\206\
---------------------------------------------------------------------------

    \203\ Deming, D., Goldin, C., & Katz, L. (2012). The For-Profit 
Postsecondary School Sector: Nimble Critters or Agile Predators? 
Journal of Economic Perspectives, 26(1), 139-164.
    Gilpin, G.A., Saunders, J., & Stoddard, C. (2015). Why has for-
profit colleges' share of higher education expanded so rapidly? 
Estimating the responsiveness to labor market changes. Economics of 
Education Review, 45, 53-63.
    \204\ Cellini, S.R. (2020). The Alarming Rise in For-Profit 
College Enrollment. Washington, DC: Brookings Institution.
    \205\ Cellini, S.R. (2009). Crowded Colleges and College Crowd-
Out: The Impact of Public Subsidies on the Two-Year College Market. 
American Economic Journal: Economic Policy, 1(2), 1-30.
    Goodman, S. & Volz, A.H. (2020). Attendance Spillovers between 
Public and For-Profit Colleges: Evidence from Statewide Variation in 
Appropriations for Higher Education. Education Finance and Policy, 
15(3), 428-456.
    \206\ Ma, J. & Pender, M. (2022). Trends in College Pricing and 
Student Aid 2022. New York: College Board.
---------------------------------------------------------------------------

    For-profit institutions that participate in title IV, HEA programs 
are also more reliant on Federal student aid than public and nonprofit 
institutions. In recent years, around 70 percent of revenue received by 
for-profit institutions came from Pell Grants and Federal student 
loans.\207\ For-profit institutions also have substantially higher 
tuition than public institutions offering similar degrees. In recent 
years, average for-profit tuition and fees charged by two-year for-
profit institutions was over 4 times the average tuition and fees 
charged by community colleges.\208\ Research suggests that Federal 
student aid supports for-profit expansions and higher prices.\209\ 
Indeed, one study finds that for-profit programs in institutions that 
participate in title IV, HEA programs charge tuition that is around 80 
percent higher than tuition charged by programs in the same field and 
with similar outcomes in nonparticipating for-profit institutions.\210\
---------------------------------------------------------------------------

    \207\ Cellini, S. & Koedel, K. (2017). The Case for Limiting 
Federal Student Aid to For-Profit Colleges. Journal of Policy 
Analysis and Management, 36(4), 934-942.
    \208\ NCES. (2022). Digest of Education Statistics (Table 
330.10). Available at: nces.ed.gov/programs/digest/d21/tables/dt21_330.10.asp.
    \209\ Cellini, S.R. (2010). Financial aid and for[hyphen]profit 
colleges: Does aid encourage entry? Journal of Policy Analysis and 
Management, 29(3), 526-552.
    Lau, C.V. (2014). The incidence of federal subsidies in 
for[hyphen]profit higher education. Unpublished manuscript. 
Evanston, IL: Northwestern University.
    \210\ Cellini, S.R., & Goldin, C. (2014). Does federal student 
aid raise tuition? New evidence on for-profit colleges. American 
Economic Journal: Economic Policy, 6(4), 174-206.
---------------------------------------------------------------------------

    For-profit institutions disproportionately enroll students with 
barriers to postsecondary access: low-income, non-white, and older 
students, as well as students who are veterans, single parents, or have 
a General Equivalency Degree.\211\ In the 1990s, sanctions related to 
high cohort default rates led a large number of for-profit institutions 
to close, significantly reducing enrollment in this sector.\212\ Yet, 
these actions did not reduce access to higher education. Instead, a 
large share of students who would have attended a sanctioned for-profit 
institution instead enrolled in local open access public institutions 
and, as a result, took on less student debt and were less likely to 
default.\213\ Similar conclusions were reached in recent studies of 
students that experienced program closures.\214\ Better evidence is now 
available on the enrollment outcomes of students that would otherwise 
attend sanctioned or closed schools than when the 2014 Prior Rule was 
considered.
---------------------------------------------------------------------------

    \211\ Deming, D., Goldin, C., & Katz, L. (2012). The For-Profit 
Postsecondary School Sector: Nimble Critters or Agile Predators? 
Journal of Economic Perspectives, 26(1), 139-164.
    Cellini, S.R. & Darolia, R. (2015). College costs and financial 
constraints. In B. Hershbein & K. Hollenbeck (Ed.). Student Loans 
and the Dynamics of Debt (137-174). Kalamazoo, MI: W.E. Upjohn 
Institute for Employment Research.
    \212\ Darolia, R. (2013). Integrity versus access? The effect of 
federal financial aid availability on postsecondary enrollment. 
Journal of Public Economics, 106, 101-114.
    \213\ Cellini, S.R., Darolia, R., & Turner, L.J. (2020). Where 
do students go when for-profit colleges lose federal aid? American 
Economic Journal: Economic Policy, 12(2), 46-83.
    \214\ See https://www.gao.gov/products/gao-22-104403 and 
sheeo.org/more-than-100000-students-experienced-an-abrupt-campus-closure-between-july-2004-and-june-2020/.
---------------------------------------------------------------------------

2. Summary of Key Provisions

----------------------------------------------------------------------------------------------------------------
              Provision                        Regulatory section            Description of proposed provision
----------------------------------------------------------------------------------------------------------------
Definitions..........................  Sec.   668.2.....................  Add definitions related to part 668,
                                                                           subparts Q and S, as well as other
                                                                           parts of the proposed regulations.
----------------------------------------------------------------------------------------------------------------
                               Financial Value Transparency and Gainful Employment
----------------------------------------------------------------------------------------------------------------
Financial value transparency scope     Sec.   668.401...................  Provide the scope and purpose of newly
 and purpose.                                                              established financial value
                                                                           transparency regulations under
                                                                           subpart Q.
Financial value transparency           Sec.   668.402...................  Provide a framework under which the
 framework.                                                                Secretary would assess the debt and
                                                                           earnings outcomes for students at
                                                                           both GE programs and eligible non-GE
                                                                           programs, using a debt-to-earnings
                                                                           metric and an earnings premium
                                                                           metric.
Calculating D/E rates................  Sec.   668.403...................  Establish a methodology to calculate
                                                                           annual and discretionary D/E rates,
                                                                           including parameters to determine
                                                                           annual loan payments, annual
                                                                           earnings, loan debt and assessed
                                                                           charges, as well as to provide
                                                                           exclusions and specify when D/E rates
                                                                           would not be calculated.
Calculating earnings premium measure.  Sec.   668.404...................  Establish a methodology to calculate a
                                                                           program's earnings premium measure,
                                                                           including parameters to determine
                                                                           median annual earnings, as well as to
                                                                           provide exclusions and specify when
                                                                           the earnings premium measure would
                                                                           not be calculated.
Process for obtaining data and         Sec.   668.405...................  Establish a process by which the
 calculating D/E rates and earnings                                        Secretary would obtain administrative
 premium measure.                                                          and earnings data to issue D/E rates
                                                                           and the earnings premium measure.
Determination of the D/E rates and     Sec.   668.406...................  Require the Secretary to notify
 earnings premium measure.                                                 institutions of their financial value
                                                                           transparency metrics and outcomes.

[[Page 32408]]

 
Student disclosure acknowledgments...  Sec.   668.407...................  Require current and prospective
                                                                           students to acknowledge having seen
                                                                           the information on the disclosure
                                                                           website maintained by the Secretary
                                                                           if an eligible non-GE program has
                                                                           failed the D/E rates measure, to
                                                                           specify the content and delivery of
                                                                           such acknowledgments, and to require
                                                                           that students must provide the
                                                                           acknowledgment before the institution
                                                                           may disburse any title IV, HEA funds.
Reporting requirements...............  Sec.   668.408...................  Establish institutional reporting
                                                                           requirements for students who enroll
                                                                           in, complete, or withdraw from a GE
                                                                           program or eligible non-GE program
                                                                           and to define the timeframe for
                                                                           institutions to report this
                                                                           information.
Severability.........................  Sec.   668.409...................  Establish severability protections
                                                                           ensuring that if any provision from
                                                                           part 668 is held invalid, the
                                                                           remaining provisions would continue
                                                                           to apply.
Scope and purpose....................  Sec.   668.601...................  Provide the scope and purpose of the
                                                                           GE regulations under subpart S.
GE criteria..........................  Sec.   668.602...................  Establish criteria for the Secretary
                                                                           to determine whether a GE program
                                                                           prepares students for gainful
                                                                           employment in a recognized
                                                                           occupation.
Ineligible GE programs...............  Sec.   668.603...................  Define the conditions under which a
                                                                           failing GE program would lose title
                                                                           IV, HEA eligibility, provide the
                                                                           opportunity for an institution to
                                                                           appeal a loss of eligibility only on
                                                                           the basis of a miscalculated D/E rate
                                                                           or earnings premium, and establish a
                                                                           period of ineligibility for failing
                                                                           GE programs that lose eligibility or
                                                                           voluntarily discontinue eligibility.
Certification requirements for GE      Sec.   668.604...................  Require institutions to provide the
 programs.                                                                 Department with transitional
                                                                           certifications, as well as to certify
                                                                           when seeking recertification or the
                                                                           approval of a new or modified GE
                                                                           program, that each eligible GE
                                                                           program offered by the institution is
                                                                           included in the institution's
                                                                           recognized accreditation or, if the
                                                                           institution is a public postsecondary
                                                                           vocational institution, the program
                                                                           is approved by a recognized State
                                                                           agency.
Warnings and acknowledgments.........  Sec.   668.605...................  Require warnings to current and
                                                                           prospective students if a GE program
                                                                           is at risk of losing title IV, HEA
                                                                           eligibility, to specify the content
                                                                           and delivery parameters of such
                                                                           notifications, and to require that
                                                                           students must acknowledge to having
                                                                           seen the warning before the
                                                                           institution may disburse any title
                                                                           IV, HEA funds.
Severability.........................  Sec.   668.606...................  Establish severability protections
                                                                           ensuring that if any provision under
                                                                           part 668 is held invalid, the
                                                                           remaining provisions would continue
                                                                           to apply.
Date, extent, duration, and            Sec.   600.10(c)(1)(v)...........  Require an institution seeking to
 consequence of eligibility.                                               establish the eligibility of a GE
                                                                           program to add the program to its
                                                                           application.
Updating application information.....  Sec.   600.21(a)(11).............  Require an institution to notify the
                                                                           Secretary within 10 days of any
                                                                           update to information included in the
                                                                           GE program's certification.
License/certification disclosure.....  Sec.   668.43(a)(5)..............  Require all programs that are designed
                                                                           to meet educational requirements for
                                                                           a specific professional license or
                                                                           certification for employment in an
                                                                           occupation list all States where the
                                                                           institution is aware the program does
                                                                           and does not meet such requirements.
Institutional and programmatic         Sec.   668.43(d).................  Establish a website for the posting
 information.                                                              and distribution of key information
                                                                           and disclosures pertaining to the
                                                                           institution's educational programs;
                                                                           require institutions to provide
                                                                           information about how to access that
                                                                           website to a prospective student
                                                                           before the student enrolls,
                                                                           registers, or makes a financial
                                                                           commitment to the institution; and
                                                                           require institutions provide
                                                                           information about how to access that
                                                                           website to a current student before
                                                                           the start date of the first payment
                                                                           period associated with each
                                                                           consecutive award year in which the
                                                                           student enrolls.
Initial and final decisions..........  Sec.   668.91(d)(3)(vi)..........  Require that a hearing official must
                                                                           terminate the eligibility of a GE
                                                                           program that fails to meet the GE
                                                                           metrics, unless the hearing official
                                                                           concludes that the Secretary erred in
                                                                           the calculation.
----------------------------------------------------------------------------------------------------------------
                                            Financial Responsibility
----------------------------------------------------------------------------------------------------------------
Centralizing requirements related to   Sec.   668.15....................  Remove and reserve section; move all
 change of ownership.                                                      requirements related to financial
                                                                           responsibility and change of
                                                                           ownership to Sec.   668.176.
Timing of audit and financial          Sec.   668.23(a)(4)..............  Require audit and financial statement
 statement submission.                                                     submission within the earlier of 30
                                                                           days after the date of the report or
                                                                           six months after the end of an
                                                                           institution's fiscal year.
Updating audit reference and           Sec.   668.23(d)(1)..............  Replace the reference to A-133 audits
 clarifying fiscal years of                                                to 2 CFR part 200, subpart F. Require
 submissions.                                                              audits cover most up-to-date fiscal
                                                                           year and match periods covered by
                                                                           submissions to the IRS.
Disclosing amounts spent on            Sec.   668.23(d)(5)..............  Require institution to disclose in a
 recruiting activities, advertising,                                       footnote to its financial statement
 and other pre-enrollment                                                  audit the dollar amounts it has spent
 expenditures.                                                             in the preceding fiscal year on
                                                                           recruiting activities, advertising,
                                                                           and other pre-enrollment
                                                                           expenditures.
Increased information from foreign     Sec.   668.23(d)(2)..............  Require institutions with at least 50
 entities.                                                                 percent ownership by a foreign entity
                                                                           to report additional information.
General financial responsibility       Sec.   668.171(b)................  Identify the standards generally used
 standards.                                                                to establish that an institution is
                                                                           financially responsible.
Mandatory triggering events..........  .................................  Identify events that would
                                                                           automatically result in the
                                                                           Department either recalculating a
                                                                           financial responsibility composite
                                                                           score or requiring financial
                                                                           protection from an institution.
Discretionary triggering events......  Sec.   668.171(d)................  Identify events that the Secretary
                                                                           could consider in determining whether
                                                                           an institution is not able to meet
                                                                           its financial or administrative
                                                                           obligations and therefore must obtain
                                                                           financial protection.
Recalculating an institution's         Sec.   668.171(e)................  Identify how the Department would
 composite score.                                                          recalculate an institution's
                                                                           composite score when certain
                                                                           mandatory triggers occur.
Reporting requirements...............  Sec.   668.171(f)................  Identify the various triggering events
                                                                           that require the institution to
                                                                           notify the Department that the
                                                                           triggering event has occurred.
Financial responsibility factors for   Sec.   668.171(g)................  Establishes financial responsibility
 public institutions.                                                      standards for public institutions
                                                                           when backed by the full faith and
                                                                           credit of the appropriate government
                                                                           entity.
Audit opinions and disclosures.......  Sec.   668.171(h)................  Establishes that the Department does
                                                                           not consider an institution to be
                                                                           financially responsible if the
                                                                           audited financial statements contain
                                                                           and opinion that is adverse,
                                                                           qualified or disclaimed unless the
                                                                           Department determines it does not
                                                                           have significant bearing on the
                                                                           institution's financial condition.
Past performance.....................  Sec.   668.174...................  Establishes the actions the Department
                                                                           may take based on an individual's or
                                                                           entity's past performance and the
                                                                           related impact on financial
                                                                           responsibility.
Alternative standards and              Sec.   668.175...................  Establishes the alternative standards
 requirements.                                                             for financial responsibility when the
                                                                           standards in Sec.   668.171(b) are
                                                                           not met or the Department acts based
                                                                           on the triggers in Sec.
                                                                           668.171(c)&(d).

[[Page 32409]]

 
Financial responsibility for changes   Sec.   668.176...................  Establish the standards and
 in ownership.                                                             requirements for determining if an
                                                                           institution undergoing a change in
                                                                           ownership is financially responsible.
----------------------------------------------------------------------------------------------------------------
                                            Administrative Capability
----------------------------------------------------------------------------------------------------------------
Require clear dissemination of         Sec.   668.16(h).................  Expand existing requirements on
 financial aid information.                                                sufficient financial aid counseling
                                                                           to include clear and accurate
                                                                           financial aid communications to
                                                                           students.
Additional past performance            Sec.   668.16(k).................  Require that institutions not have a
 requirements.                                                             principal, affiliate, or anyone who
                                                                           exercises or previously exercised
                                                                           substantial control, who has been
                                                                           convicted of, or who has pled nolo
                                                                           contendere or guilty to, certain
                                                                           crimes or been found to have
                                                                           committed fraud. This also covers
                                                                           similar individuals at other
                                                                           institutions if the institution was
                                                                           found to have engaged in misconduct
                                                                           or faced liabilities in excess of 5
                                                                           percent of its annual title IV, HEA
                                                                           program funds.
Negative actions.....................  Sec.   668.16(n).................  Provide that an institution is not
                                                                           administratively capable if it has
                                                                           been subject to a significant
                                                                           negative action subject to findings
                                                                           by a State or Federal agency, a
                                                                           court, or accrediting agency, where
                                                                           the basis of the action is repeated
                                                                           or unresolved, and the institution
                                                                           has not lost eligibility to
                                                                           participate in another Federal
                                                                           educational assistance program
                                                                           because of it.
Procedures for determining validity    Sec.   668.16(p).................  Require institutions to have adequate
 of high school diplomas.                                                  procedures for determining the
                                                                           validity of a high school diploma.
Career services......................  Sec.   668.16(q).................  Require the institution to provide
                                                                           adequate career services.
Accessible clinical externship         Sec.   668.16(r).................  Require the institution to provide
 opportunities.                                                            students with accessible clinical or
                                                                           externship opportunities within 45
                                                                           days of successful completion of
                                                                           coursework.
Timely fund disbursements............  Sec.   668.16(s).................  Require the institution to disburse
                                                                           funds to students in a timely manner.
Significant enrollment in failing GE   Sec.   668.16(t).................  Provide that an institution is not
 programs.                                                                 administratively capable if half of
                                                                           its title IV, HEA revenue and half of
                                                                           its student enrollment comes from
                                                                           programs that are failing the GE
                                                                           requirements in part 668, subpart S.
Misrepresentations...................  Sec.   668.16(u).................  Provide that an institution is not
                                                                           administratively capable if it has
                                                                           been found to engage in
                                                                           misrepresentations or aggressive
                                                                           recruitment.
----------------------------------------------------------------------------------------------------------------
                                            Certification Procedures
----------------------------------------------------------------------------------------------------------------
Removing automatic certification       Sec.   668.13(b)(3)..............  Eliminate provision that requires
 approval.                                                                 Department approval to participate in
                                                                           the title IV, HEA programs if the
                                                                           Department has not acted on an
                                                                           application within 12 months.
Provisional certification triggers...  Sec.   668.13(c)(1)..............  Expand the list of circumstances that
                                                                           may lead to provisional
                                                                           certification.
Recertification timeframe for          Sec.   668.13(c)(2)..............  Require provisionally certified
 provisionally certified institutions.                                     institutions with major consumer
                                                                           protection issues to recertify within
                                                                           a maximum timeframe of two years.
Supplementary performance measures...  Sec.   668.13(e).................  Establish supplementary performance
                                                                           measures the Secretary may consider
                                                                           in determining whether to certify or
                                                                           condition the participation of an
                                                                           institution.
Signature requirements for Program     Sec.   668.14(a)(3)..............  Require direct or indirect owners of
 Participation Agreements (PPAs).                                          proprietary or private nonprofit
                                                                           institutions to sign the PPA.
Increasing information sharing on an   Sec.   668.14(b)(17).............  Expand the list of entities that have
 institution's eligibility for or                                          the authority to share information
 participation in title IV, HEA                                            pertaining to an institution's
 programs.                                                                 eligibility for or participation in
                                                                           title IV, HEA programs or any
                                                                           information on fraud, abuse, or other
                                                                           violations to include Federal
                                                                           agencies and State attorneys general.
Prohibit the contract or employment    Sec.   668.14(b)(18)(i) and (ii).  Add to the list of situations in which
 of any individual, agency, or                                             an institution may not knowingly
 organization that was at an                                               contract with or employ any
 institution in any year in which the                                      individual, agency, or organization
 institution incurred a loss of                                            that has been, or whose officers or
 Federal funds in excess of 5 percent                                      employees have been, 10-percent-or-
 of the institution's annual title                                         higher equity owners, directors,
 IV, HEA program funds.                                                    officers, principals, executives, or
                                                                           contractors at an institution in any
                                                                           year in which the institution
                                                                           incurred a loss of Federal funds in
                                                                           excess of 5 percent of the
                                                                           institution's annual title IV, HEA
                                                                           program funds.
Limiting excessive hours of GE         Sec.   668.14(b)(26)(ii).........  Limit the number of hours in a GE
 programs.                                                                 program to the greater of the
                                                                           required minimum number of clock
                                                                           hours, credit hours, or the
                                                                           equivalent required for training in
                                                                           the recognized occupation for which
                                                                           the program prepares the student.
Licensure/certification requirements   Sec.   668.14(b)(32).............  Require all programs that prepare
 and consumer protection.                                                  students for occupations requiring
                                                                           programmatic accreditation or State
                                                                           licensure to meet those requirements
                                                                           and comply with all applicable State
                                                                           consumer protection laws related to
                                                                           misrepresentation, closure, and
                                                                           recruitment.
Prohibition on transcript withholding  Sec.   668.14(b)(33).............  Prevents institutions from withholding
 for institutional errors or                                               transcripts or taking any other
 misconduct and returns under the                                          negative action against a student
 Return of Title IV Funds                                                  related to a balance owed by the
 requirements.                                                             student that resulted from an
                                                                           institution's administrative error,
                                                                           fraud, or misconduct, or returns of
                                                                           funds under the Return of Title IV
                                                                           Funds requirements.
Adding conditions that may apply to    Sec.   668.14(e).................  Establish a non-exhaustive list of
 provisionally certified institutions.                                     conditions that the Secretary may
                                                                           apply to provisionally certified
                                                                           institutions.
Adding conditions that may apply to    Sec.   668.14(f).................  Establish conditions that may apply to
 for-profit institutions that undergo                                      institutions that undergo a change in
 a change in ownership to convert to                                       ownership to convert from a for-
 a nonprofit institution.                                                  profit institution to a nonprofit
                                                                           institution.
Adding conditions that may apply to    Sec.   668.14(g).................  Establish conditions that may apply to
 an initially certified nonprofit                                          an initially certified nonprofit
 institution, or an institution that                                       institution, or an institution that
 has undergone a change of ownership                                       has undergone a change of ownership
 and seeks to convert to nonprofit                                         and seeks to convert to nonprofit
 status.                                                                   status.
----------------------------------------------------------------------------------------------------------------
                                               Ability To Benefit
----------------------------------------------------------------------------------------------------------------
Amend student eligibility              Sec.   668.32....................  Differentiate between the title IV,
 requirements.                                                             HEA aid eligibility of non-high
                                                                           school graduates who enrolled in an
                                                                           eligible program prior to July 1,
                                                                           2012, and those who enrolled after
                                                                           July 1, 2012.
Amend the State process ATB            Sec.   668.156...................  Amend the State process ATB
 alternative.                                                              alternative regulations to separate
                                                                           the State process into an initial
                                                                           period and subsequent period. Require
                                                                           institutions to submit an application
                                                                           that includes specified components.
                                                                           Set the success rate needed for
                                                                           approval of the subsequent period at
                                                                           85 percent and allow an institution
                                                                           up to three years to achieve
                                                                           compliance. Prohibit participating
                                                                           institutions terminated by the State
                                                                           from participating in the State
                                                                           process for five years. Require
                                                                           reporting on the demographics of
                                                                           students enrolling through the State
                                                                           process. Allow the Secretary to lower
                                                                           the success rate to 75 percent in
                                                                           specified circumstances.

[[Page 32410]]

 
Add eligible career pathway program    Sec.   668.157...................  Clarify the documentation requirement
 documentation requirements.                                               for eligible career pathway programs.
----------------------------------------------------------------------------------------------------------------

3. Analysis of the Financial Value Transparency and GE Regulations

    This section presents a detailed analysis of the likely 
consequences of the Financial Value Transparency and GE provisions of 
the proposed regulations.
Methodology
Data Used in This RIA
    This section describes the data referenced in this regulatory 
impact analysis and the NPRM. To generate information on the 
performance of different postsecondary programs offered in different 
higher education sectors, the Department relied on data on the program 
enrollment, demographic characteristics, borrowing levels, post-
completion earnings, and borrower outcomes of students who received 
title IV, HEA aid for their studies. The Department produced program 
performance information, using measures based on the typical debt 
levels and post-enrollment earnings of program completers, from non-
public records contained in the administrative systems the Department 
uses to administer the title IV, HEA programs along with earnings data 
produced by the U.S. Treasury. This performance information was 
supplemented with information from publicly available sources including 
the Integrated Postsecondary Education Data System (IPEDS), 
Postsecondary Education Participants System (PEPS), and the College 
Scorecard. The data used for the State earnings thresholds come from 
the Census Bureau's 2019 American Community Survey, while statistics 
about the price level used to adjust for inflation come from the Bureau 
of Labor Statistics' Consumer Price Index. This section describes the 
data used to produce this program performance information and notes 
several differences from the measures used for this purpose and the 
proposed D/E rates and earning premium measures set forth in the rule, 
as well as differences from the data disseminated during Negotiated 
Rulemaking. The data described below are referred to as the ``2022 
Program Performance Data (2022 PPD),'' where 2022 refers to the year 
the programs were indicated as active. These data are being released 
with the NPRM.\215\
---------------------------------------------------------------------------

    \215\ To protect student privacy, we have applied certain 
protocols to the publicly released 2022 PPD and thus that dataset 
differs somewhat from the 2022 PPD analyzed in this RIA. Such 
protocols include omitting the values of variables derived from 
fewer than 30 students. For instance, the title IV enrollment in 
programs with fewer than 30 students is used to determine the number 
and share of enrollment in GE programs in this RIA, while the exact 
program-level enrollment of such programs is omitted in the public 
2022 PPD. The privacy protocols are described in the data 
documentation accompanying this NPRM. The Department would not have 
reached different conclusions on the impact of the regulation or on 
the proposed rules if we had instead relied on this privacy-
protective dataset, though the Department views analysis based on 
the 2022 PPD and described in this NPRM to provide a more precise 
representation of such impact. We view the differences in the 
analyses as substantively minor for purposes of this rulemaking.
---------------------------------------------------------------------------

    The proposed rule relies on non-public measures of the cumulative 
borrowing and post-completion earnings of federally aided title IV, HEA 
students, including both grant and loan recipients. The Department has 
information on all title IV, HEA aid grant and loan recipients at all 
institutions participating in the title IV, HEA programs, including the 
identity of the specific programs in which students are enrolled and 
whether students complete the program. This information is stored in 
the National Student Loan Data System (NSLDS), maintained by the 
Department's Office of Federal Student Aid (FSA).
    Using this enrollment and completion information, in conjunction 
with non-public student loan information also stored in NSLDS, and 
earnings information obtained from Treasury, the Department calculated 
annual and discretionary debt-to-earnings (D/E) ratios, or rates, for 
all title IV, HEA programs. The Department also calculated the median 
earnings of high school graduates aged 25 to 34 in the labor force in 
the State where the program is located using public data, which is 
referred to as the Earnings Threshold (ET). This ET is compared to a 
program's graduates' annual earnings to determine the Earnings Premium 
(EP), the extent to which a programs' graduates earn more than the 
typical high school graduate in the same State. The methodology that 
was used to calculate both D/E rates, the ET, and the EP is described 
in further detail below. In addition to the D/E rates and earnings 
data, we also calculated informational outcomes measures, including 
program-level cohort default rates, to evaluate the likely consequences 
of the proposed rule.
    In our analysis, we define a program by a unique combination 
consisting of the first six digits of its institution's Office of 
Postsecondary Education Identification (``OPEID'') number, also 
referred to as the six-digit OPEID, the program's 2010 Classification 
of Instructional Programs (CIP) code, and the program's credential 
level. The terms OPEID number, CIP code, and credential level are 
defined below. Throughout, we distinguish ``GE Programs'' from those 
that are not subject to the GE provisions of the proposed rule, 
referred to as ``non-GE Programs.'' The 2022 PPD includes information 
for 155,582 programs that account for more than 19 million title IV, 
HEA enrollments annually in award years 2016 and 2017. This includes 
2,931,000 enrollments in 32,058 GE Programs (certificate programs at 
all institution types, and degree programs at proprietary institutions) 
and 16,337,000 enrollments in 123,524 non-GE Programs (degree programs 
at public and private not-for-profit institutions).
    We calculated the performance measures in the 2022 PPD for all 
programs based on the debt and earnings of the cohort of students who 
both received title IV, HEA program funds, including Federal student 
loans and Pell Grants, and completed programs during an applicable two-
year cohort period. Consistent with the proposed rule, students who do 
not complete their program are not included in the calculation of the 
metrics. The annual loan payment component of the debt-to-earnings 
formulas for the 2022 PPD D/E rates was calculated for each program 
using student loan information from NSLDS for students who completed 
their program in award years 2016 or 2017 (i.e., between July 1, 2015, 
and June 30, 2017--we refer to this group as the 16/17 completer 
cohort). The earnings components of the rates were calculated for each 
program using information obtained from Treasury for students who 
completed between July 1, 2014, and June 30, 2016 (the 15/16 completer 
cohort), whose earnings were measured in calendar years 2018 and 2019.
    Programs were excluded from the 2022 PPD if they are operated by an 
institution that was not currently active in the Department's PEPS 
system as of March 25, 2022, if the program did not have a valid 
credential type, or if the program did not have title IV, HEA

[[Page 32411]]

completers in both the 15/16 and 16/17 completer cohorts.
    Consistent with the proposed regulations, the Department computed 
D/E and EP metrics in the 2022 PPD only for those programs with 30 or 
more students who completed the program during the applicable two-year 
cohort period--that is, those programs that met the minimum cohort size 
requirements. A detailed analysis of the likely coverage rate under the 
proposed rule and of the number and characteristics of programs that 
met the minimum size in the 2022 PPD is included in ``Analysis of Data 
Coverage'' below.
    We determined, under the provisions in the proposed regulations for 
the D/E rates and EP measures, whether each program would ``Pass D/E,'' 
``Fail D/E,'' ``Pass EP,'' and ``Fail EP'' based on their 2022 PPD 
results, or ``No data'' if they did not meet the cohort size 
requirement.\216\ These program-specific outcomes are then aggregated 
to determine the fraction of programs that pass or fail either metric 
or have insufficient data, as well as the enrollment in such programs.
---------------------------------------------------------------------------

    \216\ This is a simplification. Under the proposed regulation, a 
``no data'' year is not considered passing when determining 
eligibility for GE programs based on two out of three years. For 
non-GE programs, passing with data and without data are treated the 
same for the purposes of the warnings.
---------------------------------------------------------------------------

     Pass D/E: Programs with an annual D/E earnings rate less 
than or equal to 8 percent OR a discretionary D/E earnings rate less 
than or equal to 20 percent.
     Fail D/E: Programs with an annual D/E earnings rate over 8 
percent AND a discretionary D/E earnings rate over 20 percent.
     Pass EP: Programs with median annual earnings greater than 
the median earnings among high school graduates aged 25 to 34 in the 
labor force in the State in which the program is located.
     Fail EP: Programs with median annual earnings less than or 
equal to the median earnings among high school graduates aged 25 to 34 
in the labor force in the State in which the program is located.
     No data: Programs that had fewer than 30 students in the 
two-year completer cohorts and so earnings and debt levels could not be 
determined.
    Under the proposed regulations, a GE program would become 
ineligible for title IV, HEA program funds if it fails the D/E rates 
measure for two out of three consecutive years or fails the EP measure 
for two out of three consecutive years. GE programs would be required 
to provide warnings in any year in which the program could lose 
eligibility based on the next D/E rates or earnings premium measure 
calculated by the Department. Students at such programs would be 
required to acknowledge having seen the warning and information about 
debt and earnings before receiving title IV aid. Eligible non-GE 
programs not meeting the D/E standards would need to have students 
acknowledge viewing this information before receiving aid.
    The Department analyzed the estimated impact of the proposed 
regulations on GE and non-GE programs using the following data elements 
defined below:
     Enrollment: Number of students receiving title IV, HEA 
program funds for enrollment in a program. To estimate enrollment, we 
used the count of students receiving title IV, HEA program funds, 
averaged over award years 2016 and 2017. Since students may be enrolled 
in multiple programs during an award year, aggregate enrollment across 
programs will be greater than the unduplicated number of students.
     OPEID: Identification number issued by the Department that 
identifies each postsecondary educational institution (institution) 
that participates in the Federal student financial assistance programs 
authorized under title IV of the HEA.
     CIP code: Identification code from the Department's 
National Center for Education Statistics' (NCES) Classification of 
Instructional Programs, which is a taxonomy of instructional program 
classifications and descriptions that identifies instructional program 
specialties within educational institutions. The proposed rule would 
define programs using six-digit CIP codes, but due to data limitations, 
the statistics used in this NPRM and RIA are measured using four-digit 
codes to identify programs.\217\ We used the 2010 CIP code instead of 
the 2020 codes to align with the completer cohorts used in this 
analysis.
---------------------------------------------------------------------------

    \217\ In many cases the loss of information from conducting 
analysis at a four- rather than six-digit CIP code is minimal. 
According to the Technical Documentation: College Scorecard Data by 
Field of Study, 70 percent of credentials conferred were in four-
digit CIP categories that had only one six-digit category with 
completers at an institution. The 2015 official GE rates can be used 
to examine the extent of variation in program debt and earnings 
outcomes across 6-digit CIP programs within the same credential 
level and institution.
---------------------------------------------------------------------------

     Control: The control designation for a program's 
institution--public, private non-profit, private for-profit 
(proprietary), foreign non-profit, and foreign for-profit--using PEPS 
control data as of March 25, 2022.
     Credential level: A program's credential level--
undergraduate certificate, associate degree, bachelor's degree, post-
baccalaureate certificate, master's degree, doctoral degree, first 
professional degree, or post-graduate certificate.
     Institution predominant degree: The type designation for a 
program's institution which is based on the predominant degree the 
institution awarded in IPEDS and reported in the College Scorecard: 
less than 2 years, 2 years, and 4 years or more.
     State: Programs are assigned to a U.S. State, DC, or 
territory based on the State associated with the main institution.
    The information contained in the 2022 PDD and used in the analysis 
necessarily differs from that used to evaluate programs under the 
proposed rule in a few ways due to certain information not being 
currently collected in the same form as it would under the proposed 
rule. These include:
     4-digit CIP code is used to define programs in the 2022 
PPD, rather than 6-digit CIP code. Program earnings are not currently 
collected at the 6-digit CIP code level, but would be under the 
proposed rule. Furthermore, the 2022 PPD uses 2010 CIP codes to align 
with the completer cohorts used in the analysis, but programs would be 
defined using the 2020 CIP codes under the proposed rule;
     Unlike the proposed rule, the total loan debt associated 
with each student is not capped at an amount equivalent to the 
program's tuition, fees, books, and supplies in the 2022 PPD, nor does 
debt include institutional and other private debt. Doing so requires 
additional institutional reporting of relevant data items not currently 
available to the Department. In the 2014 Prior Rule, using information 
reported by institutions, the tuition and fees cap was applied to 
approximately 15 percent of student records for the 2008-2009 2012 D/E 
rates cohort, though this does not indicate the share of programs whose 
median debt would be altered by the cap.

[[Page 32412]]

     D/E rates using earnings levels measured in calendar years 
2018 and 2019 would ideally use debt levels measured for completers in 
2015 and 2016. Since program level enrollment data are more accurate 
for completers starting in 2016, we use completers in 2016 and 2017 to 
measure debt. We measure median debt levels and assume completers in 
the 2015 and 2016 cohorts would have had total borrowing that was the 
same in real terms (i.e., we use the CPI to adjust their borrowing 
levels to estimate what the earlier cohort would have borrowed in 
nominal terms). This use of one cohort to measure earnings outcomes and 
another to measure debt necessarily reduces the estimated coverage in 
the 2022 PPD to a lower level than will be experienced in practice, as 
we describe in more detail below. Finally, the methodology used to 
assign borrowing to particular programs in instances where a borrower 
may be enrolled in multiple programs is different in the 2022 PPD than 
the methodology that would be used in the proposed rule (which is the 
same as that used in the 2014 Prior Rule);
     Medical and dental professional programs are not evaluated 
because earnings six years after completion are not available. The 
earnings and debt levels of these programs are set to missing and not 
included in the tabulations presented here;
     150 percent of the Federal Poverty Guideline is used to 
define the ET for institutions in U.S. Territories (other than Puerto 
Rico, which uses Puerto Rico-specific ET) and foreign institutions in 
the 2022 PPD, rather than a national ET;
     The proposed rule would use a national ET if more than 
half of a program's students are out-of-state, but the 2022 PPD use an 
ET determined by the State an institution is located;
     Programs at institutions that have merged with other 
institutions since 2017 are excluded, but these programs' enrollment 
would naturally be incorporated into the merged institution if the 
proposed rule goes into effect.
     Under the proposed rule, if the two-year completer cohort 
has too few students to publish debt and earnings outcomes, but the 
four-year completer cohort has a sufficient number of students, then 
debt and earnings outcomes would be calculated for the four-year 
completer cohort. This was not possible for the 2022 PPD, so some 
programs with no data in our analysis would have data to evaluate 
performance under the proposed rule.
    The 2022 PPD also differ from those published in the Negotiated 
Rulemaking data file in several ways. The universe of programs in the 
previously published Negotiated Rulemaking data file were based, in 
part, on the College Scorecard universe which included programs as they 
are reported to IPEDS, but not necessarily to NSLDS. IPEDS is a survey, 
so institutions may report programs (degrees granted by credential 
level and CIP code) differently in IPEDS than is reflected in NSLDS. To 
reflect the impact of the proposed rule more accurately, the universe 
of the 2022 PPD is based instead on NSLDS records because it captures 
programs as reflected in the data systems used to administer title IV, 
HEA aid. Nonetheless, the 2022 PPD accounts for the same loan volume 
reflected in the Negotiated Rulemaking data file. In addition, the 
Negotiated Rulemaking data file included programs that were based on a 
previous version of College Scorecard prior to corrections made to 
resolve incorrect institution-reported information in underlying data 
sources.
Methodology for D/E Rates Calculations
    The D/E rates measure is comprised of two debt-to-earnings ratios, 
or rates. The first, the annual earnings rate, is based on annual 
earnings, and the second, the discretionary earnings rate, is based on 
discretionary earnings. These two components together define a 
relationship between the maximum typical amount of debt program 
graduates should borrow based on the programs' graduates' typical 
earnings. Both conceptually and functionally the two metrics operate 
together, and so should be thought of as one ``debt to earnings (D/E)'' 
metric. The formulas for the two D/E rates are:

Annual Earnings Rate = (Annual Loan Payment)/(Annual Earnings)
Discretionary Earnings Rate = (Annual Loan Payment)/(Discretionary 
Earnings)

    A program's annual loan payment, the numerator in both rates, is 
the median annual loan payment of the 2016-2017 completer cohort. This 
loan payment is calculated based on the program's cohort median total 
loan debt at program completion, including non-borrowers, subject to 
assumptions on the amortization period and interest rate. Cohorts' 
median total loan debt at program completion were computed as follows.
     Each student's total loan debt includes both FFEL and 
Direct Loans. Loan debt does not include PLUS Loans made to parents, 
Direct Unsubsidized Loans that were converted from TEACH Grants, 
private loans, or institutional loans that the student received for 
enrollment in the program.
     In cases where a student completed multiple programs at 
the same institution, all loan debt is attributed to the highest 
credentialed program that the student completed, and the student is not 
included in the calculation of D/E rates for the lower credentialed 
programs that the student completed.
     The calculations exclude students whose loans were in 
military deferment, or who were enrolled at an institution of higher 
education for any amount of time in the earnings calendar year, or 
whose loans were discharged because of disability or death.
    The median annual loan payment for each program was derived from 
the median total loan debt by assuming an amortization period and 
annual interest rate based on the credential level of the program. The 
amortization periods used were:
     10 years for undergraduate certificate, associate degree, 
post-baccalaureate certificate programs, and graduate certificate 
programs;
     15 years for bachelor's and master's degree programs;
     20 years for doctoral and first professional degree 
programs.
    The amortization periods account for the typical outcome that 
borrowers who enroll in higher-credentialed programs (e.g., bachelor's 
and graduate degree programs) are likely to have more loan debt than 
borrowers who enroll in lower-credentialed programs and, as a result, 
are more likely to take longer to repay their loans. These amortization 
rates mirror those used in the 2014 Prior Rule, which were based on 
Department analysis of loan balances and the differential use of 
repayment plan periods by credential level at that time.\218\ The 
interest rates used were:
---------------------------------------------------------------------------

    \218\ See pages 64939-40 of 79 FR https://www.federalregister.gov/d/2014-25594.
---------------------------------------------------------------------------

     4.27 percent for undergraduate programs;
     5.82 percent for graduate programs.
    For both undergraduate and graduate programs, the rate used is the 
average interest rate on Federal Direct Unsubsidized loans over the 
three years prior to the end of the applicable cohort period, in this 
case, the average rate for loans disbursed between the beginning of 
July 2013 and the end of June 2016.
    The denominators for the D/E rates are two different measures of 
student earnings. Annual earnings are the median total earnings in the 
calendar year three years after completion, obtained from the U.S. 
Treasury. Earnings were measured in calendar years 2018 and 2019 for 
completers in award years 2015-2016 and 2016-2017, respectively, and 
were converted to

[[Page 32413]]

2019 dollars using the CPI-U. Earnings are defined as the sum of wages 
and deferred compensation for all W-2 forms plus self-employment 
earnings from Schedule SE.\219\ Graduates who were enrolled in any 
postsecondary program during calendar year 2018 (2015-2016 completers) 
or 2019 (2016-2017 completers) are excluded from the calculation of 
earnings and the count of students. Discretionary earnings are equal to 
annual earnings, calculated as above, minus 150 percent of the Federal 
Poverty Guidelines for a single person, which for 2019 is earnings in 
excess of $18,735.
---------------------------------------------------------------------------

    \219\ See Technical Documentation: College Scorecard Data by 
Field of Study.
---------------------------------------------------------------------------

    Professional programs in Medicine (MD) and Dentistry (DDS) would 
have earnings measured over a longer time horizon to accommodate 
lengthy post-graduate internship training, where earnings are likely 
much lower three years after graduation than they would be even a few 
years further removed from completion.\220\ Since longer horizon 
earning data are not currently available, earnings for these programs 
were set to missing and treated as if they lacked sufficient number of 
completers to be measured.
---------------------------------------------------------------------------

    \220\ For example, the average medial resident earns between 
roughly $62,000 and $67,000 in the first three years of residency, 
according to the AAMC Survey of Resident/Fellow Stipends and 
Benefits, and the mean composition for physicians is $260,000 for 
primary care and $368,000 for specialists, according to the Medscape 
Physician Compensation Report.
---------------------------------------------------------------------------

Methodology for EP Rate Calculation
    The EP measures the extent to which a program's graduates earn more 
than the typical high school graduate in the same State. The Department 
first calculated the ET, which is the median earnings of high school 
graduates in the labor force in each State where the program is 
located. The ET is adjusted for differences in high school earnings 
across States and over time so it naturally accounts for variations 
across these dimensions to reflect what workers would be expected to 
earn in the absence of postsecondary participation. The ET is computed 
as the median annual earnings among respondents aged 25-34 in the 
American Community Survey who have a high school diploma or GED, but no 
postsecondary education, and who are in the labor force when they are 
interviewed, indicated by working or looking for and being available to 
work. The ET is lower than that proposed during Negotiated Rulemaking, 
which would compute median annual earnings among respondents aged 25-34 
in the American Community Survey who have a high school diploma or GED, 
but no postsecondary education, and who reported working (i.e., having 
positive earnings) in the year prior to being surveyed. Table 3.1 below 
shows the ET for each State (along with the District of Columbia and 
Puerto Rico) in 2019. The ET ranges from $31,294 (North Dakota) to 
$20,859 (Mississippi). The threshold for institutions in U.S. 
territories (other than Puerto Rico) and outside the United States is 
$18,735. We provide evidence in support of the chosen threshold below. 
Estimates of the impact of the proposed regulations using these 
alternative thresholds are presented in Section 9 ``Regulatory 
Alternatives Considered.''

              Table 3.1--Earnings Thresholds by State, 2019
------------------------------------------------------------------------
                                                               Earnings
                                                              threshold,
                                                                 2019
------------------------------------------------------------------------
State of Institution:
  Alabama..................................................       22,602
  Alaska...................................................       27,489
  Arizona..................................................       25,453
  Arkansas.................................................       24,000
  California...............................................       26,073
  Colorado.................................................       29,000
  Connecticut..............................................       26,634
  Delaware.................................................       26,471
  District of Columbia.....................................       21,582
  Florida..................................................       24,000
  Georgia..................................................       24,435
  Hawaii...................................................       30,000
  Idaho....................................................       26,073
  Illinois.................................................       25,030
  Indiana..................................................       26,073
  Iowa.....................................................       28,507
  Kansas...................................................       25,899
  Kentucky.................................................       24,397
  Louisiana................................................       24,290
  Maine....................................................       26,073
  Maryland.................................................       26,978
  Massachusetts............................................       29,830
  Michigan.................................................       23,438
  Minnesota................................................       29,136
  Mississippi..............................................       20,859
  Missouri.................................................       25,000
  Montana..................................................       25,453
  Nebraska.................................................       27,000
  Nevada...................................................       27,387
  New Hampshire............................................       30,215
  New Jersey...............................................       26,222
  New Mexico...............................................       24,503
  New York.................................................       25,453
  North Carolina...........................................       23,300
  North Dakota.............................................       31,294
  Ohio.....................................................       24,000
  Oklahoma.................................................       25,569
  Oregon...................................................       25,030
  Pennsylvania.............................................       25,569
  Rhode Island.............................................       26,634
  South Carolina...........................................       23,438
  South Dakota.............................................       28,000
  Tennessee................................................       23,438
  Texas....................................................       25,899
  Utah.....................................................       28,507
  Vermont..................................................       26,200
  Virginia.................................................       25,569
  Washington...............................................       29,525
  West Virginia............................................       23,438
  Wisconsin................................................       27,699
  Wyoming..................................................       30,544
  Puerto Rico..............................................        9,570
Foreign Institutions & Territories.........................       18,735
------------------------------------------------------------------------

    The EP is computed as the difference between Annual Earnings and 
the ET:

Earnings Premium = (Annual Earnings)-(Earnings Threshold)
where the Annual Earnings is computed as above, and the ET is assigned 
for the State in which the program is located. For foreign institutions 
and institutions located in U.S. territories, 150 percent of the 
Federal Poverty Guideline for the given year is used as the ET because 
comparable information about high school graduate earnings is not 
available.
    The Department conducted several analyses to support the decision 
of the particular ET chosen. The discussion here focuses on 
undergraduate certificate programs, which our analysis below suggests 
is the sector where program performance results are most sensitive to 
the choice of ET.
    First, based on student age information available from students' 
Free Application for Federal Student Aid (FAFSA) data, we estimate that 
the typical undergraduate program graduate three years after 
completion, when their earnings are measured, would be 30 years old. 
The average age of students three years after completion for 
undergraduate certificate programs is 31 years, while for Associate's 
programs it is 30, Bachelor's 29, Master's 33, Doctoral 38, and 
Professional programs 32. There are very few Post-BA and Graduate 
Certificate programs (162 in total) and their average ages at earnings 
measurement 35 and 34, respectively.\221\
---------------------------------------------------------------------------

    \221\ Age at earnings measurement is not contained in the data, 
so we estimate it with age at FAFSA filing immediately before 
program enrollment plus typical program length (1 for certificate, 2 
for Associate's programs, 4 for Bachelor's programs) plus 3 years. 
To the extent that students take longer to complete their programs, 
the average age will be even older than what is reported here. Using 
this approach, the mean age when earnings are likely to be measured 
in programs with at least 30 students is 30.34 across all 
undergraduate programs; the mean for undergraduate certificate 
students is 30.42.
---------------------------------------------------------------------------

BILLING CODE 4000-01-P

[[Page 32414]]

[GRAPHIC] [TIFF OMITTED] TP19MY23.005

    Figure 3.1 shows the average estimated age for for-profit 
certificate holders 3 years after completion, when earnings would be 
measured, for the 10 most common undergraduate certificate programs 
(and an aggregate `other' category). All credentials have an average 
age that falls within or above the range of ages used to construct the 
earnings threshold. In cases where the average age falls above this 
range, our earnings threshold is lower than it would be if we adjusted 
the age band use to match the programs' completers ages.
    Second, the ET proposed is typically less than the average pre-
program income of program entrants, as measured in their FAFSA. Figure 
3.2 shows average pre-program individual income for students at these 
same types of certificate programs, including any dependent and 
independent students that had previously been working.\222\ The figure 
also plots the ET and the average post-program median earnings for 
programs under consideration. The program-average share of students 
used to compute pre-program income is also reported in 
parentheses.\223\ Pre-program income falls above or quite close to the 
ET for most types of certificate programs. Furthermore, the types of 
certificate programs which we show below have very high failure rates--
Cosmetology and Somatic Bodywork (massage), for example--are unusual in 
having very low post-program earnings compared to other programs that 
have similar pre-program income.
---------------------------------------------------------------------------

    \222\ To exclude workers that are minimally attached to the 
labor force or in non-covered employment, the Census Postsecondary 
Employment Outcomes data requires workers to have annual earnings 
greater than or equal to the annual equivalent of full-time work at 
the prevailing Federal minimum wage and at least three quarters of 
non-zero earnings. (lehd.ces.census.gov/data/pseo_documentation.html). We impose a similar restriction, including 
only those students whose pre-program earnings are equivalent to 
full-time work for three quarters at the Federal minimum wage. We 
only compute average pre-program income if at least 30 students meet 
this criteria.
    \223\ Across undergraduate certificate programs for which the 
pre-program income measure was calculated, the average share of 
students meeting the criteria is 41 percent (weighting each program 
equally) or 38 percent (weighting programs by title IV, HEA 
enrollment). Given incomplete coverage and the potential for non-
random selection into the sample measuring pre-program income, we 
view this analysis only suggestive.
---------------------------------------------------------------------------

    We view this as suggestive evidence that the ET chosen provides a 
reasonable, but conservative, guide to the minimum earnings that 
program graduates should be expected to obtain.\224\
---------------------------------------------------------------------------

    \224\ The earnings of 25 to 34 high school graduates used to 
construct the ET (similar in age to program completers 3 years after 
graduation) should be expected to exceed pre-program income because 
the former likely has more labor force experience than the latter. 
Thus the comparison favors finding that the ET exceeds pre-program 
income. The fact that pre-program income generally exceeds the ET 
suggests that the ET is conservative.

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

[[Page 32415]]

[GRAPHIC] [TIFF OMITTED] TP19MY23.006

BILLING CODE 4000-01-C
Analysis of Data Coverage
    This section begins with a presentation of the Department's 
estimate of the share of enrollment and programs that would meet the n-
size requirement and be evaluated under the proposed rule. We assembled 
data on the number of completers in the two-year cohort period (AYs 
2016-2017) and total title IV enrollment for programs defined at the 
six-digit OPEID, credential level, and six-digit CIP code from NSLDS. 
This is the level of aggregation that would be used in the proposed 
rule. Total Title IV enrollment at this same level of disaggregation 
was also collected. Deceased students and students enrolled during the 
earnings measurement rule would be excluded from the earnings sample 
under the proposed rule; however, the Department has not yet applied 
such information on the number of such completers to the counts 
described above. We therefore impute the number of completers in the 
earning sample by multiplying the total completer count in our data by 
82 percent, which is the median ratio of non-enrolled earning count to 
total completer count derived from programs defined at a four-digit CIP 
code level.
    Table 3.2 below reports the share of Title IV, HEA enrollment and 
programs that would have metrics computed under an n-size of 30 and 
using six-digit CIP codes to define programs. We estimate that 75 
percent of GE enrollment and 15 percent of GE programs would have 
sufficient n-size to have metrics computed with a two-year cohort. An 
additional 8 percent of enrollment and 11 percent of programs have an 
n-size of between 15 and 29 and would thus be likely have metrics 
computed using a four-year completer cohort. The comparable rates for 
eligible non-GE programs are 69 percent of enrollment and 19 percent of 
programs with a n-size of 30 and using two-year cohort metrics, with 
the use of four-year cohort rates likely increasing these coverage 
rates of enrollment and programs by 13 and 15 percent, respectively.
    The table also reports similar estimates aggregating programs to a 
four-digit CIP code level. Coverage does not diminish dramatically (3-5 
percentage points) when moving from four-digit CIP codes, as presented 
in the 2022 PPD, to six-digit CIP codes to define programs.
    We note that the high coverage of Title IV enrollment relative to 
Title IV programs reflects the fact that there are many very small 
programs with only a few students enrolled each year. For example, 
based on our estimates, more than half of all programs (defined at six-
digit CIP code) have fewer than five students completing per year and 
about twenty percent have fewer than five students enrolled each year. 
The Department believes that the coverage of students based on 
enrollment is sufficiently high to generate substantial net benefits 
and government budget savings from the policy, as described in ``Net 
Budget Impacts'' and ``Accounting Statement'' below. We believe that 
the extent to which enrollment is covered by the proposed rule is the 
appropriate measure on which to focus coverage analysis on because the 
benefits, costs, and transfers associated with the policy almost all 
scale with the number of students (enrollment or completions) rather 
than the number of programs.

[[Page 32416]]



         Table 3.2--Share of Enrollment and Programs Meeting Sample Size Restrictions, by CIP Code Level
----------------------------------------------------------------------------------------------------------------
                                                            Enrollment                       Programs
                                                 ---------------------------------------------------------------
                                                       CIP4            CIP6            CIP4            CIP6
----------------------------------------------------------------------------------------------------------------
GE Programs:
    n-size = 15.................................            0.86            0.83            0.29            0.26
    n-size = 30.................................            0.79            0.75            0.18            0.15
Non-GE Programs:
    n-size = 15.................................            0.85            0.82            0.39            0.34
    n-size = 30.................................            0.74            0.69            0.23            0.19
----------------------------------------------------------------------------------------------------------------
Notes: Average school-certified enrollment in AY1617 is used as the measure of enrollment, but the 2022 PPD
  analyzed in the RIA uses total (certified and non-certified) enrollment, so coverage rates will differ. Non-
  enrolled earnings count for AY1617 completers is not available at a six-digit CIP level (for any n-size) or at
  a four-digit CIP level (for n-size = 15). Therefore, non-enrolled earnings counts are imputed based on the
  median ratio of non-enrolled earnings count to total completer counts at the four-digit CIP level where
  available. This median ratio is multiplied by the actual completer count for AY1617 at the four- and six-digit
  CIP level for all programs to determine the estimated n-size.

    The rest of this section describes coverage rates for programs as 
they appear in the 2022 PPD to give context for the numbers presented 
in the RIA. Again, the analyses above are the better guide to the 
coverage of metrics we expect to publish under the rule. The coverage 
in the 2022 PPD is lower than that reported in Table 3.2, due to 
differences in data used and because the 2022 PPD does not apply the 
four-year cohort period ``look back'' provisions and instead only uses 
two-year cohorts.\225\
---------------------------------------------------------------------------

    \225\ Unlike the proposed rule, the 2022 PPD also combines 
earnings and debt data from two different (but overlapping) two-year 
cohorts. Alternatively, the calculations in Table 3.2 use 
information for a single two-year completer cohort for both earnings 
and debt, as the rule would do, and thus provides a more accurate 
representation of the expected overall coverage. A second difference 
between the coverage estimates in Table 3.2 and that in the 2022 PPD 
has do with different data sources that result in slightly different 
estimates of enrollment coverage between the two sources.
---------------------------------------------------------------------------

    Tables 3.3a and 3.3b report the share of non-GE and GE enrollment 
and programs with valid D/E rates and EP rates in the 2022 PPD, by 
control and credential level. For Non-GE programs, metrics could be 
calculated for 62.0 percent of enrollment who attended 18.0 percent of 
programs. Coverage is typically highest for public bachelor's degree 
programs and professional programs at private non-profit institutions. 
Doctoral programs in either sector are the least likely to have 
sufficient size to compute performance metrics. Programs at foreign 
institutions are very unlikely to have a sufficient number of 
completers.
    Overall, 65.4 percent of title IV, HEA enrollment is in GE programs 
that have a sufficient number of completers to allow the Department to 
construct both valid D/E and EP rates in the 2022 PPD. This represents 
12.8 percent of GE programs. Note that a small number of programs have 
an EP metric computed but a D/E metric is not available because there 
are fewer than 30 completers in the two-year debt cohort. Coverage is 
typically higher in the proprietary sector--we are able to compute D/E 
or EP metrics for programs accounting for about 87.0 percent of 
enrollment in proprietary undergraduate certificate programs. 
Comparable rates are 61.5 percent and 21.4 percent of enrollment in the 
non-profit and public undergraduate certificate sectors, respectively.

   Table 3.3a--Percent of Programs and Enrollment in Programs With Valid D/E and EP Information by Control and
                                       Credential Level (Non-GE Programs)
----------------------------------------------------------------------------------------------------------------
                                                             Data availability category
                                   -----------------------------------------------------------------------------
                                       Has both D/E and EP           Has EP only         Does not have EP or D/E
                                   -----------------------------------------------------------------------------
                                      Programs    Enrollees     Programs    Enrollees     Programs    Enrollees
----------------------------------------------------------------------------------------------------------------
Public:
    Associate's...................         11.6         55.8          0.3          0.3         88.1         43.9
    Bachelor's....................         39.3         74.3          0.5          0.2         60.2         25.5
    Master's......................         15.5         57.4          0.8          0.9         83.8         41.7
    Doctoral......................          3.0         21.7          0.3          0.7         96.7         77.6
    Professional..................         37.7         55.5          0.7          0.6         61.6         43.9
Private, Nonprofit:
    Associate's...................         12.6         61.9          0.4          0.1         87.0         38.0
    Bachelor's....................         13.4         50.6          0.3          0.4         86.3         49.1
    Master's......................         19.7         67.1          0.9          0.9         79.3         32.0
    Doctoral......................          7.6         50.8          0.3          1.9         92.1         47.4
    Professional..................         43.3         74.8          1.9          0.8         54.8         24.4
Foreign Private:
    Associate's...................  ...........  ...........  ...........  ...........        100.0        100.0
    Bachelor's....................          0.1          1.2  ...........  ...........         99.9         98.8
    Master's......................          0.3          4.6          0.1          0.4         99.6         95.0
    Doctoral......................  ...........  ...........  ...........  ...........        100.0        100.0
    Professional..................          3.4         20.7          1.1          3.9         95.5         75.4
Total:
    Total.........................         18.0         62.0          0.4          0.4         81.6         37.7
----------------------------------------------------------------------------------------------------------------


[[Page 32417]]


   Table 3.3b--Percent of Programs and Enrollment in Programs With Valid D/E and EP Information by Control and
                                         Credential Level (GE Programs)
----------------------------------------------------------------------------------------------------------------
                                                             Data availability category
                                   -----------------------------------------------------------------------------
                                       Has both D/E and EP           Has EP only         Does not have EP or D/E
                                   -----------------------------------------------------------------------------
                                      Programs    Enrollees     Programs    Enrollees     Programs    Enrollees
----------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates...............          4.8         21.4          0.3          0.4         94.9         78.2
    Post-BA Certs.................          0.9          7.0          0.1          0.2         99.0         92.7
    Grad Certs....................          2.7         21.7          0.2          1.3         97.1         77.0
Private, Nonprofit:
    UG Certificates...............         12.4         61.5          0.5          0.1         87.1         38.4
    Post-BA Certs.................          0.7          3.8          1.0          2.5         98.3         93.8
    Grad Certs....................          3.9         25.6          0.4          1.1         95.8         73.4
Proprietary:
    UG Certificates...............         50.8         87.0          1.4          0.4         47.8         12.7
    Associate's...................         34.9         84.4          2.3          0.7         62.9         15.0
    Bachelor's....................         38.5         91.6          1.3          0.6         60.3          7.8
    Post-BA Certs.................          8.7         62.2  ...........  ...........         91.3         37.8
    Master's......................         41.4         93.2          2.1          0.7         56.4          6.1
    Doctoral......................         35.0         74.0          1.7          3.9         63.3         22.2
    Professional..................         31.0         65.1          3.4         21.2         65.5         13.7
    Grad Certs....................         16.1         66.8          4.8          1.1         79.0         32.2
Total:
    Total.........................         12.8         65.4          0.6          0.7         86.6         34.0
----------------------------------------------------------------------------------------------------------------

Explanation of Terms
    While most analysis will be simple cross-tabulations by two or more 
variables, we use linear regression analysis (also referred to as 
``ordinary least squares'') to answer some questions about the 
relationship between variables holding other factors constant. 
Regression analysis is a statistical method that can be used to measure 
relationships between variables. For instance, in the demographic 
analysis, the demographic variables we analyze are referred to as 
``independent'' variables because they represent the potential inputs 
or determinants of outcomes or may be proxies for other factors that 
influence those outcomes. The annual debt to earnings (D/E) rate and 
earnings premium (EP) are referred to as ``dependent'' variables 
because they are the variables for which the relationship with the 
independent variables is examined. The output of a regression analysis 
contains several relevant points of information. The ``coefficient,'' 
also known as the point estimate, for each independent variable is the 
average amount that a dependent variable is estimated to change with a 
one-unit change in the associated independent variable, holding all 
other independent variables included in the model constant. The 
standard error of a coefficient is a measure of the precision of the 
estimate. The ratio of the coefficient and standard error, called a 
``t-statistic'' is commonly used to determine whether the relationship 
between the independent and dependent variables is ``statistically 
significant'' at conventional levels.\226\ If an estimated coefficient 
is imprecise (i.e., it has a large standard error relative to the 
coefficient), it may not be a reliable measure of the underlying 
relationship. Higher values of the t-statistic indicate a coefficient 
is more precisely estimated. The ``R-squared'' is the fraction of the 
variance of the dependent variable that is statistically explained by 
the independent variables.
---------------------------------------------------------------------------

    \226\ We use significance level, or alpha, of 0.05 when 
assessing the statistical significance in our regression analysis.
---------------------------------------------------------------------------

Results of the Financial Value Transparency Measures for Programs Not 
Covered by Gainful Employment
    In this subsection we examine the results of the transparency 
provisions of the proposed regulations for the 123,524 non-GE Programs. 
The analysis is focused on results for a single set of financial-value 
measures--approximating rates that would have been released in 2022 
(with some differences, described above). Though programs with fewer 
than 30 completers in the cohort are not subject to the D/E and EP 
tests and would not have these metrics published, we retain these 
programs in our analysis and list them in the tables as ``No Data'' to 
provide a more complete view of the distribution of enrollment and 
programs across the D/E and EP metrics.
    Table 3.4 and 3.5 reports the results for non-GE programs by 
control and credential level. Non-GE programs with failing D/E metrics 
are required to have students acknowledge having seen the program 
outcome information before aid is disbursed. Students at non-GE 
programs that do not pass the earnings premium metric are not subject 
to the student acknowledgement requirement, however, for informational 
purposes, we report rates of passing this metric for non-GE programs as 
well. We expect performance on the EP metric contained on the ED-
administered program disclosure website to be of interest to students 
even if it is not part of the acknowledgement requirement. This 
analysis shows that:
     870 public and 760 non-profit degree programs 
(representing 1.2 and 1.6 percent of programs and 4.6 and 7.8 percent 
of enrollment, respectively) would fail at least one of the D/E or EP 
metrics.
     At the undergraduate level, failure of the EP metric is 
most common at public Associate degree programs, whereas failure of the 
D/E metric is relatively more common among Bachelor's degree programs, 
particularly at non-profit institutions.
     Failure for graduate programs is almost exclusively due to 
the failure of the D/E metric and is most prominent for doctoral and 
professional programs at private, non-profit institutions.
     In total, 127,900 students (1.1 percent) at public 
institutions and 273,700 students (6.8 percent) at non-profit 
institutions are in programs with failing D/E metrics and would be 
required to provide acknowledgment prior to having aid disbursed.

[[Page 32418]]



                         Table 3.4--Number and Percent of Title IV Enrollment in Non-GE by Result, Control, and Credential Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Percent of enrollment                             Number of enrollments
                                                     ---------------------------------------------------------------------------------------------------
                                                                                   Fail
                                                                        Fail D/  both D/   Fail EP                          Fail D/E    Fail     Fail EP
                                                      No data    Pass    E only   E and     only      No data      Pass       only    both D/E    only
                                                                                    EP                                                 and EP
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public:
    Associate's.....................................     44.1     48.1      0.4      0.2      7.3    2,424,700   2,642,100    19,900     9,800   400,400
    Bachelor's......................................     25.7     72.5      1.1      0.2      0.6    1,491,800   4,202,800    63,000    10,300    32,800
    Master's........................................     42.6     55.8      1.5      0.0      0.0      324,300     424,600    11,300       300         0
    Doctoral........................................     78.3     19.1      2.6      0.0      0.0      113,600      27,800     3,800         0         0
    Professional....................................     44.5     48.0      7.5      0.0      0.0       56,700      61,100     9,600         0         0
    Total...........................................     35.8     59.7      0.9      0.2      3.5    4,411,100   7,358,400   107,600    20,300   433,200
Private, Nonprofit:
    Associate's.....................................     38.1     37.2      7.7     15.3      1.7      101,800      99,300    20,700    40,700     4,500
    Bachelor's......................................     49.4     46.3      1.8      1.1      1.3    1,310,000   1,228,500    47,900    30,100    34,700
    Master's........................................     32.8     59.4      7.4      0.3      0.1      261,400     472,900    58,600     2,400       800
    Doctoral........................................     49.2     31.0     19.6      0.1      0.0       70,300      44,300    28,000       200         0
    Professional....................................     25.2     40.1     34.6      0.0      0.2       32,800      52,300    45,100         0       200
    Total...........................................     44.5     47.6      5.0      1.8      1.0    1,776,300   1,897,400   200,300    73,400    40,200
Foreign Private:
    Associate's.....................................    100.0      0.0      0.0      0.0      0.0          100           0         0         0         0
    Bachelor's......................................     98.8      0.0      0.0      1.2      0.0        5,400           0         0       100         0
    Master's........................................     95.4      2.8      1.8      0.0      0.0        8,600         300       200         0         0
    Doctoral........................................    100.0      0.0      0.0      0.0      0.0        2,800           0         0         0         0
    Professional....................................     79.3      0.0     20.7      0.0      0.0        1,200           0       300         0         0
    Total...........................................     95.7      1.3      2.6      0.4      0.0       18,100         300       500       100         0
Total:
    Associate's.....................................     43.8     47.6      0.7      0.9      7.0    2,526,500   2,741,400    40,500    50,500   404,800
    Bachelor's......................................     33.2     64.2      1.3      0.5      0.8    2,807,200   5,431,300   111,000    40,400    67,500
    Master's........................................     38.0     57.3      4.5      0.2      0.1      594,300     897,800    70,100     2,700       800
    Doctoral........................................     64.2     24.8     10.9      0.1      0.0      186,700      72,100    31,800       200         0
    Professional....................................     35.0     43.7     21.2      0.0      0.1       90,700     113,400    55,000         0       200
    Total...........................................     38.0     56.7      1.9      0.6      2.9    6,205,500   9,256,100   308,400    93,800   473,400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Enrollment counts rounded to the nearest 100.


                                Table 3.5--Number and Percent of Non-GE Programs by Result, Control, and Credential Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Result in 2019
                                                        ------------------------------------------------------------------------------------------------
                                                          No D/E or EP data         Pass           Fail D/E only    Fail both D/E and     Fail EP only
                                                        -----------------------------------------------------------         EP        ------------------
                                                                                                                   -------------------
                                                          Percent      N      Percent      N      Percent     N      Percent     N      Percent     N
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public:
    Associate's........................................      88.5    24,161       9.9     2,694       0.1       24       0.1       19       1.5      414
    Bachelor's.........................................      60.8    14,801      37.8     9,202       0.7      164       0.2       48       0.5      123
    Master's...........................................      84.6    12,337      15.0     2,191       0.3       50       0.0        3       0.0        1
    Doctoral...........................................      97.0     5,553       2.8       162       0.2        9       0.0        0       0.0        0
    Professional.......................................      63.4       360      33.5       190       3.2       18       0.0        0       0.0        0
    Total..............................................      78.9    57,212      19.9    14,439       0.4      265       0.1       70       0.7      538
Private, Nonprofit:
    Associate's........................................      87.7     2,036       9.1       212       1.2       28       1.5       34       0.5       11
    Bachelor's.........................................      86.7    25,784      12.4     3,689       0.4      125       0.3       75       0.3       79
    Master's...........................................      80.5     8,342      17.1     1,771       2.2      227       0.2       17       0.0        5
    Doctoral...........................................      92.4     2,638       5.3       150       2.2       64       0.1        2       0.0        0
    Professional.......................................      57.6       284      25.2       124      16.6       82       0.0        0       0.6        3
    Total..............................................      85.4    39,084      13.0     5,946       1.1      526       0.3      128       0.2       98
Foreign Private:
    Associate's........................................     100.0        18       0.0         0       0.0        0       0.0        0       0.0        0
    Bachelor's.........................................      99.9     1,227       0.0         0       0.0        0       0.1        1       0.0        0
    Master's...........................................      99.7     3,067       0.1         4       0.1        3       0.0        0       0.0        1
    Doctoral...........................................     100.0       793       0.0         0       0.0        0       0.0        0       0.0        0
    Professional.......................................      97.1       101       0.0         0       2.9        3       0.0        0       0.0        0
    Total..............................................      99.8     5,206       0.1         4       0.1        6       0.0        1       0.0        1
Total:
    Associate's........................................      88.4    26,215       9.8     2,906       0.2       52       0.2       53       1.4      425
    Bachelor's.........................................      75.6    41,812      23.3    12,891       0.5      289       0.2      124       0.4      202
    Master's...........................................      84.7    23,746      14.2     3,966       1.0      280       0.1       20       0.0        7
    Doctoral...........................................      95.9     8,984       3.3       312       0.8       73       0.0        2       0.0        0
    Professional.......................................      63.9       745      27.0       314       8.8      103       0.0        0       0.3        3
    Total..............................................      82.2   101,502      16.5    20,389       0.6      797       0.2      199       0.5      637
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Tables 3.6 and 3.7 report results by credential level and 2-digit 
CIP code for non-GE programs. This analysis shows that:
     Rates of not passing at least one of the metrics are 
particularly high for professional programs in law (CIP 22,

[[Page 32419]]

19.6 percent of law programs representing 29.2 percent of enrollment in 
law programs), theology (CIP 39, 6.6 percent, 25.4 percent) and health 
(CIP 51, 9.7 percent, 18.6 percent). Recall that for graduate degrees, 
failure is almost exclusively due to the D/E metric, which would 
trigger the acknowledgement requirement.

Table 3.6--Number and Percent of Non-GE Title IV Enrollment in Programs Failing Either D/E or EP Metric, by CIP2
----------------------------------------------------------------------------------------------------------------
                                                                 Credential level
                                --------------------------------------------------------------------------------
                                   Associate's    Bachelor's    Master's     Doctoral    Professional     Total
----------------------------------------------------------------------------------------------------------------
1: Agriculture & Related                    0.8          1.2          0.0          0.0             0.0       1.0
 Sciences......................
3: Natural Resources And                    0.0          1.3          1.8          0.0             0.0       1.2
 Conservation..................
4: Architecture And Related                 0.0          0.0          2.7          0.0             0.0       0.7
 Services......................
5: Area & Group Studies........             0.0          0.6          0.0          0.0             0.0       0.5
9: Communication...............             3.5          2.1          2.0          0.0             0.0       2.3
10: Communications Tech........             8.1          2.9          0.0  ...........  ..............       5.9
11: Computer Sciences..........             1.5          0.1          0.0          0.0             0.0       0.6
12: Personal And Culinary                   9.5          0.0          0.0  ...........  ..............       8.3
 Services......................
13: Education..................            16.6          2.7          1.8          4.3             0.0       4.4
14: Engineering................             0.0          0.0          0.0          0.0             0.0       0.0
15: Engineering Tech...........             0.3          0.0          0.0          0.0  ..............       0.2
16: Foreign Languages..........             1.0          2.1          0.0          0.0             0.0       1.8
19: Family & Consumer Sciences.            11.2          8.0          3.8          0.0             0.0       9.2
22: Legal Professions..........             7.8          9.8          3.6         29.6            29.2      20.4
23: English Language...........             1.1          5.7          3.9          0.0             0.0       4.8
24: Liberal Arts...............            14.0          2.8          0.6          0.0             0.0      10.8
25: Library Science............             0.0          0.0          0.0          0.0             0.0       0.0
26: Biological & Biomedical                 4.9          2.6          6.3          1.4             0.0       3.1
 Sciences......................
27: Mathematics And Statistics.             0.0          0.0          0.0          0.0             0.0       0.0
28: Military Science...........  ..............          0.0          0.0  ...........  ..............       0.0
29: Military Tech..............             0.0          0.0          0.0  ...........  ..............       0.0
30: Multi/Interdisciplinary                 1.3          1.2          1.6          0.0             0.0       1.3
 Studies.......................
31: Parks & Rec................             4.8          1.8          0.6          0.0             0.0       2.2
32: Basic Skills...............             0.0          0.0          0.0  ...........  ..............       0.0
33: Citizenship Activities.....  ..............          0.0          0.0  ...........  ..............       0.0
34: Health-Related Knowledge                0.0          0.0          0.0          0.0             0.0       0.0
 And Skills....................
35: Interpersonal And Social     ..............          0.0          0.0  ...........  ..............       0.0
 Skills........................
36: Leisure And Recreational                0.0          0.0          0.0          0.0  ..............       0.0
 Activities....................
37: Personal Awareness And Self- ..............  ...........          0.0  ...........  ..............       0.0
 Improvement...................
38: Philosophy And Religious               40.5          1.3          0.0          0.0             0.0       4.2
 Studies.......................
39: Theology And Religious                  9.4         21.5          7.7          0.0            25.4      14.8
 Vocations.....................
40: Physical Sciences..........             0.0          0.3          0.0          0.0             0.0       0.2
41: Science Technologies/                   4.2          0.0          0.0          0.0  ..............       3.7
 Technicians...................
42: Psychology.................            10.8          6.4         31.5         25.3            13.6      10.5
43: Homeland Security..........             3.7          2.6          7.6          0.0             0.0       3.4
44: Public Admin & Social                  23.4          5.1          6.9          0.0             0.0       9.0
 Services......................
45: Social Sciences............             4.9          0.9          3.2          0.0             0.0       1.6
46: Construction Trades........             0.0          0.0          0.0          0.0  ..............       0.0
47: Mechanic & Repair Tech.....             0.4          0.0  ...........  ...........  ..............       0.4
48: Precision Production.......             0.0          0.0          0.0  ...........  ..............       0.0
49: Transportation And                      0.0          0.0          0.0          0.0  ..............       0.0
 Materials Moving..............
50: Visual And Performing Arts.             6.4         12.7         21.6          1.9             0.0      11.6
51: Health Professions And                  6.2          1.7          5.8         20.1            18.6       5.8
 Related Programs..............
52: Business...................             5.3          0.7          0.8          0.0             0.0       2.0
53: High School/Secondary                   0.0          0.0          0.0  ...........  ..............       0.0
 Diplomas......................
54: History....................             0.0          0.8         12.2          0.0             0.0       1.6
60: Residency Programs.........  ..............  ...........          0.0          0.0             0.0       0.0
Total..........................             8.6          2.6          4.7         11.0            21.3       5.4
----------------------------------------------------------------------------------------------------------------


            Table 3.7--Number and Percent of Non-GE Programs Failing Either D/E or EP Metric, by CIP2
----------------------------------------------------------------------------------------------------------------
                                                                 Credential level
                                --------------------------------------------------------------------------------
                                   Associate's    Bachelor's    Master's     Doctoral    Professional     Total
----------------------------------------------------------------------------------------------------------------
1: Agriculture & Related                    0.1          0.7          0.0          0.0             0.0       0.3
 Sciences......................
3: Natural Resources And                    0.0          0.4          0.3          0.0             0.0       0.3
 Conservation..................
4: Architecture And Related                 0.0          0.0          0.8          0.0             0.0       0.3
 Services......................
5: Area & Group Studies........             0.0          0.3          0.0          0.0             0.0       0.2
9: Communication...............             0.8          1.3          0.6          0.0             0.0       1.1
10: Communications Tech........             2.2          2.4          0.0  ...........  ..............       2.1
11: Computer Sciences..........             0.4          0.1          0.0          0.0             0.0       0.2
12: Personal And Culinary                   3.9          0.0          0.0  ...........  ..............       3.6
 Services......................
13: Education..................             3.5          0.8          0.7          0.1             0.0       1.0
14: Engineering................             0.0          0.0          0.0          0.0             0.0       0.0
15: Engineering Tech...........             0.1          0.0          0.0          0.0             0.0       0.1
16: Foreign Languages..........             0.3          0.6          0.0          0.0             0.0       0.4
19: Family & Consumer Sciences.             3.5          2.9          1.2          0.0             0.0       2.7
22: Legal Professions..........             1.0          1.4          0.4         14.3            19.6       5.0
23: English Language...........             0.4          1.9          1.0          0.0             0.0       1.4
24: Liberal Arts...............            15.3          2.1          0.4          0.0             0.0       8.1
25: Library Science............             0.0          0.0          0.0          0.0             0.0       0.0
26: Biological & Biomedical                 0.8          1.4          0.6          0.1             0.0       0.9
 Sciences......................

[[Page 32420]]

 
27: Mathematics And Statistics.             0.0          0.0          0.0          0.0             0.0       0.0
28: Military Science...........  ..............          0.0          0.0  ...........  ..............       0.0
29: Military Tech..............             0.0          0.0          0.0  ...........  ..............       0.0
30: Multi/Interdisciplinary                 1.1          0.7          0.4          0.0             0.0       0.6
 Studies.......................
31: Parks & Rec................             0.8          1.3          0.3          0.0             0.0       1.0
32: Basic Skills...............             0.0          0.0          0.0  ...........  ..............       0.0
33: Citizenship Activities.....  ..............          0.0          0.0  ...........  ..............       0.0
34: Health-Related Knowledge                0.0          0.0          0.0          0.0             0.0       0.0
 And Skills....................
35: Interpersonal And Social     ..............          0.0          0.0  ...........  ..............       0.0
 Skills........................
36: Leisure And Recreational                0.0          0.0          0.0          0.0  ..............       0.0
 Activities....................
37: Personal Awareness And Self- ..............  ...........          0.0  ...........  ..............       0.0
 Improvement...................
38: Philosophy And Religious                2.1          0.2          0.0          0.0             0.0       0.2
 Studies.......................
39: Theology And Religious                  2.0          2.5          2.6          0.0             6.6       2.4
 Vocations.....................
40: Physical Sciences..........             0.0          0.0          0.0          0.0             0.0       0.0
41: Science Technologies/                   0.6          0.0          0.0          0.0  ..............       0.4
 Technicians...................
42: Psychology.................             3.1          2.9          5.4          3.1             4.2       3.7
43: Homeland Security..........             0.8          2.2          1.3          0.0             0.0       1.3
44: Public Admin & Social                   6.3          1.5          2.2          0.0             0.0       2.5
 Services......................
45: Social Sciences............             0.5          0.5          0.2          0.0             0.0       0.4
46: Construction Trades........             0.0          0.0          0.0          0.0  ..............       0.0
47: Mechanic & Repair Tech.....             0.2          0.0  ...........  ...........  ..............       0.2
48: Precision Production.......             0.0          0.0          0.0  ...........  ..............       0.0
49: Transportation And                      0.0          0.0          0.0          0.0  ..............       0.0
 Materials Moving..............
50: Visual And Performing Arts.             1.4          4.4          4.9          0.4             0.0       3.7
51: Health Professions And                  1.5          1.0          2.6          4.5             9.7       2.2
 Related Programs..............
52: Business...................             1.4          0.3          0.2          0.0             0.0       0.6
53: High School/Secondary                   0.0          0.0          0.0  ...........  ..............       0.0
 Diplomas......................
54: History....................             0.0          0.3          0.5          0.0             0.0       0.3
60: Residency Programs.........             0.0  ...........          0.0          0.0             0.0       0.0
Total..........................             1.8          1.1          1.1          0.8             9.1       1.3
----------------------------------------------------------------------------------------------------------------

Results of GE Accountability for Programs Subject to the Gainful 
Employment Rule
    This analysis is based on the 2022 PPD described in the ``Data Used 
in this RIA'' above. In this subsection, we examine the combined 
results of the GE accountability components of the proposed regulations 
for the 32,058 GE Programs. The analysis is primarily focused on GE 
metric results for a single year, though continued eligibility depends 
on performance in multiple years. The likelihood of repeated failure is 
discussed briefly below and is incorporated into the budget impact and 
cost-benefit analyses. Though programs with fewer than 30 completers in 
the cohort are not subject to the D/E and EP tests, we retain these 
programs in our analysis to provide a more complete view of program 
passage than if they were excluded.
Program-Level Results
    Table 3.8 and 3.9 reports D/E and EP results by control and 
credential level for GE programs. This analysis shows that:
     65.3 percent of enrollment is in the 4,100 GE programs for 
which rates can be calculated.
     41.3 percent of enrollment is in 2,300 programs (7.1 
percent of all GE programs) that meet the size threshold and would pass 
both the D/E measure and EP metrics.
     24 percent of enrollment is in 1,800 programs (5.5 percent 
of all GE programs) that would fail at least one of the two metrics.
     Failure rates are significantly lower for public 
certificate programs (4.3 percent of enrollment is in failing programs) 
than for proprietary (50 percent of enrollment is in failing programs) 
or non-profit (43.6 percent of enrollment is in failing programs) 
certificate programs, though the latter represents a small share of 
overall enrollment. Certificate programs that fail typically fail the 
EP metric, rather than the D/E metric.
     Across all proprietary certificate and degree programs, 
33.6 percent of enrollment is in programs that fail one of the two 
metrics, representing 22.1 percent of programs. Degree programs that 
fail typically fail the D/E metric, with only associate degree programs 
having a noticeable number of programs that fail the EP metric.

                      Table 3.8--Number and Percent of Title IV Enrollment in GE Programs by Result, Control, and Credential Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Percent                                           Number
                                                     ---------------------------------------------------------------------------------------------------
                                                                                   Fail
                                                                        Fail D/  both D/   Fail EP                          Fail D/E    Fail     Fail EP
                                                      No data    Pass    E only   E and     only      No data      Pass       only    both D/E    only
                                                                                    EP                                                 and EP
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates.................................     78.5     17.2      0.0      0.3      4.0      682,300     149,300       200     3,000    34,700
    Post-BA Certs...................................     93.0      7.0      0.0      0.0      0.0       11,800         900         0         0         0
    Grad Certs......................................     78.3     21.3      0.4      0.0      0.0       32,800       8,900       200         0         0
    Total...........................................     78.7     17.2      0.0      0.3      3.8      726,900     159,200       300     3,000    34,700
Private, Nonprofit:
    UG Certificates.................................     38.5     18.0      0.0      4.9     38.7       30,000      14,000         0     3,800    30,100
    Post-BA Certs...................................     96.2      3.8      0.0      0.0      0.0        7,600         300         0         0         0
    Grad Certs......................................     74.4     22.1      3.5      0.0      0.0       26,600       7,900     1,300         0         0

[[Page 32421]]

 
    Total...........................................     52.8     18.3      1.0      3.1     24.8       64,200      22,200     1,300     3,800    30,100
Proprietary:
    UG Certificates.................................     12.7     37.3      0.2      8.5     41.3       70,000     205,000     1,100    46,500   227,300
    Associate's.....................................     15.5     46.2     19.3     14.4      4.5       50,600     151,100    63,200    47,200    14,700
    Bachelor's......................................      8.4     67.2     22.3      2.0      0.1       56,800     454,000   150,600    13,700       600
    Post-BA Certs...................................     37.8     62.2      0.0      0.0      0.0          300         500         0         0         0
    Master's........................................      6.8     75.2     17.0      0.9      0.0       16,400     180,500    40,800     2,200         0
    Doctoral........................................     26.0     58.8     15.1      0.0      0.0       14,100      31,800     8,200         0         0
    Professional....................................     34.9     14.5     50.7      0.0      0.0        4,200       1,800     6,100         0         0
    Grad Certs......................................     32.6     28.9     37.9      0.0      0.7        3,500       3,100     4,100         0       100
    Total...........................................     11.5     55.0     14.7      5.9     13.0      215,900   1,027,800   274,200   109,600   242,700
Foreign Private:
    UG Certificates.................................    100.0      0.0      0.0      0.0      0.0          100           0         0         0         0
    Post-BA Certs...................................    100.0      0.0      0.0      0.0      0.0            0           0         0         0         0
    Grad Certs......................................     15.8      0.0      0.0     84.2      0.0          200           0         0     1,300         0
    Total...........................................     20.4      0.0      0.0     79.6      0.0          300           0         0     1,300         0
Foreign For-Profit:
    Master's........................................    100.0      0.0      0.0      0.0      0.0          200           0         0         0         0
    Doctoral........................................     80.5     19.5      0.0      0.0      0.0        1,600         400         0         0         0
    Professional....................................     79.7      0.0     20.3      0.0      0.0        9,200           0     2,400         0         0
    Total...........................................     80.0      2.8     17.2      0.0      0.0       11,000         400     2,400         0         0
Total:
    UG Certificates.................................     52.2     24.6      0.1      3.6     19.5      782,400     368,400     1,300    53,300   292,100
    Associate's.....................................     15.5     46.2     19.3     14.4      4.5       50,600     151,100    63,200    47,200    14,700
    Bachelor's......................................      8.4     67.2     22.3      2.0      0.1       56,800     454,000   150,600    13,700       600
    Post-BA Certs...................................     92.1      7.9      0.0      0.0      0.0       19,700       1,700         0         0         0
    Master's........................................      6.9     75.2     17.0      0.9      0.0       16,600     180,500    40,800     2,200         0
    Doctoral........................................     27.9     57.5     14.6      0.0      0.0       15,600      32,200     8,200         0         0
    Professional....................................     56.8      7.4     35.8      0.0      0.0       13,400       1,800     8,500         0         0
    Grad Certs......................................     70.3     22.2      6.1      1.4      0.1       63,100      19,900     5,500     1,300       100
    Total...........................................     34.7     41.3      9.5      4.0     10.5    1,018,300   1,209,600   278,100   117,600   307,500
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Enrollment counts rounded to the nearest 100.


                                        Table 3.9--Number of GE Programs by Result, Control, and Credential Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Number                                          Percent
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                                         Fail
                                                           No D/E             Fail D/    Fail     Fail EP    No D/E           Fail D/  both D/   Fail EP
                                                            or EP     Pass     E only  both D/E     only     or EP     Pass    E only   E and     only
                                                            data                        and EP                data                        EP
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates.....................................    18,051       729        1         6       184      95.2      3.8      0.0      0.0       1.0
    Post-BA Certs.......................................       865         7        0         0         0      99.2      0.8      0.0      0.0       0.0
    Grad Certs..........................................     1,887        50        2         0         0      97.3      2.6      0.1      0.0       0.0
    Total...............................................    20,803       786        3         6       184      95.5      3.6      0.0      0.0       0.8
Private, Nonprofit:
    UG Certificates.....................................     1,218        94        0         8        67      87.8      6.8      0.0      0.6       4.8
    Post-BA Certs.......................................       625         4        0         0         0      99.4      0.6      0.0      0.0       0.0
    Grad Certs..........................................     1,344        44        9         0         0      96.2      3.1      0.6      0.0       0.0
    Total...............................................     3,187       142        9         8        67      93.4      4.2      0.3      0.2       2.0
Proprietary:
    UG Certificates.....................................     1,596       548        4       154       916      49.6     17.0      0.1      4.8      28.5
    Associate's.........................................     1,135       339       98        79        69      66.0     19.7      5.7      4.6       4.0
    Bachelor's..........................................       601       259       80        21         2      62.4     26.9      8.3      2.2       0.2
    Post-BA Certs.......................................        48         4        0         0         0      92.3      7.7      0.0      0.0       0.0
    Master's............................................       282       148       39         9         0      59.0     31.0      8.2      1.9       0.0
    Doctoral............................................        80        30       12         0         0      65.6     24.6      9.8      0.0       0.0
    Professional........................................        23         5        4         0         0      71.9     15.6     12.5      0.0       0.0
    Grad Certs..........................................       105        14        6         0         3      82.0     10.9      4.7      0.0       2.3
    Total...............................................     3,870     1,347      243       263       990      57.6     20.1      3.6      3.9      14.7
Foreign Private:
    UG Certificates.....................................        28         0        0         0         0     100.0      0.0      0.0      0.0       0.0
    Post-BA Certs.......................................        27         0        0         0         0     100.0      0.0      0.0      0.0       0.0
    Grad Certs..........................................        76         0        0         1         0      98.7      0.0      0.0      1.3       0.0
    Total...............................................       131         0        0         1         0      99.2      0.0      0.0      0.8       0.0
Foreign For-Profit:
    UG Certificates.....................................         1         0        0         0         0     100.0      0.0      0.0      0.0       0.0
    Master's............................................         6         0        0         0         0     100.0      0.0      0.0      0.0       0.0
    Doctoral............................................         3         1        0         0         0      75.0     25.0      0.0      0.0       0.0
    Professional........................................         5         0        2         0         0      71.4      0.0     28.6      0.0       0.0
    Total...............................................        15         1        2         0         0      83.3      5.6     11.1      0.0       0.0
Total:
    UG Certificates.....................................    20,894     1,371        5       168     1,167      88.5      5.8      0.0      0.7       4.9

[[Page 32422]]

 
    Associate's.........................................     1,135       339       98        79        69      66.0     19.7      5.7      4.6       4.0
    Bachelor's..........................................       601       259       80        21         2      62.4     26.9      8.3      2.2       0.2
    Post-BA Certs.......................................     1,565        15        0         0         0      99.1      0.9      0.0      0.0       0.0
    Master's............................................       288       148       39         9         0      59.5     30.6      8.1      1.9       0.0
    Doctoral............................................        83        31       12         0         0      65.9     24.6      9.5      0.0       0.0
    Professional........................................        28         5        6         0         0      71.8     12.8     15.4      0.0       0.0
    Grad Certs..........................................     3,412       108       17         1         3      96.4      3.0      0.5      0.0       0.1
    Total...............................................    28,006     2,276      257       278     1,241      87.4      7.1      0.8      0.9       3.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Tables 3.10 and 3.11 reports the results by credential level and 2-
digit CIP code. This analysis shows:
     Highest rate of failure is in Personal and Culinary 
Services (CIP2 12), where 76 percent of enrollment, representing 38 
percent of undergraduate certificate programs in that field, have 
failing metrics. This is primarily due to failing the EP metric.
     In Health Professions and Related Programs (CIP2 51), 
where allied health, medical assisting, and medical administration are 
the primary specific fields, 26.2 percent of enrollment is in an 
undergraduate certificate program that fails at least one of the two 
metrics, representing 8.6 percent of programs.
BILLING CODE 4000-01-P
[GRAPHIC] [TIFF OMITTED] TP19MY23.007


[[Page 32423]]


[GRAPHIC] [TIFF OMITTED] TP19MY23.008

Program Ineligibility
    For GE programs, Title IV ineligibility is triggered by two years 
of failing the same metric within a three-year period. Years of not 
meeting the n-size requirement are not counted towards those three 
years. The top panel of Table 3.12 shows the share of GE enrollment and 
programs in each result category in a second year as a function of the 
result in the first year, along with the rate of becoming ineligible. 
Failure rates are quite persistent, with failure in one year being 
highly predictive of failure in the next year, and thus ineligibility 
for title IV, HEA funds. Among programs that fail only the D/E metric 
in the first year, 58.4 percent of enrollment is in programs that also 
fail D/E in year 2 and would be ineligible for Title IV aid the 
following year. The comparable rates for programs that fail EP only or 
both D/E and EP in the first year are 91.2 and 88.8 percent, 
respectively. The share of programs (rather than enrollment in such 
programs) that become ineligible conditional on first year results is 
similar, as shown in the bottom panel of Table 3.12. These rates 
understate the share of programs that would ultimately become 
ineligible when a third year is considered.

[[Page 32424]]

[GRAPHIC] [TIFF OMITTED] TP19MY23.009

BILLING CODE 4000-01-C
Institution-Level Aanalysis of GE Program Accountability Provisions
    Many institutions have few programs that are subject to the 
accountability provisions of GE, either because they are nonproprietary 
institutions with relatively few certificate programs or because their 
programs tend to be too small in size to have published median debt or 
earnings measures. Characterizing the share of GE programs that have 
reported debt and earnings metrics that fail in particular 
postsecondary sectors can therefore give a distorted sense for the 
effect the rule might have on institutions in that sector. For example, 
a college (or group of colleges) might offer a single GE program that 
fails the rule and so appear to have 100 percent of its GE programs 
fail the rule. But if that program is a very small share of the 
institution's overall enrollment (or its title IV, HEA enrollment) then 
even if every student in that program were to stop enrolling in the 
institution--an unlikely scenario as discussed below--the effect on the 
institution(s) would be much less than would be implied by the 100 
percent failure rate among its GE programs. To provide better context 
for evaluating the potential effect of the GE rule on institutions or 
sets of institutions, we describe the share of all title IV supported 
enrollment--including enrollment in both GE and non-GE programs--that 
is in a GE program and that fails a GE metric and, therefore, is at 
risk of losing title IV, HEA eligibility.\227\ Again, this should not 
be viewed as an estimate of potential enrollment (or revenue) loss to 
the institution--in many cases the most likely impact of a program 
failing the GE metrics or losing eligibility is that students enroll in 
higher performing programs in the same institution.
---------------------------------------------------------------------------

    \227\ Note that these statistics still do not fully capture the 
financial impact of GE on institutions. A complete analysis would 
account for the share of institutional revenue accounted for by 
title IV, HEA students, and the extent to which students in programs 
that fail GE will unenroll from the institutions entirely (vs. 
transferring to a passing program at the same institution). The 
measures here are best viewed as a proxy for the share of Federal 
title IV, HEA revenue at an institution that is potentially at risk 
due to the GE accountability provisions.
---------------------------------------------------------------------------

    Table 3.13 reports the distribution of institutions by share of 
enrollment that is in a failing GE program, by control and institution 
type. It shows that 93 percent of public institutions and 97 percent of 
non-profit institutions have no enrollment in GE programs that fail the 
GE metric. This rate is much lower--42 percent--for proprietary 
institutions, where all types of credential programs are covered by GE 
accountability and failure rates tend to be higher.

  Table 3.13--Distribution of Institutions by Share of Enrollment That Fails GE Accountability, by Control and
                                       Institution Type (All Institutions)
----------------------------------------------------------------------------------------------------------------
                                              Share of institutional enrollment in failing GE programs
                                   -----------------------------------------------------------------------------
                                     Total      0%      0-5%    5-10%     10-20%     20-40%     40-99%     100%
----------------------------------------------------------------------------------------------------------------
Public:
    Less-Than 2-Year..............      561      470       23       13         26         23          5        1
    2-Year........................      691      649       35        3          1          2          1        0
    4-Year or Above...............      560      557        2        1          0          0          0        0
    Total.........................    1,812    1,676       60       17         27         25          6        1
Private, Nonprofit:
    Less-Than 2-Year..............      113       92        1        0          1          3         11        5
    2-Year........................      110      101        2        0          2          2          2        1
    4-Year or Above...............    1,350    1,332       10        4          1          1          1        1

[[Page 32425]]

 
    Total.........................    1,573    1,525       13        4          4          6         14        7
Proprietary:
    Less-Than 2-Year..............    1,274      499        6        8         24         38        208      491
    2-Year........................      119       67        1        6          4         14         24        3
    4-Year or Above...............      101       62        0        3          7         10         16        3
    Total.........................    1,494      628        7       17         35         62        248      497
Total:
    Less-Than 2-Year..............    1,948    1,061       30       21         51         64        224      497
    2-Year........................      920      817       38        9          7         18         27        4
    4-Year or Above...............    2,011    1,951       12        8          8         11         17        4
    Total.........................    4,879    3,829       80       38         66         93        268      505
----------------------------------------------------------------------------------------------------------------

    Very few public community or technical colleges (CCs) have 
considerable enrollment in programs that would fail GE. Only 40 (6 
percent) of the 690 predominant 2-year public colleges have any of 
their enrollment in certificate programs that would fail, and only 30 
(5 percent) of the 560 predominantly less than 2-year technical 
colleges have more than 20% of enrollment that does. The share of 
enrollment in failing GE programs for HBCUs, TCCUs, and other minority-
serving institutions is even smaller, as shown in Table 3.14. At HBCUs, 
only one college out of 100 has more than 5 percent of enrollment in 
failing programs; across all HBCUs, only 5 programs at 4 schools fail. 
TCCUs have no failing programs, only 5 (1 percent) of Hispanic-serving 
institutions have more than 10 percent of enrollment in failing 
programs.\228\ We conducted a similar analysis excluding institutions 
that do not have any GE programs. The patterns are similar.
---------------------------------------------------------------------------

    \228\ The number of Hispanic Serving Institutions reported here 
differs slightly from the current eligibility list, as the 2022 PPD 
uses designations from 2021. The number of HBCUs and TCCUs is the 
same in both sources, however.

Table 3.14--Distribution of Institutions by Share of Enrollment That Fails GE Accountability, by Special Mission
                                                      Type
----------------------------------------------------------------------------------------------------------------
                                                  Share of institutional enrollment in failing GE programs
                                           ---------------------------------------------------------------------
                                              Total      0%       0-5%      5-10%    10-20%    20-40%    40-99%
----------------------------------------------------------------------------------------------------------------
                                                                           N of Institutions
                                                     -----------------------------------------------------------
HBCU......................................       100        96         3         1         0         0         0
                                           ---------------------------------------------------------------------
TCCU......................................        35        35         0         0         0         0         0
HSI.......................................       446       417        22         2         1         2         2
All Other Non-FP MSI......................       158       144         3         3         4         4         0
                                           ---------------------------------------------------------------------
    Total.................................       739       692        28         6         5         6         2
----------------------------------------------------------------------------------------------------------------

    As noted above, these estimates cannot assess the impact of the GE 
provisions on total enrollment at these institutions. Especially at 
institutions with diverse program offerings, many students in failing 
programs can be expected to transfer to other non-failing programs 
within the institution (as opposed to exiting the institution). 
Moreover, many institutions are likely to admit additional enrollment 
into their programs from failing programs at other (especially for-
profit) institutions. We quantify the magnitude of this enrollment 
shift and revisit the implications for overall institution-level 
enrollment effects in a later section.
Regulation Targets Low-Performing GE Programs
    The Department conducted an analysis on which specific GE programs 
fail the metrics. The analysis concludes that the metrics target 
programs where students earn little, borrow more, and default at higher 
rates on their student loans than similar programs providing the same 
credential.
    Table 3.15 reports the average program-level cohort default rate 
for GE programs, separately by result, control, and credential level. 
Programs are weighted by their average title IV, HEA enrollment in AY 
2016 and 2017 to better characterize the outcomes experienced by 
students. The overall 3-year program default rate is 12.9 percent but 
is higher for certificate programs and for programs offered by 
proprietary schools. The average default rate is higher for programs 
that fail the EP threshold than for programs that fail the D/E metric, 
despite debt being lower for the former. This is because even low 
levels of debt are difficult to repay when earnings are very low. 
Programs that pass the metrics, either with data or without, have lower 
default rates than those that fail.

[[Page 32426]]



     Table 3.15--Average Program Cohort Default Rate by Result, Overall and by Control, and Credential Level
                                              (Enrollment-Weighted)
----------------------------------------------------------------------------------------------------------------
                                                                Fail D/E   Fail both D/   Fail EP
                                      No data        Pass         only       E and EP       only        Total
----------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates...............         16.6         17.5         11.1         20.4         19.9         16.9
    Post-BA Certs.................          2.3          2.4  ...........  ...........  ...........          2.3
    Grad Certs....................          2.6          2.2          0.0  ...........  ...........          2.5
    Total.........................         15.8         16.5          6.2         20.4         19.9         16.1
Private, Nonprofit:
    UG Certificates...............          9.7          9.6  ...........         16.4         14.4         12.0
    Post-BA Certs.................          2.9          1.2  ...........  ...........  ...........          2.8
    Grad Certs....................          2.7          1.9          0.3  ...........  ...........          2.4
    Total.........................          6.0          6.7          0.3         16.4         14.4          8.7
Proprietary:
    UG Certificates...............         14.8         14.0         16.9         14.9         14.1         14.2
    Associate's...................         14.4         13.0         17.8         19.8         16.4         15.3
    Bachelor's....................         13.8         11.6         14.4         14.8          0.0         12.4
    Post-BA Certs.................         26.4         13.2  ...........  ...........  ...........         16.9
    Master's......................          3.9          3.9          5.3          4.5  ...........          4.1
    Doctoral......................          4.1          4.5          4.6  ...........  ...........          4.4
    Professional..................          1.0          0.0          0.7  ...........  ...........          0.7
    Grad Certs....................          1.4          4.2          5.5  ...........  ...........          3.9
    Total.........................         12.3         10.6         13.1         16.8         14.2         12.0
Foreign Private:
UG Certificates...................          0.0  ...........  ...........  ...........  ...........          0.0
    Post-BA Certs.................         12.5  ...........  ...........  ...........  ...........         12.5
    Grad Certs....................          5.2  ...........  ...........          0.0  ...........          0.2
    Total.........................          3.6  ...........  ...........          0.0  ...........          0.2
Foreign For-Profit:
    Master's......................          0.0  ...........  ...........  ...........  ...........          0.0
    Doctoral......................          0.5          5.3  ...........  ...........  ...........          1.4
    Professional..................          1.3  ...........          1.3  ...........  ...........          1.3
    Total.........................          1.1          5.3          1.3  ...........  ...........          1.3
Total:
    UG Certificates...............         16.2         15.1         16.1         15.3         14.7         15.5
    Associate's...................         14.4         13.0         17.8         19.8         16.4         15.3
    Bachelor's....................         13.8         11.6         14.4         14.8          0.0         12.4
    Post-BA Certs.................          2.9          5.4  ...........  ...........  ...........          3.2
    Master's......................          3.9          3.9          5.3          4.5  ...........          4.1
    Doctoral......................          3.7          4.5          4.6  ...........  ...........          4.3
    Professional..................          1.2          0.0          0.8  ...........  ...........          1.0
    Grad Certs....................          2.6          2.4          4.2          0.0  ...........          2.6
    Total.........................         14.1         11.3         12.9         16.7         14.7         12.9
----------------------------------------------------------------------------------------------------------------

    To better understand the specific types of programs that underpin 
the aggregate patterns described above, Table 3.16 lists the 20 most 
common types of programs (the combination of field and credential 
level) by enrollment count in the 2022 PPD. The programs with the 
highest enrollments are undergraduate certificate programs in 
cosmetology, allied health, liberal arts, and practical nursing, along 
with bachelor's programs in business and nursing. These 20 most common 
types of programs represent more than half of all enrollments in GE 
programs. Table 3.17 provides the average program annual loan payment 
(weighted by the number of students completing a program), the average 
program earnings (weighted by the number of students completing a 
program), the average annual D/E rate, and the average cohort default 
rate (weighted by the number of students completing a program). This 
shows quite a bit of variability in debt, loan service, earnings, and 
default across different types of programs.

                   Table 3.16--GE Programs With the Most Students, by CIP and Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                                                     Number of    Percent of all     Number of      students at
                                                     programs        programs        students      all programs
----------------------------------------------------------------------------------------------------------------
Field of Study (Ordered by All-Sector
 Enrollment):
    1204--Cosmetology & Personal Grooming--UG              1,267             4.0         191,600             6.5
     Certificates...............................
    5202--Business Administration--Bachelor's...              72             0.2         149,000             5.1
    5108--Allied Health (Medical Assisting)--UG              895             2.9         147,100             5.0
     Certificates...............................
    2401--Liberal Arts--UG Certificates.........             345             1.1         140,900             4.8
    5139--Practical Nursing--UG Certificates....           1,032             3.3         130,900             4.5
    5107--Health & Medical Administrative                    910             2.9          83,500             2.8
     Services--UG Certificates..................
    5138--Registered Nursing, Nursing                         56             0.2          75,600             2.6
     Administration, Nursing Research & Clinical
     Nursing--Bachelor's........................
    4706--Vehicle Maintenance & Repair--UG                   722             2.3          75,100             2.6
     Certificates...............................
    4301--Criminal Justice & Corrections--                    47             0.2          55,500             1.9
     Bachelor's.................................
    5202--Business Administration--Master's.....              46             0.1          55,400             1.9
    4805--Precision Metal Working--UG                        761             2.4          49,000             1.7
     Certificates...............................
    5109--Allied Health (Diagnostic &                        725             2.3          47,000             1.6
     Treatment)--UG Certificates................
    5108--Allied Health (Medical Assisting)--                142             0.5          43,800             1.5
     Associate's................................
    5107--Health & Medical Administrative                     46             0.1          42,100             1.4
     Services--Bachelor's.......................
    5202--Business Administration--Associate's..              89             0.3          39,600             1.4
    5107--Health & Medical Administrative                    128             0.4          38,700             1.3
     Services--Associate's......................

[[Page 32427]]

 
    5138--Registered Nursing, Nursing                         20             0.1          37,800             1.3
     Administration, Nursing Research & Clinical
     Nursing--Master's..........................
    5138--Registered Nursing, Nursing                         92             0.3          36,300             1.2
     Administration, Nursing Research & Clinical
     Nursing--Associate's.......................
    5202--Business Administration--UG                        573             1.8          34,300             1.2
     Certificates...............................
    5106--Dental Support--UG Certificates.......             432             1.4          33,100             1.1
All Other Programs..............................          22,920            73.2       1,424,900            48.6
----------------------------------------------------------------------------------------------------------------


 Table 3.17--Annual Loan Payment, Earnings, D/E Rate, Cohort Default Rate by Program Type (Enrollment-Weighted)
----------------------------------------------------------------------------------------------------------------
                                                                 Median 2018- 19
                                                  Annual loan     earnings (in    Average annual  Cohort default
                                                    payment     2019 $) of 3 yrs     DTE rate          rate
                                                                after graduation
----------------------------------------------------------------------------------------------------------------
Field of Study (Ordered by All-Sector
 Enrollment):
    1204--Cosmetology & Personal Grooming--UG            1,004            16,822             6.4            13.7
     Certificates.............................
    5202--Business Administration--Bachelor's.           2,711            47,956             5.8            14.1
    5108--Allied Health (Medical Assisting)--              947            24,000             4.2            16.6
     UG Certificates..........................
    2401--Liberal Arts--UG Certificates.......              99            29,894             0.3            16.4
    5139--Practical Nursing--UG Certificates..           1,075            39,273             3.5            10.2
    5107--Health & Medical Administrative                1,107            23,231             5.5            15.0
     Services--UG Certificates................
    5138--Registered Nursing, Nursing                    1,948            72,449             2.8             3.8
     Administration, Nursing Research &
     Clinical Nursing--Bachelor's.............
    4706--Vehicle Maintenance & Repair--UG               1,410            36,260             4.1            19.5
     Certificates.............................
    4301--Criminal Justice & Corrections--               2,720            37,537             7.6            17.1
     Bachelor's...............................
    5202--Business Administration--Master's...           3,725            58,204             6.6             4.1
    4805--Precision Metal Working--UG                      642            34,456             2.1            26.6
     Certificates.............................
    5109--Allied Health (Diagnostic &                      564            41,511             2.1            11.7
     Treatment)--UG Certificates..............
    5108--Allied Health (Medical Assisting)--            2,275            30,226             7.6            12.2
     Associate's..............................
    5107--Health & Medical Administrative                3,292            37,028             9.2            10.9
     Services--Bachelor's.....................
    5202--Business Administration--Associate's           2,532            32,427             8.3            21.7
    5107--Health & Medical Administrative                2,721            26,600            10.4            14.0
     Services--Associate's....................
    5138--Registered Nursing, Nursing                    3,852            96,798             4.0             2.6
     Administration, Nursing Research &
     Clinical Nursing--Master's...............
    5138--Registered Nursing, Nursing                    2,535            54,352             4.7             6.9
     Administration, Nursing Research &
     Clinical Nursing--Associate's............
    5202--Business Administration--UG                      705            35,816             1.6            20.1
     Certificates.............................
    5106--Dental Support--UG Certificates.....           1,024            24,502             4.4            14.0
All Other Programs............................           3,105            42,273             8.0            12.1
----------------------------------------------------------------------------------------------------------------

    Table 3.18 lists the most frequent types of failing GE programs (by 
enrollment in failing programs). Failing programs are 
disproportionately in a small number of types of programs. Twenty-two 
percent of enrollment is in UG Certificate Cosmetology programs alone, 
reflecting both high enrollment and high failure rates. Another 23 
percent are in UG Certificate programs in Health/Medical administration 
and assisting, dental support, and massage, reflecting large enrollment 
and moderate failure rates. These 20 categories account for 71 percent 
of all enrollments in programs that fail at least one GE metric. Table 
3.19 provides the average program annual loan payment, the average 
program earnings, and the average default rate (all weighted by title 
IV, HEA enrollment) for the most frequent types (by field and 
credential) of GE programs that fail at least one GE metric (by 
enrollment count), separately for failing and passing programs. Within 
each type of program, failing programs have much higher loan payments, 
lower earnings, and higher default rates than programs that pass the GE 
metrics. This demonstrates that higher-performing GE programs exist 
even within the same field and credential level as programs that fail 
GE.

         Table 3.18--Failing GE Programs With the Most Students, by GE Result, CIP and Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                                                    Percent of
                                                     Number of      Percent of       Number of      students at
                                                      failing         failing        students         failing
                                                     programs        programs                        programs
----------------------------------------------------------------------------------------------------------------
1204--Cosmetology & Personal Grooming--UG                    639            36.2         154,100            21.9
 Certificates...................................
5108--Allied Health (Medical Assisting)--UG                  155             8.8          70,300            10.0
 Certificates...................................
5107--Health & Medical Administrative Services--             102             5.8          32,400             4.6
 UG Certificates................................
5107--Health & Medical Administrative Services--              37             2.1          28,800             4.1
 Associate's....................................
5107--Health & Medical Administrative Services--               5             0.3          26,400             3.7
 Bachelor's.....................................
3017--Behavioral Sciences--Bachelor's...........               2             0.1          20,100             2.9
5202--Business Administration--Associate's......              23             1.3          19,000             2.7
5108--Allied Health (Medical Assisting)--                     38             2.2          17,600             2.5
 Associate's....................................
1312--Teacher Education & Professional                         2             0.1          17,500             2.5
 Development, Specific Levels & Methods--
 Bachelor's.....................................
5115--Mental & Social Health Services & Allied                 5             0.3          15,400             2.2
 Professions--Master's..........................
5106--Dental Support--UG Certificates...........              60             3.4          13,400             1.9
5135--Somatic Bodywork--UG Certificates.........              95             5.4          13,400             1.9

[[Page 32428]]

 
4301--Criminal Justice & Corrections--Bachelor's               7             0.4          13,100             1.9
4400--Human Services, General--Bachelor's.......               2             0.1          12,100             1.7
4301--Criminal Justice & Corrections--                        16             0.9          11,700             1.7
 Associate's....................................
4201--Psychology--Bachelor's....................               4             0.2          10,200             1.5
1205--Culinary Arts--UG Certificates............              21             1.2           5,800             0.8
2301--English Language & Literature, General--UG               8             0.5           5,600             0.8
 Certificates...................................
5139--Practical Nursing--UG Certificates........              27             1.5           5,500             0.8
5204--Business Operations--UG Certificates......              33             1.9           5,400             0.8
All Other Programs..............................             485            27.5         205,500            29.2
                                                 ---------------------------------------------------------------
    Total.......................................           1,766          100.00         703,300           100.0
----------------------------------------------------------------------------------------------------------------
Note: Student counts rounded to the nearest 100.

[GRAPHIC] [TIFF OMITTED] TP19MY23.010

Student Demographic Analysis
Methodology for Student Demographic Analysis
    The Department conducted analyses of the 2022 PPD to assess the 
role of student demographics as a factor in program performance. Our 
analysis demonstrates that GE programs that fail the metrics have 
particularly bad outcomes that are not explained by student 
demographics alone. We examined the demographic composition of program 
enrollment, comparing the composition of programs that pass, fail, or 
did not have data. We also conducted regression analysis, which permits 
us to hold constant several factors at once. This analysis focuses on 
GE programs since non-GE programs are not at risk of becoming 
ineligible for title IV, HEA aid.\229\
---------------------------------------------------------------------------

    \229\ We conducted the regression analysis discussed below for 
non-GE programs as well. Our conclusions about the relative 
contribution of demographic factors in explaining program 
performance on the D/E and EP metrics is similar for non-GE programs 
as for GE programs.
---------------------------------------------------------------------------

    For the race and ethnicity variables, we used the proportion of 
individuals in each race and ethnicity category among all completers of 
each certificate or degree reported in the IPEDS 2016 and 2017 
Completions Surveys.\230\ Race and ethnicity is not available for only 
title IV, HEA recipients, so we rely on information for all (including 
non-title IV, HEA student) completers instead from IPEDS. We construct 
four race/ethnicity variables:
---------------------------------------------------------------------------

    \230\ Specifically, the C2016A and C2017A datasets available 
from the IPEDS data center. These cover the 2015-16 and 2016-17 
academic years (July 1 to June 30).

 Percent Black
 Percent Hispanic
 Percent Asian
 Percent non-White, which also includes individuals with more 
than one race. Note that this is not mutually exclusive with the other 
three race/ethnicity categories.

    We aggregated the number of completions in each race/ethnicity 
category reported for each program in IPEDS to the corresponding GE 
program definition of six-digit OPEID, CIP code, and credential level. 
While D/E and EP rates measure only the outcomes of students who 
completed a program and received title IV, HEA program funds, IPEDS 
completions data include both title IV, HEA graduates and non-title IV, 
HEA graduates. Race and ethnicity data is not available separately for 
title IV, HEA completers. We believe the IPEDS data provides a 
reasonable approximation of the proportion, by race and ethnicity, of 
title IV, HEA graduates completing GE programs. We determined percent 
of each race and ethnicity category for 25,278 of the 32,058 programs. 
Many smaller programs could not be matched primarily because, as stated 
above, IPEDS and NSLDS use different program categorization systems, 
and the two sources at times are not sufficiently consistent to match 
data at the GE program-level. Nonetheless, we do not believe this will 
substantially affect our results since programs that do not match are 
less likely to meet the n-size criteria and thus would be likely 
excluded from our analysis of program performance.
    Percent Pell for this analysis is the percentage of title IV, HEA 
completers during award years 15, 16, and 17 who received a Pell Grant 
at any time in their academic career. Because Pell status is being used 
as a proxy for socioeconomic background, we counted students if they 
had received a Pell Grant at any time in

[[Page 32429]]

their academic career, even if they did not receive it for enrollment 
in the program. For instance, students that received Pell at their 
initial undergraduate institution but not at another institution they 
attended later would be considered a Pell Grant recipient at both 
institutions.
    Several other background variables were collected from students' 
Free Application for Federal Student Aid (FAFSA) form. For all students 
receiving title IV, HEA aid in award years 15, 16, and 17, the 
Department matched their enrollment records to their latest FAFSA filed 
associated with their first award year in the program in which they 
were enrolled. First-generation status, described below, is taken from 
students earliest received FAFSA. From these, the Department 
constructed the following:
     Percent of students that are male.
     Percent of students that are first-generation, defined as 
those who indicated on the FAFSA not having a parent that had attended 
college. Children whose parents completed college are more likely to 
attend and complete college.
     Average family income in 2019 dollars. For dependent 
students, this includes parental income and the students' own income. 
For independent students, it includes the student's own income and 
spousal income.
     Average expected family contribution. We consider EFC as 
an indicator of socioeconomic status because EFC is calculated based on 
household income, other resources, and family size.
     Average age at time of FAFSA filing.
     Percent of students aged 24 or older at time of FAFSA 
filing.
     Share of students that are independent. Independent status 
is determined by a number of factors, including age, marital status, 
having dependents, and veteran status.
     Median student income prior to program enrollment among 
students whose income is greater than or equal to three-quarters of a 
year of earnings at Federal minimum wage. We only compute this variable 
for programs where at least 30 students meet this requirement, this 
variable should be viewed as a rough indicator of students' financial 
position prior to program entry. The average percentage of enrollees 
covered by this variable is 57.6 across all programs.
    Based on these variables, we determined the composition of over 
23,907 of the 32,058 programs in our data, though some demographic 
variables have more non-missing observations. Unless otherwise stated, 
our demographic analysis treats programs (rather than students) as the 
unit of analysis. The analysis, therefore, does not weight programs 
(and their student characteristics) by enrollment.
    Table 3.20 provides program-level descriptive statistics for these 
demographic variables in the GE program dataset. The typical (median) 
program has 6 percent completers that are Black, 6 percent Hispanic, 0 
percent Asian (program mean is 3 percent), and 38 percent non-White. At 
the median program, sixty-one percent are independent, half are over 
the age 24, and 31 percent are male. Half are first-generation college 
students and 77 percent have ever received a Pell Grant. Average family 
income at time of first FAFSA filing is $38,000 and the typical student 
who is attached to the labor force earns $29,900 before enrolling in 
the program.

                         Table 3.20--Descriptive Statistics of the Demographic Variables
----------------------------------------------------------------------------------------------------------------
                                                                                                         Std.
                                                                Programs      Median      Average     deviation
----------------------------------------------------------------------------------------------------------------
Share T4 Completers First Gen...............................       24,199           50           49           34
Share T4 Completers Ever Pell...............................       24,199           77           67           36
Share T4 Completers Out-of-State............................       24,199            0           16           30
Share of T4 Completers Male.................................       24,199           31           42           41
Share of T4 Completers Age 24+..............................       24,199           50           51           37
Share T4 Completers Independent.............................       24,199           61           58           36
Share All Completions Non-White.............................       25,278           38           43           30
Share All Completions Black.................................       25,278            6           14           20
Share All Completions Hispanic..............................       25,278            6           15           23
Share All Completions Asian.................................       25,278            0            3            9
Age at Time of FAFSA........................................       23,907           26           28            8
FAFSA Family Income.........................................       23,907       38,137       47,726       45,433
Median Student Pre-Inc......................................       17,599       29,908       38,585       32,806
----------------------------------------------------------------------------------------------------------------

Student Demographics Descriptive Analysis
    Table 3.21 reports average demographic characteristics of GE 
programs separately by GE result. Programs that fail at least one GE 
metric have a higher share of students that are female, higher share of 
students that are Black or Hispanic, lower student and family income, 
and higher share of students that have ever received the Pell Grant. 
Average student age and dependency status is similar for passing and 
failing programs.

                                    Table 3.21--Demographic Shares by Result
----------------------------------------------------------------------------------------------------------------
                                                                                    Fail
                                                              All      Passing     (any)    Fails D/E   Fails EP
----------------------------------------------------------------------------------------------------------------
Share TIV Completers First Gen...........................         49         48         61         55         62
Share TIV Completers Ever Pell...........................         67         66         81         74         83
Share TIV Completers Out-of-State........................         16         15         20         39         15
Share of TIV Completers Male.............................         42         44         22         28         20
Share of TIV Completers Age 24+..........................         51         51         49         57         45
Share TIV Completers Independent.........................         58         58         59         66         56
Share All Completions Non-White..........................         43         41         58         58         57
Share All Completions Black..............................         14         13         21         25         20

[[Page 32430]]

 
Share All Completions Hispanic...........................         15         15         25         18         26
Share All Completions Asian..............................          3          3          3          2          4
Age at Time of FAFSA.....................................         28         28         27         29         27
FAFSA Family Income......................................     47,700     48,700     35,100     41,000     33,300
Median Student Pre-Inc...................................     38,600     39,600     29,100     34,200     27,200
----------------------------------------------------------------------------------------------------------------
Note: Income values rounded to the nearest 100.

Student Demographics Regression Analysis
    One limitation of the descriptive tabulations presented above is 
that it is difficult to determine which factors, whether they be 
demographics or program characteristics, explain the higher failure 
rate of programs serving certain groups of students. To further examine 
the relationship between student demographics and program results under 
the proposed regulations, we analyzed the degree to which specific 
demographic characteristics might be associated with a program's annual 
D/E rate and EP, while holding other characteristics constant.
    For this analysis, the Department estimated the parameters of 
linear regression models (OLS) with annual debt-to-earnings or the 
earnings premium as the dependent (outcome) variables and indicators of 
student, program, and institutional characteristics as independent 
variables.\231\ The independent demographic variables included in the 
regression analysis are: share of students in different race and 
ethnicity categories; share of students ever receiving Pell Grants; 
share of students that are male; share of students that are first-
generation college students; share of students that are independent; 
and average family income from student's FAFSA. Program and 
institutional characteristics include credential level and control 
(public, private non-profit, and proprietary). In some specifications 
we include institution fixed effects and omit control. When used with 
program-level data, institutional fixed effects control for any factors 
that differ between institutions but are common among programs in the 
same institution, such as institutional leadership, pricing strategy, 
and state or local factors.
---------------------------------------------------------------------------

    \231\ Though not shown below, we have conducted parallel 
regression analysis with binary indicators for whether the program 
fails the D/E metric and whether it fails the EP metric as the 
outcomes. Results are qualitatively similar to those reported here 
using continuous outcomes, though the amount of variation in these 
binary outcomes that demographics explain is even more muted than 
that reported here.
---------------------------------------------------------------------------

    Table 3.22 reports estimates from the D/E rate regressions 
described above, with each column representing a different regression 
model that includes different sets of independent variables. Comparing 
the R-squared across different columns demonstrates the degree to which 
different factors explain variation in the outcome. The first three 
columns quantify the extent to which variation in D/E rates are 
accounted for by program and institutional characteristics. The 
institutional control alone (column 1) explains 15 percent of the 
variation in D/E and adding credential level increases the R-squared to 
23 percent (column 2). D/E rates are 3.7 to 3.9 percentage points 
higher for private non-profit and for-profit institutions than public 
institutions (the omitted baseline category) after controlling for 
credential level. This likely reflects the much higher tuition prices 
charged by private institutions, which results in higher debt service. 
Graduate credential levels also have much higher debt-to-earnings 
ratios than undergraduate credentials, reflecting the typically higher 
tuition costs associated with graduate programs.
    Almost all programs are in institutions with multiple GE programs, 
so column 3 includes institution fixed effects in place of indicators 
for control.\232\ Credential level and institution together account for 
69 percent of the variation in D/E rates across programs. To illustrate 
how much more of the variation in outcomes is accounted for by student 
characteristics, column 4 adds the demographic characteristics on top 
of the model with credential level and institution effects. Doing so 
only slightly increases the model's ability to account for variation in 
D/E, lifting the R-squared to 71 percent. This specification 
effectively compares programs with more Pell students to those with 
fewer Pell students within the same institution and same credential 
level, while also controlling for the other independent variables 
listed. Demographic characteristics, therefore, appear to explain 
little of the variation in D/E rates across programs beyond what can be 
predicted by institutional characteristics and program credential 
level. Evidently, institution- and program-level factors, which could 
include such things as institutional performance and decisions about 
institutional pricing along with other factors, are much more 
important.\233\ The final two columns report similar models, but 
weighting by average title IV, HEA enrollment, and the results are 
qualitatively similar.
---------------------------------------------------------------------------

    \232\ Only 4 percent of GE programs are the only GE program 
within the institution. The median number of programs within an 
institution is 18.
    \233\ The patterns by race are broadly similar to what was found 
in analysis of the 2014 final rule. The coefficient on % Black in 
the final column suggests that a 10-percentage point increase in the 
percent of students that are black is associated with a 0.15 higher 
debt-to-earnings ratio, holding institution, credential level, and 
the other demographic factors listed constant. Analysis of the prior 
rule found an increase of 0.19, though the set of controls is not 
the same.

                                 Table 3.22--Regression Analysis of the Demographic Variables, GE Programs, Outcome: D/E
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     1                 2                 3                 4                 5                 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Private, Nonprofit..........................    4.367 (0.898)     3.939 (0.947)  ................  ................  ................  .................
Proprietary.................................    4.797 (0.109)     3.685 (0.102)  ................  ................  ................  .................
Credential Level:
    UG Certificates.........................  ...............    -2.162 (0.205)    -2.446 (0.585)    -3.973 (0.602)    -1.096 (0.636)     -5.005 (0.586)
    Associate's.............................  ...............     0.065 (0.250)     0.298 (0.433)    -0.617 (0.413)     1.344 (0.629)     -0.926 (0.418)
    Master's................................  ...............     2.850 (0.747)     1.541 (0.575)     1.252 (0.469)     0.991 (0.704)      1.593 (0.563)

[[Page 32431]]

 
    Doctoral................................  ...............     4.883 (0.795)     3.811 (1.054)     5.599 (1.008)     3.803 (1.397)      7.716 (1.189)
    Professional............................  ...............    12.510 (3.678)     5.828 (0.998)     5.616 (1.365)     6.711 (0.837)      8.627 (1.540)
    Grad Certs..............................  ...............     0.558 (0.697)     1.408 (1.702)     0.831 (1.639)     4.573 (2.536)      4.517 (2.376)
% Black.....................................  ...............  ................  ................     0.015 (0.009)  ................      0.032 (0.016)
% Hispanic..................................  ...............  ................  ................    -0.013 (0.011)  ................     -0.030 (0.017)
% Asian.....................................  ...............  ................  ................    -0.056 (0.028)  ................     -0.159 (0.043)
% Male......................................  ...............  ................  ................    -0.015 (0.002)  ................     -0.029 (0.004)
% Ever Pell.................................  ...............  ................  ................     0.002 (0.011)  ................      0.044 (0.016)
% First Generation..........................  ...............  ................  ................    -0.001 (0.010)  ................     -0.021 (0.016)
% Independent...............................  ...............  ................  ................    -0.005 (0.006)  ................     -0.005 (0.008)
FAFSA Family Income ($1,000)................  ...............  ................  ................    -0.055 (0.013)  ................     -0.088 (0.014)
Intercept...................................    1.260 (0.064)     3.290 (0.216)     6.328 (0.456)    10.787 (1.594)     6.223 (0.413)     12.187 (1.968)
R-squared...................................             0.15              0.23              0.69              0.71              0.61               0.71
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Specifications 3 to 6 include fixed effects for each six-digit OPEID number. Bachelor's degree and public are the omitted categories for
  credential type and control, respectively. Columns 5 and 6 weight programs by average title IV enrollment in AY16 and AY17.

    Table 3.23 reports estimates from identical regression models, but 
instead using EP as the outcome. Again, each column represents a 
different regression model that includes different sets of independent 
variables. Program and institutional characteristics still matter 
greatly to earnings outcomes. Institutional effects and credential 
level together explain 77 percent of the variation in program-level 
earnings outcomes (column 3). Adding demographic variables explains an 
additional 7 percent of the variation in program-level earnings (column 
4). Note that the estimated regression coefficients will likely 
overstate the effect of the baseline characteristics on outcomes if 
these characteristics are correlated with differences in program 
quality not captured by the crude institution and program 
characteristics included in the regression.

                            Table 3.23--Regression Analysis of the Demographic Variables, GE Programs, Outcome: EP ($1,000s)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     1                 2                 3                 4                 5                 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Private, Nonprofit..........................    7.355 (2.327)     0.215 (1.647)  ................  ................  ................  .................
Proprietary.................................   -4.613 (0.607)   -10.717 (0.486)  ................  ................  ................  .................
Credential Level:
    UG Certificates.........................  ...............   -18.505 (0.821)   -17.197 (1.611)    -7.579 (1.376)   -20.851 (2.298)     -0.728 (1.902)
    Associate's.............................  ...............    -6.844 (0.985)    -8.616 (1.283)    -3.605 (1.093)   -11.086 (1.938)     -0.341 (1.242)
    Master's................................  ...............    11.188 (1.613)    11.085 (2.031)     7.169 (1.764)    11.323 (3.453)      8.738 (2.830)
    Doctoral................................  ...............    32.005 (2.892)    32.988 (4.440)    20.813 (3.932)    28.303 (6.102)     10.521 (4.338)
    Professional............................  ...............   41.519 (12.275)   58.782 (13.667)   44.858 (11.362)    66.297 (9.928)    43.511 (11.765)
    Grad Certs..............................  ...............    23.979 (3.219)    13.521 (4.118)    11.646 (3.529)     7.767 (6.321)      8.836 (6.407)
% Black.....................................  ...............  ................  ................    -0.114 (0.047)  ................     -0.198 (0.058)
% Hispanic..................................  ...............  ................  ................    -0.084 (0.038)  ................     -0.002 (0.061)
% Asian.....................................  ...............  ................  ................     0.492 (0.110)  ................      1.390 (0.266)
% Male......................................  ...............  ................  ................     0.099 (0.007)  ................      0.096 (0.016)
% Ever Pell.................................  ...............  ................  ................    -0.153 (0.045)  ................     -0.084 (0.064)
% First Generation..........................  ...............  ................  ................    -0.053 (0.029)  ................      0.001 (0.047)
% Independent...............................  ...............  ................  ................     0.143 (0.017)  ................      0.193 (0.031)
FAFSA Family Income ($1,000)................  ...............  ................  ................     0.170 (0.055)  ................      0.443 (0.072)
Intercept...................................   11.267 (0.514)    27.732 (0.918)    19.839 (1.311)     9.842 (7.404)    21.911 (1.645)    -20.679 (9.331)
R-squared...................................             0.03              0.42              0.77              0.84              0.71               0.87
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Specifications 3 to 6 include fixed effects for each six-digit OPEID number. Bachelor's degree and public are the omitted categories for
  credential type and control, respectively. Columns 5 and 6 weight programs by average title IV enrollment in AY16 and AY17.

    Conclusions about the extent to which different factors explain 
variation in program outcomes can be sensitive to the order in which 
factors are entered into regressions. However, a variance decomposition 
analysis (that is insensitive to ordering) demonstrates that program 
and institutional factors explain the majority of the variance in both 
the D/E and EP metrics across programs when student characteristics are 
also included.
    Figure 3.3 provides another view, demonstrating that many 
successful programs exist and enroll similar shares of low-income 
students. It shows the distribution of raw EPs for undergraduate 
certificate programs (the y-axis is in $1,000s) grouped by the average 
FAFSA family income of the program. Programs are placed in 20 equally 
sized groups from lowest to highest FAFSA family income.\234\ Each dot 
represents an individual program. The EP of the median program in each 
income group, indicated by the large black square, is clearly 
increasing, reflecting the greater earnings opportunities for students 
that come from higher income families. However, there is tremendous 
variation around this median. Even among programs with students that 
come from the lowest income families, there are clearly programs whose 
students go on to have earnings success after program completion. This 
graph demonstrates that demographics are not destiny when it comes to 
program performance.
---------------------------------------------------------------------------

    \234\ Since each of the 20 groups includes the same number of 
programs, the income range varies across groups.

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

[[Page 32432]]

[GRAPHIC] [TIFF OMITTED] TP19MY23.011

Gender Differences
    The analysis above showed that programs failing the EP threshold 
have a higher share of female students. In Table 3.24, descriptively we 
show that there are many programs that have similar gender composition 
but have much higher rates of passage than programs in cosmetology and 
massage, where failure rates are comparatively higher. Other programs, 
such as practical nursing and dental support, are similar in terms of 
their gender and racial balance but have much higher passage rates.

                 Table 3.24--Gender and Racial Composition of Undergraduate Certificate Programs
----------------------------------------------------------------------------------------------------------------
                                                      Share of all completers who are . . .
                                  Share of  --------------------------------------------------------  Women (any
                                  programs     Black     Hispanic     Asian      Other      White       race)
                                  failing      women       women      women      women      women
----------------------------------------------------------------------------------------------------------------
Teacher Education.............        0.068      0.226       0.165      0.025      0.094      0.439        0.950
Human Development.............        0.022      0.216       0.284      0.039      0.063      0.366        0.968
Health & Medical Admin........        0.388      0.209       0.171      0.029      0.086      0.442        0.938
Medical Assisting.............        0.478      0.171       0.292      0.030      0.067      0.317        0.876
Laboratory Science............        0.178      0.163       0.138      0.030      0.079      0.434        0.843
Practical Nursing.............        0.042      0.154       0.134      0.033      0.067      0.498        0.886
Cosmetology...................        0.803      0.150       0.191      0.051      0.059      0.451        0.902
Dental Support................        0.405      0.146       0.300      0.025      0.064      0.384        0.920
Business Operations...........        0.261      0.142       0.166      0.020      0.057      0.395        0.781
Business Administration.......        0.001      0.128       0.090      0.018      0.058      0.308        0.601
Culinary Arts.................        0.322      0.123       0.148      0.019      0.060      0.249        0.598
Somatic Bodywork..............        0.617      0.102       0.127      0.029      0.079      0.418        0.754
Accounting....................        0.071      0.096       0.141      0.060      0.067      0.361        0.725
Criminal Justice..............        0.041      0.072       0.079      0.004      0.027      0.151        0.333
Liberal Arts..................        0.038      0.049       0.205      0.043      0.055      0.262        0.613
Allied Health, Diagnostic.....        0.026      0.046       0.089      0.016      0.034      0.309        0.494
IT Admin & Mgmt...............        0.046      0.044       0.021      0.009      0.029      0.081        0.183
Ground Transportation.........        0.007      0.041       0.007      0.003      0.007      0.034        0.092
Computer & Info Svcs..........        0.074      0.030       0.078      0.012      0.017      0.113        0.250
Precision Metal Working.......        0.041      0.009       0.007      0.001      0.005      0.036        0.058
HVAC..........................        0.026      0.008       0.003      0.000      0.001      0.012        0.025
Fire Protection...............        0.000      0.007       0.019      0.001      0.005      0.058        0.091
Power Transmission............        0.016      0.007       0.006      0.000      0.003      0.019        0.035
Vehicle Maintenance...........        0.049      0.006       0.011      0.001      0.006      0.027        0.052
Environment Ctrl Tech.........        0.011      0.006       0.007      0.001      0.005      0.018        0.036
----------------------------------------------------------------------------------------------------------------


[[Page 32433]]

Conclusions of Student Demographic Analysis
    On several dimensions, programs that have higher enrollment of 
underserved students have worse outcomes--lower completion, higher 
default, and lower post-college earnings levels--due to a myriad of 
challenges these students face, including fewer financial resources and 
structural discrimination in the labor market.\235\ And yet, there is 
evidence that some institutions aggressively recruited vulnerable 
students---at times with deceptive marketing and fraudulent data--into 
programs without sufficient institutional support and instructional 
investment, placing students at risk for having high debt burdens and 
low earnings.\236\ Nonetheless, our analysis demonstrates that GE 
programs that fail the metrics have particularly bad outcomes that are 
not explained by student demographics alone. Furthermore, alternative 
programs with similar student characteristics but where students have 
better outcomes exist and serve as good options for students that would 
otherwise attend low-performing programs. We quantify the extent of 
these alternative options more directly in the next section. The 
proposed GE rule aims to protect students from low-value programs and 
steer them to programs that would be greater engines of upward economic 
mobility.
---------------------------------------------------------------------------

    \235\ Blau, Francine D., and Lawrence M. Kahn. 2017. ``The 
Gender Wage Gap: Extent, Trends, and Explanations.'' Journal of 
Economic Literature 55 (3): 789-865.
    Hillman, N.W. (2014). College on Credit: A Multilevel Analysis 
of Student Loan Default. Review of Higher Education 37(2), 169-195.
    Pager, D., Western, B. & Bonikowski, B. (2009). Discrimination 
in a Low-Wage Labor Market: A Field Experiment. American 
Sociological Review, 74, 777-799.
    \236\ Cottom, T.M. (2017). Lower Ed: The Troubling Rise of For-
Profit Colleges in the New Economy.
    Government Accountability Office (2010). For-Profit Colleges: 
Undercover Testing Finds Colleges Encouraged Fraud and Engaged in 
Deceptive and Questionable Marketing Practices.
    United States Senate Committee on Health, Education, Labor and 
Pensions (2012). For Profit Higher Education: The Failure to 
Safeguard the Federal Investment and Ensure Student Success.
---------------------------------------------------------------------------

Alternative Options Exist for Students To Enroll in High-Value Programs
Measuring Students' Alternative Options
    One concern with limiting title IV, HEA eligibility for low-
performing GE programs is that such measures could reduce postsecondary 
opportunities for some students. The Department conducted an analysis 
to estimate the short-term alternative options that are available to 
students that might, in the absence of these regulations, enroll in 
failing programs.
    Students deterred from attending a specific program because of a 
loss of title IV, HEA aid eligibility at that program have several 
alternatives. For programs that are part of a multi-program 
institution, many may choose to still enroll at the institution, but 
attend a different program in a related subject that did not lose 
access to title IV, HEA and, therefore, likely offers better outcomes 
for students in terms of student debt, earnings, or both. Some would 
stay in their local area but attend a similar program at a different 
nearby institution. Others would venture to a related subject at a 
different nearby institution. Still others would attend an institution 
further away, but perhaps in the same State or online.\237\ In order to 
identify geographical regions where the easiest potential transfer 
options exist, we used the 3-digit ZIP code (ZIP3) in which each 
institution is located. Three-digit zip codes designate the processing 
and distribution center of the United States Postal Service that serves 
a given geographic area. For each combination of ZIP3, CIP code, and 
credential level, we determined the number of programs available and 
the number of programs that would pass both the D/E and EP rates 
measures. Since programs that pass due to insufficient n-size to 
compute D/E and EP rates represent real options for students at failing 
programs, we include these programs in our calculations. Importantly, 
we also include all non-GE programs at public and private non-profit 
institutions.\238\ Our characterization of programs by the number of 
alternative options available is also used in the simulations of 
enrollment shifts that underly the Budget Impact and Cost, Benefit, and 
Transfer estimates, which we describe later.
---------------------------------------------------------------------------

    \237\ Two other possibilities, which we include in our 
simulation of budget impacts, is that students continue to enroll in 
programs without receiving title IV, HEA aid or decline to enroll 
altogether.
    \238\ Since the 2022 PPD are aggregated to each combination of 
the six-digit OPEID, four-digit CIP code, and credential level, we 
do not have precise data on geographic location. For example, a 
program can have multiple branch locations in different cities and 
States. At some of these locations, the program could be offered as 
an online program while other locations offer only in-person 
programs. Each of these locations would present as a single program 
in our data set without detail regarding precise location or format. 
We do not possess more detailed geographic information that would 
allow us to address this issue, so we recognize that our analysis of 
geographic scope and alternatives may be incomplete and cause us to 
understate the number of options students have. Nonetheless, the 
vast majority of alternative options will be captured in our 
analysis.
---------------------------------------------------------------------------

    Table 3.25 reports the distribution of the number of transfer 
options available to the students that would otherwise attend GE 
programs that fail at least one of the two metrics. We present 
estimates for four different ways of conceptualizing and measuring 
these transfer options. We assume students have more flexibility over 
the specific field and institution attended than credential level, so 
all four measures assume students remain in the same credential level. 
While not captured in this analysis, it is possible that some students 
would pursue a credential at a higher level in the same field, thereby 
further increasing their available options. Half of students in failing 
GE programs (in 42 percent of failing programs) have at least one 
alternative non-failing program of the same credential level at the 
same institution, but in a related field (as indicated by being in the 
same 2-digit CIP code). Nearly a quarter have more than one additional 
option. Two-thirds of students (at 61 percent of the failing programs) 
have a transfer option passing the GE measures within the same 
geographic area (ZIP3), credential level, and narrow field (4-digit CIP 
code). More than 90 percent of students have at least one transfer 
option within the same geographic area and credential level when the 
field is broadened to include programs in the same 2-digit CIP code. 
Finally, all students have at least one program in the same State, 
credential level, and 2-digit CIP code. While this last measure 
includes options that may not be viable for currently enrolled 
students--requiring moving across the State or attending virtually--it 
does suggest that at least some options are available for all students, 
both current and potential students, that would otherwise attend 
failing GE programs.

[[Page 32434]]



      Table 3.25--Share of Programs and Enrollment in Failing GE Programs, by Number of Alternative Options
----------------------------------------------------------------------------------------------------------------
                                                       Same
                                                   institution,     Same Zip3,      Same Zip3,      Same state,
                                                    cred level,     cred level,     cred level,     cred level,
                                                       CIP2            CIP4            CIP2            CIP2
----------------------------------------------------------------------------------------------------------------
A. Programs Transfer options:
    1 or more...................................            0.42            0.61            0.88            1.00
    5 or more...................................            0.04            0.05            0.51            0.96
B. Enrollment Transfer options:
    1 or more...................................            0.50            0.66            0.91            1.00
    5 or more...................................            0.04            0.05            0.53            0.96
----------------------------------------------------------------------------------------------------------------

    Table 3.26 repeats this analysis for non-GE programs with at least 
one failing GE metric. Students considering non-GE programs with D/E or 
EP metrics that do not meet Department standards may choose to enroll 
elsewhere. More than half of students at failing non-GE programs have a 
non-failing program in the same 4-digit CIP code, credential level, and 
geographic area that they could choose to enroll in. This share 
approaches three-quarters if the field is broadened to include programs 
in the same two-digit CIP code. Therefore, while the set of 
alternatives is not as numerous for non-GE programs as for GE programs, 
the number of alternatives is still quite high. Furthermore, since non-
GE programs are not at risk of losing eligibility for title IV aid, the 
slightly lower number of alternatives to failing non-GE programs is 
less concerning.

    Table 3.26--Share of Programs and Enrollment in Failing Non-GE Programs, by Number of Alternative Options
----------------------------------------------------------------------------------------------------------------
                                                       Same
                                                   institution,     Same Zip3,      Same Zip3,      Same state,
                                                    cred level,     cred level,     cred level,     cred level,
                                                       CIP2            CIP4            CIP2            CIP2
----------------------------------------------------------------------------------------------------------------
A. Programs Transfer options:
    1 or more...................................            0.54            0.50            0.81            0.99
    5 or more...................................            0.11            0.07            0.41            0.94
B. Enrollment Transfer options:
    1 or more...................................            0.38            0.51            0.72            1.00
    5 or more...................................            0.08            0.06            0.31            0.93
----------------------------------------------------------------------------------------------------------------

    This analysis likely understates the transfer options available to 
students for three reasons. First, as stated above, it does not 
consider programs of a different credential level. For example, 
students who would have pursued a certificate program might opt for an 
associate degree program that shows higher earnings. Second, it does 
not consider the growth of online/distance programs now available in 
most fields of study, from both traditional schools and primarily on-
line institutions.
    Third, we do not consider non-title IV, HEA institutions. 
Undergraduate certificate programs in cosmetology represent the largest 
group of programs without nearby passing options in the same four-digit 
CIP code, in large part because many of these programs do not pass the 
GE metrics. Nonetheless, recent data from California and Texas suggest 
that many students successfully pass licensure exams after completing 
non-title IV, HEA programs in cosmetology.\239\ Non-title IV, HEA 
cosmetology schools operate in almost all counties in Texas.\240\ In 
Florida, non-title IV, HEA cosmetology schools have similar licensure 
pass rates but much lower tuition.\241\
---------------------------------------------------------------------------

    \239\ In California, 55 percent of individuals passing either 
the practical or written components of the licensure test are from 
title IV, HEA schools according to Department analysis using 
licensing exam data retrieved from www.barbercosmo.ca.gov/schools/schls_rslts.shtml on December 7, 2022.
    \240\ Cellini, S. R. & Onwukwe, B. (2022). Cosmetology Schools 
Everywhere. Most Cosmetology Schools Exist Outside of the Federal 
Student Aid System. Postsecondary Equity & Economics Research 
Project working paper, August 2022.
    \241\ Cellini, S. R., & Goldin, C. (2014). Does federal student 
aid raise tuition? New evidence on for-profit colleges. American 
Economic Journal: Economic Policy, 6(4), 174-206.
---------------------------------------------------------------------------

Potential Alternative Programs Have Better Outcomes Than Failing 
Programs
    A key motivation for more accountability via this proposed rule is 
to steer students to higher value programs. As mentioned previously, 
research has shown that when an institution closed due to failing an 
accountability measure, students were diverted to schools with better 
outcomes.\242\ The Department conducted an analysis of the possible 
earnings impact of students shifting from programs that fail one of the 
GE metrics to similar programs that do not fail. For each failing 
program, we computed the average program-level median earnings of non-
failing programs included in the failing program's transfer options, 
which we refer to as ``Alternative Program Earnings.'' Earnings were 
weighted by average title IV, HEA enrollment in award years 2016 and 
2017. Alternative options were determined in the same way as described 
above. In computing Alternative Program Earnings, priority was first 
given to passing programs in the same institution, credential level, 
and two-digit CIP code if such programs exist and have valid earnings. 
This assigned Alternative Program Earnings for 20 percent of failing 
programs. Next priority was given to programs in the same ZIP3, 
credential level, and four-digit CIP code, which assigned Alternative 
Program Earnings for 8 percent of programs. Next was programs in the 
same ZIP3, credential level, and two-digit CIP code, which assigned 
Alternative Program Earnings for 14

[[Page 32435]]

percent of programs. We did not use the earnings of programs outside 
the ZIP3 to assign Alternative Program Earnings given the wage 
differences across regions. It was not possible to compute the earnings 
of alternative options for the remaining 59 percent of programs 
primarily because their options have insufficient number of completers 
to report median earnings (47 percent) or because they did not have 
alternative options in the same ZIP3 (12 percent). For these programs, 
we set the Alternative Program Earnings equal to the median earnings of 
high school graduates in the State (the same value used to determine 
the ET). The percent increase in earnings associated with moving from a 
failing program to a passing program was computed as the difference 
between a program's Alternative Program Earnings and its own median 
earnings, divided by its own median earnings. We set this earnings gain 
measure to 100 percent in the small number of cases where the median 
program earnings are zero or the ratio is greater than 100 percent.
---------------------------------------------------------------------------

    \242\ Cellini, S.R., Darolia, R. & Turner, L.J. (2020). Where Do 
Students Go When For-Profit Colleges Lose Federal Aid? American 
Economic Journal: Economic Policy, 12(2): 46-83.
---------------------------------------------------------------------------

    Table 3.27 reports the estimated percent difference in earnings 
between alternative program options and failing programs, separately by 
two-digit CIP and credential level. Across all subjects, the difference 
in earnings at passing undergraduate certificate programs and failing 
programs is about 50 percent. This is unsurprising, given that the EP 
metric explicitly identifies programs with low earnings, which in 
practice are primarily certificate programs. Encouragingly, many 
passing programs exist in the same subject, level, and market that 
result in much higher earnings than programs that fail. Failing 
associate degree programs also have similar non-failing programs with 
much higher earnings. Earnings differences are still sizable and 
positive, though not quite as large for higher credentials. Passing GE 
bachelor's programs have 31 percent higher earnings than bachelor's 
programs that fail the GE metrics.
    Table 3.28 reports similar estimates for non-GE programs. The 
earnings difference between failing and passing non-GE programs is more 
modest than for GE programs, but still significant: 21 percent across 
all credential levels, ranging from close to zero for Doctoral programs 
to 30 percent for Bachelor's programs.
    We use a similar process to compute the percent change in average 
program-level median debt between failing GE or non-GE programs and 
alternative programs.\243\ Tables 3.29 and 3.30 report the percent 
change in debt between alternative program options and failing 
programs, separately by two-digit CIP and credential level. Across all 
subjects and credential levels, debt is 22 percent lower at alternative 
programs than at failing GE programs. Large differences in debt are 
seen at all degree levels (other than professional), with modest 
differences for undergraduate certificate programs. At non-GE programs, 
there is no aggregate debt difference between failing programs and 
their alternatives, though this masks heterogeneity across credential 
levels. For graduate degree programs, relative to failing programs, 
alternative programs have lower debt levels ranging from 24 percent 
(Professional programs) to 35 percent (Doctoral programs). Failing 
associate degree programs have debt that is 12 percent higher than in 
passing programs.
---------------------------------------------------------------------------

    \243\ The only exception being that we use the debt for 
alternative programs in the same credential level, same two-digit 
CIP code, and State to impute alternative program debt if such a 
program is not available or calculable in students' ZIP3. This is 
because there is no other natural benchmark debt level analogous to 
the ET used to compute alternative program earnings.
---------------------------------------------------------------------------

    While these differences don't necessarily provide a completely 
accurate estimate of the actual earnings gain or debt reduction that 
students would experience by shifting programs, they suggest 
alternative options exist that provide better financial outcomes than 
programs that fail the proposed D/E and EP metrics.

 Table 3.27--Percent Earnings Difference Between Transfer Options and Failing GE Programs, by CIP and Credential
                                                      Level
----------------------------------------------------------------------------------------------------------------
                                                           Credential level
                             ---------------------------------------------------------------------------
                                                                                                  Grad    Total
                              UG cert.   Assoc.     Bach.    Master's    Doctoral    Profess.    certs
----------------------------------------------------------------------------------------------------------------
cip2
1...........................      1.00  ........  ........  ..........  ..........  ..........  .......     1.00
3...........................  ........  ........     -0.18  ..........  ..........  ..........  .......    -0.18
9...........................      0.18  ........      0.24        0.24  ..........  ..........  .......     0.20
10..........................      0.42      0.26     -0.02       -0.38  ..........  ..........  .......     0.07
11..........................      0.55      0.24      0.79       -0.62  ..........  ..........  .......     0.47
12..........................      0.54      0.11     -0.18  ..........  ..........  ..........     1.00     0.53
13..........................      0.48      0.38      0.13        0.46        0.18  ..........    -0.04     0.22
14..........................  ........     -0.01     -0.37  ..........  ..........  ..........  .......    -0.20
15..........................      0.16     -0.10  ........  ..........  ..........  ..........  .......     0.13
16..........................  ........  ........     -0.03  ..........  ..........  ..........  .......    -0.03
19..........................      0.69      0.29      0.13       -0.27       -0.55  ..........  .......     0.12
22..........................      0.33     -0.03     -0.03  ..........  ..........        0.22    -0.60    -0.00
23..........................      0.57      0.00      0.38       -0.09  ..........  ..........  .......     0.45
24..........................      0.06  ........  ........  ..........  ..........  ..........  .......     0.06
25..........................  ........  ........     -0.03  ..........  ..........  ..........  .......    -0.03
26..........................  ........  ........  ........  ..........  ..........  ..........    -0.32    -0.32
30..........................  ........      0.24     -0.03  ..........  ..........  ..........    -0.34     0.01
31..........................      0.51     -0.00  ........  ..........  ..........  ..........  .......     0.09
32..........................      0.32  ........  ........  ..........  ..........  ..........  .......     0.32
39..........................      0.40  ........     -0.03       -0.20  ..........  ..........  .......     0.04
42..........................  ........  ........      0.06        0.21       -0.39  ..........    -0.34    -0.06
43..........................      0.25      0.19      0.24        0.42       -0.56  ..........  .......     0.21
44..........................  ........      0.10      0.43        0.15        0.12  ..........    -0.50     0.31
45..........................  ........  ........      0.23       -0.24  ..........  ..........  .......     0.06
46..........................      0.45  ........  ........  ..........  ..........  ..........  .......     0.45
47..........................      0.70      0.14  ........  ..........  ..........  ..........  .......     0.61

[[Page 32436]]

 
48..........................      0.25  ........  ........  ..........  ..........  ..........  .......     0.25
49..........................      0.76  ........  ........  ..........  ..........  ..........  .......     0.76
50..........................      0.46      0.22      0.27        0.46  ..........  ..........  .......     0.30
51..........................      0.50      0.81      0.76        0.87       -0.07       -0.06     0.00     0.60
52..........................      0.51      0.31      0.61        0.22        0.34  ..........     0.20     0.38
54..........................  ........  ........     -0.13  ..........  ..........  ..........  .......    -0.13
                             -----------------------------------------------------------------------------------
    Total...................      0.51      0.48      0.31        0.49       -0.34       -0.03    -0.14     0.43
----------------------------------------------------------------------------------------------------------------


    Table 3.28--Percent Earnings Difference Between Transfer Options and Failing Non-GE Programs, by CIP and
                                                Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                    Credential level
                                                --------------------------------------------------------  Total
                                                  Assoc.     Bach.    Master's    Doctoral    Profess.
----------------------------------------------------------------------------------------------------------------
cip2
1..............................................      0.31      0.12  ..........  ..........  ..........     0.16
3..............................................  ........      0.38       -0.24  ..........  ..........     0.30
4..............................................  ........  ........       -0.31  ..........  ..........    -0.31
5..............................................  ........      0.02  ..........  ..........  ..........     0.02
9..............................................      0.12      0.31       -0.02  ..........  ..........     0.27
10.............................................      0.14     -0.01  ..........  ..........  ..........     0.11
11.............................................      0.32      1.00  ..........  ..........  ..........     0.37
12.............................................      0.25  ........  ..........  ..........  ..........     0.25
13.............................................      0.22      0.32        0.20       -0.12  ..........     0.23
15.............................................      0.83  ........  ..........  ..........  ..........     0.83
16.............................................      0.03      0.43  ..........  ..........  ..........     0.40
19.............................................      0.18      0.40       -0.42  ..........  ..........     0.27
22.............................................     -0.02     -0.09       -0.26       -0.59       -0.08    -0.14
23.............................................      0.38      0.23       -0.18  ..........  ..........     0.20
24.............................................      0.15      0.10       -0.54  ..........  ..........     0.14
26.............................................      0.13      0.39        0.12       -0.70  ..........     0.31
30.............................................      0.12      0.11       -0.17  ..........  ..........     0.10
31.............................................      0.10      0.22       -0.22  ..........  ..........     0.18
38.............................................     -0.05     -0.10  ..........  ..........  ..........    -0.07
39.............................................      0.55      0.49       -0.02  ..........        0.20     0.38
40.............................................  ........      0.58  ..........  ..........  ..........     0.58
41.............................................      0.08  ........  ..........  ..........  ..........     0.08
42.............................................      0.31      0.04       -0.10       -0.34       -0.69    -0.01
43.............................................      0.20      0.02       -0.12  ..........  ..........     0.09
44.............................................      0.21     -0.04        0.11  ..........  ..........     0.12
45.............................................      0.09      0.47       -0.12  ..........  ..........     0.23
47.............................................      0.38  ........  ..........  ..........  ..........     0.38
50.............................................      0.23      0.40        0.31       -0.29  ..........     0.37
51.............................................      0.65      0.77        0.57        0.26        0.11     0.48
52.............................................      0.14      0.53        0.42  ..........  ..........     0.23
54.............................................  ........      0.06       -0.19  ..........  ..........    -0.09
                                                ----------------------------------------------------------------
    Total......................................      0.22      0.30        0.15       -0.00        0.03     0.21
----------------------------------------------------------------------------------------------------------------


   Table 3.29--Percent Debt Difference Between Transfer Options and Failing GE Programs, by CIP and Credential
                                                      Level
----------------------------------------------------------------------------------------------------------------
                                                           Credential level
                             ---------------------------------------------------------------------------
                                                                                                  Grad    Total
                              UG cert.   Assoc.     Bach.    Master's    Doctoral    Profess.    certs
----------------------------------------------------------------------------------------------------------------
cip2                          ........  ........  ........  ..........  ..........  ..........  .......  .......
1...........................      0.00  ........  ........  ..........  ..........  ..........  .......     0.00
3...........................  ........  ........     -0.65  ..........  ..........  ..........  .......    -0.65
9...........................      0.06  ........     -0.26       -0.01  ..........  ..........  .......    -0.04
10..........................      0.15      0.63     -0.32  ..........  ..........  ..........  .......    -0.15
11..........................      0.06     -0.36     -0.23       -0.79  ..........  ..........  .......    -0.19
12..........................     -0.23     -0.49      0.13  ..........  ..........  ..........     0.00    -0.24
13..........................     -0.27     -0.89     -0.31       -0.36       -0.18  ..........    -0.20    -0.39

[[Page 32437]]

 
14..........................  ........      0.01     -0.58  ..........  ..........  ..........  .......    -0.30
15..........................     -0.13     -0.69  ........  ..........  ..........  ..........  .......    -0.19
16..........................  ........  ........     -0.52  ..........  ..........  ..........  .......    -0.52
19..........................     -0.05     -0.26     -0.24       -0.30  ..........  ..........  .......    -0.23
22..........................      1.00     -0.60     -0.26  ..........  ..........       -0.40  .......    -0.47
23..........................      0.00     -0.82     -0.33        0.00  ..........  ..........  .......    -0.18
24..........................      0.00  ........  ........  ..........  ..........  ..........  .......     0.00
25..........................  ........  ........  ........  ..........  ..........  ..........  .......  .......
26..........................  ........  ........  ........  ..........  ..........  ..........    -0.25    -0.25
30..........................  ........     -0.91     -0.54  ..........  ..........  ..........  .......    -0.58
31..........................     -0.83     -0.75  ........  ..........  ..........  ..........  .......    -0.80
32..........................      0.00  ........  ........  ..........  ..........  ..........  .......     0.00
39..........................      0.59  ........  ........  ..........  ..........  ..........  .......     0.59
42..........................  ........  ........     -0.49       -0.21       -0.76  ..........    -0.77    -0.42
43..........................     -0.57     -0.70     -0.42       -0.10  ..........  ..........  .......    -0.53
44..........................  ........     -0.74     -0.09       -0.28       -0.38  ..........  .......    -0.23
45..........................  ........  ........     -0.11  ..........  ..........  ..........  .......    -0.11
46..........................      0.16  ........  ........  ..........  ..........  ..........  .......     0.16
47..........................      0.10     -0.24  ........  ..........  ..........  ..........  .......     0.05
48..........................     -0.21  ........  ........  ..........  ..........  ..........  .......    -0.21
49..........................      0.32  ........  ........  ..........  ..........  ..........  .......     0.32
50..........................      0.21     -0.60     -0.34       -0.23  ..........  ..........  .......    -0.31
51..........................      0.02     -0.14     -0.37       -0.48       -0.64        0.60    -0.58    -0.09
52..........................     -0.14     -0.42     -0.33       -0.17       -0.17  ..........    -0.27    -0.35
54..........................  ........  ........     -0.22  ..........  ..........  ..........  .......    -0.22
                             -----------------------------------------------------------------------------------
    Total...................     -0.09     -0.37     -0.36       -0.35       -0.60        0.48    -0.43    -0.22
----------------------------------------------------------------------------------------------------------------


 Table 3.30--Percent Debt Difference Between Transfer Options and Failing Non-GE Programs, by CIP and Credential
                                                      Level
----------------------------------------------------------------------------------------------------------------
                                                                    Credential level
                                                --------------------------------------------------------  Total
                                                  Assoc.     Bach.    Master's    Doctoral    Profess.
----------------------------------------------------------------------------------------------------------------
cip2
1..............................................     -0.37     -0.14  ..........  ..........  ..........    -0.19
3..............................................  ........      0.02       -0.53  ..........  ..........    -0.06
4..............................................  ........  ........       -0.35  ..........  ..........    -0.35
5..............................................  ........     -0.12  ..........  ..........  ..........    -0.12
9..............................................      0.64     -0.17       -0.37  ..........  ..........    -0.09
10.............................................      0.01     -0.11  ..........  ..........  ..........    -0.01
11.............................................     -0.29     -0.42  ..........  ..........  ..........    -0.30
12.............................................      0.08  ........  ..........  ..........  ..........     0.08
13.............................................      0.24     -0.14       -0.32       -0.03  ..........     0.04
15.............................................      0.22  ........  ..........  ..........  ..........     0.22
16.............................................     -0.27      0.19  ..........  ..........  ..........     0.15
19.............................................      0.07      0.21       -0.39  ..........  ..........     0.14
22.............................................     -0.55     -0.28  ..........       -0.16       -0.27    -0.29
23.............................................      0.19     -0.04       -0.33  ..........  ..........    -0.04
24.............................................      0.19     -0.10  ..........  ..........  ..........     0.16
26.............................................      0.78      0.13       -0.29  ..........  ..........     0.18
30.............................................     -0.15     -0.10        0.00  ..........  ..........    -0.12
31.............................................      0.80     -0.22  ..........  ..........  ..........     0.12
38.............................................  ........     -0.26  ..........  ..........  ..........    -0.26
39.............................................     -0.67     -0.03       -0.29  ..........        0.00    -0.10
40.............................................  ........      1.00  ..........  ..........  ..........     1.00
41.............................................
42.............................................      0.33     -0.11       -0.32       -0.46  ..........    -0.16
43.............................................     -0.22     -0.23       -0.35  ..........  ..........    -0.24
44.............................................     -0.26     -0.30       -0.40  ..........  ..........    -0.32
45.............................................     -0.08     -0.19       -0.53  ..........  ..........    -0.18
47.............................................      0.21  ........  ..........  ..........  ..........     0.21
50.............................................      0.25     -0.02       -0.28  ..........  ..........    -0.01
51.............................................      0.02      0.02       -0.10       -0.38       -0.22    -0.10
52.............................................     -0.15     -0.26       -0.12  ..........  ..........    -0.17
54.............................................  ........      0.39       -0.79  ..........  ..........     0.10
                                                ----------------------------------------------------------------

[[Page 32438]]

 
    Total......................................      0.12     -0.07       -0.27       -0.35       -0.24     0.00
----------------------------------------------------------------------------------------------------------------

Transfer Causes Net Enrollment Increase in Some Sectors
    The aggregate change in enrollment overall, by sector, and by 
institution would likely be less than that implied by the program- and 
institution-level results presented in the ``Results of GE 
Accountability'' section above because those do not consider that many 
students would likely transfer to passing programs or even remain 
enrolled at failing programs in response to a program losing title IV 
eligibility. The Department simulated the likely destinations of 
students enrolled in failing GE programs. Based on the research 
literature and described more fully in ``Student Response Assumptions'' 
subsection in Section 5 below, we use assumptions about the share of 
students that transfer to another program, remain enrolled in the 
original program, or drop out entirely if a program loses title IV, HEA 
eligibility. These student mobility assumptions differ according to the 
number of alternative options that exist and are the same assumptions 
used in the Net Budget Impact section.
    Using these assumptions, for every failing GE program, we estimate 
the title IV, HEA enrollment from that program that would remain, 
dropout, or transfer to another program. Our notion of ``transfers'' 
includes both current students and future students who attend an 
alternative program instead of one that fails the GE metrics. The 
number of transfers is then reallocated to specific other non-failing 
GE and non-GE programs in the same institution (OPEID6), credential 
level, and 2-digit CIP code. If multiple such programs exist, transfer 
enrollment is allocated based on the share of initial title IV, HEA 
enrollment in these programs. If no alternative options exist using 
this approach, the transfer enrollment is allocated to non-failing GE 
and non-GE programs in the same geographic area (ZIP3), credential 
level, and 4-digit CIP code. Again, initial title IV, HEA enrollment 
shares are used to allocate transfer enrollment if multiple such 
alternative programs exist. These two approaches reallocate 
approximately 80 percent of the transfer enrollments we would expect 
from failing GE programs. Finally, new title IV, HEA enrollment is 
computed for each program that sums existing enrollment (or retained 
enrollment, in the case of failing GE programs) and the allocated 
transfer enrollment.
    Table 3.30 summarizes these simulation results, separately by type 
of institution.\244\ Without accounting for transfers or students 
remaining in failing GE programs, aggregate title IV, HEA enrollment 
drops by 699,700 (3.6 percent), with at least some enrollment declines 
in all sectors. This will greatly overstate the actual enrollment 
decline associated with the proposed regulation because it assumes that 
students leave postsecondary education in response to their program 
failing a GE metric. The final column simulates enrollment after 
accounting for transfers within institution (to similar programs) and 
to similar programs at other geographically-proximate institutions, 
along with permitting some modest enrollment retention at failing 
programs. In this scenario, aggregate enrollment declines by only 
228,000 (1.2 percent) due to the proposed rule.\245\ Importantly, some 
sectors experience an enrollment increase as students transfer from 
failing to passing programs. For instance, public 2-year community 
colleges are simulated to experience a 27,000-student enrollment 
increase once transfers are accounted for rather than a 30,000-student 
decrease when they are not. Historically Black Colleges and 
Universities (HBCUs) are simulated to gain 1,200 students rather than 
lose 700.
---------------------------------------------------------------------------

    \244\ Programs at foreign institutions are excluded from this 
table as they do not have an institutional type.
    \245\ Note that since many failing programs result in earnings 
lower than those of the typical high school graduate, students 
leaving postsecondary education still may be better off financially 
compared to staying in a failing program.

                     Table 3.31--Projected Enrollment With and Without Transfers, by Sector
----------------------------------------------------------------------------------------------------------------
                                                                                   + within       + within ZIP3-
                                      Number of    Initial     No transfers    institution-CIP2   CIP4 transfers
                                        inst.     enrollment   or retention        transfers
----------------------------------------------------------------------------------------------------------------
Sector of institution:
    Public, 4-year +................        700    8,186,900       8,179,700           8,184,900       8,209,000
    Non-profit, 4-year +............      1,400    4,002,400       3,994,500           3,998,900       4,005,500
    For-profit, 4-year +............        200    1,298,800         950,900           1,150,600       1,158,900
    Public, 2-year..................        900    5,025,200       4,995,600           5,013,300       5,052,000
    Non-profit, 2-year..............        100       97,200          74,300              88,100          89,100
    For-profit, 2-year..............        300      290,900         205,000             251,800         259,500
    Public, < 2-year................        200       42,600          41,300              42,100          46,200
    Non-profit, < 2-year............        <50       11,600           6,200               8,300           8,500
    For-profit, < 2-year............      1,000      278,400          86,900             149,400         177,500
                                     ---------------------------------------------------------------------------
        Total.......................      4,900   19,234,100      18,534,500          18,887,300      19,006,000
----------------------------------------------------------------------------------------------------------------
Note: Values rounded to the nearest 100.


[[Page 32439]]

4. Discussion of Costs, Benefits, and Transfers

Description of Baseline
    In absence of the proposed regulations, many students enroll in 
low-financial-value programs where they either end up not being able to 
secure a job that leads to higher earnings, take on unmanageable debt, 
or both. Many of these students default on their loans, with negative 
consequences for their credit and financial security and at substantial 
costs to the taxpayers. Many students with insufficient earnings to 
repay their debts would be eligible to have their payments reduced and 
eventually have their loans forgiven through income-driven repayment 
(IDR). This shields low-income borrowers from the consequences of 
unaffordable debts but shifts the financial burden onto taxpayers.
Transparency and Gainful Employment
    We have considered the primary costs, benefits, and transfers of 
both the transparency and accountability proposed regulations for the 
following groups or entities that would be affected by the final 
regulations:

 Students
 Institutions
 State and local governments
 The Federal government

    We first discuss the anticipated benefits of the proposed 
regulations, including improved market information. We then assess the 
expected costs and transfers for students, institutions, the Federal 
government, and State and local governments. Table 4.1 below summarizes 
the major benefits, costs, and transfers and whether they are 
quantified in our analysis or not.

  Table 4.1--Summary of Costs, Benefits, and Transfers for Financial Value Transparency and Gainful Employment
                                              Proposed Regulations
----------------------------------------------------------------------------------------------------------------
                                                                         State and local
                               Students             Institutions           governments       Federal government
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Quantified............  Earnings gain from     .....................  State tax revenue     Federal tax revenue
                         shift to higher                               from higher           from higher
                         value programs.                               earnings.             earnings.
Not quantified........  Lower rates of         Increased enrollment
                         default, higher        and revenue
                         rates of family &      associated with new
                         business formation,    enrollments from
                         higher retirement      improved information
                         savings, saving of     about value;
                         opportunity cost for   improvements in
                         non-enrollees.         program quality.
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Quantified............  Time for               Disclosure reporting;  Additional spending   Implementation of
                         acknowledgment.        time for               at institutions       data collection and
                                                acknowledgment.        that absorb           information
                                                                       students from         website.
                                                                       failing programs.
Not quantified........  Time, logistics,       Investments to
                         credit loss            improve program
                         associated with        quality; decreased
                         program transfer.      enrollment and
                                                revenue associated
                                                with fewer new
                                                enrollments from
                                                improved information
                                                about value.
----------------------------------------------------------------------------------------------------------------
                                                    Transfers
----------------------------------------------------------------------------------------------------------------
Quantified............  .....................  Aid money from         ....................  Aid money from
                                                failing programs to                          failing programs to
                                                govt for non-                                govt for non-
                                                enrollments; aid                             enrollments.
                                                money from failing
                                                to better-value
                                                programs for
                                                transfers.
Not quantified........  Increased loan         Aid money from         Aid money from        Increased loan
                         payments associated    failing programs to    failing programs to   payments associated
                         with less IDR          State govt for non-    State govt for non-   with less IDR
                         forgiveness.           enrollments.           enrollments.          forgiveness and
                                                                                             fewer defaults.
----------------------------------------------------------------------------------------------------------------

Benefits
    We expect the primary benefits of both the accountability and 
transparency components of the proposed regulation to derive from a 
shift of students from low-value to high-value programs or, in some 
cases, a shift away from low-value postsecondary programs to non-
enrollment. This shift would be due to improved and standardized market 
information about GE and non-GE programs. This would increase the 
transparency of student outcomes for better decision making by current 
students, prospective students, and their families; the public, 
taxpayers, and the Government; and institutions. Furthermore, the 
accountability component would improve program quality by directly 
eliminating the ability of low-value programs to participate in the 
title IV, HEA programs. Finally, both the transparency and 
accountability provisions of the rule should lead to a more competitive 
postsecondary market that encourages improvement, thereby, improving 
the outcomes and/or reducing the cost of existing programs that 
continue to enroll students.
Benefits to Students
    Under the proposed regulation, students, prospective students, and 
their families would have extensive, comparable, and reliable 
information about the outcomes of students who enroll in GE and non-GE 
programs such as cost, debt, earnings, completion, and repayment 
outcomes. This information would assist them in choosing institutions 
and programs where they believe they are most likely to complete their 
education and achieve the earnings they desire, while having debt that 
is manageable. This information would result in more informed decisions 
based on reliable information about a program's outcomes.
    Students would potentially benefit from this information via higher 
earnings, lower costs and less debt, and better program quality. This 
can happen through three channels. First, students benefit by 
transferring to passing programs. Second, efforts to improve programs 
would lead to better labor market outcomes, such as improved job 
prospects and higher earnings, by offering better student services, 
working with employers to ensure graduates have needed skills, 
improving academic quality, and helping students with

[[Page 32440]]

career planning. This may happen as institutions improve programs to 
avoid failing the D/E or EP measures or simply from programs competing 
more for students based on quality, with the proposed rule providing 
greater transparency about program quality. As a result of these 
enrollment shifts, students who graduate with manageable debts and 
adequate earnings would be more likely to pay back their loans, marry, 
buy a home, and invest in their futures.\246\ Finally, some students 
that chose not to enroll in low-value programs will save opportunity 
costs by not investing their time in programs that do not lead to good 
outcomes. While these other factors are certainly important to student 
wellbeing, our analysis focuses on the improvement in earnings 
associated with a shift from low-value programs to higher value 
programs.
---------------------------------------------------------------------------

    \246\ Chakrabarti, R., Fos, V., Liberman, A. & Yannelis, C. 
(2020). Tuition, Debt, and Human Capital. Federal Reserve Bank of 
New York Staff Report No. 912.
    Gicheva, D. (2016). Student Loans or Marriage? A Look at the 
Highly Educated. Economics of Education Review, 53, 207-2016.
    Gicheva, D. & Thompson, J. (2015). The effects of student loans 
on long-term household financial stability. In B. Hershbein & K. 
Hollenbeck (Ed.). Student Loans and the Dynamics of Debt (137-174). 
Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.
    Hillman, N.W. (2014). College on Credit: A Multilevel Analysis 
of Student Loan Default. Review of Higher Education 37(2), 169-195.
    Mezza, A., Ringo, D., Sherlund, S., & Sommer, K. (2020). 
``Student Loans and Homeownership,'' Journal of Labor Economics, 
38(1): 215-260.
---------------------------------------------------------------------------

Benefits to Institutions
    Institutions offering high-performing programs to students are 
likely to see growing enrollment and revenue and to benefit from 
additional market information that permits institutions to demonstrate 
the value of their programs without excessive spending on marketing and 
recruitment. Additionally, institutions that work to improve the 
quality of their programs could see increased revenues from improved 
retention and completion and therefore, additional tuition revenue.
    We believe disclosures would increase enrollment and revenues in 
well-performing programs. Improved information from disclosures would 
increase market demand for programs that produce good outcomes. While 
the increases or decreases in revenues for institutions are benefits or 
costs from the institutional perspective, they are transfers from a 
social perspective. However, any additional demand for education due to 
overall program quality improvement would be considered a social 
benefit.
    The improved information that would be available as a result of the 
proposed regulations would also benefit institutions' planning and 
improvement efforts. Information about student outcomes would help 
institutions determine whether it would be prudent to expand, improve 
quality, reduce costs, or eliminate various programs. Institutions may 
also use this information to offer new programs in fields where 
students are experiencing positive outcomes, including higher earnings 
and steady employment. Additionally, institutions would be able to 
identify and learn from programs that produce exceptional results for 
students.
Benefits to State and Local Governments
    State and local governments would benefit from additional tax 
revenue associated with higher student earnings and students' increased 
ability to spend money in the economy. They would also benefit from 
reduced costs because, as institutions improve the quality of their 
programs, their graduates would likely have improved job prospects and 
higher earnings, meaning that governments would likely be able to spend 
less on unemployment benefits and other social safety net programs. 
State and local governments would also experience improved oversight of 
their investments in postsecondary education. Additionally, State and 
local postsecondary education funding could be allocated more 
efficiently to higher-performing programs. State and local governments 
would also experience a better return on investment on their dollars 
spent on financial aid programs as postsecondary program quality 
improves.
Benefits to Federal Government
    The Federal government would benefit from additional tax revenue 
associated with higher student earnings and students' increased ability 
to spend money in the economy. Another primary benefit of the proposed 
regulations would be improved oversight and administration of the title 
IV, HEA programs, particularly the new data reported by institutions. 
Additionally, Federal taxpayer funds would be allocated more 
efficiently to higher-performing programs, where students are more 
likely to graduate with manageable amounts of debt and gain stable 
employment in a well-paying field, increasing the positive benefits of 
Federal investment in title IV, HEA programs.
    The taxpayers and the Government would also benefit from improved 
information about GE programs. As the funders and stewards of the title 
IV, HEA programs, these parties have an interest in knowing whether 
title IV, HEA program funds are benefiting students. The information 
provided in the disclosures would allow for more effective monitoring 
of the Federal investment in GE programs.
Costs
Costs to Students
    Students may incur some costs as a result of the proposed 
regulations. One cost is that all title IV, HEA students attending 
eligible non-GE programs that fail the D/E metric would be required to 
acknowledge having seen information about program outcomes before title 
IV aid is disbursed. Students attending GE programs with at least one 
failing metric would additionally be required to acknowledge a warning 
that the program could lose title IV, HEA eligibility. The 
acknowledgement is the main student cost we quantify in our analysis. 
We expect that over the long-term, all students would have increased 
access to programs that lead to successful outcomes. In the short term, 
students in failing programs would incur search and logistical costs 
associated with finding and enrolling in an alternative program, 
whether that be a GE or non-GE program. Further, at least some students 
may be temporarily left without transfer options. We expect that many 
of these students would re-enter postsecondary education later, but we 
understand that some students may not continue. We do not quantify 
these costs associated with searching for and transferring to new 
postsecondary programs.
Costs to Institutions
    Under the proposed regulations, institutions would incur costs as 
they make changes needed to comply, including costs associated with the 
reporting, disclosure, and acknowledgment requirements. These costs 
could include: (1) Training of staff for additional duties, (2) 
potential hiring of new employees, (3) purchase of new, or 
modifications to existing, software or equipment, and (4) procurement 
of external services.
    As described in the Preamble, much of the necessary information 
required from GE programs would already have been reported to the 
Department under the 2014 Prior Rule, and as such we believe the added 
burden of this reporting relative to existing requirements would be 
reasonable. Furthermore, 88 percent of public and 47 percent of private 
non-profit institutions operated at least one GE

[[Page 32441]]

program and thus have experience with similar data reporting for the 
subset of their students enrolled in certificate programs under the 
2014 Prior Rule. Moreover, many institutions report more detailed 
information on the components of cost of attendance and other sources 
of financial aid in the Federal National Postsecondary Student Aid 
Survey (NPSAS) administered by the National Center for Education 
Statistics. Finally, for the first year after the effective date of the 
proposed rule, the Department proposes flexibility for institutions to 
avoid reporting data on students who completed programs in the past, 
and instead to use data on more recent completer cohorts to estimate 
median debt levels. In part, this is intended to ease the 
administrative burden of providing this data for programs that were not 
covered by the 2014 Prior Rule reporting requirements, especially for 
the small number of institutions that may not previously have had any 
programs subject to these requirements.
    Our initial estimate of the time cost of these reporting 
requirements for institutions is 5.1 million hours initially and then 
1.5 million hours annually after the first year. The Department 
recognizes that institutions may have different approaches and 
processes for record-keeping and administering financial aid, so the 
burden of the GE and financial transparency reporting could vary by 
institution. Many institutions may have systems that can be queried or 
existing reports that can be adapted to meet these reporting 
requirements. On the other hand, some institutions may still have data 
entry processes that are very manual in nature and generating the 
information for their programs could involve many more hours and 
resources. Institutions may fall in between these poles and be able to 
automate the reporting of some variables but need more effort for 
others. The total reporting burden will be distributed across 
institutions depending on the setup of their systems and processes. We 
believe that, while the reporting relates to program or student-level 
information, the reporting process is likely to be handled at the 
institutional level.
    Table 4.2 presents the Department's estimates of the hours 
associated with the reporting requirements. The reporting process will 
involve staff members or contractors with different skills and levels 
of responsibility. We have estimated this using Bureau of Labor 
statistics median hourly wage for Education Administrators, Post-
Secondary of $46.59.\247\
---------------------------------------------------------------------------

    \247\ Available at https://www.bls.gov/oes/current/oes119033.htm.

                       Table 4.2--Estimated Hours and Wage Rate for Reporting Requirements
----------------------------------------------------------------------------------------------------------------
                          Process                              Hours                   Hours basis
----------------------------------------------------------------------------------------------------------------
Review systems and existing reports for adaptability for            10  Per institution.
 this reporting.
Develop reporting query/result template:
    Program-level reporting................................         15  Per institution.
    Student-level reporting................................         30  Per institution.
Run test reports:
    Program-level reporting................................       0.25  Per institution.
    Student-level reporting................................        0.5  Per institution.
Review/validate test report results:
    Program-level reporting................................         10  Per institution.
    Student-level reporting................................         20  Per institution.
Run reports:
    Program-level reporting................................       0.25  Per program.
    Student-level reporting................................        0.5  Per program.
Review/validate report results:
    Program-level reporting................................          2  Per program.
    Student-level reporting................................          5  Per program.
Certify and submit reporting...............................         10  Per institution.
----------------------------------------------------------------------------------------------------------------

    The ability to set up reports or processes that can be rerun in 
future years, along with the fact that the first reporting cycle 
includes information from several prior years, means that the expected 
burden should decrease significantly after the first reporting cycle. 
We estimate that the hours associated with reviewing systems, 
developing or updating queries, and reviewing and validating the test 
queries or reports will be reduced by 35 percent after the first year. 
After initial reporting is completed, the institution will need to 
confirm there are no program changes in CIP code, credential level, 
preparation for licensure, accreditation, or other items on an ongoing 
basis. We expect that process would be less burdensome than initially 
establishing the reporting. Table 4.3 presents estimates of reporting 
burden for the initial year and subsequent years under proposed Sec.  
668.408.

                     Table 4.3.1--Estimated Reporting Burden for the Initial Reporting Cycle
----------------------------------------------------------------------------------------------------------------
                                                                Institution   Program
                      Control and level                            count       count       Hours        Amount
----------------------------------------------------------------------------------------------------------------
Private 2-year...............................................           153        530       31,080    1,448,006
Proprietary 2-year...........................................         1,353      3,775      246,575   11,487,918
Public 2-year................................................         1,106     36,522    1,238,082   57,682,217

[[Page 32442]]

 
Private 4-year...............................................         1,449     48,797    1,651,449   76,940,997
Proprietary 4-year...........................................           204      3,054      114,207    5,320,904
Public 4-year................................................           742     57,769    1,861,886   86,745,245
                                                              --------------------------------------------------
    Total....................................................         5,007    150,447    5,143,277  239,625,287
----------------------------------------------------------------------------------------------------------------


                     Table 4.3.2--Estimated Reporting Burden for Subsequent Reporting Cycles
----------------------------------------------------------------------------------------------------------------
                                                                Institution   Program
                      Control and level                            count       count       Hours        Amount
----------------------------------------------------------------------------------------------------------------
Private 2-year...............................................           153        530       14,206      661,834
Proprietary 2-year...........................................         1,353      3,775      118,554    5,523,443
Public 2-year................................................         1,106     36,522      356,042   16,587,973
Private 4-year...............................................         1,449     48,797      473,811   22,074,843
Proprietary 4-year...........................................           204      3,054       37,133    1,730,003
Public 4-year................................................           742     57,769      496,682   23,140,403
                                                              --------------------------------------------------
    Total....................................................         5,007    150,447    1,496,426   69,718,499
----------------------------------------------------------------------------------------------------------------

    The Department welcomes comments on the assumptions related to the 
reporting burden of the proposed regulations. As described under 
Paperwork Reduction Act of 1995, the final estimates of reporting costs 
will be cleared at a later date through a separate information 
collection.
    As described in the section titled ``Paperwork Reduction Act of 
1995,'' the final estimates of reporting costs will be cleared at a 
later date through a separate information collection. Institutions' 
share of the annual costs associated with disclosures, acknowledgement 
for non-GE programs, and warnings and acknowledgement for GE programs 
are estimated to be $12 million, $0.05 million, and $0.76 million, 
respectively. Note that most of the burden associated acknowledgements 
will fall on students, not institutions. These costs are discussed in 
more detail in the section titled ``Paperwork Reduction Act of 1995.''
    Institutions that make efforts to improve the outcomes of failing 
programs would face additional costs. For example, institutions that 
reduce the tuition and fees of programs would see decreased revenue. 
For students who are currently enrolled in a program, the reduced price 
would be a transfer to them in the form of a lower cost of attendance. 
In turn, some of this price reduction would be a transfer to the 
government if the tuition was being paid for with title IV, HEA funds. 
An institution could also choose to spend more on curriculum 
development to, for example, link a program's content to the needs of 
in-demand and well-paying jobs in the workforce, or allocate more funds 
toward other functions. These other functions could include hiring 
better faculty; providing training to existing faculty; offering 
tutoring or other support services to assist struggling students; 
providing career counseling to help students find jobs; acquiring more 
up-to-date equipment; or investing in other areas where increased 
spending could yield improved performance. However, as mentioned in the 
benefits section, institutions that improve program quality could see 
increased tuition revenue with improved retention and completion.
    The costs of program changes in response to the proposed 
regulations are difficult to quantify generally as they would vary 
significantly by institution and ultimately depend on institutional 
behavior. For example, institutions with all passing programs could 
elect to commit only minimal resources toward improving outcomes. On 
the other hand, they could instead make substantial investments to 
expand passing programs and meet increased demand from prospective 
students, which could result in an attendant increase in enrollment 
costs. Institutions with failing programs could decide to devote 
significant resources toward improving performance, depending on their 
capacity, or could instead elect to discontinue one or more of the 
programs. However, as mentioned previously, some of these costs might 
be offset by increased revenue from improved program quality. Given 
these ambiguities, we do not quantify costs (or benefits) associated 
with program quality improvements.
    Finally, some poorly performing programs will experience a 
reduction in enrollment that is not fully offset by gains to other 
institutions (which will experience increased enrollment) or the 
Federal government (which will experiences lower spending on Title IV, 
HEA aid). These losses should be considered as costs for institutions.
Costs to States and Local Governments
    State and local governments may experience increased costs as 
enrollment in well-performing programs at public institutions increases 
as a result of some students transferring from programs at failing 
programs, including those offered by for-profit institutions.
    The Department recognizes that a shift in students to public 
institutions could result in higher State and local government costs, 
but the extent of this is dependent on student transfer patterns, State 
and local government choices, and the existing capacity of public 
programs. If States choose to expand the enrollment capacity of passing 
programs at public institutions, it is not necessarily the case that 
they would face marginal costs that are similar to their average cost 
or that they would only choose to expand through traditional brick-and-
mortar institutions. The Department continues to find that many States 
across the country are experimenting with innovative models that use 
different methods of instruction and content delivery, including online 
offerings, that allow students to complete courses faster and at lower 
cost. Furthermore, enrollment shifts would likely be towards community 
colleges, where declining enrollment has created excess capacity. An 
under-subscribed college may see greater efficiency gains from 
increasing enrollment and avoid other

[[Page 32443]]

costly situations such as unused classroom space or unsustainably low 
enrollment. Forecasting the extent to which future growth would occur 
in traditional settings versus online education or some other model is 
outside the scope of this analysis. Nonetheless, we do include the 
additional instructional cost associated with a shift from failing to 
passing programs in our analysis, some of which will fall on state and 
local governments.
Costs to Federal Government
    The main costs to the Federal government involve setting up the 
infrastructure to handle and process additional information reported by 
institutions, compute rates and other information annually, and 
maintain a website to host the disclosure information and 
acknowledgment process. Most of these activities would be integrated 
into the Department's existing processes. We estimate that the total 
implementation cost will be $30 million.
Transfers
    Enrollment shifts between programs, and potentially to non-
enrollment, would transfer resources between students, institutions, 
State and local governments, and the Federal government. We model three 
main transfers. First, if some students drop out of postsecondary 
education or remain in programs that lose eligibility for title IV, HEA 
Federal student aid, there would be a transfer of Federal student aid 
from those students to the Federal government. Second, as students 
change programs based on program performance, disclosures, and title 
IV, HEA eligibility, revenues and expenses associated with students 
would transfer between postsecondary institutions. Finally, the 
additional earnings associated with movement from low- to high-value 
programs would result in greater loan repayment by borrowers. This is 
through both lower default rates and a lower likelihood of loan 
forgiveness through existing IDR plans. This represents a transfer from 
students to the Federal government. We do not quantify the transfers 
between students and State governments associated with changes in 
State-financed student aid, as such programs differ greatly across 
States. Transfers between students and States could be net positive for 
States if fewer students apply for, or need, State aid programs or they 
could be negative if enrollment shifts to State programs results in 
greater use of State aid.
Financial Responsibility
    The Department has a responsibility to ensure that the institutions 
participating in the title IV, HEA programs have the financial 
resources to meet the requirements of the HEA and its regulations. This 
includes ensuring that their financial situation is unlikely to lead 
them to a sudden and unexpected closure or to operate in ways that 
either lead to a significant deterioration in the education and related 
services delivered or the need to engage in riskier behavior, such as 
aggressive recruitment, to stay financially afloat.
    The Department also has a responsibility to protect taxpayers from 
the costs incurred by the Federal government due to the sudden closure 
of an institution. Ensuring the Department has sufficient tools to 
identify and take steps to more closely oversee institutions that are 
in a financially precarious position is particularly important because 
students enrolled at the time an institution closes, or who have left 
shortly before without completing their program, are entitled to a 
discharge of their Federal student loan balances. If the Department has 
failed to secure financial protection from the institution prior to 
that point it is highly likely under existing regulations that 
taxpayers will end up bearing the cost of those discharges in the form 
of a transfer from the Department to those borrowers who have their 
loans cancelled.
    Historically when institutions close there are little to no 
resources left at the school, and to the extent there are, the 
Department must compete with other creditors to secure some assets. In 
some cases, other entities that had ownership stakes in the institution 
still had resources even when the institution itself did not, but the 
Department lacked the ability to recover funds from these other 
entities.
    These proposed regulations provide greater tools for the Department 
to demand financial protection when an institution exhibits signs of 
financial instability and to obtain information that would make it 
easier to detect those problems sooner than it currently does. It also 
clarifies the rules about financial protection when institutions change 
owners, a situation that can be risky for students and taxpayers, 
particularly if the purchasing entity lacks experience or the necessary 
financial strength to effectively manage an acquired institution.
    The table below provides information on the Department's estimates 
of how frequently the circumstances associated with the proposed 
mandatory and discretionary triggers have occurred in the last several 
years.

                 Table 4.4--Mandatory Triggering Events
------------------------------------------------------------------------
           Trigger                 Description             Impact
------------------------------------------------------------------------
Debts or liability payments   An institution with   For institutional
 668.171(c)(2)(i)(A).          a composite score     fiscal years that
                               of less than 1.5      ended between July
                               with some             1, 2019, and June
                               exceptions is         30, 2020, there
                               required to pay a     were 225 private
                               debt or incurs a      nonprofit or
                               liability from a      proprietary schools
                               settlement, final     with a composite
                               judgment, or          score of less than
                               similar proceeding    1.5. Of these, 7
                               that results in a     owe a liability to
                               recalculated          the Department,
                               composite score of    though not all of
                               less than 1.0.        these liabilities
                                                     are significant
                                                     enough to result in
                                                     a recalculated
                                                     score of 1.0. We do
                                                     not have data on
                                                     non-Department
                                                     liabilities that
                                                     might meet this
                                                     trigger.
Lawsuits 668.171(c)(2)(i)(B)  Lawsuits against an   The Department is
                               institution after     aware of
                               July 1, 2024, by      approximately 50
                               Federal or State      institutions or
                               authorities or a      ownership groups
                               qui tam pending for   that have been
                               120 days in which     subject to Federal
                               the Federal           or State
                               government has        investigations,
                               intervened.           lawsuits, or
                                                     settlements since
                                                     2012. This includes
                                                     criminal
                                                     prosecutions of
                                                     owners.
Borrower defense recoupment   The Department has    The Department has
 668.171(c)(2)(i)(C).          initiated a           initiated one
                               proceeding to         proceeding against
                               recoup the cost of    an institution to
                               approved borrower     recoup the proceeds
                               defense claims        of approved claims.
                               against an            Separately, the
                               institution.          Department has
                                                     approved borrower
                                                     defense claims at
                                                     more than six other
                                                     institutions or
                                                     groups of
                                                     institutions where
                                                     it has not sought
                                                     recoupment.
Change in ownership debts     An institution in     Over the last 5
 and liabilities               the process of a      years there have
 668.171(c)(2)(i)(D).          change of ownership   been 188
                               must pay a debt or    institutions that
                               liability related     underwent a change
                               to settlement,        in ownership. This
                               judgment, or          number separately
                               similar matter at     counts campuses
                               any point through     that may be part of
                               the second full       the same chain or
                               fiscal year after     ownership group
                               the change in         that are part of a
                               ownership.            single transaction.
                                                     The Department does
                                                     not currently have
                                                     data on how many of
                                                     those had a debt or
                                                     liability that
                                                     would meet this
                                                     trigger.

[[Page 32444]]

 
Withdrawal of owner's equity  A proprietary         In the most recent
 668.171(c)(2)(ii)(A).         institution with a    available data, 161
                               score less than 1.5   proprietary
                               has a withdrawal of   institutions had a
                               owner's equity that   composite score
                               results in a          that is less than
                               composite score of    1.5. The Department
                               less than 1.0.        has not determined
                                                     how many of those
                                                     may have had a
                                                     withdrawal of
                                                     owner's equity that
                                                     would meet this
                                                     trigger.
Significant share of Federal  An institution has    There are
 aid in failing GE programs    at least 50 percent   approximately 740
 668.171(c)(2)(iii).           of its title IV,      institutions that
                               HEA aid received      would meet this
                               for programs that     trigger. These are
                               fail GE thresholds.   almost entirely
                                                     private for-profit
                                                     institutions that
                                                     offer only a small
                                                     number of programs
                                                     total. These data
                                                     only include
                                                     institutions
                                                     operating in March
                                                     2022 that had
                                                     completions
                                                     reported in 2015-16
                                                     and 2016-2017. Data
                                                     are based upon 2018
                                                     and 2019 calendar
                                                     year earnings.
Teach-out plans               The institution is    Not identified
 668.171(c)(2)(iv).            required to submit    because the
                               a teach-out plan or   Department is not
                               agreement.            currently always
                                                     informed when an
                                                     institution is
                                                     required to submit
                                                     a teach-out plan or
                                                     agreement.
State actions                 The institution is    Not identified
 668.171(c)(2)(v).             cited by a State      because the
                               licensing or          Department is not
                               similar authority     currently always
                               for failing to meet   informed when an
                               State requirements    institution is
                               and the institution   subject to these
                               receives notice       requirements.
                               that its licensure
                               or authorization
                               will be terminated
                               or withdrawn if it
                               does not come into
                               compliance.
Actions related to publicly   These apply to any    Department data
 listed entities               entity where at       systems currently
 668.171(c)(2)(vi).            least 50 percent of   identify 38 schools
                               an institution's      that are owned by
                               direct or indirect    13 publicly traded
                               ownership is listed   corporations. One
                               on a domestic or      of these may be
                               foreign exchange.     affected by this
                               Actions include the   trigger.
                               SEC taking steps to
                               suspend or revoke
                               the entity's
                               registration or
                               taking any other
                               action. It also
                               includes actions
                               from exchanges,
                               including foreign
                               ones, that say the
                               entity is not in
                               compliance with the
                               listing
                               requirements or may
                               be delisted.
                               Finally, the entity
                               failed to submit a
                               required annual or
                               quarterly report by
                               the required due
                               date.
90/10 failure                 A proprietary         Over the last 5
 668.171(c)(2)(vii).           institution did not   years an average of
                               meet the              12 schools failed
                               requirement to        the 90/10 test.
                               derive at least 10    Most recently, the
                               percent of its        Department reported
                               revenue from          that 21 proprietary
                               sources other than    institutions had
                               Federal educational   received 90 percent
                               assistance.           or more of their
                                                     revenue from title
                                                     IV, HEA programs
                                                     based upon
                                                     financial
                                                     statements for
                                                     fiscal years ending
                                                     between July 1,
                                                     2020, and June 30,
                                                     2021.
Cohort default rate (CDR)     An institution's two  Twenty institutions
 failure 668.171(c)(2)(viii).  most recent           with at least 30
                               official CDRs are     borrowers in their
                               30 percent or         cohorts had a CDR
                               greater.              at or above 30
                                                     percent for the
                                                     fiscal year
                                                     (FY)2017 and FY2016
                                                     cohorts (the last
                                                     rates not impacted
                                                     by the pause on
                                                     repayment during
                                                     the national
                                                     emergency).
Loss of eligibility from      The institution       The Department is
 other Federal educational     loses its ability     aware of 5
 assistance program            to participate in     institutions
 668.171(c)(2)(ix).            another Federal       participating in
                               educational           title IV, HEA
                               assistance program.   programs that have
                                                     lost access to the
                                                     Department of
                                                     Defense's Tuition
                                                     Assistance (TA)
                                                     program since 2017.
                                                     Three of those also
                                                     lost accreditation
                                                     or access to title
                                                     IV, HEA funds.
Contributions followed by a   The institution's     Not currently
 distribution                  financial             identified because
 668.171(c)(2)(x).             statements reflect    this information is
                               a contribution in     not currently
                               the last quarter of   centrally recorded
                               its fiscal year       in Department
                               followed by a         databases.
                               distribution within
                               first two quarters
                               of the next fiscal
                               year and that
                               results in a
                               recalculated
                               composite score of
                               <1.0.
Creditor events               An institution has a  Not currently
 668.171(c)(2)(xi).            condition in its      identified because
                               agreements with a     institutions do not
                               creditor that could   currently report
                               result in a default   the information
                               or adverse            needed to assess
                               condition due to an   this trigger to the
                               action by the         Department. Several
                               Department or a       major private for-
                               creditor              profit colleges
                               terminates,           that failed had
                               withdraws, or         creditor
                               limits a loan         arrangements that
                               agreement or other    would have met this
                               financing             trigger.
                               arrangement.
Financial exigency            The institution       Not identified
 668.171(c)(2)(xii).           makes a formal        because
                               declaration of        institutions do not
                               financial exigency.   currently always
                                                     report this
                                                     information to the
                                                     Department.
Receivership                  The institution is    The Department is
 668.171(c)(2)(xiii).          either required to    aware of 3
                               or chooses to enter   instances of
                               a receivership.       institutions
                                                     entering
                                                     receiverships in
                                                     the last few years.
                                                     Each of these
                                                     institutions
                                                     ultimately closed.
------------------------------------------------------------------------


               Table 4.5--Discretionary Triggering Events
------------------------------------------------------------------------
           Trigger                 Description             Impact
------------------------------------------------------------------------
Accreditor actions            The institution is    Since 2018, we
 668.171(d)(1).                placed on show        identified just
                               cause, probation,     under 190 private
                               or an equivalent      institutions that
                               status.               were deemed as
                                                     being significantly
                                                     out of compliance
                                                     and placed on
                                                     probation or show
                                                     cause by their
                                                     accrediting agency,
                                                     with the bulk of
                                                     these stemming from
                                                     one agency that
                                                     accredits
                                                     cosmetology
                                                     schools.
Other creditor events and     The institution is    Not identified
 judgments 668.171(d)(2).      subject to other      because
                               creditor actions or   institutions do not
                               conditions that can   currently report
                               result in a           this information to
                               creditor requesting   the Department.
                               grated collateral,
                               an increase in
                               interest rates or
                               payments, or other
                               sanctions,
                               penalties, and
                               fees, and such
                               event is not
                               captured as a
                               mandatory trigger.
                               This trigger also
                               captures judgments
                               that resulted in
                               the awarding of
                               monetary relief
                               that is subject to
                               appeal or under
                               appeal.
Fluctuations in title IV,     There is a            From the 2016-2017
 HEA volume 668.171(d)(3).     significant change    through the 2021-
                               upward or downward    2022 award years,
                               in the title IV,      approximately 155
                               HEA volume at an      institutions
                               institution between   enrolled 1,000 or
                               consecutive award     more title IV, HEA
                               years or over a       students and saw
                               period of award       their title IV, HEA
                               years.                volume change by
                                                     more than 25
                                                     percent from one
                                                     year to the next.
                                                     Of those, 33 saw a
                                                     change of more than
                                                     50 percent. The
                                                     Department would
                                                     need to determine
                                                     which circumstances
                                                     indicated enough
                                                     risk to need
                                                     additional
                                                     financial
                                                     protection.

[[Page 32445]]

 
High dropout rates            An institution has    According to College
 668.171(d)(4).                high annual dropout   Scorecard data for
                               rates, as             the AY2014-15
                               calculated by the     cohort, there were
                               Department.           approximately 66
                                                     private
                                                     institutions that
                                                     had more than half
                                                     their students
                                                     withdraw within two
                                                     years of initial
                                                     enrollment. Another
                                                     132 had withdrawal
                                                     rates between 40
                                                     and 50 percent. The
                                                     Department would
                                                     need to determine
                                                     which circumstances
                                                     indicated enough
                                                     risk to need
                                                     additional
                                                     financial
                                                     protection.
Interim reporting             An institution that   Not currently
 668.171(d)(5).                is required to        identified because
                               provide additional    Department staff
                               reporting due to a    currently do not
                               lack of financial     look for this
                               responsibility        practice in their
                               shows negative cash   reviews.
                               flows, failure of
                               other liquidation
                               ratios, or other
                               indicators in a
                               material change of
                               the financial
                               condition of a
                               school.
Pending borrower defense      The institution has   To date there are 48
 claims 668.171(d)(6).         pending borrower      institutional names
                               defense claims and    as recorded in the
                               the Department has    National Student
                               formed a group        Loan Data System
                               process to consider   that have had more
                               at least some of      than 2,000 borrower
                               them.                 defense claims
                                                     filed against them.
                                                     This number may
                                                     include multiple
                                                     institutions
                                                     associated with the
                                                     same ownership
                                                     group. There is no
                                                     guarantee that a
                                                     larger number of
                                                     claims will result
                                                     in a group claim,
                                                     but they indicate a
                                                     higher likelihood
                                                     that there may be
                                                     practices that
                                                     result in a group
                                                     claim.
Program discontinuation       The institution       Not currently
 668.171(d)(7).                discontinues a        identified due to
                               program or programs   data limitations.
                               that affect more
                               than 25 percent of
                               enrolled students.
Location closures             The institution       Not currently
 668.171(d)(8).                closes more than 50   identified due to
                               percent of its        data limitations.
                               locations or
                               locations that
                               enroll more than 25
                               percent of its
                               students.
State citations               The institution is    Not identified
 668.171(d)(9).                cited by a State      because
                               agency for failing    institutions do not
                               to meet a State       currently report
                               requirement or        this information
                               requirements.         consistently to the
                                                     Department.
Loss of program eligibility   One or more of the    The Department does
 668.171(d)(10).               programs at the       not currently have
                               institution loses     comprehensive data
                               eligibility to        on program
                               participate in        eligibility loss
                               another Federal       for all other
                               education             Federal assistance
                               assistance program    programs. So, we
                               due to an             looked at VA, which
                               administrative        is one of the other
                               action.               largest sources of
                                                     Federal education
                                                     assistance. Since
                                                     2018 the VA
                                                     reported over 900
                                                     instances of an
                                                     institution of
                                                     higher education
                                                     having its access
                                                     to VA benefits
                                                     withdrawn. However,
                                                     this number
                                                     includes extensive
                                                     duplication that
                                                     counts multiple
                                                     locations of the
                                                     same school,
                                                     withdrawals due to
                                                     issues captured
                                                     elsewhere like loss
                                                     of accreditation or
                                                     closure, and
                                                     withdrawals that
                                                     may not have lasted
                                                     an extended period.
                                                     The result is that
                                                     the actual number
                                                     of affected
                                                     institutions would
                                                     likely be
                                                     significantly
                                                     lower.
Exchange disclosures          An institution that   Department data
 668.171(d)(11).               is at least 50        systems currently
                               percent owned by an   identify 38 schools
                               entity that is        that are owned by
                               listed on a           13 publicly traded
                               domestic or foreign   corporations. There
                               stock exchange        is one school that
                               notes in a filing     could potentially
                               that it is under      be affected by this
                               investigation for     trigger.
                               possible violations
                               of State, Federal
                               or foreign law.
Actions by another Federal    The institution is    Not identified
 agency 668.171(d)(12).        cited and faces       because current
                               loss of education     reporting by
                               assistance funds      institutions do not
                               from another          always capture
                               Federal agency if     these events.
                               it does not comply
                               with that agency's
                               requirements.
------------------------------------------------------------------------

Benefits
    The proposed improvements to the Financial Responsibility 
regulations would provide significant benefits to the Federal 
government and to borrowers. They also could benefit institutions that 
are in stronger financial shape by dissuading struggling institutions 
from engaging in questionable behaviors to gain a competitive advantage 
in increasing enrollment. Each of these benefits is discussed below in 
greater detail.
    The proposed Financial Responsibility regulations would provide 
benefits to the Federal government because they would increase the 
frequency with which the Department secures additional financial 
protection from institutions of higher education. This would help the 
government, and in turn taxpayers, in several ways. First, when an 
institution closes, a borrower who was enrolled at the time of closure 
or within 180 days of closure and does not complete their program is 
entitled to a discharge of their Federal student loans. If the proposed 
regulations result in more instances where the Department has obtained 
a letter of credit or other form of financial protection from an 
institution that closes, then taxpayers would bear less of the costs 
from those discharges, which occur in the form of a transfer from the 
Department to the borrower whose loans are discharged. This is 
important because to date it is very uncommon for the Department to 
have significant financial resources from an institution to offset the 
costs from closed school discharges. According to FSA data, closures of 
for-profit colleges that occurred between January 2, 2014, to June 30, 
2021, resulted in $550 million in closed school discharges. These are 
discharges for borrowers who did not complete their program and were 
enrolled on the date of closure or left the institution in the months 
prior to the closure. (This excludes the additional $1.1 billion in 
closed school discharges related to ITT Technical Institute that was 
announced in August 2021). Of that amount, the Department recouped just 
over $10.4 million from institutions.\248\
---------------------------------------------------------------------------

    \248\ The budgetary cost of these discharges is not the same as 
the amount forgiven.
---------------------------------------------------------------------------

    Second, the ability to secure additional financial protection would 
help offset the costs the government would otherwise face in the form 
of transfers associated with approved borrower defense to repayment 
claims. Under the HEA, borrowers may receive a discharge of their loans 
when their institutions engage in certain acts or omissions. Under the 
Biden-Harris Administration, the Department has approved $13 billion in 
discharges for 979,000 borrowers related to borrower defense findings. 
This includes a combination of borrowers who received a borrower 
defense discharge after review of an application they submitted and 
others who received a discharge as part of a group based upon borrower 
defense findings where the mechanism used to effectuate relief was the

[[Page 32446]]

Department's settlement and compromise authority. To date there has 
only been a single instance in which the Department recovered funds to 
offset the costs of borrower defense discharges from the institution, 
which was in the Minnesota School of Business and Globe University's 
bankruptcy proceeding. In that situation, the Department received $7 
million from a bankruptcy settlement. While the Department cannot 
simply cash in a letter of credit or take other financial protection 
solely upon approval of borrower defense claims, having the funding 
upfront is still important. That is because, to date, the Department 
has mostly approved borrower defense claims against institutions that 
are no longer operating, including several situations where an 
institution closed years prior. When that occurs, even if the 
Department sought to recoup the cost of discharges, there are unlikely 
to be assets to draw upon. Were there financial protection in place, 
the Department would have greater confidence that a successful 
recoupment effort would result in funds being available to offset the 
cost of discharges.
    Third, the Federal government would also benefit from the deterrent 
effect of additional financial responsibility triggers. Articulating 
more situations that could lead to either mandatory financial 
protection or the possibility of a financial protection request would 
dissuade institutions from taking steps that could trigger those 
conditions. For example, the Department proposes a trigger tied to 
situations where an institution has conditions in a financing agreement 
with an external party that would result in an automatic default if the 
Department takes an action against the institution. The Department is 
concerned that such situations are used by institutions to try and 
discourage the Department from exercising its proper oversight 
authority due to the financial consequences for the school. It could 
also be used by the school to blame the Department if the action later 
results in a closure even though its shuttering is a result of poor 
management. Therefore, this proposed trigger should discourage the 
inclusion of such provisions going forward. The same is true for the 
inclusion of various actions taken by States, accrediting agencies, or 
the SEC. Knowing that such situations could result in additional 
requests for financial protection would provide an even greater reason 
for institutions to avoid risky behavior that could run afoul of other 
actors.
    These proposed triggers would also benefit students. For one, the 
deterrence benefits mentioned above would help protect students from 
being taken advantage of by predatory institutions. The Department has 
seen situations in the past where institutions engaged in risky 
behavior to keep growing at a rapid rate to satisfy investor 
expectations. This resulted in colleges becoming too big, too fast to 
be able to deliver educational value. It also meant that institutions 
risked becoming financially shaky if they experienced declines in 
enrollment. While these proposed triggers would not fully discourage 
rapid growth, they would discourage a growth-at-all-costs mindset, 
particularly if that growth is encouraged through misrepresentations, 
aggressive recruitment, or other practices that may run afoul of both 
the Department and other oversight entities. With the proposed triggers 
in place, institutions that would otherwise engage in such behaviors 
may instead opt to stay at a more appropriate and sustainable size at 
which they are able to deliver financial value for students and 
taxpayers. This outcome would also decrease the risk of closure, which 
can be very disruptive for students, often delaying if not terminating 
their pursuit of a postsecondary credential. For example, research by 
GAO found that 43 percent of borrowers never completed their program or 
transferred to another school after a closure.\249\ While 44 percent 
transferred to another school, 5 percent of all borrowers transferred 
to a college that later closed. GAO then looked at the subset of 
borrowers who transferred long enough ago that they could have been at 
the new school for six years, the amount of time typically used to 
calculate graduation rates. GAO found that nearly 49 percent of these 
students who transferred did not graduate in that time. These findings 
are similar to those from SHEEO, which found that just 47 percent of 
students reenrolled after a closure and only 37 percent of students who 
reenrolled earned a postsecondary credential.\250\
---------------------------------------------------------------------------

    \249\ www.gao.gov/products/gao-21-105373.
    \250\ https://sheeo.org/more-than-100000-students-experienced-an-abrupt-campus-closure-between-july-2004-and-june-2020/.
---------------------------------------------------------------------------

    The proposed regulations' deterrence effect would also benefit 
students by encouraging institutions to improve the quality and value 
of their educational offerings. For example, the proposed trigger for 
institutions with high dropout rates would incentivize institutions to 
improve their graduation rates. Along with the trigger for institutions 
failing the cohort default rate, this can reduce the number of students 
who default on their loans, as students who do not complete a degree 
are more likely to default on their loans.\251\ Improved completion 
rates also have broader societal benefits, such as increased tax 
revenue because college graduates, on average, have lower unemployment 
rates, are less likely to rely on public benefit programs, and 
contribute more in tax revenue through higher earnings.\252\
---------------------------------------------------------------------------

    \251\ libertystreeteconomics.newyorkfed.org/2017/11/who-is-more-likely-to-default-on-student-loans/.
    \252\ www.luminafoundation.org/resource/its-not-just-the-money/; 
www.thirdway.org/report/ripple-effect-the-cost-of-the-college-dropout-rate.
---------------------------------------------------------------------------

    Finally, the proposed regulations would also provide benefits for 
institutions that are not affected by a new request for financial 
protection. Many of the factors that can lead to a letter of credit 
would be associated with institutions that have engaged in 
questionable, and sometimes predatory, behavior, often in the hopes of 
maintaining or growing enrollment. For instance, aggressive conduct 
during the recruitment process, including misrepresenting key elements 
of a program to students, can generate lawsuits, State actions, and 
borrower defense claims. To the extent these proposed triggers 
discourage such behaviors, that would help institutions that act 
responsibly by allowing them to better compete for potential students 
based on factors like quality and value delivered and of the 
educational program.
Costs
    The proposed regulations could create costs for institutions in a 
few ways. First, institutions could face costs to obtain a letter of 
credit or other form of financial protection. Financial institutions 
typically charge some sort of fee to provide a letter of credit. Or the 
institution may have to set aside funds so the financial institution is 
willing to issue the letter of credit. These fees or set aside amounts 
may be based upon the total amount of the letter of credit and could 
potentially also reflect the bank's view of the level of risk 
represented by the school. Institutions do not currently inform the 
Department of how much they must spend to obtain a letter of credit, so 
the Department does not have a way of ascertaining any potential added 
costs resulting from fees or set aside amounts. The fees, however, 
would be borne by the institution regardless of whether the letter of 
credit is collected on or not, while funds set aside for the letter of 
credit would be returned to the institution if it is not collected 
upon. Other types of financial protection, such as providing funds 
directly or offsetting title IV, HEA aid

[[Page 32447]]

received, would not come with such fees.
    The second form of cost would be transfers to the Department that 
occur when it collects on a letter of credit or keeps the funds from a 
cash escrow account, title IV, HEA offset, or other forms of financial 
protection. In those situations, the Department would use those funds 
to offset liabilities owed to it. This would be a benefit to the 
Department and taxpayers.
    The rate at which the Department collects on financial protection 
it receives would likely change under these proposed regulations. The 
Department anticipates that one effect of the proposed regulations 
would be an increase in the instances in which it requests financial 
protection. That would result in a larger total amount of financial 
protection available. However, it is possible that the increase in 
financial protection would result in a lower rate at which those 
amounts are collected on. This could be a result of the financial 
protection providing a greater and earlier deterrence against behavior 
that would have otherwise led to a closure. Additionally, the proposed 
regulations could result in be more situations where the Department has 
financial protection but an institution does not ultimately have unpaid 
liabilities. At the same time, if the Department is more successful in 
securing financial protection from institutions that do close, it may 
end up with a greater share of outstanding liabilities covered by funds 
from an institution.
Administrative Capability
Benefits
    The proposed Administrative Capability regulations would provide 
several benefits for students, the Department, and other institutions 
of higher education. Each is discussed below in turn.
Students
    For students, the proposed changes would particularly help them 
make more informed choices about where to enroll, how much they might 
borrow, and ensure that students who are seeking a job get the 
assistance they need to launch or continue their careers. On the first 
point, the proposed changes in Sec.  668.16(h) expand an existing 
requirement related to sufficient financial aid counseling to also 
include written information, such as what is contained when 
institutions inform students about their financial aid packages. Having 
a clear sense of how much an institution will cost is critical for 
students to properly judge the financial transaction they are entering 
into when they enroll. For many students and families, a postsecondary 
education is the second most expensive financial decision they make 
after buying a home. However, the current process of understanding the 
costs of a college education is far less consistent than that of a 
buying a home. For the latter, there are required standard disclosures 
that present critical information like the total price, interest rate, 
and the amount of interest that will ultimately be paid. Having such 
common disclosures helps to compare different mortgage offers.
    By contrast, financial aid offers are extremely varied. A 2018 
study by New America that examined more than 11,000 financial aid 
offers from 515 schools found 455 different terms used to describe an 
unsubsidized loan, including 24 that did not use the word ``loan.'' 
\253\ More than a third of the financial aid offers New America 
reviewed did not include any cost information. Additionally, many 
colleges included Parent PLUS loans as ``awards'' with 67 unique terms, 
12 of which did not use the word ``loan'' in the description. 
Similarly, a 2022 report by the GAO estimated that, based on their 
nationally representative sample of colleges, 22 percent of colleges do 
not provide any information about college costs in their financial aid 
offers, and of those that include cost information, 41 percent do not 
include a net price and 50 percent understate the net price.\254\ GAO 
estimated that 21 percent of colleges do not include key details about 
how Parent PLUS loans differ from student loans. This kind of 
inconsistency creates significant risk that students and families may 
be presented with information that is both not directly comparable 
across institutions but may be outright misleading. That hinders the 
ability to make an informed financial choice and can result in students 
and families paying more out-of-pocket or going into greater debt than 
they had planned.
---------------------------------------------------------------------------

    \253\ www.newamerica.org/education-policy/policy-papers/decoding-cost-college/.
    \254\ www.gao.gov/products/gao-23-104708.
---------------------------------------------------------------------------

    While the proposed regulatory language would not mandate that all 
colleges adopt the same offer, they would establish requirements around 
key information that must be provided to students. Some of these 
details align with the existing College Financing Plan, which is used 
by half of the institutions in at least some form. The proposed 
regulations will thereby increase the likelihood that students receive 
consistent information, including, in some cases, through the expanded 
adoption of the College Financing Plan. Clear and reliable information 
could further help students choose institutions and programs that might 
have lower net prices, regardless of sticker price, which may result in 
students enrolling in institutions and programs where they and their 
families are able to pay less out of pocket or take on lower amounts of 
debt.
    Students would also benefit from the proposed Sec.  668.16(p), 
related to proper procedures for evaluating high school diplomas. It is 
critical that students can benefit from the postsecondary training they 
pursue. If they do not, then they risk wasting time and money, as well 
as ending up with loan debt they would struggle to repay because they 
are unable to secure employment in the field they are studying. 
Students who have not obtained a valid high school diploma may be at a 
particular risk of ending up in programs where they are unlikely to 
succeed. The Department has seen in the past that institutions that had 
significant numbers of students who enrolled from diploma mills or 
other schools that did not provide a proper secondary education have 
had high rates of withdrawal, non-completion, or student loan default. 
The added requirements in proposed Sec.  668.16(p) would better ensure 
that students pursuing postsecondary education have received the 
secondary school education needed to benefit from the programs they are 
pursuing.
    The provision related to adequate career services in proposed Sec.  
668.16(q) and the provision of externships in proposed Sec.  668.16(r) 
would result in significant benefits for students as they are 
completing their programs. While postsecondary education and training 
provides a range of important benefits, students repeatedly indicate 
that getting a job is either the most or among the most important 
reasons for attending. For example, one survey asked students their 
reasons for deciding to go to college and 91 percent said to improve 
their employment opportunities, 90 percent said to make more money, and 
89 percent said to get a good job.\255\ Another survey of 14- to 23-
year-olds showed that two-thirds said they wanted a degree to provide 
financial security.\256\ Similarly, many institutions construct their 
marketing around their connections to employers, the careers

[[Page 32448]]

their students pursue, or other job-related outcomes. But students will 
have a hard time achieving those goals if the institution lacks 
sufficient career services to assist them in finding a job. This is 
even more pronounced for students whose career pathways require an 
externship or clinical experience, which is commonly a requirement to 
obtain the necessary license to work in certain fields. Making it an 
explicit requirement that institutions have sufficient career services 
and provide necessary clinical or externship experiences would increase 
the ability of students to find jobs in the fields for which they are 
being prepared.
---------------------------------------------------------------------------

    \255\ www.luminafoundation.org/resource/deciding-to-go-to-college/.
    \256\ www.washingtonpost.com/news/grade-point/wp/2018/09/01/college-students-say-they-want-a-degree-for-a-job-are-they-getting-what-they-want/.
---------------------------------------------------------------------------

    The Department anticipates that the proposed provisions in Sec.  
668.16(s) would ensure students receive their funds when they most need 
them. Refunds of financial aid funds remaining after paying for tuition 
and fees gives students critical resources to cover important costs 
like food, housing, books, and transportation. Students that are unable 
to pay for these costs struggle to stay enrolled and may instead need 
to either leave a program or increase the number of hours they are 
working, which can hurt their odds of academic success. Ensuring 
institutions disburse funds in a timely manner would help students get 
their money when they need it.
    Finally, the provisions in Sec. Sec.  668.16(k)(2) and 668.16(t) 
through (u) would also benefit students by protecting them from 
institutions that are engaging in poor behavior, institutions that are 
at risk of losing access to title IV, HEA aid for a significant share 
of their students because they do not deliver sufficient value, and 
institutions that are employing individuals who have a problematic 
history with the financial aid programs. All three of these elements 
can be a sign of an elevated risk of closure or an institution's 
engagement in concerning behaviors that could result in the approval of 
borrower defense claims or actions under part 668, subpart G, either of 
which could place the institution in challenging financial situations.
Federal Government
    The proposed Administrative Capability regulations would also 
provide benefits for the Department. False institutional promises about 
the availability of career services, externships or clinical 
placements, or the ability to get a job can result in the Department 
granting a borrower defense discharge. For instance, the Department has 
approved borrower defense claims at American Career Institute for false 
statements about career services and at Corinthian Colleges and ITT 
Technical Institute related to false promises about students' job 
prospects. But the Department has not been able to recoup the costs of 
those transfers to borrowers from the Department. Adding these 
requirements to the Administrative Capability regulations would 
increase the ability of the Department to identify circumstances 
earlier that might otherwise lead to borrower defense discharges later. 
That should reduce the number of future claims as institutions would 
know ahead of time that failing to offer these services is not 
acceptable. It also could mean terminating the participation in the 
title IV, HEA programs sooner for institutions that do not meet these 
standards, reducing the exposure to future possible liabilities through 
borrower defense.
    The Department would also benefit from improved rules around 
verifying high school diplomas. Borrowers who received student loans 
when they did not in fact have a valid high school diploma may be 
eligible for a false certification discharge. If that occurs, the 
Department has no guarantee that it would be able to recover the cost 
of such a discharge, resulting in a transfer from the government to the 
borrower. Similarly, grant aid that goes to students who lack a valid 
high school diploma is a transfer of funds that should not otherwise be 
allowed and is unlikely to be recovered. Finally, if students who lack 
a valid high school diploma or its equivalent are not correctly 
identified, then the Department may end up transferring Federal funds 
to students who are less likely to succeed in their program and could 
end up in default or without a credential. Such transfers would 
represent a reduction in the effectiveness of the Federal financial aid 
programs.
    Provisions around hiring individuals with past problems related to 
the title IV, HEA programs would also benefit the Department. Someone 
with an existing track record of misconduct, including the possibility 
that they have pled guilty to or been convicted of a crime, represents 
a significant risk to taxpayers that those individuals might engage in 
the same behavior again. Keeping these individuals away from the 
Federal aid programs would decrease the likelihood that concerning 
behavior will repeat. The Department is already concerned that today 
there can be executives who run one institution poorly and then simply 
jump to another or end up working at a third-party servicer. Without 
this proposed regulatory change, it can be harder to prevent these 
individuals from continuing to participate in the aid programs.
    The Department would gain similar benefits from the provisions 
related to institutions with significant enrollment in failing GE 
programs; institutions subject to a significant negative action subject 
to findings by a State or Federal agency, court, or accrediting agency; 
and institutions engaging in misrepresentations. These are situations 
where a school may be at risk of closure or facing significant borrower 
defense liabilities. Allowing these institutions to continue to 
participate in Title IV, HEA programs could result in transfers to 
borrowers in the form of closed school or borrower defense discharges 
that are not reimbursed. These proposed provisions would allow for more 
proactive action to address these concerning situations and behaviors.
    Finally, the Department would benefit from students receiving 
accurate financial aid information. Students whose program costs end up 
being far different from what the institution initially presented may 
end up not completing a program because the price tag ends up being 
unaffordable. That can make them less likely to pay their student loans 
back and potentially leave them struggling in default. This could also 
include situations where the cost is presented accurately but the 
institution fails to properly distinguish grants from loans, resulting 
in a student taking on more debt than they intended to and being unable 
to repay their debt as a result.
Costs
    The costs of the proposed regulations would largely fall on 
institutions, as well as some administrative costs for the Department. 
For institutions that fail to provide clear financial aid information 
or lack sufficient career services staff, they may face costs either 
updating their financial aid information (e.g., redoing financial aid 
offers) or hiring additional staff to bolster career services. The 
former costs would likely be a one-time, minimal expense, while the 
latter would be ongoing. Institutions may also face some administrative 
costs for creating procedures for verifying high school diplomas if 
they currently lack sufficient processes. This proposed requirement 
would not entail reviewing every individual high school diploma, so the 
costs would depend on how many students the institution enrolls that 
have high school diplomas that may merit additional investigation. 
Institutions currently enrolling large numbers of students who should 
not otherwise be deemed to have eligible high school diplomas under 
these

[[Page 32449]]

revised policies may also face costs in the form of reduced transfers 
from the Federal government if these individuals are not able to enroll 
under an ability-to-benefit pathway. Finally, the costs to an 
institution associated with having a failing GE program are similar to 
those discussed in that section of the regulatory impact analysis.
    These changes would also impose some administrative costs on the 
Department. The Department would need to incorporate procedures into 
its reviews of institutions to identify the added criteria. That could 
result in costs for retraining staff or added time to review certain 
institutions where these issues manifest.
    Finally, institutions that face significant administrative 
capability problems related to issues such as State, accreditor, or 
other Federal agency sanctions or conducting misrepresentations could 
face costs in the form of reduced transfers from the Department if 
those actions result in loss of access to title IV, HEA financial 
assistance. Situations that do not reach that level may or may not 
result in added costs, including transfers, if they affect receipt of 
title IV, HEA aid, depending on the steps an institution needs to take 
to address the concerns.
Certification Procedures
    An institution must be certified to participate in the title IV, 
HEA financial assistance programs. Doing so ensures the institution 
agrees to abide by the requirements of these programs, helping to 
maintain integrity and accountability around Federal dollars. Decisions 
about whether to certify an institution's participation, how long to 
certify it for, and what types of conditions should be placed on that 
certification are a critical element of managing oversight of 
institutions, particularly the institutions that pose risks to students 
and taxpayers. Shorter certification periods or provisional 
certification can allow the Department greater flexibility to respond 
to an institution that may be exhibiting some signs of concern. This is 
necessary to ensure that students and taxpayer funds are well 
protected. Similarly, institutions that do not raise concerns can be 
certified for longer and with no additional conditions, allowing the 
Department to focus its resources where greater attention is most 
needed.
    The proposed regulations are necessary to ensure that the 
Department can more effectively manage its resources in overseeing 
institutions of higher education. The proposed changes would remove 
requirements that risked giving institutions longer approval periods 
when they merit closer scrutiny and would clarify the options available 
when additional oversight is necessary. The net result would be an 
oversight and monitoring approach that is more flexible and effective.
Benefits
    The proposed regulations would provide several important benefits 
for the Department that would result in better allocation of its 
administrative resources. One of these is the proposed elimination of 
Sec.  668.13(b)(3). This is a recently added provision that requires 
the Department to issue a decision on a certification within 12 months 
of the date its participation expires. While it is important for the 
Department to move with deliberate speed in its oversight work, the 
institutions that have extended periods with a pending certification 
application are commonly in this situation due to unresolved issues 
that must be dealt with first. For instance, an institution may have a 
pending certification application because it may have an open program 
review or a Federal or State investigation that could result in 
significant actions. Being forced to make a decision on that 
application before the review process or an investigation is completed 
could result in suboptimal outcomes for the Department, the school, and 
students. For the institution, the Department may end up placing it on 
a short certification that would result in an institution facing the 
burden of redoing paperwork after only a few months. That would carry 
otherwise unnecessary administrative costs and increase uncertainty for 
the institution and its students.
    The Department would similarly benefit from provisions in proposed 
Sec.  668.13(c)(1) that provides additional circumstances in which an 
institution would become provisionally certified. The proposed change 
in Sec.  668.13(c)(1)(i)(F)--giving the Secretary the ability to place 
an institution on provisional certification if there is a determination 
that an institution is at risk of closure--would be a critical tool for 
better protecting students and taxpayers when an institution appears to 
be on shaky footing. The same is true for the proposed changes in Sec.  
668.13(c)(1)(ii) related to how certain conditions can automatically 
result in provisional status. Institutional closures can occur very 
quickly. An institution may face a sudden shock that puts them out of 
business or the gradual accumulation of a series of smaller problems 
that culminates in a sudden closure. The pace at which these events 
occur requires the Department to be nimble in responding to issues and 
better able to add additional requirements for an institution's 
participation outside of the normal renewal process. Absent this 
proposed language, the Department would be in a position where an 
obviously struggling institution might stay fully certified for years 
longer, despite the risk it poses.
    Such benefits are also related to the provisions in proposed Sec.  
668.14(e) that lay out additional conditions that could be placed on an 
institution if it is in a provisional status. This non-exhaustive list 
of requirements specifies ways the Department can more easily protect 
students and taxpayers when concerns arise. Some of these conditions 
would make it easier to manage the size of a risky institution and 
would ensure that it does not keep growing when it may be in dire 
straits. Such size management would be accomplished by imposing 
conditions such as restricting the growth of an institution, preventing 
the addition of new programs or locations, or limiting the ability of 
the institution to serve as a teach-out partner for other schools or to 
enter into agreements with other institutions to provide portions of an 
educational program.
    Other conditions in proposed Sec.  668.14(e) would give the 
Department better ability to ensure that it is receiving the 
information it needs to properly monitor schools and that there are 
plans for adequately helping students. The additional reporting 
requirements proposed in Sec.  668.14(e)(7) would help the Department 
more quickly receive information about issues so it could react in 
real-time as concerns arise. The proposed requirements in Sec.  
668.14(e)(1), meanwhile, would give the Department greater tools to 
ensure students are protected when a college is at risk of closure. Too 
often of late, colleges have closed without any meaningful agreement in 
place for where students could continue their programs. According to 
SHEEO, of the more than 143,000 students who experienced a closure over 
16 years, 70 percent experienced an abrupt closure without a teach-out 
plan or adequate notice.\257\ Additionally, even for those with a 
teach-out plan, some of the teach-out plans were at another branch 
campus that later closed. The proposed changes would, therefore, 
increase the number of meaningful teach-out plans or agreements in 
place prior to a closure.
---------------------------------------------------------------------------

    \257\ sheeo.org/more-than-100000-students-experienced-an-abrupt-campus-closure-between-july-2004-and-june-2020/.
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    To get a sense of the potential effect of these changes, Table 4.4 
below breaks down the certification status of all

[[Page 32450]]

institutions participating in title IV, HEA programs. This provides 
some sense of which institutions might currently be subject to 
additional conditions.

 Table 4.6--Certification Status of Institutions Participating in the Title IV, HEA Federal Student Aid Programs
----------------------------------------------------------------------------------------------------------------
                                                                    Fully      Provisionally     Month-to-month
                                                                  certified      certified       certification
----------------------------------------------------------------------------------------------------------------
Public.........................................................        1,732               95                 32
Private Nonprofit..............................................        1,461              197                 57
Private For-Profit.............................................        1,120              502                 78
Foreign Public.................................................            2                1                  0
Foreign Private Nonprofit......................................          312               59                 60
Foreign Private For-Profit.....................................            0                9                  1
                                                                ------------------------------------------------
    Total......................................................        4,627              863                228
----------------------------------------------------------------------------------------------------------------
Source: Postsecondary Education Participants Systems as of January 2023.
Note: The month-to-month column is a subset of schools that could be in either the fully certified or the
  provisionally certified column.

    Other provisions in proposed Sec.  668.14 would provide benefits to 
the Department by increasing the number of entities that could be 
financially liable for the cost of monies owed to the Department that 
are unpaid when a college closes. Electronic Announcement (EA) GENERAL 
22-16 updated PPA signature requirements for entities exercising 
substantial control over non-public institutions of higher 
education.\258\ While EA GENERAL 22-16 used a rebuttable presumption, 
we propose language in Sec.  668.14(a)(3) that would not only require a 
representative of the institution to sign a PPA, but also an authorized 
representative of an entity with direct or indirect ownership of a 
private institution. Historically, the Department has often seen 
colleges decide to close when faced with significant liabilities 
instead of paying them. The result is both that the existing liability 
is not paid and the cost to taxpayers may further increase due to 
closed school discharges due to students.
---------------------------------------------------------------------------

    \258\ Updated Program Participation Agreement Signature 
Requirements for Entities Exercising Substantial Control Over Non-
Public Institutions of Higher Education. https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2022-03-23/updated-program-participation-agreement-signature-requirements-entities-exercising-substantial-control-over-non-public-institutions-higher-education.
---------------------------------------------------------------------------

    To get a sense of how often the Department successfully collects on 
assessed liabilities, we looked at the amount of institutional 
liabilities established as an account receivable and processed for 
repayment, collections, or referral to Treasury following the 
exhaustion of any applicable appeals over the prior 10 years. This does 
not include liabilities that were settled or not established as an 
account receivable and referred to the Department's Finance Office. 
Items in the latter category could include liabilities related to 
closed school loan discharges that the Department did not assess 
because there were no assets remaining at the institution to collect 
from.
    We then compared estimated liabilities to the amount of money 
collected from institutions for liabilities owed over the same period. 
The amount collected in a given year is not necessarily from a 
liability established in that year, as institutions may make payments 
on payment plans, have liabilities held while they are under appeal, or 
be in other similar circumstances.

       Table 4.7--Liabilities Versus Collections From Institutions
                             [$ in millions]
------------------------------------------------------------------------
                                                             Amounts
          Federal fiscal year             Established    collected from
                                          liabilities     institutions
------------------------------------------------------------------------
2013..................................            19.6              26.9
2014..................................            86.1              37.5
2015..................................           108.1              13.1
2016..................................            64.5              30.8
2017..................................           149.7              34.5
2018..................................           126.2              51.1
2019..................................           142.9              52.3
2020..................................           246.2              31.7
2021..................................           465.7              29.1
2022..................................           203.0              37.0
------------------------------------------------------------------------
    2013-2022.........................         1,611.9             344.2
------------------------------------------------------------------------
Source: Department analysis of data from the Office of Finance and
  Operations including reports from the Financial Management Support
  System.

    At the same time, there may be many situations where the entities 
that own the closed college still have resources that could be used to 
pay liabilities owed to the Department. The provisions in proposed 
Sec.  668.14(a)(3) would make it clearer that the Department would seek 
signatures on program participation agreements from those

[[Page 32451]]

types of entities, making them financially liable for the costs to the 
Department. In addition to the financial benefits in the form of the 
greater possibility of transfers from the school or other entities to 
the Department, this provision would also provide deterrence benefits. 
Entities considering whether to invest in or otherwise purchase an 
institution would want to conduct greater levels of due diligence to 
ensure that they are not supporting a place that might be riskier and, 
therefore, more likely to generate liabilities the investors would have 
to repay. The effect should mean that riskier institutions receive less 
outside investment and are unable to grow unsustainably. In turn, 
outside investors may then be more willing to consider institutions 
that generate lower returns due to more sustainable business practices. 
This could include institutions that do not grow as quickly because 
they want to ensure they are capable of serving all their students 
well, or make other choices that place a greater priority on student 
success.
    The added provisions in proposed Sec.  668.14(b)(32) through (34) 
would also provide benefits to the Department, largely by ensuring that 
Federal student aid is spent more efficiently, is paying for fewer 
wasted credits, and is not withheld from students in a way that may 
harm completion. On the first point, proposed Sec.  668.14(b)(32) would 
make it harder for institutions to offer programs that lead to 
licensure or certification whose length far exceeds what is required to 
obtain the approvals necessary to work in that field in a student's 
State. While it is important that students get enough aid to finish 
their program, the Department is concerned that overly long programs 
may end up generating unnecessary transfers from the Department to the 
institution in the form of financial aid funding courses that are not 
needed for the borrower to obtain a position in the field for which 
they are being prepared. For instance, if a State only requires 1,000 
hours for a program but an institution sets its program length at 1,500 
hours, then the taxpayer would be supporting significant additional 
courses that are not required by the state and are potentially 
superfluous. These types of protections are also necessary for students 
and families, as some of these additional transfers may come from them 
in tuition dollars paid, often in the form of greater and unnecessary 
student loan debt, increasing both the amount students have to pay back 
and representing potentially a larger share of their annual income. 
Other parts of paragraph (32), meanwhile, would ensure that colleges 
enrolling online students from another State would not be able to avoid 
any relevant key State consumer protection laws regarding closure, 
recruitment, or misrepresentation. This would help the Federal 
government by ensuring States can continue to play meaningful roles in 
the three areas that are most likely to be a source of liabilities in 
the form of closed school or borrower defense discharges.
    Proposed Sec.  668.14(b)(33), meanwhile would reduce the number of 
credits paid for with title IV, HEA funds that a student is unable to 
transfer to another institution or use to verify education to potential 
employers due to a hold on their transcript. The Department is 
concerned that credits funded with taxpayer money that are on 
transcripts that an institution will not release due to mistakes on its 
own part or returns of title IV, HEA funds through the Return of Title 
IV Funds process represent an unacceptable loss of Federal money. 
Credits that cannot be redeemed elsewhere toward a credential do not 
help a student complete a program and increase the potential for the 
government to pay for the same courses twice. Credits that cannot be 
verified do not help students obtain employment. While this proposed 
change may not address broader issues of credit transfer or transcript 
withholding, it would mitigate some of those problems and at least 
benefit the government by preventing withholding and wasting of credits 
due to administrative errors or required functions related to the title 
IV, HEA programs.
    Proposed Sec.  668.14(b)(34) would provide benefits to the 
Department. Research shows that additional financial aid can provide 
important supports to help increase the likelihood that students 
graduate. For example, one study showed that increasing the amount some 
students were allowed to borrow improved degree completion, later-life 
earnings, and their ability to repay their loans.\259\ This proposed 
language would prevent situations in which an institution may prevent a 
student from receiving all the title IV aid they are entitled to 
without replacing it with other grant aid. This would diminish the risk 
that students are left with gaps that could otherwise have been covered 
by title IV aid, which would help them finish their programs.
---------------------------------------------------------------------------

    \259\ www.nber.org/papers/w27658.
---------------------------------------------------------------------------

Students
    Many of the same benefits for the Department would also accrue to 
students. In most cases, college closures are extremely disruptive for 
students. As found by GAO and SHEEO, only 44 to 47 percent of students 
enroll elsewhere and even fewer complete college.\260\ SHEEO also found 
that over 100,000 students were affected by sudden closures from July 
2004 to June 2020.\261\ Proposed Sec.  668.13(e) would benefit students 
in two ways. First, some potential conditions added to the program 
participation agreement would protect students from enrolling in an at-
risk institution in the first place. Preventing a risky school from 
growing or adding new programs would mean enrollment does not increase 
and, therefore, fewer students attending a place that may close. 
Second, the requirements around teach-out plans and agreements would 
increase the number of schools where there is better planning on what 
will happen to students' educational journeys should a college cease 
operating. That would help more students make informed decisions about 
when to re-enroll versus walk away from their programs.
---------------------------------------------------------------------------

    \260\ www.gao.gov/products/gao-21-105373; sheeo.org/more-than-100000-students-experienced-an-abrupt-campus-closure-between-july-2004-and-june-2020/.
    \261\ https://sheeo.org/more-than-100000-students-experienced-an-abrupt-campus-closure-between-july-2004-and-june-2020/.
---------------------------------------------------------------------------

    Students would also benefit from the proposed requirements in Sec.  
668.14(a)(3) around making additional entities responsible for unpaid 
liabilities. This proposed provision would make outside investors more 
cautious in engaging with riskier institutions, making it harder for 
them to grow as quickly. This in turn would reduce the number of 
students enrolling in risky institutions that might not serve them 
well.
    The proposed changes in Sec.  668.14(b)(32) would provide benefits 
to students by reducing the likelihood of them paying more for 
education and training programs that artificially extend their program 
length beyond what is needed to earn the licensure or certification for 
which they are being prepared. Programs that are unnecessarily long may 
depress students' ability to complete, as it introduces more 
opportunities for life to interfere with academics, and cost students 
time out of the labor force where they could be earning money in the 
occupation for which they are training. It can also result in students 
taking out more student loans than otherwise needed, potentially 
increasing the risk of unaffordable loan payments, followed by 
delinquency and default. Similarly, the provision that an institution 
must abide by State laws

[[Page 32452]]

related to closure, recruitment, and misrepresentation would ensure 
that students are protected by key State consumer protection laws 
regardless of whether they attend an institution that is physically 
located in their State.
    Restrictions on the ability of institutions to withhold transcripts 
as proposed in Sec.  668.14(b)(33) would benefit students by helping 
them better leverage the credits they earned in courses paid for by 
their title IV, HEA aid. Refusing to release a transcript means that 
students cannot easily transfer their credits. That can arrest progress 
toward completion elsewhere and result in credits paid for by title IV, 
HEA dollars that never lead to a credential. A 2020 study by Ithaka S+R 
estimated that 6.6 million students have credits they are unable to 
access because their transcript is being withheld by an 
institution.\262\ That study and a 2021 study published by the same 
organization estimate that the students most affected are likely adult 
learners, low-income students, and racial and ethnic minority 
students.\263\ This issue inhibits students with some college, but no 
degree from completing their educational programs, as well as prevents 
some students with degrees from pursuing further education or finding 
employment if potential employers are unable to verify that they 
completed a degree or if they are unable to obtain licensure for the 
occupation for which they trained.
---------------------------------------------------------------------------

    \262\ sr.ithaka.org/publications/solving-stranded-credits/.
    \263\ sr.ithaka.org/publications/stranded-credits-a-matter-of-equity/.
---------------------------------------------------------------------------

    The proposal in Sec.  668.14(b)(34), meanwhile, would provide 
benefits to students by ensuring that they receive all the Federal aid 
they are entitled to. This could result in an increase in transfers 
from the Department to students as they receive aid that would 
otherwise have been withheld by the school. Research shows that 
increased ability to borrow can increase completed credits and improve 
grade point average, completion, post-college earnings, and loan 
repayment for some students.\264\
---------------------------------------------------------------------------

    \264\ www.aeaweb.org/articles?id=10.1257/pol.20180279; 
www.nber.org/papers/w24804.
---------------------------------------------------------------------------

Costs
    The proposed regulations would create some modest administrative 
costs for the Department. These would consist of staffing costs to 
monitor the additional conditions added to program participation 
agreements, as well as any increase in changes to an institution's 
certification status. This cost would likely be larger than the amount 
the Department spends on reviews of less risky institutions. Beyond 
these administrative costs, the Department could see a slight increase 
in costs in the title IV, HEA programs that come in the form of greater 
transfers to students who would otherwise have received less financial 
aid under the conditions prohibited in proposed Sec.  668.14(b)(34). As 
discussed in the benefits section, greater aid could help students 
finish their programs.
    The Department is not anticipating that these proposals would have 
a significant cost for students. While some of the proposals could 
affect the institution in which a student chooses to enroll, the 
Department does not believe that these provisions would likely have a 
significant effect on whether students enroll in a postsecondary 
institution at all.
    The proposed regulations would establish costs in various forms for 
institutions. For some, the changes would create costs in the form of 
reduced transfers from the Department. This would occur in situations 
such as growth restrictions or preventing institutions from starting 
new programs or opening new locations. It is not possible to clearly 
estimate these costs, as which conditions are placed on institutions 
would be fact-specific and gauging their effect would require judging 
how many students the institution would then have otherwise enrolled.
    Institutions that would be affected by the proposed requirements to 
limit programs to the required length in their State (or that of a 
neighboring state in certain limited circumstances) would also face 
administrative costs to redesign programs. This could require 
determining what courses to eliminate or how to otherwise make a 
program shorter. These changes could also reduce transfers from the 
Department to the institution as aid is no longer provided for the 
portion of the program that is eliminated.
    Other costs to institutions would come in the form of 
administrative expenses. Institutions that are placed on provisional 
status may need to submit additional information for reporting 
purposes, which would require some staff time. Similarly, an 
institution that becomes provisionally certified may have to submit an 
application for recertification sooner than anticipated, which would 
require additional staff time. The extent of these administrative costs 
would vary depending on the specific demands for an institution and it 
is not possible to model them.
Ability To Benefit
    The HEA requires students who are not high school graduates to 
fulfill an ATB alternative and enroll in an eligible career pathway 
program to gain access to title IV, HEA aid. The three ATB alternatives 
are passing an independently administered ATB test, completing six 
credits or 225 clock hours of coursework, or enrolling through a State 
process.\265\ Colloquially known as ATB students, these students are 
eligible for all title IV, HEA aid, including Federal Direct loans. The 
ATB regulations have not been updated since 1994. In fact, the current 
Code of Federal Regulations makes no mention of eligible career pathway 
programs. Changes to the statute have been implemented through 
subregulatory guidance laid out in Dear Colleague Letters (DCLs). DCL 
GEN 12-09, 15-09, and 16-09 explained the implementation procedures for 
the statutory text. Due to the changes over the years, as described in 
the Background section of this proposed rule, the Department seeks to 
update, clarify, and streamline the regulations related to ATB.
---------------------------------------------------------------------------

    \265\ As of January 2023, there are six States with an approved 
State process.
---------------------------------------------------------------------------

Benefits
    The proposed regulations would provide benefits to States by more 
clearly establishing the necessary approval processes. This would help 
more States have their applications approved and reduce the burden of 
seeking approval. This would be particularly achieved by the proposal 
to separate the application into an initial process and a subsequent 
process. Currently, States that apply are required to submit a success 
rate calculation under current Sec.  668.156(h) as a part of the first 
application. Doing so is very difficult because the calculation 
requires that a postsecondary institution is accepting students through 
its State process for at least one year. This means that a 
postsecondary institution needs to enroll students without the use of 
title IV aid for one year to gather enough data to submit a success 
rate to the Department. Doing so may be cost prohibitive for 
postsecondary institutions.
    The proposed regulations would also benefit institutions by making 
it easier for them to continue participating in a State process while 
they work to improve their results. More specifically, reducing the 
success rate calculation threshold from 95 percent to 85 percent, and 
the proposal for struggling institutions to meet a 75 percent

[[Page 32453]]

threshold for a limited number of years, would give institutions 
additional opportunities to improve their outcomes before being 
terminated from a State process. This added benefit would not come at 
the expense of costs to the student from taking out title IV, HEA aid 
to attend an eligible career pathway program. This is because the 
Department proposes to incorporate more guardrails and student 
protections in the oversight of ATB programs, including documentation 
and approval by the Department of the eligible career pathway program. 
That means the proposed changes would not on the whole decrease 
regulatory oversight.
    Institutions that are not struggling to maintain results would also 
benefit from these proposed regulations. Under current regulations, the 
success rate calculation includes all institutions combined. The result 
is that an institution with strong outcomes could be combined with 
those that are doing worse. Under this proposal, the Department would 
calculate the success rate for each individual participating 
institution, therefore allowing other participating institutions that 
are in compliance with the proposed regulations to continue 
participation in the State process.
Costs
    The proposed regulatory changes would impose additional costs on 
the Department, postsecondary institutions, and entities that apply for 
the State process.
    The proposed regulations would break up the State process into an 
initial and subsequent application that must be submitted to the 
Department after two years of initial approval. This would increase 
costs to the State and participating institutions. This new application 
process would be offset because the participating institutions would no 
longer need to fund their own State process without title IV, HEA 
program aid to gain enough data to submit a successful application to 
the Department.
    In the proposed initial application, the institution would have to 
calculate the withdrawal rate for each participating institution, and 
the Department would verify a sample of eligible career pathway 
programs offered by participating institutions to verify compliance 
with the proposed definition under Sec.  668.2. This would increase 
costs to the State and participating institutions. The increased 
administrative costs associated with the new outcome metric would be 
minimal because a participating institution would already know how to 
calculate the withdrawal rate as it is already required under 
Administrative Capability regulations. These costs are also worthwhile 
because they allow for the added benefit that the State could remove 
poorer performing institutions from its application.
    The increase in program eligibility costs associated with the 
eligible career pathway verification process would be minimal because 
schools are already required to meet to the definition of an eligible 
career pathway program under the HEA.
    The Department is also proposing to place additional reporting 
requirements on States, including information on the demographics of 
students. This would increase administrative burden costs to the State 
and participating institutions. There is a lack of data about ability 
to benefit and eligible career pathway programs, and the new reporting 
the Department would be able to analyze the data and may be able to 
report trends publicly.
    Proposed Sec.  668.157 prescribes the minimum documentation 
requirements that all eligible career pathway programs would have to 
meet in the event of an audit, program review, or review and approval 
by the Department. Currently the Department does not approve eligible 
career pathway programs, therefore, the proposed regulation would 
increase costs to any postsecondary institutions that provide an 
eligible career pathway program. For example, proposed Sec.  
668.157(a)(2) would require a government report demonstrate that the 
eligible career pathway program aligns with the skill needs of 
industries in the State or regional labor market. Therefore, if no such 
report exists the program would not be title IV, HEA eligible. Further, 
under proposed Sec.  668.157(b) the Department would approve every 
eligible career pathway program for postsecondary institutions that 
admit students under the six credit and ATB test options. We believe 
that benefits of the new documentation standards outweigh their costs 
because the proposed regulations would increase program integrity and 
oversight and could stop title IV, HEA aid from subsidizing programs 
that do not meet the statutory definition.
    Institutions currently use their best faith to comply with the 
statute which means there are likely many different interpretations of 
the HEA. These proposed regulations would set clear expectations and 
standardize the rules.
    Elsewhere in this section under the Paperwork Reduction Act of 
1995, we identify and explain burdens specifically associated with 
information collection requirements.

5. Methodology for Budget Impact and Estimates of Costs, Benefits, and 
Transfers

    In this section we describe the methodology used to estimate the 
budget impact as well as the main costs, benefits, and transfers. Our 
modeling and impact only include the Financial Value Transparency and 
GE parts of the proposed rule. We do not include separate estimates for 
Financial Responsibility, Administrative Capability, Certification 
Procedures, or ATB because we anticipate these to have negligible 
impact on the budget in our primary scenario. We do, however, include a 
sensitivity analysis for Financial Responsibility.
    The main behaviors that drive the direction and magnitudes of the 
budget impacts of the proposed rule and the quantified costs, benefits, 
and transfers are the performance of programs and the enrollment and 
borrowing decisions of students. The Department developed a model based 
on assumptions regarding enrollment, program performance, student 
response to program performance, and average amount of title IV, HEA 
funds per student to estimate the budget impact of these proposed 
regulations. Additional assumptions about the earnings outcomes and 
instructional spending associated with program enrollment and tax 
revenue from additional earnings were used to quantify costs, benefits, 
and transfers. The model (1) takes into account a program's past 
results under the D/E and EP rates measure to predict future results, 
and (2) tracks a GE program's cumulative results across multiple cycles 
of results to determine title IV, HEA eligibility.
Assumptions
    We made assumptions in four areas in order to estimate the budget 
impact of the proposed regulations: (1) Program performance under the 
proposed regulations; (2) Student behavior in response to program 
performance; (3) Borrowing of students under the proposed regulation; 
and (4) Enrollment growth of students in GE and non-GE programs. Table 
5.1 below provides an overview of the main categories of assumptions 
and the sources. Assumptions that are included in our sensitivity 
analysis are also highlighted. Wherever possible, our assumptions are 
based on past performance and student enrollment patterns in data 
maintained by the Department or documented by scholars in prior 
research. Additional assumptions needed to quantify costs,

[[Page 32454]]

benefits, and transfers are described later when we describe the 
methodology for those calculations.

                                     Table 5.1--Main Assumptions and Sources
----------------------------------------------------------------------------------------------------------------
              Category                         Detail                    Source         Included in sensitivity?
----------------------------------------------------------------------------------------------------------------
                 Assumptions for Budget Impact and Calculation of Costs, Benefits, and Transfers
----------------------------------------------------------------------------------------------------------------
Program Performance at Baseline....  Share in each performance   ED data..............  No.
                                      category at baseline (GE
                                      and non-GE programs).
Enrollment Growth..................  Annual enrollment growth    Sector-level           No.
                                      rate by sector/level and    projections based on
                                      year.                       Department data.
Program transition between           AY2025-26, AY2026-27        Based on Department    Yes.
 performance categories.              onward, separately by       data + program
                                      loan risk group and for     improvement
                                      GE and non-GE programs.     assumptions.
Student response...................  Share of students who       Assumptions from 2014  Yes.
                                      remain in programs,         RIA and prior work.
                                      transfer to passing
                                      programs, or withdraw or
                                      decline to enroll by
                                      program performance
                                      category and transfer
                                      group; separately for GE
                                      and non-GE programs.
Student borrowing..................  Debt changes if students    Based on Department    No.
                                      transfer to passing         data.
                                      program by program
                                      performance, risk group,
                                      and cohort; separately
                                      for GE and non-GE
                                      programs.
----------------------------------------------------------------------------------------------------------------
                    Additional Assumptions for Calculation of Costs, Benefits, and Transfers
----------------------------------------------------------------------------------------------------------------
Earnings gain......................  Average program earnings    Based on Department    Yes.
                                      by risk group and program   data.
                                      performance, separately
                                      for GE and non-GE
                                      programs.
Tax rates..........................  Federal and State average   Hendren and Sprung-    No.
                                      marginal tax and transfer   Keyser 2020
                                      rates.                      estimates based on
                                                                  CBO.
Instructional cost.................  Average institution-level   IPEDS................  No.
                                      instructional expenditure
                                      by risk group and program
                                      performance; separately
                                      for GE and non-GE
                                      programs.
----------------------------------------------------------------------------------------------------------------

Enrollment Growth Assumptions
    For AYs 2023 to 2034, the budget model assumes a constant yearly 
rate of growth or decline in enrollment of students receiving title IV, 
HEA program funds in GE and non-GE programs in absence of the 
rule.\266\ We compute the average annual rate of change in title IV, 
HEA enrollment from AY 2016 to AY 2022, separately by the combination 
of control and credential level. We assume this rate of growth for each 
type of program for AYs 2023 to 2034 when constructing our baseline 
enrollment projections.\267\ Table 5.2 below reports the assumed 
average annual percent change in title IV, HEA enrollment.
---------------------------------------------------------------------------

    \266\ AYs 2023 to 2034 are transformed to FYs 2022 to 2023 later 
in the estimation process.
    \267\ The number of programs in proprietary post-BA certificates 
and proprietary professional degrees was too low to reliably compute 
a growth rate. Therefore, we assumed a rate equal to the overall 
proprietary rate of -0.4%.

                         Table 5.2--Annual Enrollment Growth Rate (Percent) Assumptions
----------------------------------------------------------------------------------------------------------------
                                                                                   Private, non-
                                                                      Public          profit        Proprietary
----------------------------------------------------------------------------------------------------------------
UG Certificates.................................................            -2.6            -6.9             4.1
Associate's.....................................................            -3.7            -3.9            -3.7
Bachelor's......................................................            -0.5            -0.8            -2.7
Post-BA Certs...................................................             4.2            -2.3            -0.4
Master's........................................................             3.0             0.5            -1.1
Doctoral........................................................             4.9             3.1            -1.7
Professional....................................................             0.9            -0.1            -0.4
Grad Certs......................................................             1.2             2.0            -0.8
----------------------------------------------------------------------------------------------------------------

Program Performance Transition Assumptions
    The methodology, described in more detail below, models title IV, 
HEA enrollment over time not for specific programs, but rather by 
groupings of programs by broad credential level and control, the number 
of alternative programs available, whether the program is GE or non-GE, 
and whether the program passes or fails the D/E and EP metrics. The 
model estimates the flow of students between these groups due to 
changes in program performance over time and reflects assumptions for 
the share of enrollment that would transition between the following 
four performance categories in each year:

 Passing (includes with and without data)
 Failing D/E rate only
 Failing EP rate only
 Failing both D/E and EP rates

    A GE program becomes ineligible if it fails either the D/E or EP 
rate measures in two out of three consecutive years. We assume that 
ineligible programs remain that way for all future years and, 
therefore, do not model performance transitions after ineligibility is 
reached. The model applies different assumptions for the first year of 
transition (from year 2025 to 2026) and subsequent years (after 2026). 
It assumes that the rates of program transition reach a steady state in 
2027. We assume modest improvement in performance, indicated by a 
reduction in the rate of failing and an increase in the rate of 
passing, among programs that fail one of the metrics, and an increase 
in the rate of passing again, among GE programs that pass the metrics. 
All transition probabilities are estimated separately for GE and non-GE 
programs and for four

[[Page 32455]]

aggregate groups: proprietary 2-year or less; public or non-profit 2-
year or less; 4-year programs; graduate programs.\268\
---------------------------------------------------------------------------

    \268\ The budget simulations separate lower and upper division 
enrollment in 4-year programs. We assume the same program transition 
rates for both.
---------------------------------------------------------------------------

    The assumptions for the 2025 to 2026 transition are taken directly 
from an observed comparison of actual rates results for two consecutive 
cohorts of students. The initial assignment of performance categories 
in 2025 is based on the 2022 PPD for students who completed programs in 
award years 2015 and 2016, whose earnings are measured in calendar 
years 2018 and 2019. The program transition assumptions for 2025 to 
2026 are based on the outcomes for this cohort of students along with 
the earnings outcomes of students who completed programs in award years 
2016 and 2017 (earnings measured in calendar years 2019 and 2020) and 
debt of students who completed programs in award years 2017 and 2018. A 
new set of D/E and EP metrics was computed for each program using this 
additional two-year cohort. Programs with fewer than 30 completers or 
with fewer than 30 completers with earnings records are determined to 
be passing, though can transition out of this category between years. 
The share of enrollment that transitions from each performance category 
to another is computed separately for each group.\269\
---------------------------------------------------------------------------

    \269\ In order to produce transition rates that are stable over 
time and that do not include secular trends in passing or failing 
rates (which are already reflected in our program growth 
assumptions), we compute transition rates from Year 1 to Year 2 and 
from Year 2 to Year 1 and average them to generate a stable rate 
shown in the tables.
---------------------------------------------------------------------------

    The left panels of Tables 5.3 and Table 5.4 report the program 
transition assumptions from 2025 to 2026 for non-GE and GE programs, 
respectively. Program performance for non-GE is quite stable, with 95.8 
percent of passing enrollment in two-year or less public and non-profit 
expected to remain in passing programs. Persistence rates are even 
higher among 4-year and graduate programs. Among programs that fail the 
EP threshold, a relatively high share--more than one-third among 2-year 
and less programs--would be at passing programs in a subsequent year. 
The performance of GE programs is only slightly less persistent than 
that of non-GE programs. Note that GE programs would become ineligible 
for title IV, HEA funds the following year if they fail the same metric 
two years in a row. Among enrollment in less than two-year proprietary 
programs that fail the EP metric in 2025, 21.7 percent would pass in 
2026 due to a combination of passing with data and no data.
    The observed results also serve as the baseline for each subsequent 
transition of results (2026 to 2027, 2027 to 2028, etc.). The model 
applies additional assumptions from this baseline for each transition 
beginning with 2026 to 2027. Because the baseline assumptions are the 
actual observed results of programs based on a cohort of students that 
completed programs prior to the Department's GE rulemaking efforts, 
these transition assumptions do not account for changes that 
institutions have made to their programs in response to the 
Department's regulatory actions or would make after the final 
regulations are published.
    As done with analysis of the 2014 rule, the Department assumes that 
institutions at risk of warning or sanction would take at least some 
steps to improve program performance by improving program quality, job 
placement, and lowering prices (leading to lower levels of debt), 
beginning with the 2026 to 2027 transition. There is evidence that 
institutions have responded to past GE measures by aiming to improve 
outcomes or redirecting enrollment from low-performing programs. 
Institutions subject to GE regulations have experienced slower 
enrollment and those that pass GE thresholds tend to have a lower 
likelihood of program or institution closure.\270\ Some leaders of 
institutions subject to GE regulation in 2014 did make improvements, 
such as lowering costs, increasing job placement and academic support 
staff, and other changes.\271\ We account for this by increasing the 
baseline observed probability of having a passing result by five 
percentage points for programs with at least one failing metric in 
2026. Additionally, we improve the baseline observed probability of 
passing GE programs having a sequential passing result by two and a 
half percentage points to capture the incentive that currently passing 
programs have to remain that way. These new rates are shown in the 
right panels of Tables 5.3 and 5.4.
---------------------------------------------------------------------------

    \270\ Fountain, J. (2019). The Effect of the Gainful Employment 
Regulatory Uncertainty on Student Enrollment at For-Profit 
Institutions of Higher Education. Research in Higher Education, 
Springer; Association for Institutional Research, vol. 60(8), 1065-
1089. Kelchen, R. & Liu, Z. (2022) Did Gainful Employment 
Regulations Result in College and Program Closures? Education 
Finance and Policy; 17 (3): 454-478.
    \271\ Hentschke, G.C., Parry, S.C. Innovation in Times of 
Regulatory Uncertainty: Responses to the Threat of ``Gainful 
Employment''. Innov High Educ 40, 97-109 (2015). doi.org/10.1007/s10755-014-9298-z.
---------------------------------------------------------------------------

    We assume the same rates of transition between performance 
categories for subsequent years as we do for the 2026 to 2027 
transitions.
    Since the budget impact and net costs, benefits, and transfers 
depend on assumptions about institutional performance after the rule is 
enacted, we incorporate alternative assumptions about these transitions 
in our sensitivity analysis.

                                                Table 5.3--Program Transition Assumptions Non-GE Programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Percent in year t+1 status (2026)         Percent in year t+1 status (2027-2033)
                                                                ----------------------------------------------------------------------------------------
                                                                             Fail D/E   Fail EP                           Fail D/E   Fail  EP     Fail
                                                                    Pass       only       only     Fail both     Pass       only       only       both
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Public and Non-Profit 2-year or less
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       95.8        0.0        4.1        0.1        95.8        0.0        4.1        0.1
    Fail D/E only..............................................        9.8       86.0        0.0        4.2        14.8       81.0        0.0        4.2
    Fail EP only...............................................       37.8        0.0       62.0        0.1        42.8        0.0       57.0        0.1
    Fail Both..................................................       21.7        5.2        3.2       69.9        26.7        5.2        3.2       64.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         4-year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       99.0        0.3        0.5        0.2        99.0        0.3        0.5        0.2
    Fail D/E only..............................................       26.9       66.1        0.0        7.0        31.9       61.1        0.0        7.0
    Fail EP only...............................................       36.8        0.0       58.7        4.6        41.8        0.0       53.7        4.6

[[Page 32456]]

 
    Fail Both..................................................       22.5       10.6        7.0       59.8        27.5       10.6        7.0       54.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Graduate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       98.4        1.5        0.0        0.0        98.4        1.5        0.0        0.0
    Fail D/E only..............................................       20.2       78.7        0.0        1.1        25.2       73.7        0.0        1.1
    Fail EP only...............................................       75.6        0.0       24.4        0.0        80.6        0.0       19.4        0.0
    Fail Both..................................................       21.5       38.8        0.0       39.7        26.5       38.8        0.0       34.7
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                  Table 5.4--Program Transition Assumptions GE Programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Share in year t+1 status (2026)           Share in year t+1 status (2027-2033)
                                                                ----------------------------------------------------------------------------------------
                                                                             Fail D/E   Fail EP                           Fail D/E   Fail EP
                                                                    Pass       only       only     Fail both     Pass       only       only    Fail both
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Proprietary 2-year or less
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       93.4        0.6        5.8        0.1        95.9        0.4        3.6        0.1
    Fail D/E only..............................................       10.0       82.1        0.0        7.9        15.0       77.1        0.0        7.9
    Fail EP only...............................................       21.7        0.0       77.8        0.6        26.7        0.0       72.8        0.6
    Fail Both..................................................       10.0        5.5        6.9       77.6        15.0        5.5        6.9       72.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Public and Non-Profit 2-year or less
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       92.4        0.5        6.2        0.9        94.9        0.4        4.2        0.6
    Fail D/E only..............................................       14.0       31.2        0.0       54.8        19.0       26.2        0.0       54.8
    Fail EP only...............................................       38.8        0.0       57.6        3.6        43.8        0.0       52.6        3.6
    Fail Both..................................................       34.8        1.5        2.5       61.2        39.8        1.5        2.5       56.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         4-year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       94.6        4.8        0.2        0.4        97.1        2.6        0.1        0.2
    Fail D/E only..............................................       18.6       72.5        0.0        8.9        23.6       67.5        0.0        8.9
    Fail EP only...............................................       14.0        0.0       86.0        0.0        19.0        0.0       81.0        0.0
    Fail Both..................................................        5.1       37.8        0.0       57.0        10.1       37.8        0.0       52.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Graduate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year t Status:
    Pass.......................................................       97.3        2.6        0.0        0.1        99.8        0.2        0.0        0.0
    Fail D/E only..............................................       15.1       83.0        0.0        1.9        20.1       78.0        0.0        1.9
    Fail EP only...............................................      100.0        0.0        0.0        0.0       100.0        0.0        0.0        0.0
    Fail Both..................................................        8.7       37.4        0.0       53.9        13.7       37.4        0.0       48.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

Student Response Assumptions
    The Department's model applies assumptions for the probability that 
a current or potential student would transfer or choose a different 
program, remain in or choose the same program, or withdraw from or not 
enroll in any postsecondary program in reaction to a program's 
performance. The model assumes that student response would be greater 
when a program becomes ineligible for title IV, HEA aid than when a 
program has a single year of inadequate performance, which initiates 
warnings and the acknowledgment requirement for GE programs, an 
acknowledgement requirement non-GE programs that fail D/E, and publicly 
reported performance information in the ED portal for both GE and non-
GE programs. We also let the rates of transfer and withdrawal or non-
enrollment differ with the number of alternative transfer options 
available to students enrolled (or planning to enroll) in a failing 
program. Specifically, building on the analysis presented in 
``Measuring Students' Alternative Options'' above, we categorize 
individual programs into one of four categories:
     High transfer options: Have at least one passing program 
in the same credential level at the same institution and in a related 
field (as indicated by being in the same 2-digit CIP code).
     Medium transfer options: Have a passing transfer option 
within the same ZIP3, credential level, and narrow field (4-digit CIP 
code).
     Low transfer options: Have a passing transfer option 
within the same ZIP3, credential level, and broad (2-digit) CIP code.
     Few transfer options: Do not have a passing transfer 
option within the same ZIP3, credential level, and broad (2-digit) CIP 
code. Students in these programs would be required to enroll in either 
a distance education program or enroll outside their ZIP3. As shown in 
``Measuring Students' Alternative Options,'' all failing programs have 
at least one non-failing program in the same credential level and 2-
digit CIP code in the same State.
    For each of the four categories above, we make assumptions for each 
type of student transition. Programs with

[[Page 32457]]

passing metrics are assumed to retain all of their students.
    Students that transfer are assumed to transfer to passing programs, 
and for the purposes of the budget simulation this includes programs 
with an insufficient n-size. We assume that rates of withdrawal (or 
non-enrollment) and transfer are higher for ineligible programs than 
those where only the warning/acknowledgment is required (GE programs 
with one year of a failing metric and non-GE programs with a failing D/
E metric). We also assume that rates of transfer are weakly decreasing 
(and rates of dropout and remaining in program are both weakly 
increasing) as programs have fewer transfer options. These assumptions 
regarding student responses to program results are provided in Table 
5.5 and Table 5.6. Coupled with the scenarios presented in the 
``Sensitivity Analysis,'' these assumptions are intended to provide a 
reasonable estimation of the range of impact that the proposed 
regulations could have on the budget and overall social costs, 
benefits, and transfers.
    The assumptions above are based on our best judgment and from 
extant research that we view as reasonable guides to the share of 
students likely to transfer to or choose another program when their 
program loses title IV, HEA eligibility. For instance, a 2021 GAO 
report found that about half of non-completing students who were at 
closed institutions transferred.\272\ This magnitude is similar to 
recent analysis that found that 47 percent of students reenrolled after 
an institutional closure.\273\ The authors of this report find very 
little movement from public or non-profit institutions into for-profit 
institutions, but considerable movement in the other direction. For 
example, about half of re-enrollees at closed for-profit 2-year 
institutions moved to public 2-year institutions, whereas less than 3% 
of re-enrollees at closed public and private non-profit 4-year 
institutions moved to for-profit institutions. Other evidence from 
historical cohort default rate sanctions indicates a transfer rate of 
about half of students at for-profit colleges that were subject to loss 
of federal financial aid disbursement eligibility, with much of that 
shift to public two-year institutions.\274\ The Department also 
conducted its own internal analysis of ITT Technical Institute 
closures. About half of students subject to the closure re-enrolled 
elsewhere (relative to pre-closure patterns). The majority of students 
that re-enrolled did so in the same two-digit CIP code. Of Associate's 
degree students that re-enrolled, 45% transferred to a public 
institution, 41% transferred to a different for-profit institution, and 
13% transferred to a private non-profit institution. Most remained in 
Associate's or certificate programs. Of Bachelor's degree students that 
re-enrolled, 54% transferred to a different for-profit institution, 25% 
shifted to a public institution, and 21% transferred to a private non-
profit institution.
---------------------------------------------------------------------------

    \272\ https://www.gao.gov/products/gao-22-104403.
    \273\ sheeo.org/more-than-100000-students-experienced-an-abrupt-campus-closure-between-july-2004-and-june-2020/.
    \274\ Cellini, S.R., Darolia, R., & Turner, L.J. (2020). Where 
do students go when for-profit colleges lose federal aid? American 
Economic Journal: Economic Policy, 12(2), 46-83.
---------------------------------------------------------------------------

    Data from the Beginning Postsecondary Students Longitudinal 2012/
2017 study provides further information on students' general patterns 
through and across postsecondary institutions (not specific to 
responses to sanctions or closures). Of students that started at a 
public or private non-profit 4-year institution, about 3 percent 
shifted to a for-profit institution within 5 years. Of those that began 
at a public or private non-profit 2-year institution, about 8 percent 
shifted to a for-profit institution within 5 years.

                     Table 5.5--Student Response Assumptions, by Program Result and Number of Alternative Program Options Available
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Program result [rarr]                           Pass                                Fail once                           Ineligible
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Withdrawal/                           Withdrawal/                          Withdrawal/
         Student response [rarr]            Remain    Transfer       non-         Remain    Transfer       non-         Remain    Transfer      non-
                                                                  enrollment                            enrollment                           enrollment
--------------------------------------------------------------------------------------------------------------------------------------------------------
GE:
    High Alternatives...................       1.00       0.00           0.00        0.40       0.45           0.15        0.20       0.60          0.20
    Medium Alternatives.................       1.00       0.00           0.00        0.45       0.35           0.20        0.20       0.55          0.25
    Low Alternatives....................       1.00       0.00           0.00        0.50       0.30           0.20        0.25       0.45          0.30
    Few Alternatives....................       1.00       0.00           0.00        0.55       0.25           0.20        0.25       0.35          0.40
Non-GE:
    High Alternatives...................       1.00       0.00           0.00        0.80       0.20           0.00          na         na            na
    Medium Alternatives.................       1.00       0.00           0.00        0.85       0.15           0.00          na         na            na
    Low Alternatives....................       1.00       0.00           0.00        0.90       0.10           0.00          na         na            na
    Few Alternatives....................       1.00       0.00           0.00        0.95       0.05           0.00          na         na            na
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In Table 5.6, we provide detail of the assumptions of the 
destinations among students who transfer, separately for the following 
groups: \275\
---------------------------------------------------------------------------

    \275\ Lower division includes students in their first two years 
of undergraduate education. Upper division includes students in 
their third year or higher.

 Risk 1 (Proprietary <=2 year)
 Risk 2 (Public, NonProfit <=2 year)
 Risk 3 (Lower division 4 year)
 Risk 4 (Upper division 4 year)
 Risk 5 (Graduate)


                              Table 5.6--Student Response Assumptions, Among Transferring Students, Share Shifting Sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Shift to GE programs                            Shift to non-GE programs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Shift from . . .                      Risk 1     Risk 2     Risk 3     Risk 4     Risk 5      Risk 2     Risk 3     Risk 4     Risk 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
GE:
    Risk 1..........................................       0.50       0.30       0.10       0.00       0.00        0.10       0.00       0.00       0.00
    Risk 2..........................................       0.30       0.50       0.10       0.00       0.00        0.10       0.00       0.00       0.00
    Risk 3..........................................       0.00       0.00       0.80       0.00       0.00        0.00       0.20       0.00       0.00
    Risk 4..........................................       0.00       0.00       0.00       0.80       0.00        0.00       0.00       0.20       0.00

[[Page 32458]]

 
    Risk 5..........................................       0.00       0.00       0.00       0.00       0.80        0.00       0.00       0.00       0.20
Non-GE:
    Risk 2..........................................       0.05       0.05       0.00       0.00       0.00        0.70       0.20       0.00       0.00
    Risk 3..........................................       0.00       0.00       0.05       0.00       0.00        0.05       0.90       0.00       0.00
    Risk 4..........................................       0.00       0.00       0.00       0.05       0.00        0.00       0.00       0.95       0.00
    Risk 5..........................................       0.00       0.00       0.00       0.00       0.05        0.00       0.00       0.00       0.95
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As we describe below, the assumptions for student responses are 
applied to the estimated enrollment in each aggregate group after 
factoring in enrollment growth.
Student Borrowing Assumptions
    Analyses in the Regulatory Impact Analysis of the 2014 Prior Rule 
assumed that student debt was unchanged if students transferred from 
failing to passing programs, but we believe this assumption to be too 
conservative given that one goal of the GE rule is to reduce the debt 
burden of students. Recall that tables 3.29 and 3.30 above reported the 
percent difference in mean debt between failing GE and non-GE programs 
and their transfer options, by credential level and 2-digit CIP code. 
Across all subjects and credential levels, debt is 22 percent lower at 
alternative programs than at failing GE programs. At non-GE programs, 
there is no aggregate debt difference between failing programs and 
their alternatives, though this masks heterogeneity across credential 
levels. For graduate degree programs, movement to alternative programs 
from failing programs is associated with lower debt levels while 
movement from failing to passing Associate's programs is associated 
with an increase in debt. Students that drop out of (or decline to 
enroll in) failing programs are assumed to acquire no educational debt.
    To incorporate changes in average loan volume associated with 
student transitions, we compute average subsidized and unsubsidized 
direct loan, Grad PLUS, and Parent PLUS per enrollment separately for 
GE and non-GE programs by risk group and program performance group. 
These averages are then applied to shifts in enrollment to generate 
changes in the amount of aid.
Methodology for Net Budget Impact
    The budget model estimates a yearly enrollment for AYs 2023 to 2034 
and the distribution of those enrollments in programs characterized by 
D/E and EP performance, risk group, transfer category, and whether it 
is a GE program. This enrollment is projected for a baseline (in 
absence of the proposed rule) and under the proposed policy. The net 
budget impact for each year is calculated by applying assumptions 
regarding the average amount of title IV, HEA program funds received by 
this distribution of enrollments across groups of programs. The 
difference in these two scenarios provides the Department's estimate of 
the impact of the proposed policy. We do not simulate the impact on the 
rule at the individual program level because doing so would necessitate 
very specific assumptions about which programs' students transfer to in 
response to the regulations. While we made such assumptions in the 
``Measuring Students' Alternatives'' section above, we do not think it 
is analytically tractable to do for all years. Therefore, for the 
purposes of budget modeling, we perform analysis with aggregations of 
programs into groups defined by the following: \276\
---------------------------------------------------------------------------

    \276\ Note that non-GE programs do not include risk group 1 (2-
year and below for-profit institutions) or the pre-ineligible or 
ineligible performance categories. Some groups also do not have all 
four transfer group categories. There are 184 total groups used in 
the analysis.
---------------------------------------------------------------------------

     Five student loan model risk groups: (1) 2-year (and 
below) for-profit; (2) 2-year (and below) public or non-profit; (3) 4-
year (any control) lower division, which is students in their first two 
years of a Bachelor's program; (4) 4-year (any control) upper division, 
which is students beyond their first two years of a Bachelor's program; 
(5) Graduate student (any control).\277\
     Four transfer categories (high, medium, low, few 
alternatives) by which the student transfer rates are assumed to 
differ. This is a program-level characteristic that is assumed not to 
change.
     Two GE program categories (GE and eligible non-GE) by 
which the program transitions are assumed to differ.
     Six performance categories: Pass, Fail D/E, Fail EP, Fail 
Both, Pre-ineligible (a program's current enrollment is Title IV, HEA 
eligible, but next year's enrollment would not be), Ineligible (current 
enrollment is not Title IV, HEA eligible).
    We refer to groups defined by these characteristics as ``program 
aggregate'' groups.
    We first generate a projected baseline (in absence of the proposed 
rule) enrollment, Pell volume, and loan volume for each of the program 
aggregate groups from 2023 to 2033. This baseline projection includes 
several steps. First, we compute average annual growth rate for each 
control by credential level from 2016 to 2022. These growth rates are 
presented in Table 5.5. We then apply these annual growth rates to the 
actual enrollment by program in 2022 to forecast enrollment in each 
program in 2023. This step is repeated for each year to get projected 
enrollment by program through 2033. We then compute average Pell, 
subsidized and unsubsidized direct loan, Grad PLUS, and Parent PLUS per 
enrollment by risk group, program performance group, and GE vs. non-GE 
for 2022. These averages are then adjusted according to the PB2024 loan 
volume and Pell Grant baseline assumptions for the change in average 
loan by loan type and the change in average Pell Grant. We then 
multiply the projected enrollment for each program by these average aid 
amounts to get projected total aid volume by program through 2033. 
Finally, we sum the enrollment and aid amounts across programs for each 
year to get enrollment and aid volume by program aggregate group, 2023 
to 2033.
    The most significant task is to generate projected enrollment, Pell 
volume, and loan volume for each of the program aggregate groups from 
2023 to 2033 with the rule in place. We assume the first set of rates 
would be released in 2025 award year, so this is starting year for our 
projections. Projecting counterfactual enrollment and aid volumes 
involves several steps:
    Step 1: Start with the enrollment by program aggregate group in 
2025. In this first year there are no programs that are ineligible for 
Title IV, HEA funding.
    Step 2: Apply the student transition assumptions to the enrollment 
by

[[Page 32459]]

program aggregate group. This generates estimates of the enrollment 
that is expected to remain enrolled in the program aggregate group, the 
enrollment that is expected to drop out of postsecondary enrollment, 
and the enrollment that is expected to transfer to a different program 
aggregate group.
    Step 3: Compute new estimated enrollment for the start of 2026 
(before the second program performance is revealed) for each cell by 
adding the remaining enrollment to the enrollment that is expected to 
transfer into that group. We assume that (1) students transfer from 
failing or ineligible programs to passing programs in the same transfer 
group and GE program group; (2) Students in risk groups 3 (lower 
division 4-year), 4 (upper division 4-year college) or 5 (graduate) 
stay in those risk groups; (3) Students in risk group 1 can shift to 
risk groups 2 or 3; (4) Students in risk group 2 can shift to risk 
groups 1 or 3. Therefore, we permit enrollment to shift between 
proprietary and public or non-profit certificate programs and from 
certificate and Associate's programs to lower-division Bachelor's 
programs. We also allow enrollment to shift between GE and non-GE 
program, based on the assumptions listed in Table 5.6.
    Step 4: Determine the change in aggregate baseline enrollment 
between 2025 and 2026 for each risk group and allocate these additional 
enrollments to each program aggregate group in proportion to the group 
enrollment computed in Step 3.
    Step 5: Apply the program transition assumptions to the aggregate 
group enrollment from Step 4. This results in estimates of the 
enrollment that would stay within or shift from each performance 
category to another performance category in the next year. This mapping 
would differ for GE and non-GE programs and by risk group, as reported 
in Table 5.3 and 5.4 above. For non-GE programs, every performance 
category can shift enrollment to every performance category. For GE 
programs, however, enrollment in each failure category would not remain 
in the same category because if a metric is failed twice, this 
enrollment would move to pre-ineligibility. The possible program 
transitions for GE programs are:

 Pass [rarr] Pass, Fail D/E, Fail EP, Fail Both
 Fail D/E [rarr] Pass, Fail EP, Pre-Ineligible
 Fail EP [rarr] Pass, Fail D/E, Pre-Ineligible
 Fail Both [rarr] Pass, Pre-Ineligible

    Step 6: Compute new estimated enrollment at end of 2026 (after 
program performance is revealed) for each program aggregate group by 
adding the number that stay in the same performance category plus the 
number that shift from other performance categories.
    Step 7: Repeat steps 1 to 6 above using the end of 2026 enrollment 
by group as the starting point for 2027 and repeat through 2034. The 
only addition is that in Step 5, two more program transitions are 
possible for GE programs: Pre-Ineligible moves to Ineligible and 
Ineligible remains Ineligible.
    Step 8: Generate projected Pell and loan volume by program 
aggregate group from AY 2023 to 2034 under the proposed rule. We 
multiply the projected enrollment by group by average aid amounts (Pell 
and loan volume) to get projected total aid amounts by group through 
2034. Any enrollment that has dropped out (not enrolled in 
postsecondary) or in the ineligible category get zero Pell and loan 
amounts. Note that the average aid amounts by cell come from the PB 
projections, so are allowed to vary over time.
    Step 9: Shift Pell and loan volume under the proposed rule from AYs 
2025 to 2034 to FYs 2025 to 2033 for calculating budget cost estimates.
    A net savings for the title IV, HEA programs comes through four 
mechanisms. The primary source is from students who drop out of 
postsecondary education in the year after their program receives a 
failing D/E or EP rate or becomes ineligible. The second is for the 
smaller number of students who remain enrolled at a program that 
becomes ineligible for title IV, HEA program funds. Third, we assume a 
budget impact on the title IV, HEA programs from students who transfer 
from programs that are failing to better-performing programs because 
the typical aid levels differ between programs according to risk group 
and program performance. For instance, subsidized direct loan borrowing 
is 24 percent less ($2044 vs. $1547) for students at GE programs 
failing the D/E metric in risk group 1 than in passing programs in the 
same risk group in 2026.
    Finally, consistent with the requirements of the Credit Reform Act 
of 1990, budget cost estimates for the title IV, HEA programs also 
reflect the estimated net present value of all future non-
administrative Federal costs associated with a cohort of loans. To 
determine the estimated budget impact from reduced loan volume, the 
difference in yearly loan volumes between the baseline and policy 
scenarios were calculated as a percent of baseline scenario volumes. 
This generated an adjustment factor that was applied to loan volumes in 
the Student Loan Model (SLM) for each cohort, loan type, and risk group 
combination in the President's Budget for FY2024 (PB2024). The reduced 
loan volumes are also expected to result in some decrease in future 
consolidations which is also captured in the model run. Since the 
implied subsidy rate for each loan type differs by risk group, 
enrollment shifts to risk groups with greater expected repayment would 
generate a net budget savings. Since our analysis does not incorporate 
differences in subsidy rates between programs in the same risk group, 
such as between programs passing and failing the D/E or EP metrics, 
these estimates potentially understate the increase in expected 
repayment resulting from the proposed regulations.
Methodology for Costs, Benefits, and Transfers
    The estimated enrollment in each aggregate program group is used to 
quantify the costs, benefits, and transfers resulting from the proposed 
regulations for each year from 2023 to 2033. As described in the 
Discussion of Costs, Benefits, and Transfers, we quantify an earnings 
gain for students from attending higher financial value programs and 
the additional tax revenue that comes from that additional earnings. We 
quantify the cost associated with additional instructional expenses to 
educate students who shift to different types of programs and the 
transfer of instructional expenses as students shift programs. We also 
estimate the transfer of title IV, HEA program funds from programs that 
lose students to programs that gain students.
Earnings Gain Benefit
    A major goal of greater transparency and accountability is to shift 
students towards higher financial value programs--those with greater 
earnings potential, lower debt, or both. To quantify the earnings gain 
associated with the proposed regulation, we estimate the aggregate 
annual earnings of would-be program graduates under the baseline and 
policy scenarios and take the difference. For each risk group and 
program performance group, we compute the enrollment-weighted average 
of median program earnings. Average earnings for programs that have 
become ineligible is assumed to be the average of median earnings for 
programs in the three failing categories, weighted by the enrollment 
share in these categories. This captures, for instance, that the 
earnings of 2-year programs that

[[Page 32460]]

become ineligible are quite lower than those that enroll graduate 
students. Since we have simulated enrollment, but not completion, 
annual program enrollment is converted into annual program completions 
by applying a ratio that differs for 2-year programs or less, 
Bachelor's degree programs, or graduate programs.\278\ Earnings for 
students that do not complete are not available and thus not included 
in our calculations. Students that drop out of failing programs (or 
decline to enroll altogether) are assumed to receive earnings equal to 
the median earnings of high school graduates in the State (the same 
measure used for the Earnings Threshold). Therefore, earnings could 
increase for this group if students reduce enrollment in programs 
leading to earnings less than a high school graduate. We estimate 
aggregate earnings by program group by multiplying enrollment by 
average earnings, reported in Table 5.7, and the completion ratio.
---------------------------------------------------------------------------

    \278\ The ratios used are 11.5% for 2-year or less, 16.5% for 
Bachelor's programs, and 27.3% for graduate programs. These are the 
ratio between number of title IV, HEA completers in the two-year 
earnings cohort and the average title IV, HEA enrollment in the 2016 
and 2017 Award Years.

                                  Table 5.7--Average Program Earnings by Group
                                                     [$2019]
----------------------------------------------------------------------------------------------------------------
                                                                                Fail EP
                                                         Pass      Fall D/E      only      Fail both  Ineligible
----------------------------------------------------------------------------------------------------------------
                                                   GE Programs
----------------------------------------------------------------------------------------------------------------
Proprietary 2yr or less.............................      38,147      28,673      18,950      18,498      20,408
Public/NP 2yr or less...............................      37,235      30,234      19,904      18,400      19,789
Bachelor Lower......................................      51,096      31,160       5,147      23,491      30,427
Bachelor Upper......................................      51,096      31,160       5,147      23,491      30,427
Graduate............................................      66,848      47,523      15,891      19,972      46,056
----------------------------------------------------------------------------------------------------------------
                                                 Non-GE Programs
----------------------------------------------------------------------------------------------------------------
Public/NP 2yr or less...............................      36,473      29,626      23,502      19,071         N/A
Bachelor Lower......................................      47,602      28,723      19,813      20,729         N/A
Bachelor Upper......................................      47,602      28,723      19,813      20,729         N/A
Graduate............................................      74,631      55,654      19,765      22,747         N/A
----------------------------------------------------------------------------------------------------------------

    Students experience earnings gain each year they work following 
program completion. We compute the earnings benefit over the analysis 
window by giving 2026 completers 7 years of earnings gains, 2027 
completers 6 years of earnings gains, and so on. The earnings gain of 
students that graduate during 2033 are only measured for one year. In 
reality program graduates would experience an earnings gain annually 
over their entire working career; our estimates likely understate the 
total likely earnings benefit of the policy.
    However, our approach can overstate the earnings gain of students 
that shift programs if students experience a smaller earnings gain than 
the average difference between passing and failing programs within each 
GE-by-risk group in Table 5.7. To account for this, we apply an 
additional adjustment factor to the aggregate earnings difference to 
quantify how much of the earnings difference is accounted for by 
programs.
    There is not consensus in the research literature on the magnitude 
of this parameter, with some studies finding very large impacts of 
specific programs or institutions on earnings \279\ and others finding 
smaller impacts.\280\ Unfortunately, many of these studies are set in 
specific contexts (e.g., only public four-year universities in one 
state) and most look at institutions overall rather than programs, 
which may not extrapolate to our setting given the large outcome 
variation across programs in the same institution.
---------------------------------------------------------------------------

    \279\ Hoekstra, Mark (2009) The Effect of Attending the Flagship 
State University on Earnings: A Discontinuity-Based Approach, Review 
of Economics and Statistics 2009, 91(4): 717-724.
    Hoxby, C.M. 2019. The Productivity of US Postsecondary 
Institutions. In Productivity in Higher Education, C.M. Hoxby and 
K.M. Stange (eds). University of Chicago Press: Chicago, 2019.
    Andrews, R.J., & Stange, K.M. (2019). Price regulation, price 
discrimination, and equality of opportunity in higher education: 
Evidence from Texas. American Economic Journal: Economic Policy, 
11.4, 31-65.
    Andrews, Rodney, Scott Imberman, Michael Lovenheim, & Kevin 
Stange (2022). The Returns to College Major Choice: Average and 
Distributional Effects, Career Trajectories, and Earnings 
Variability. NBER Working Paper 30331, August 2022.
    \280\ Mountjoy, Jack and Brent Hickman (2021). The Returns to 
College(s): Relative Value-Added and Match Effects in Higher 
Education. NBER Working Paper 29276, September 2021.
---------------------------------------------------------------------------

    To select the value used for this adjustment factor, we compared 
the average earnings difference between passing and failing programs 
(conditional on credential level) before versus after controlling for 
the rich demographic characteristics described in ``Student Demographic 
Analysis.'' We find that this conditional earnings difference declined 
by approximately 25 percent after controlling for the share of students 
in each race/ethnic category, the share of students that are male, 
independent, first-generation, and a Pell recipient, and the average 
family income of students.\281\ Our primary estimates thus adjust the 
raw earnings difference in Table 5.7 down using an adjustment factor of 
75 percent.
---------------------------------------------------------------------------

    \281\ Note that both the ``raw'' and fully controlled 
regressions include indicators for credential level, as enrollment 
is not permitted to move across credential levels in our budget 
simulations other than modest shift from 2-year programs to lower-
division four-year programs.
---------------------------------------------------------------------------

    Given the uncertainty around the proper adjustment factor to use, 
we include a range of values in the sensitivity analysis. We seek 
public comment as to how best to craft any further assumptions of the 
earnings benefits of the Financial Value Transparency and Gainful 
Employment components of the proposed rule.
    In the analysis of alternative options above, we showed the 
expected change in earnings for students that transfer from failing 
programs for each credential-level by 2-digit CIP code. Across all 
credential levels, students that shift from failing GE programs were 
expected to increase annual earnings by 44 percent and those 
transferring from failing non-GE programs were expected to increase 
annual earnings by 22 percent. These estimates are in line with those 
from Table 5.7 and used in the benefit impact.

[[Page 32461]]

Fiscal Externality Benefit
    The increased earnings of program graduates would generate 
additional Federal and State tax revenue and reductions in transfer 
program expenditure. To the earnings gain, we multiply an average 
marginal tax and transfer rate of 18.6 percent to estimate the fiscal 
benefit. This rate was computed in Hendren and Sprung-Keyser (2020) 
specifically to estimate the fiscal externality of earnings gains 
stemming from improvement in college quality, so it is appropriate for 
use in our setting.\282\ The rate is derived from 2016 CBO estimates 
and includes Federal and State income taxes and transfers from the 
Supplemental Nutrition Assistance Program (SNAP) but excludes payroll 
taxes, housing vouchers, and other safety-net programs. Note that this 
benefit is not included in our budget impact estimates.
---------------------------------------------------------------------------

    \282\ Hendren, Nathaniel, and Ben Sprung-Keyser. 2020. ``A 
Unified Welfare Analysis of Government Policies.'' Quarterly Journal 
of Economics 135(3): 1209-1318.
---------------------------------------------------------------------------

Instructional Spending Cost and Transfer
    To determine the additional cost of educating students that shift 
from one type of program to another or the cost savings from students 
who chose not to enroll, we estimate the aggregate annual instructional 
spending under the baseline and policy scenarios and take the 
difference. We used the instructional expense per FTE enrollee data 
from IPEDS to calculate the enrollment-weighted average institutional-
level instructional expense per FTE student for programs by risk group 
and performance result, separately for GE programs and non-GE programs. 
Average spending for programs that have become ineligible is assumed to 
be the average of the three failing categories, weighted by the 
enrollment share in these categories. These estimates are reported in 
Table 5.8. We estimate aggregate spending by program group by 
multiplying enrollment from 2023 through 2033 by average spending.

                             Table 5.8--Average Instructional Cost per FTE by Group
----------------------------------------------------------------------------------------------------------------
                                                                             Fail EP
                                                     Pass       Fall D/E       only      Fail both    Ineligible
----------------------------------------------------------------------------------------------------------------
GE Programs:
    Proprietary 2yr or less....................        4,392        3,038        4,347        3,957        4,045
    Public/NP 2yr or less......................        7,334        5,859        4,956        3,681        4,838
    Bachelor Lower.............................        3,671        2,667          844        3,396        2,721
    Bachelor Upper.............................        3,671        2,667          844        3,396        2,721
    Graduate...................................        5,309        3,896        1,837        5,151        3,959
Non-GE Programs:
    Public/NP 2yr or less......................        6,411        5,197        5,940        4,357          N/A
    Bachelor Lower.............................       11,274        7,467        8,572       11,419          N/A
    Bachelor Upper.............................       11,274        7,467        8,572       11,419          N/A
    Graduate...................................       15,696       15,874        7,528       24,355          N/A
----------------------------------------------------------------------------------------------------------------

    Note that since we are using institution-level rather than program-
level spending, this will not fully capture spending differences 
between undergraduate and graduate enrollment, between upper and lower 
division, and across field of study.\283\
---------------------------------------------------------------------------

    \283\ This may cause our estimates to slightly understate the 
instructional cost impact since failing programs are 
disproportionately in lower-earning fields and lower credential 
levels, which tend to have lower instructional costs. Though we 
anticipate most movement will be within field and credential level, 
which would mute this effect. See Steven W. Hemelt & Kevin M. Stange 
& Fernando Furquim & Andrew Simon & John E. Sawyer, 2021. ``Why Is 
Math Cheaper than English? Understanding Cost Differences in Higher 
Education,'' Journal of Labor Economics, vol 39(2), pages 397-435.
---------------------------------------------------------------------------

    To calculate the transfer of instructional expenses from failing to 
passing programs, we multiply the average instructional expense per 
enrollee shown in 5.7 by the estimated number of annual student 
transfers for 2023 to 2033 from each risk group and failing category.
Student Aid Transfers
    To calculate the amounts of student aid that could transfer with 
students each year, we multiply the estimated number of students 
receiving title IV, HEA program funds transferring from ineligible or 
failing GE and non-GE programs to passing programs in each risk 
category each year by the average Pell Grant, Stafford subsidized loan, 
unsubsidized loan, PLUS loan, and GRAD PLUS loan per enrollment in the 
same categories.
    To annualize the amount of benefits, costs, and title IV, HEA 
program fund transfers from 2023 to 2033, we calculate the net present 
value (NPV) of the yearly amounts using a discount rate of 3 percent 
and a discount rate of 7 percent and annualize it over 10 years.

6. Net Budget Impacts

    These proposed regulations are estimated to have a net Federal 
budget impact of $-12.6 billion, consisting of $-8.6 billion in reduced 
Pell Grants and $-4.1 billion for loan cohorts 2024 to 2033.\284\ 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. The baseline for estimating the cost of these 
final regulations is the President's Budget for 2024 (PB2024) as 
modified for the proposed changes to the REPAYE plan published in the 
NPRM dated January 10, 2023. The GE and Financial Transparency 
provisions are responsible for the estimated net budget impact of the 
proposed regulations, as described below. The other provisions are 
considered in the Other Provisions section of this Net Budget Impact 
topic.
---------------------------------------------------------------------------

    \284\ Since the policy is not estimated to shift enrollment 
until AY 2026 (which includes part of FY 2025), we present 
enrollment and budget impacts starting in 2025. Impacts in both AY 
and FY 2024 are zero.
---------------------------------------------------------------------------

Gainful Employment and Financial Transparency
    The proposed regulations are estimated to shift enrollment towards 
programs with lower debt-to-earnings or higher median earnings or both, 
and away from programs that fail either of the two performance metrics. 
The vast majority of students are assumed to resume their education at 
the same or another program in the event they are warned about poor 
program performance or if their program loses eligibility. The proposed 
regulations are

[[Page 32462]]

also estimated to reduce overall enrollment, as some students decide to 
not enroll. Table 6.1 summarize the main enrollment results for non-GE 
programs. Enrollment in non-GE programs is expected to increase by 
about 0.3 percent relative to baseline over the budget period. There is 
a modest enrollment shift towards programs that pass both metrics, with 
a particularly large (proportionate) reduction in the share of 
enrollment in programs that fail D/E. By the end of the analysis 
window, 96.5 percent of enrollment is expected to be in passing 
programs.

                                                Table 6.1--Primary Enrollment Estimate (Non-GE Programs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2025       2026       2027       2028       2029       2030       2031       2032       2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Total Aggregate Enrollment (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................................     14.119     13.974     13.839     13.710     13.588     13.472     13.364     13.265     13.170
Policy...............................................     14.119     14.001     13.885     13.766     13.646     13.530     13.418     13.311     13.209
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Percent of Enrollment by Program Performance
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pass:
    Baseline.........................................       95.6       95.6       95.6       95.6       95.7       95.7       95.7       95.8       95.8
    Policy...........................................       95.6       95.7       96.0       96.2       96.3       96.4       96.4       96.5       96.5
Fail D/E:
    Baseline.........................................        1.8        1.8        1.8        1.9        1.9        1.9        1.9        2.0        2.0
    Policy...........................................        1.8        1.7        1.5        1.4        1.4        1.3        1.3        1.3        1.4
Fail EP:
    Baseline.........................................        2.1        2.1        2.0        2.0        1.9        1.9        1.8        1.8        1.8
    Policy...........................................        2.1        2.2        2.1        2.0        2.0        1.9        1.9        1.8        1.8
Fail Both:
    Baseline.........................................        0.5        0.5        0.5        0.5        0.5        0.5        0.5        0.5        0.5
    Policy...........................................        0.5        0.5        0.4        0.4        0.4        0.4        0.4        0.4        0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 6.2 reports comparable estimates for GE programs. Note that 
for GE programs we estimate enrollment in two additional categories: 
Pre-Ineligible, i.e., programs that would be ineligible for title IV, 
HEA aid the following year; and Ineligible. Enrollment in GE programs 
is projected to decline by 8 percent relative to baseline, with the 
largest marginal decline in the first year programs become ineligible. 
There is a large enrollment shift towards programs that pass both 
metrics, with a particularly large reduction in the share of enrollment 
in programs that fail EP. By the end of the analysis window, 95.1 
percent of enrollment is expected to be in passing programs, compared 
to 72.2 percent in the baseline scenario.

                                                  Table 6.2--Primary Enrollment Estimate (GE Programs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2025       2026       2027       2028       2029       2030       2031       2032       2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Total Aggregate Enrollment (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................................      2.628      2.614      2.604      2.596      2.590      2.588      2.588      2.591      2.596
Policy...............................................      2.628      2.472      2.443      2.444      2.437      2.425      2.410      2.394      2.378
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Percent of Enrollment by Program Performance
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pass:
    Baseline.........................................       76.0       75.5       75.1       74.6       74.2       73.7       73.2       72.7       72.2
    Policy...........................................       76.0       85.5       91.7       93.7       94.4       94.8       94.9       95.0       95.1
Fail D/E:
    Baseline.........................................        6.8        6.6        6.5        6.4        6.3        6.1        6.0        5.9        5.7
    Policy...........................................        6.8        2.3        1.1        1.2        1.2        1.2        1.1        1.1        1.1
Fail EP:
    Baseline.........................................       13.9       14.4       14.9       15.5       16.0       16.6       17.1       17.7       18.3
    Policy...........................................       13.9        2.4        1.7        1.8        1.8        1.8        1.8        1.8        1.9
Fail Both:
    Baseline.........................................        3.4        3.4        3.5        3.5        3.6        3.6        3.7        3.7        3.8
    Policy...........................................        3.4        0.4        0.2        0.2        0.2        0.2        0.2        0.2        0.2
Pre-Inelig:
    Baseline.........................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Policy...........................................        0.0        9.3        3.2        1.5        1.2        1.2        1.2        1.2        1.2
Inelig:
    Baseline.........................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Policy...........................................        0.0        0.0        2.1        1.7        1.2        0.8        0.7        0.6        0.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For non-GE programs, these shifts occur primarily across programs 
that have different performance in the same loan risk category, with a 
very modest shift from public and non-profit two-year and less programs 
to lower-division 4-year programs. This is shown in Table 6.3. Shifts 
away from the public and non-profit two-year sector within non-GE 
programs is partially offset from shifts into these programs from 
failing GE programs. Recall that in ``Transfer Causes Net Enrollment 
Increase in Some Sectors'' above we showed that the vast majority of 
community colleges would gain enrollment from the proposed regulations.

[[Page 32463]]



                                         Table 6.3--Primary Enrollment Estimates by Risk Group (Non-GE Programs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2025       2026       2027       2028       2029       2030       2031       2032       2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Projected Total Enrollment by Loan Risk Category (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public/NP 2-year & below:
    Baseline.........................................      2.926      2.818      2.715      2.615      2.519      2.426      2.337      2.251      2.169
    Policy...........................................      2.926      2.824      2.723      2.623      2.524      2.428      2.335      2.246      2.160
4-year (lower):
    Baseline.........................................      6.163      6.093      6.026      5.960      5.896      5.833      5.771      5.712      5.654
    Policy...........................................      6.163      6.108      6.054      5.996      5.937      5.878      5.819      5.760      5.701
4-year (upper):
    Baseline.........................................      2.597      2.580      2.563      2.546      2.530      2.513      2.496      2.481      2.464
    Policy...........................................      2.597      2.582      2.567      2.552      2.536      2.520      2.504      2.488      2.472
Graduate:
    Baseline.........................................      2.432      2.483      2.535      2.588      2.644      2.701      2.760      2.821      2.883
    Policy...........................................      2.432      2.487      2.541      2.595      2.649      2.704      2.760      2.817      2.875
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Percent of Enrollment by Loan Risk Category
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public/NP 2-year & below:
    Baseline.........................................       20.7       20.2       19.6       19.1       18.5       18.0       17.5       17.0       16.5
    Policy...........................................       20.7       20.2       19.6       19.1       18.5       17.9       17.4       16.9       16.4
4-year (lower):
    Baseline.........................................       43.6       43.6       43.5       43.5       43.4       43.3       43.2       43.1       42.9
    Policy...........................................       43.6       43.6       43.6       43.6       43.5       43.4       43.4       43.3       43.2
4-year (upper):
    Baseline.........................................       18.4       18.5       18.5       18.6       18.6       18.7       18.7       18.7       18.7
    Policy...........................................       18.4       18.4       18.5       18.5       18.6       18.6       18.7       18.7       18.7
Graduate:
    Baseline.........................................       17.2       17.8       18.3       18.9       19.5       20.0       20.7       21.3       21.9
    Policy...........................................       17.2       17.8       18.3       18.8       19.4       20.0       20.6       21.2       21.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 6.4 reports a similar breakdown for GE programs. Shifts to 
passing programs are accompanied by a shift away from proprietary two-
year and below programs and towards public and non-profit programs of 
similar length, along with a more modest shift towards lower-division 
4-year programs.

                                           Table 6.4--Primary Enrollment Estimates by Risk Group (GE Programs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Projected Total Enrollment by Loan Risk Category (Millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prop. 2-year & below:
    Baseline..............................      0.710      0.734      0.759      0.785      0.813      0.842      0.872      0.904      0.938  .........
    Policy................................      0.710      0.605      0.592      0.606      0.621      0.637      0.653      0.668      0.683  .........
Public/NP 2-year & below:
    Baseline..............................      0.533      0.518      0.504      0.489      0.475      0.462      0.450      0.437      0.424  .........
    Policy................................      0.533      0.548      0.551      0.547      0.537      0.523      0.509      0.494      0.480  .........
4-year (lower):
    Baseline..............................      0.794      0.779      0.765      0.752      0.739      0.728      0.717      0.707      0.697  .........
    Policy................................      0.794      0.756      0.746      0.742      0.735      0.725      0.714      0.703      0.692  .........
4-year (upper):
    Baseline..............................      0.208      0.202      0.197      0.192      0.186      0.182      0.177      0.172      0.168  .........
    Policy................................      0.208      0.194      0.187      0.183      0.178      0.173      0.168      0.163      0.158  .........
Graduate:
    Baseline..............................      0.383      0.381      0.379      0.378          0.376             0.374      0.373      0.371      0.369
    Policy................................          0.383             0.369      0.366      0.367      0.367      0.367      0.366      0.366      0.365
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Percent of Enrollment by Loan Risk Category
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prop. 2-year & below:
    Baseline..............................       27.0       28.1       29.1       30.3       31.4       32.5       33.7       34.9       36.1  .........
    Policy................................       27.0       24.5       24.3       24.8       25.5       26.3       27.1       27.9       28.7  .........
Public/NP 2-year & below:
    Baseline..............................       20.3       19.8       19.4       18.9       18.4       17.9       17.4       16.9       16.3  .........
    Policy................................       20.3       22.2       22.5       22.4       22.0       21.6       21.1       20.7       20.2  .........
4-year (lower):
    Baseline..............................       30.2       29.8       29.4       29.0       28.5       28.1       27.7       27.3       26.8  .........
    Policy................................       30.2       30.6       30.6       30.4       30.1       29.9       29.6       29.4       29.1  .........
4-year (upper):
    Baseline..............................        7.9        7.7        7.6        7.4        7.2        7.0        6.8        6.6        6.5  .........
    Policy................................        7.9        7.9        7.7        7.5        7.3        7.1        7.0        6.8        6.7  .........
Graduate:
    Baseline..............................       14.6       14.6       14.6       14.5       14.5       14.5       14.4       14.3       14.2  .........
    Policy................................       14.6       14.9       15.0       15.0       15.1       15.1       15.2       15.3       15.3  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 32464]]

    As reported in Tables 6.5 and 6.6, we estimate that the regulations 
would result in a reduction of title IV, HEA aid between fiscal years 
2025 and 2033.

                                   Table 6.5--Estimated Annual Change in Title IV, HEA Aid Volume Relative to Baseline
                                                                    [Millions, $2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE Programs:
    Pell..................................       (80)      (157)      (217)      (157)      (149)      (150)      (197)      (210)      (221)    (1,538)
    Subs..................................       (46)       (54)       (51)       (48)       (52)       (54)       (51)       (53)       (51)      (460)
    Unsub.................................       (18)       (34)      (123)       (88)      (110)      (175)      (194)      (219)      (238)    (1,200)
    Grad PLUS.............................         87       (30)       (69)       (68)      (199)      (249)      (269)      (285)      (300)    (1,381)
    Par. PLUS.............................         38         53         88         71         77         13         15         13         14        381
GE Programs:
    Pell..................................      (102)      (354)      (648)      (838)      (906)      (944)    (1,003)    (1,077)    (1,168)    (7,040)
    Subs..................................      (133)      (327)      (383)      (374)      (372)      (381)      (397)      (418)      (444)    (3,229)
    Unsub.................................      (229)      (531)      (631)      (595)      (579)      (593)      (610)      (634)      (665)    (5,067)
    Grad PLUS.............................       (10)       (49)       (58)       (49)       (57)       (57)       (54)       (53)       (51)      (437)
    Par. PLUS.............................        (8)       (25)       (18)       (10)        (5)       (11)       (14)       (19)       (26)      (135)
Total:
    Pell..................................      (181)      (510)      (864)      (995)    (1,055)    (1,094)    (1,200)    (1,287)    (1,388)    (8,574)
    Subs..................................      (180)      (381)      (435)      (423)      (424)      (435)      (448)      (471)      (495)    (3,689)
    Unsub.................................      (247)      (564)      (754)      (683)      (689)      (769)      (804)      (853)      (903)    (6,267)
    Grad PLUS.............................         76       (78)      (127)      (117)      (255)      (305)      (323)      (338)      (351)    (1,818)
    Par. PLUS.............................         30         29         70         62         72          2          1        (6)       (13)        246
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                  Table 6.6--Estimated Annual Percent Change in Title IV, HEA Aid Volume by Fiscal Year
                                                                           [%]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE Programs:
    Pell..................................      -0.80      -0.78      -0.71      -0.18      -0.63      -0.63      -0.67      -0.73      -0.71      -0.65
    Subs..................................      -0.43      -0.50      -0.48      -0.46      -0.50      -0.52      -0.50      -0.52      -0.51      -0.49
    Unsub.................................      -0.08      -0.15      -0.55      -0.40      -0.49      -0.77      -0.85      -0.95      -1.03      -0.59
    Grad PLUS.............................       1.72      -0.55      -1.25      -1.19      -3.26      -3.97      -4.21      -4.37      -4.50      -2.58
    Par. PLUS.............................       0.42       0.59       0.96       0.77       0.83       0.13       0.17       0.14       0.15       0.46
GE Programs:
    Pell..................................      -4.88     -11.87     -14.12     -13.51     -13.86     -14.23     -14.92     -15.74     -16.61     -13.31
    Subs..................................      -4.75     -10.78     -12.78     -12.12     -11.79     -12.01     -12.32     -12.77     -13.33     -11.41
    Unsub.................................      -4.74     -10.78     -12.79     -12.15     -11.86     -12.11     -12.44     -12.93     -13.51     -11.48
    Grad PLUS.............................      -1.50      -6.81      -8.01      -6.63      -7.46      -7.42      -7.14      -6.95      -6.78      -6.56
    Par. PLUS.............................      -1.11      -3.43      -2.47      -1.28      -0.63      -1.37      -1.77      -2.38      -3.19      -1.96
Total:
    Pell..................................      -1.51      -2.73      -3.10      -2.59      -3.05      -3.15      -3.35      -3.60      -3.81      -2.97
    Subs..................................      -1.32      -2.82      -3.24      -3.17      -3.20      -3.30      -3.43      -3.63      -3.84      -3.10
    Unsub.................................      -0.95      -2.12      -2.81      -2.55      -2.55      -2.82      -2.93      -3.09      -3.25      -2.57
    Grad PLUS.............................       1.33      -1.29      -2.03      -1.80      -3.73      -4.34      -4.52      -4.64      -4.73      -3.02
    Par. PLUS.............................       0.31       0.29       0.71       0.62       0.72       0.02       0.01      -0.06      -0.13       0.28
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 6.7 reports the annual net budget impact after accounting for 
estimated loan repayment. We estimate a net Federal budget impact of 
$12.6 billion, consisting of $8.6 billion in reduced Pell Grants and 
$4.1 billion for loan cohorts 2024 to 2033.

                                                      Table 6.7--Estimated Annual Net Budget Impact
                                                                  [Outlays in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pell......................................       -181       -510       -864       -995     -1,055     -1,094     -1,200     -1,287     -1,388     -8,574
Subs......................................        -38        -99       -121       -117       -115       -115       -117       -140       -114       -975
Unsub.....................................        -36       -115       -177       -174       -169       -185       -197       -208       -216     -1,476
PLUS (Par. & Grad)........................        -55        -56        -62        -66        -94       -106       -106       -108       -111       -764
Consol....................................          0         -1        -10        -33        -65       -109       -157       -207       -262       -844
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................       -310       -781     -1,234     -1,385     -1,498     -1,609     -1,777     -1,950     -2,091    -12,633
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The provisions most responsible for the costs of the proposed 
regulations are those related to Financial Value Transparency and 
Gainful Employment. The Department does not anticipate significant 
costs related to the Ability to Benefit, Financial Responsibility, 
Administrative Capability, and Certification Procedures provisions. The 
Department's calculations of the net budget impacts represent our best 
estimate of the effect of the regulations on the Federal student aid 
programs. However, realized budget impacts will be heavily influenced 
by actual program performance, student response to program performance, 
student borrowing and repayment behavior, and changes in enrollment as 
a result of the regulations. For example, if students, including 
prospective students, react more strongly to the warnings, 
acknowledgement requirement, or potential ineligibility of programs 
than

[[Page 32465]]

anticipated and, if many of these students leave postsecondary 
education, the impact on Pell Grants and loans could increase. 
Similarly, if institutions react to the regulations by improving 
performance, the assumed enrollment and aid amounts could be 
overstated, though this would be very beneficial to students. Finally, 
if students' repayment behavior is different than that assumed in the 
model, the realized budget impact could be larger or smaller than our 
estimate.
Other Provisions
    The proposed regulations related to Financial Responsibility, 
Administrative Capability, Certification Procedures, and Ability to 
Benefit have not been estimated to have a significant budget impact. 
This is consistent with how the Department has treated similar changes 
in recent regulatory packages related to Financial Responsibility and 
Certification Procedures. The Financial Responsibility triggers are 
intended to identify struggling institutions and increase the financial 
protection the Department receives. While this may increase recoveries 
from institutions for certain types of loan discharges, affect the 
level of closed school discharges, or result in the Department 
withholding title IV, HEA funds, all items that would have some budget 
impact, we have not estimated any savings related to those provisions. 
Historically, the Department has not been able to obtain much financial 
protection obtained from closed schools and existing triggers have not 
been used to a great extent. Therefore, we would wait to include any 
effects from the proposed revisions until indications are available in 
title IV, HEA loan data that they meaningfully reduce closed school 
discharges or significantly increasing recoveries. However, we did run 
some sensitivity analyses where these changes did affect these 
discharges, as described in Table 6.8. We only project these 
sensitivity analyses affecting future cohorts of loans since it would 
be related to financial protection obtained in the future.

        Table 6.8--Financial Responsibility Sensitivity Analysis
------------------------------------------------------------------------
                                                      Cohorts 2024-2033
                     Scenario                           outlays ($ in
                                                          millions)
------------------------------------------------------------------------
Closed School Discharges Reduced by 5 percent.....                -4,060
Closed School Discharges Reduced by 25 percent....                -5,516
Borrower Defense Discharges Reduced by 5 percent..                -4,130
Borrower Defense Discharges Reduced by 15 percent.                -4,290
------------------------------------------------------------------------

7. Accounting Statement

    As required by OMB Circular A-4, we have prepared an accounting 
statement showing the classification of the benefits, costs, and 
transfers associated with the provisions of these regulations.
Primary Estimates
    We estimate that by shifting enrollment to higher financial-value 
programs, the proposed regulations would increase student's earnings, 
resulting in net after-tax gains to students and benefits for taxpayers 
in the form of additional tax revenue. Table 7.1 reports the estimated 
aggregate earnings gain for each cohort of completers, separately for 
GE and non-GE programs, and the cumulative (not discounted) earnings 
gain over the budget window. The proposed regulation is estimated to 
generate $19.4 billion of additional earnings gains over the budget 
window, both from GE and non-GE programs. Using the approach described 
in ``Methodology for Costs, Benefits, and Transfers,'' we expect $15.8 
billion to benefit students and $3.6 billion to benefit Federal and 
State governments and taxpayers.

                             Table 7.1--Annual and Cumulative Earnings Gain and Distribution Between Students and Government
                                                                    [millions, $2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2025     2026     2027     2028     2029     2030     2031     2032     2033    Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Single-year Earnings Gains of Each Cohort of Completers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE........................................................        0      251      513      644      703      701      670      599      520    4,602
GE............................................................        0      378      654      780      824      818      792      756      712    5,714
                                                               -----------------------------------------------------------------------------------------
    Total.....................................................        0      629    1,167    1,423    1,527    1,519    1,463    1,355    1,232   10,316
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Cumulative Earnings Gain
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative gain...............................................        0      629    1,797    2,591    2,950    3,046    2,982    2,818    2,587   19,400
Student share.................................................        0      512    1,462    2,109    2,401    2,479    2,427    2,294    2,106   15,792
Gov't share...................................................        0      117      334      482      549      567      555      524      481    3,608
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The proposed rule could also alter aggregate instructional 
spending, by shifting enrollment to higher-cost institutions (an 
increase in spending) or by reducing aggregate enrollment (a decrease 
in spending). Table 7.2 reports estimated annual and cumulative changes 
in instructional spending, overall and separately for GE and non-GE 
programs. The net effect is an increase in aggregate cumulative 
instructional spending of $2.7 billion (not discounted), though this 
masks differences between non-GE programs (net increase in spending) 
and GE programs (net decrease in spending). Spending is reduced in the 
first year of the policy due to the decrease in enrollment, but then 
increases as more students transfer to more costly programs.

[[Page 32466]]



                                                        Table 7.2--Instructional Spending Change
                                                                    [Millions, $2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2025     2026     2027     2028     2029     2030     2031     2032     2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE.....................................................        0      362      644      780      836      830      794      702      613       5,562
GE.........................................................        0     -435     -358     -258     -240     -282     -352     -434     -525      -2,883
                                                            --------------------------------------------------------------------------------------------
    Total..................................................        0      -73      287      522      596      548      442      268       88       2,679
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The proposed rule would create transfers between students, the 
Federal Government, and among postsecondary institutions by shifting 
enrollment between programs, removing title IV, HEA eligibility for GE 
programs that fail a GE metric multiple times, and causing some 
students to choose non-enrollment instead of a low value program. Table 
7.3 reports the number of enrolments that transfer programs, remain 
enrolled at ineligible programs, or decline to enroll in postsecondary 
education altogether. We estimate that more than 1.6 million 
enrollments would transfer from low financial value programs to better 
programs over the decade. A more modest number would remain enrolled at 
a program that is no longer eligible for title IV, HEA aid.

                                  Table 7.3--Estimated Enrollment of Transfers and Ineligible Under Proposed Regulation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              2025       2026       2027       2028       2029       2030       2031       2032       2033       Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE:
    Transfer.............................          0    115,145    112,088     97,411     88,455     83,331     80,240     78,200     76,722     731,591
    Inelig...............................          0          0          0          0          0          0          0          0          0           0
GE:
    Transfer.............................          0    212,919    191,246    129,756     94,840     77,576     69,140     64,862     62,537     902,876
    Inelig...............................          0          0     50,106     41,127     28,100     20,400     16,374     14,284     13,168     183,559
Total:
    Transfer.............................          0    328,064    303,334    227,167    183,296    160,906    149,380    143,062    139,259   1,634,467
    Inelig...............................          0          0     50,106     41,127     28,100     20,400     16,374     14,284     13,168     183,559
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The resulting reductions in expenditures on title IV, HEA program 
funds from enrollment declines and continued enrollment at non-eligible 
institutions are classified as transfers from affected student loan 
borrowers and Pell grant recipients to the Federal Government. The 
combined reduction in title IV, HEA expenditures was presented in the 
Net Budget Impacts section above. Transfers also include title IV, HEA 
program funds that follow students as they shift from low-performing 
programs to higher-performing programs, which is presented in Table 
7.4.

                      Table 7.4--Estimated Title IV, HEA Aid Transferred From Failing To Passing Programs Under Proposed Regulation
                                                                    [$2019, millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE....................................          0        547        532        466        430        409        396        387        381      3,548
GE........................................          0      1,163      1,039        700        512        417        370        347        333      4,882
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................          0      1,710      1,571      1,167        942        826        766        734        715      8,430
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Transfers are neither costs nor benefits, but rather the 
reallocation of resources from one party to another.
    Table 7.5 provides our best estimate of the changes in annual 
monetized benefits, costs, and transfers as a result of these proposed 
regulations. Our baseline estimate with a discount rate of 3 percent is 
that the proposed regulation would generate $1.851 billion of 
annualized benefits against $371 million of annualized costs and $1.209 
billion of transfers to the Federal government and $836 million 
transfers from failing programs to passing programs. A discount rate of 
7 percent results in $1.734 billion of benefits against $361 million of 
annualized costs and $1.138 billion of transfers to the Federal 
government and $823 million transfers from failing programs to passing 
programs. Note that the accounting statement does not include benefits 
that are unquantified, such as benefits for students associated with 
lower default and better credit and benefits for institutions from 
improved information about their value.

          Table 7.5--Accounting Statement for Primary Scenario
------------------------------------------------------------------------
                                  Annualized impact (millions, $2019)
                             -------------------------------------------
                               Discount rate = 3%    Discount rate = 7%
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Earnings gain (net of taxes)                 1,507                 1,411
 for students...............

[[Page 32467]]

 
Additional Federal and State                   344                   323
 tax revenue and reductions
 in transfer program
 expenditure (not included
 in budget impact)..........
                             -------------------------------------------
For students, lower default,
 better credit leading to
 family and business
 formation, more retirement
 savings. For institutions,
 increased enrollment and
 revenue associated with new
 enrollments from improved
 information about value....  Not quantified.
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Greater instructional                          258                   245
 spending...................
Additional reporting by                       89.0                  92.3
 institutions...............
Warning/acknowledgment by                     20.1                  20.1
 institutions and students..
Implementation of reporting,                   3.4                   4.0
 website, acknowledgement by
 ED.........................
                             -------------------------------------------
Time/moving cost for
 transfers; Investments to
 improve program quality....  Not quantified.
------------------------------------------------------------------------
                                Transfers
------------------------------------------------------------------------
Transfer of Federal Pell                       821                   773
 dollars to Federal
 government from enrollment
 reduction..................
Transfer of Federal loan                       388                   365
 dollars to Federal
 government from reduced
 borrowing and greater
 repayment..................
Transfer of aid dollars from                   836                   823
 non-passing programs to
 passing programs...........
                             -------------------------------------------
Transfer of State aid
 dollars from failing
 programs for dropouts......  Not quantified.
------------------------------------------------------------------------

Sensitivity Analysis
    We conducted the simulations of the rule while varying several key 
assumptions. Specifically, we provide estimates of the change in title 
IV, HEA volumes using varied assumptions about student transitions, 
student dropout, program performance, and the earnings gains associated 
with enrollment shifts. We believe these to be the main sources of 
uncertainty in our model.
Varying Levels of Student Transition
    Our primary analysis assumes rates of transfer and dropout for GE 
programs based on the research literature, but these quantities are 
uncertain. The alternative models adjust transfer and dropout rates for 
all transfer groups to the rates for high alternatives and few 
alternatives, respectively, as shown in Table 5.5. As reported in 
Tables 7.6 and 7.7, we estimate that the regulations would result in a 
reduction of title IV, HEA aid between fiscal years 2025 and 2033, 
regardless of if all students have the highest or lowest amount of 
transfer alternatives.

                 Table 7.6--High Transfer Sensitivity Analysis--Estimated Annual Change in Title IV, HEA Aid Volume Relative to Baseline
                                                                    [Millions, $2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE Programs:
    Pell..................................       (81)      (160)      (225)      (170)      (165)      (169)      (219)      (233)      (245)    (1,667)
    Subs..................................       (46)       (54)       (53)       (50)       (55)       (57)       (53)       (55)       (53)      (477)
    Unsub.................................       (32)       (68)      (168)      (137)      (159)      (224)      (242)      (266)      (284)    (1,580)
    Grad PLUS.............................         71       (71)      (122)      (126)      (258)      (306)      (325)      (340)      (354)    (1,831)
    Par. PLUS.............................         39         56         90         73         79         15         19         17         18        406
GE Programs:
    Pell..................................      (100)      (338)      (607)      (778)      (841)      (886)      (954)    (1,035)    (1,129)    (6,668)
    Subs..................................      (131)      (313)      (356)      (348)      (350)      (363)      (382)      (404)      (431)    (3,079)
    Unsub.................................      (225)      (509)      (590)      (554)      (545)      (565)      (585)      (611)      (642)    (4,826)
    Grad PLUS.............................       (11)       (49)       (55)       (45)       (53)       (53)       (51)       (49)       (48)      (415)
    Par. PLUS.............................        (4)       (15)        (7)          0          3        (4)        (9)       (14)       (21)       (72)
Total:
    Pell..................................      (179)      (497)      (832)      (947)    (1,005)    (1,055)    (1,171)    (1,267)    (1,373)    (8,326)
    Subs..................................      (177)      (367)      (409)      (399)      (405)      (420)      (435)      (460)      (484)    (3,555)
    Unsub.................................      (257)      (577)      (759)      (691)      (704)      (788)      (826)      (876)      (926)    (6,406)
    Grad PLUS.............................         59      (120)      (178)      (172)      (311)      (360)      (376)      (389)      (401)    (2,247)
    Par. PLUS.............................         35         41         83         73         82         11         10          3        (3)        334
--------------------------------------------------------------------------------------------------------------------------------------------------------


                 Table 7.7--Low Transfer Sensitivity Analysis--Estimated Annual Change in Title IV, HEA Aid Volume Relative to Baseline
                                                                    [Millions, $2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE Programs:
    Pell..................................       (77)      (149)      (203)      (133)      (114)      (106)      (144)      (149)      (154)    (1,229)

[[Page 32468]]

 
    Subs..................................       (43)       (44)       (40)       (35)       (38)       (40)       (36)       (38)       (37)      (351)
    Unsub.................................         13         50        (6)         50         43       (11)       (23)       (41)       (55)         18
    Grad PLUS.............................        121         64         64         92       (19)       (58)       (71)       (81)       (91)         21
    Par. PLUS.............................         37         53         88         73         79         15         17         14         14        391
GE Programs:
    Pell..................................       (96)      (367)      (721)      (987)    (1,100)    (1,139)    (1,184)    (1,245)    (1,326)    (8,165)
    Subs..................................      (125)      (352)      (459)      (461)      (453)      (454)      (464)      (480)      (504)    (3,753)
    Unsub.................................      (216)      (572)      (758)      (740)      (716)      (716)      (722)      (739)      (766)    (5,946)
    Grad PLUS.............................       (10)       (55)       (73)       (66)       (73)       (71)       (68)       (65)       (64)      (546)
    Par. PLUS.............................       (10)       (39)       (46)       (40)       (33)       (37)       (38)       (41)       (47)      (331)
Total:
    Pell..................................      (173)      (516)      (924)    (1,119)    (1,214)    (1,245)    (1,328)    (1,393)    (1,480)    (9,392)
    Subs..................................      (168)      (396)      (499)      (497)      (492)      (494)      (500)      (519)      (540)    (4,104)
    Unsub.................................      (203)      (522)      (765)      (690)      (672)      (728)      (745)      (781)      (822)    (5,928)
    Grad PLUS.............................        111          9        (9)         26       (93)      (130)      (139)      (147)      (155)      (525)
    Par. PLUS.............................         27         13         43         33         46       (22)       (20)       (27)       (34)         59
--------------------------------------------------------------------------------------------------------------------------------------------------------

No Program Improvement
    Our primary analysis assumes that both non-GE and GE programs 
improve performance after failing either the D/E or EP metric and that 
GE programs that pass both metrics still improve performance in 
response to the rule. We incorporate this by increasing the fail to 
pass program transition rate by 5 percentage points for each type of 
program failure after 2026 for GE and non-GE programs, by reducing the 
rate of repeated failure by 5 percentage points for GE and non-GE 
programs, and by increasing the rate of a repeated passing result by 
two and a half percentage points for GE programs. The alternative model 
will assume no program improvement in response to failing metrics.
    As reported in Table 7.8, we estimate that the regulations would 
result in a reduction of title IV, HEA aid between fiscal years 2025 
and 2033, regardless of if programs show improvement.

            Table 7.8--No Program Improvement Sensitivity Analysis--Estimated Annual Change in Title IV, HEA Aid Volume Relative to Baseline
                                                                    [Millions, $2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2025       2026       2027       2028       2029       2030       2031       2032       2033      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-GE Programs:
    Pell..................................       (80)      (157)      (214)      (147)      (124)      (110)      (139)      (135)      (131)    (1,237)
    Subs..................................       (46)       (54)       (49)       (41)       (40)       (38)       (31)       (29)       (24)      (353)
    Unsub.................................       (18)       (34)      (110)       (51)       (54)      (105)      (111)      (124)      (132)      (739)
    Grad PLUS.............................         87       (30)       (56)       (34)      (150)      (191)      (204)      (215)      (226)    (1,020)
    Par. PLUS.............................         38         53         90         77         88         28         34         36         40        483
GE Programs:
    Pell..................................      (102)      (354)      (650)      (854)      (948)    (1,015)    (1,104)    (1,204)    (1,321)    (7,552)
    Subs..................................      (133)      (327)      (388)      (393)      (404)      (426)      (453)      (484)      (520)    (3,529)
    Unsub.................................      (229)      (531)      (639)      (627)      (639)      (677)      (714)      (758)      (807)    (5,621)
    Grad PLUS.............................       (10)       (49)       (60)       (55)       (68)       (72)       (73)       (74)       (76)      (535)
    Par. PLUS.............................        (8)       (25)       (22)       (20)       (20)       (31)       (39)       (48)       (59)      (270)
Total:
    Pell..................................      (181)      (510)      (865)    (1,000)    (1,071)    (1,124)    (1,243)    (1,341)    (1,451)    (8,786)
    Subs..................................      (180)      (381)      (437)      (434)      (445)      (464)      (484)      (514)      (544)    (3,881)
    Unsub.................................      (247)      (564)      (749)      (678)      (694)      (782)      (825)      (881)      (939)    (6,360)
    Grad PLUS.............................         76       (78)      (116)       (89)      (218)      (263)      (277)      (290)      (301)    (1,555)
    Par. PLUS.............................         30         29         68         58         67        (4)        (4)       (12)       (19)        213
--------------------------------------------------------------------------------------------------------------------------------------------------------

Alternative Earnings Gain
    Our primary analysis assumes that the earnings change associated 
with shifts in enrollment is equal to the difference in average 
earnings between groups defined by loan risk group, program performance 
category, and whether the program is a GE program or not, multiplied by 
an adjustment factor equal to 0.75. This adjustment factor was derived 
from a regression model where the earnings difference between passing 
and failing programs conditional on credential level was shown to 
decline by 25 percent when a rich set of student characteristics are 
controlled for. The estimated earnings gain associated with the rule 
scales directly with the value of this adjustment factor. A value of 
1.0 (all of the difference in average earnings between groups would 
manifest as earnings gain) would increase the total annualized earnings 
gain for students from $1.412 billion up to $1.883 billion (3 percent 
discount rate).
    A value of 0.40 reduces it to $0.754 billion; a value of 0.20 
reduces it to $0.377 billion. The net fiscal externality increases or 
decreases proportionately. Each of these two scenarios would involve 
more of the raw earnings difference between passing and failing 
programs of the same credential level being explained by factors we are 
not able to measure (such as student academic preparation) than those 
that we are able to measure (such as race, sex, parent education, 
family income, and Pell receipt).\285\ Even at these low

[[Page 32469]]

values for the adjustment factor, the estimated earnings benefits of 
the rule by themselves outweigh the estimated costs.
---------------------------------------------------------------------------

    \285\ In unpublished analysis of approximately 600 programs 
(defined by 2-digit CIP by institution) at four-year public colleges 
in Texas as part of their published work, Andrews & Stange (2019) 
find that a 1 percent increase in log program earnings (unadjusted) 
is associated with a .72 percent increase in log program earnings 
after controlling for student race/ethnicity, limited English 
proficiency, economic disadvantage, and achievement test scores. 
Additionally controlling for students' college application and 
admissions behavior reduces this to 0.62. Using the correlation of 
institution-level average earnings and value-added in Figure 2.1 of 
Hoxby (2018) we estimate that an earnings gain of $10,000 is 
associated with a value added gain of roughly $6,000 over the entire 
sample, of roughly $4,000 for scores below 1200, and of roughly 
$2,000 for scores below 1000. These relationships imply parameter 
values of 0.72, 0.62, 0.60, 0.40, and 0.20, respectively. Again, 
institution-level correlations may not be directly comparable to 
program-level data.
---------------------------------------------------------------------------

Additional Sensitivity Analysis
    The Department is currently examining the sensitivity to changes in 
the following assumptions.
     Constant aid amounts for students that transfer. Our 
primary analysis assumes that students' aid volume (Pell and loans) 
would change as they shift enrollment between types of programs. This 
assumption captures the fact that students moving to less expensive 
programs would likely require less financial aid. The alternative model 
will assume that students' aid packages are unchanged when they 
transfer between institutions.
     Alternative enrollment growth rates. Our primary analysis 
projects program-level enrollment based on annual growth rates for each 
credential level and control from 2016 to 2022. It is possible that 
these recent growth patterns will not continue for the next decade. The 
alternative model will project baseline enrollment growth using assumed 
higher and lower growth rates for the sectors that have the highest 
failure rates of the performance metrics.
    We seek public comment as to how best to craft any further 
assumptions of the possible budgetary effect of the Financial Value 
Transparency and Gainful Employment components of the proposed rule.
Financial Responsibility Triggers
    We also conducted several sensitivity analyses to provide some 
indication of the potential effects of the Financial Responsibility 
triggers if they did result in meaningful increases in financial 
protection obtained that can offset either closed school or borrower 
defense discharges. We modeled these as reductions in the amount of 
projected discharges in these categories. This would not represent a 
reduction in benefits given to students, but a way of considering what 
the cost would be if the Department was reimbursed for a portion of the 
discharges. These are described above in Net Budget Impacts. We seek 
public comment as to how best to craft any further assumptions of the 
possible budgetary effect of these triggers.

8. Distributional Consequences

    The proposed regulation would advance distributional equity aims 
because the benefits of the proposed regulation--better information, 
increased earnings, and more manageable debt repayment--would 
disproportionately be realized by students who otherwise would have low 
earnings. Students without access to good information about program 
performance tend to be more disadvantaged; improved transparency about 
program performance would be particularly valuable to these students. 
The proposed regulation improves program quality in the undergraduate 
certificate sector in particular, which, as documented above, 
disproportionately enrolls low-income students. Students already 
attending high-quality colleges, who tend to be more advantaged, would 
be relatively unaffected by the regulation. The major costs of the 
program involve additional paperwork and instructional spending, which 
are not incurred by students directly.

9. Alternatives Considered

    As part of the development of these proposed regulations, the 
Department engaged in a negotiated rulemaking process in which we 
received comments and proposals from non-Federal negotiators 
representing numerous impacted constituencies. These included higher 
education institutions, consumer advocates, students, financial aid 
administrators, accrediting agencies, and State attorneys general. Non-
Federal negotiators submitted a variety of proposals relating to the 
issues under discussion. Information about these proposals is available 
on our negotiated rulemaking website at www2.ed.gov/policy/highered/reg/hearulemaking/2021/.
Financial Value Transparency and Gainful Employment
D/E Rate Only
    The Department considered using only the D/E rates metric, 
consistent with the 2014 Prior Rule. Tables 9.1 and 9.2 show the share 
of GE and non-GE programs and enrollment that would fail under only the 
D/E metric compared to our preferred rule that considers both D/E and 
EP metrics.

              Table 9.1--Percent of GE Students and Programs That Fail Under D/E Only vs. D/E + EP
----------------------------------------------------------------------------------------------------------------
                                                             Programs                        Students
                                                 ---------------------------------------------------------------
                                                   Fail D/E only   Fail D/E + EP   Fail D/E only   Fail D/E + EP
----------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates.............................             0.0             1.0             0.4             4.4
    Post-BA Certs...............................             0.0             0.0             0.0             0.0
    Grad Certs..................................             0.1             0.1             0.4             0.4
    Total.......................................             0.0             0.9             0.4             4.1
Private, Nonprofit:
    UG Certificates.............................             0.6             5.8             4.9            43.5
    Post-BA Certs...............................             0.0             0.0             0.0             0.0
    Grad Certs..................................             0.7             0.7             3.5             3.5
    Total.......................................             0.5             2.6             4.2            28.9
Proprietary:
    UG Certificates.............................             5.0            34.0             8.7            50.0
    Associate's.................................            10.8            14.8            33.8            38.3
    Bachelor's..................................            10.7            10.8            24.3            24.4
    Post-BA Certs...............................             0.0             0.0             0.0             0.0
    Master's....................................            10.1            10.1            17.9            17.9
    Doctoral....................................            10.0            10.0            15.1            15.1

[[Page 32470]]

 
    Professional................................            13.8            13.8            50.7            50.7
    Grad Certs..................................             4.8             7.3            37.9            38.6
    Total.......................................             7.8            22.8            20.5            33.5
Foreign Private:
    UG Certificates.............................             0.0             0.0             0.0             0.0
    Post-BA Certs...............................             0.0             0.0             0.0             0.0
    Grad Certs..................................             1.5             1.5            84.2            84.2
    Total.......................................             0.9             0.9            79.6            79.6
Foreign For-Profit:
    Master's....................................             0.0             0.0             0.0             0.0
    Doctoral....................................             0.0             0.0             0.0             0.0
    Professional................................            28.6            28.6            20.3            20.3
    Total.......................................            11.8            11.8            17.2            17.2
----------------------------------------------------------------------------------------------------------------


        Table 9.2--Percent of Non-GE Programs and Enrollment at GE Programs That Fail Under D/E Only vs.
                                                    D/E + EP
----------------------------------------------------------------------------------------------------------------
                                                             Programs                        Students
                                                 ---------------------------------------------------------------
                                                   Fail D/E only   Fail D/E + EP   Fail D/E only   Fail D/E + EP
----------------------------------------------------------------------------------------------------------------
Public:
    Associate's.................................             0.2             1.7             0.5             7.8
    Bachelor's..................................             0.9             1.4             1.3             1.8
    Master's....................................             0.4             0.4             1.5             1.5
    Doctoral....................................             0.2             0.2             2.6             2.6
    Professional................................             3.3             3.3             7.5             7.5
    Total.......................................             0.5             1.2             1.0             4.6
Private, Nonprofit:
    Associate's.................................             2.7             3.2            23.0            24.7
    Bachelor's..................................             0.7             0.9             2.9             4.3
    Master's....................................             2.4             2.4             7.7             7.8
    Doctoral....................................             2.3             2.3            19.7            19.7
    Professional................................            17.1            17.7            34.6            34.7
    Total.......................................             1.4             1.7             6.9             7.9
Foreign Private:
    Associate's.................................             0.0             0.0             0.0             0.0
    Bachelor's..................................             0.1             0.1             1.2             1.2
    Master's....................................             0.1             0.1             1.8             1.9
    Doctoral....................................             0.0             0.0             0.0             0.0
    Professional................................             3.4             3.4            20.7            20.7
    Total.......................................             0.2             0.2             2.9             2.9
----------------------------------------------------------------------------------------------------------------

Alternative Earnings Thresholds
    The Department examined the consequences of two different ways of 
computing the earnings threshold. For the first, we computed the 
earnings threshold as the annual earnings among all respondents aged 
25-34 in the American Community Survey who have a high school diploma 
or GED, but no postsecondary education. The second is the median annual 
earnings among respondents aged 25-34 in the American Community Survey 
who have a high school diploma or GED, but no postsecondary education, 
and who worked a full year prior to being surveyed. These measures, 
which are included in the 2022 PPD, straddle our preferred threshold, 
which includes all respondents in the labor force, but excludes those 
that are not in the labor force.
    Tables 9.3 and 9.4 reports the share of programs and enrollment 
that would pass GE metrics under three different earnings threshold 
methods, with our proposed approach in the middle column. The share of 
enrollment in undergraduate proprietary certificate programs that would 
fail ranges from 34 percent under the lowest threshold up to 66 percent 
under the highest threshold. The failure rate for public undergraduate 
certificate programs is much lower than proprietary programs under all 
three scenarios, ranging from 2 percent for the lowest threshold to 9 
percent under the highest. The earnings threshold chosen would have a 
much smaller impact on failure rates for degree programs, which range 
from 36 percent to 46 percent of enrollment for associate's programs 
and essentially no impact for Bachelor's degree or higher programs.

[[Page 32471]]



           Table 9.3--Share of Enrollment in GE Programs That Fail, by Where Earnings Threshold Is Set
----------------------------------------------------------------------------------------------------------------
                                                                   % Failing DTE   DTE + higher    Total number
                                                  DTE + lower EP    + medium EP         EP         of enrollees
----------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates.............................             1.7             4.4             9.1         869,600
    Post-BA Certs...............................             0.0             0.0             0.0          12,600
    Grad Certs..................................             0.4             0.4             0.4          41,900
Private, Nonprofit:
    UG Certificates.............................            27.9            43.5            46.1          77,900
    Post-BA Certs...............................             0.0             0.0             0.0           7,900
    Grad Certs..................................             3.5             3.5             5.5          35,700
Proprietary:
    UG Certificates.............................            31.4            50.0            64.1         549,900
    Associate's.................................            34.5            38.3            44.7         326,800
    Bachelor's..................................            24.3            24.4            24.9         675,800
    Post-BA Certs...............................             0.0             0.0             0.0             800
    Master's....................................            17.9            17.9            17.9         240,000
    Doctoral....................................            15.1            15.1            15.1          54,000
    Professional................................            50.7            50.7            50.7          12,100
    Grad Certs..................................            38.3            38.6            38.6          10,800
----------------------------------------------------------------------------------------------------------------
Note: Enrollment counts rounded to the nearest hundred.


                  Table 9.4--Share of GE Programs That Fail, by Where Earnings Threshold Is Set
----------------------------------------------------------------------------------------------------------------
                                                                   % Failing DTE   DTE + higher    Total number
                                                  DTE + lower EP    + medium EP         EP          of programs
----------------------------------------------------------------------------------------------------------------
Public:
    UG Certificates.............................             0.6             1.0             1.6           19,00
    Post-BA Certs...............................             0.0             0.0             0.0             900
    Grad Certs..................................             0.1             0.1             0.1           1,900
Private, Nonprofit:
    UG Certificates.............................             3.3             5.6             6.3           1,400
    Post-BA Certs...............................             0.0             0.0             0.0             600
    Grad Certs..................................             0.6             0.6             0.7           1,400
Proprietary:
    UG Certificates.............................            21.7            33.2            39.8           3,200
    Associate's.................................            11.1            14.1            18.1           1,700
    Bachelor's..................................            10.5            10.6            11.4           1,000
    Post-BA Certs...............................             0.0             0.0             0.0              50
    Master's....................................            10.0            10.0            10.0             500
    Doctoral....................................             9.8             9.8             9.8             100
    Professional................................            12.5            12.5            12.5              30
    Grad Certs..................................             5.5             7.0             7.0             100
----------------------------------------------------------------------------------------------------------------
Note: Program counts rounded to the nearest 100, except where 50 or fewer.

    Tables 9.5 and 9.6 illustrate this for non-GE programs. As with GE 
programs, the earnings threshold chosen would have almost no impact on 
the share of Bachelors' or higher programs that fail but would impact 
failure rates for associate degree programs at public institutions, 
where the share of enrollment in failing programs ranges from 2 percent 
at the lowest threshold to 23 percent at the highest. Our proposed 
measure would result in 8 percent of enrollment failing.

         Table 9.5--Share of Enrollment in Non-GE Programs That Fail, by Where Earnings Threshold Is Set
----------------------------------------------------------------------------------------------------------------
                                                                   % Failing DTE   DTE + higher    Total number
                                                  DTE + lower EP    + medium EP         EP         of enrollees
----------------------------------------------------------------------------------------------------------------
Public:
    Associate's.................................             1.6             7.8            23.2       5,496,800
    Bachelor's..................................             1.4             1.8             4.3       5,800,700
    Master's....................................             1.5             1.5             1.6         760,500
    Doctoral....................................             2.6             2.6             2.6         145,200
    Professional................................             7.5             7.5             7.5         127,500
Private, Nonprofit:
    Associate's.................................            23.3            24.7            27.0         266,900
    Bachelor's..................................             3.7             4.3             6.0       2,651,300
    Master's....................................             7.7             7.8             7.9         796,100
    Doctoral....................................            19.7            19.7            19.7         142,900

[[Page 32472]]

 
    Professional................................            34.7            34.7            34.7         130,400
----------------------------------------------------------------------------------------------------------------
Note: Enrollment counts rounded to the nearest hundred.


                Table 9.6--Share of Non-GE Programs That Fail, by Where Earnings Threshold Is Set
----------------------------------------------------------------------------------------------------------------
                                                   DTE +  lower    % Failing DTE   DTE +  higher   Total number
                                                        EP         +  medium EP         EP          of programs
----------------------------------------------------------------------------------------------------------------
Public:
    Associate's.................................             0.4             1.7             3.6          27,300
    Bachelor's..................................             1.0             1.4             3.0          24,300
    Master's....................................             0.4             0.4             0.4          14,600
    Doctoral....................................             0.2             0.2             0.2           5,700
    Professional................................             3.2             3.2             3.2             600
Private, Nonprofit:
    Associate's.................................             2.8             3.1             4.0           2,300
    Bachelor's..................................             0.8             0.9             1.4          29,800
    Master's....................................             2.4             2.4             2.4          10,400
    Doctoral....................................             2.3             2.3             2.3           2,900
    Professional................................            17.2            17.2            17.2             500
----------------------------------------------------------------------------------------------------------------
Note: Program counts rounded to the nearest 100.

No Reporting, Disclosure, and Acknowledgment for Non-GE Programs
    The Department considered proposing to apply the reporting, 
disclosure, and acknowledgment requirements only to GE programs, and 
calculating D/E rates and the earnings premium measure only for these 
programs, similar to the 2014 Prior Rule. This approach, however, would 
fail to protect students, families, and taxpayers from investing in 
non-GE programs that deliver low value and poor debt and earnings 
outcomes. As higher education costs and student debt levels increase, 
students, families, institutions, and the public have a commensurately 
growing interest in ensuring their higher education investments are 
justified through positive career, debt, and earnings outcomes for 
graduates, regardless of the sector in which the institution operates 
or the credential level of the program. Furthermore, comprehensive 
performance information about all programs is necessary to guide 
students that would otherwise choose failing GE programs to better 
options.
Small Program Rates
    While we believe the D/E rates and earnings premium measure are 
reasonable and useful metrics for assessing debt and earnings outcomes, 
we acknowledge that the minimum n-size of 30 completers would exempt 
small programs from these Financial Value Transparency measures. In our 
initial proposals during negotiated rulemaking, the Department 
considered calculating small program rates in such instances. These 
small program rates would have been calculated by combining all of an 
institution's small programs to produce the institution's small program 
D/E rates and earnings premium measure, which would be used for 
informational purposes only. In the case of GE programs, these small 
program rates would not have resulted in program eligibility 
consequences. Several negotiators questioned the usefulness of the 
small program rates because they would not provide information specific 
to any particular program, and because an institution's different small 
programs in various disciplines could lead to vastly different debt and 
earnings outcomes. In addition, several negotiators expressed concerns 
about the use of small program rates as a supplementary performance 
measure under proposed Sec.  668.13(e). Upon consideration of these 
points, and in the interest of simplifying the proposed rule, the 
Department has opted to omit the small program rates.
Alternative Components of the D/E Rates Measure
    The Department considered alternative ways of computing the D/E 
rates measure, including:

 Lower completer thresholds n-size
 Different ways of computing interest rates
 Different amortization periods

    We concluded that the proposed parameters used in the D/E rates and 
earnings premium calculations were most consistent with best practices 
identified in prior analysis and research.
Discretionary Earnings Rate
    The Department considered simplifying the D/E rates metric by only 
including a discretionary earnings rate. We believe that using only the 
discretionary earnings rate would be insufficient because there may be 
some instances in which a borrower's annual earnings would be 
sufficient to pass an 8 percent annual debt-to-earnings threshold, even 
if that borrower's discretionary earnings are insufficient to pass a 20 
percent discretionary debt-to-earnings threshold. Utilizing both annual 
and discretionary D/E rates would provide a more complete picture of a 
program's true debt and earnings outcomes and would be more generous to 
institutions because a program that passes either the annual earnings 
rate or the discretionary earnings rate would pass the D/E rates 
metric.
Pre- and Post-Earnings Comparison
    A standard practice for evaluating the effectiveness of 
postsecondary programs is to compare the earnings of students after 
program completion to earnings before program enrollment, to control 
for any student-specific factors that determine labor market success 
that should not be attributed to program performance. While the 
Department

[[Page 32473]]

introduced limited analysis of pre-program earnings from students' 
FAFSA data into the evidence above, it is not feasible to perform such 
comparisons on a wide and ongoing scale in the proposed regulation. 
Pre-program earnings data is only available for students who have labor 
market experience prior to postsecondary enrollment, which excludes 
many students who proceed directly to postsecondary education from high 
school. Furthermore, earnings data from part-time work during high 
school is mostly uninformative for earnings potential after 
postsecondary education. Although some postsecondary programs enroll 
many students with informative pre-program earnings, many postsecondary 
programs would lack sufficient numbers of such students to reliably 
incorporate pre-program earnings from the FAFSA into the proposed 
regulation.
Financial Responsibility
    We considered keeping the existing set of financial responsibility 
triggers, but ultimately decided it was important to propose to expand 
the options. The Department is concerned that the existing set of 
triggers do not properly account for all the scenarios in which there 
is significant financial risk at an institution. We also believe these 
additional triggers are necessary due to concerns about the frequency 
with which institutions close or can face liabilities without 
sufficient financial protection in place.
    The Department considered proposing a mandatory trigger for 
borrower defense based solely upon the approval of claims. However, we 
decided not to propose that given that there may be circumstances in 
which we did not decide to seek to recoup the cost of approved claims 
or would not be able to do so under the relevant regulations, and in 
these circumstances it is not necessary to retain financial protection 
to ensure the institution is able to cover the cost of approved 
borrower defense claims.
    We also considered constructing the proposed trigger related to 
closing a location or a program solely in terms of the share of 
locations or programs at an institution. However, we decided that a 
component that reflects student enrollment is important because if an 
institution only has two locations but enrolls 95 percent of its 
students at one of them, then closing the smaller location should not 
be as much of a concern.
    We also considered constructing more of the proposed triggers as 
requiring a recalculation of the composite score as was done in the 
2016 regulations. However, we are concerned that determining how to 
recalculate the composite score in many circumstances would be 
challenging and could create additional burden internally and 
externally to properly assess the financial situation. Moreover, 
composite scores by their very nature always have a built-in lag since 
an institution must wait for its fiscal year to end and then conduct a 
financial audit. The result is that recalculating composite scores that 
may reflect a quite old financial situation for an institution would 
not help further the goal of better protecting against unreimbursed 
discharges or unpaid liabilities. Instead, dividing triggers into 
situations that would automatically require financial protection versus 
those where the Department has discretion ensures that the Department 
can obtain protection more readily when severe situations necessitate 
it.
Administrative Capability
    The Department considered additional guidance regarding the 
validity of a high school diploma. We are proposing that a high school 
diploma should not be valid if (1) it does not meet the requirements 
set by the State agency where the high school is located, (2) it has 
been deemed invalid by the Department, State agency where the high 
school is located, or through a court proceeding, (3) was obtained from 
an entity that requires little or no secondary instruction, or (4) was 
obtained from an entity that maintains a business relationship with the 
eligible institution or is not accredited. We considered providing 
greater discretion to the institution around how it would determine 
that a high school diploma is valid. However, we are concerned that the 
current situation, which already incorporates extensive deference, has 
led to the too many instances of insufficient verification of high 
school diplomas.
Certification Procedures
    For circumstances that may lead to provisional certification, the 
Department initially considered proposing to make an institution 
provisionally certified when an institution received the same finding 
of noncompliance in more than one program review or audit. However, 
after hearing negotiators' concerns on how and when this provision 
would be used, we abandoned this proposed specification. We agreed with 
negotiators who noted that we already have the authority to place an 
institution on provisional status for repeat findings of noncompliance.
    In addition, to address excessive program hours in GE programs, the 
Department considered proposing to limit title IV, HEA eligibility for 
GE programs to no longer than the national median of hours required for 
the occupation in all States that license the occupation (if at least 
half of States license the occupation). However, negotiators were 
concerned with funding being cut off before students finished their 
programs, and many negotiators also pointed out how harmful it would be 
for students to begin programs with title IV, HEA funds but not be able 
to finish with them. During negotiations there was also support for the 
Department to revert to using the ``greater'' language instead of 
``lesser''. Ultimately, we are proposing the ``greater'' language, and 
we also dropped the proposal of establishing a limitation on the amount 
of title IV, HEA aid that can be provided to a GE program that is 
subject to State licensure requirements. We did not propose this out of 
concern about its complexity and the confusing situation that would 
arise where a borrower would potentially only receive funding for a 
portion of their program.
    Moreover, to address transcript withholding we initially considered 
language for institutions at risk of closure to release holds on 
student transcripts over a de minimis amount of unpaid balances, and to 
release all holds on student transcripts in the event of a closure. 
However, negotiators felt that this approach was too narrow and did not 
go far enough to help students. Several negotiators stated that 
students of color are disproportionately unable to access their 
transcripts due to transcript withholding. In addition, one negotiator 
argued that if an institution was being considered at risk for closure, 
most students would want to transfer institutions, but unfortunately 
transcript holds for certain amounts would negatively impact a 
student's ability to transfer to another institution. As mentioned 
during negotiations, the Department's authority to prohibit 
institutions from withholding transcripts is limited to instances where 
the institution's reason for withholding the transcript involves the 
title IV, HEA functions. However, if an institution is provisionally 
certified, we may apply other conditions that are necessary or 
appropriate to the institution, including, but not limited to releasing 
holds on student transcripts. Accordingly, we are proposing to expand 
the provisional conditions related to transcript withholding to 
increase students' access

[[Page 32474]]

to their educational records at institutions with risk of closure or 
institutions that are not financially responsible or administratively 
capable.
Ability To Benefit
    The Department considered not regulating in this area. We were 
concerned, however, that the lack of an update to ATB regulations since 
the mid-1990s could create confusion. Moreover, the Department had 
stated in DCL GEN 16-09 that we would not develop a career pathway 
program approval process but would instead review the eligibility of 
these programs through program reviews and audits. This statement in 
effect allowed institutions to use their best-faith determinations to 
initiate eligible career pathway programs but provided no framework for 
how the Department would evaluate these programs from through a program 
review. This led to a vacuum in guidance for institutions and authority 
to intervene for the Department. We also think this ultimately chilled 
the usage of a State process, the first application we received was in 
2019 and as of February 2023 only six States have applied for approval. 
The Department also noted that there were technical updates to the 
regulations necessary to codify the changes to student eligibility made 
by Public Law 113-235 in 2014. Therefore, we decided the added clarity 
from these proposed regulations would result in greater usage of the 
State process for ATB, while still preserving protections for students 
and taxpayers.
    The Department also considered using completion rates as an outcome 
metric in our approval of a State process, as opposed to the success 
rate calculation that is required under the current regulation and 
amended in this proposed regulation. We were concerned with the 
complexity of developing a framework for a completion rate in 
regulation for eligible career pathway programs. These programs can be 
less than two-years, two-years, or four-years long. We did not want to 
create a framework in regulation that did not account for the nuances 
between programs. We believe we have clarified the calculation with the 
proposed amendments to the success rate calculation. We also propose to 
lower the success rate threshold from 95 percent to 85 percent and to 
give the Secretary the ability to lower it to 75 percent for up to two 
years if more than 50 percent of the participating institutions in the 
State cannot achieve the 85 percent success rate. This would provide 
participating institutions and the Department reasonable accommodations 
for unintended or unforeseen circumstances that may arise.
    In drafting proposed Sec.  668.157, we initially did not require 
postsecondary institutions to document that students would receive 
adult education and literacy activities as described in 34 CFR 463.30 
and workforce preparation activities as described in 34 CFR 463.34, 
simultaneously. A negotiator recommended that the Department utilize 
existing definitions in the Code of Federal regulations for concepts 
like adult education and literacy services and workforce preparation 
activities, and the Department agreed to propose to cross reference 
them instead of creating different standards in 34 CFR 668.157. We also 
did not initially consider proposing to require that, in order to 
demonstrate that the program aligns with the skill needs of industries 
in the State or regional labor market, the institution would have to 
submit (1) Government reports (2) Surveys, interviews, meetings, or 
other information, and (3) Documentation that demonstrates direct 
engagement with industry. We were persuaded by a committee member that 
the documentation the Department initially considered proposing was 
lacking and could allow programs that did not comply with the 
definition of an eligible career pathway program to be approved. Our 
goal is to ensure students have ability to benefit and we believe these 
proposed reasonable documentation standards would achieve that.
Clarity of the Regulations
    Executive Order 12866 and the Presidential memorandum ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand. The Secretary invites comments 
on how to make these proposed regulations easier to understand, 
including answers to questions such as the following:
     Are the requirements in the proposed regulations clearly 
stated?
     Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
     Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec.  '' and a numbered heading; for example, 
Sec.  668.2.)
     Could the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in 
making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section.

10. Regulatory Flexibility Act Analysis

    This section considers the effects that the proposed regulations 
may have on small entities in the Educational Sector as required by the 
Regulatory Flexibility Act (RFA, 5 U.S.C. et seq., Pub. L. 96-354) as 
amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA). The purpose of the RFA is to establish as a principle of 
regulation that agencies should tailor regulatory and informational 
requirements to the size of entities, consistent with the objectives of 
a particular regulation and applicable statutes. The RFA generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute unless the agency 
certifies that the rule will not have a ``significant impact on a 
substantial number of small entities.'' As we describe below, the 
Department anticipates that the proposed regulatory action would have a 
significant economic impact on a substantial number of small entities. 
We therefore present this Initial Regulatory Flexibility Analysis. Our 
analysis focuses on the financial value transparency and gainful 
employment (GE) components of the proposed regulation, as those would 
have the most economically significant implications for small entities.
Description of the Reasons That Action by the Agency Is Being 
Considered
    The Secretary is proposing new regulations to address concerns 
about the rising cost of postsecondary education and training and 
increased student borrowing by establishing an accountability and 
transparency framework to encourage eligible postsecondary programs to 
produce acceptable debt and earnings outcomes, apprise current and 
prospective students of those outcomes, and provide better information 
about program price. Proposed regulations for gainful employment would 
establish eligibility and certification requirements tied to the debt-
to-earnings and median earnings (relative to high school

[[Page 32475]]

graduates) of program graduates. These regulations address ongoing 
concerns about educational programs that are required by statute to 
provide training that prepares students for gainful employment in a 
recognized occupation, but instead are leaving students with 
unaffordable levels of loan debt in relation to their earnings or 
earnings lower than that of a typical high school graduate. These 
programs often lead to default or provide no earnings benefit beyond 
that provided by a high school education, thus failing to fulfill their 
intended goal of preparing students for gainful employment.
Succinct Statement of the Objectives of, and Legal Basis for, the 
Regulations
    Through the proposed financial value transparency regulations, the 
Department aims to ensure that prospective students, families, and 
taxpayers can receive accurate information about program costs, typical 
borrowing, available financial aid, and realistic earnings potential to 
evaluate a program and compare it to similar programs offered at other 
institutions before investing time and resources in a postsecondary 
program. The GE regulations further aim to ensure that students 
receiving title IV, HEA aid only enroll in GE programs if such programs 
prepare students for gainful employment.
    The Department's authority to pursue financial value transparency 
in GE programs and eligible non-GE programs and accountability in GE 
programs is derived primarily from three categories of statutory 
enactments: first, the Secretary's generally applicable rulemaking 
authority in 20 U.S.C. 1221e-3 (section 410 of the General Education 
Provisions Act) and 20 U.S.C. 3474 (section 414 of the Department of 
Education Organization Act), along with 20 U.S.C. 1231a, which applies 
in part to title IV, HEA; second, authorizations and directives within 
sections 131 and 132 of title IV of the HEA, regarding the collection 
and dissemination of potentially useful information about higher 
education programs, as well as section 498 of the HEA, regarding 
eligibility and certification standards for institutions that 
participate in title IV; and third, the further provisions within title 
IV of the HEA, such as sections 101 and 481, which address the limits 
and responsibilities of gainful employment programs. The specific 
statutory sources of this authority are detailed in the Authority for 
This Regulatory Action section of the Preamble above.
Description of and, Where Feasible, an Estimate of the Number of Small 
Entities To Which the Proposed Regulations Would Apply
    The Small Business Administration (SBA) defines ``small 
institution'' using data on revenue, market dominance, tax filing 
status, governing body, and population. The majority of entities to 
which the Office of Postsecondary Education's (OPE) regulations apply 
are postsecondary institutions, however, which do not report data on 
revenue that is directly comparable across institutions. As a result, 
for purposes of this NPRM, the Department proposes to continue defining 
``small entities'' by reference to enrollment, to allow meaningful 
comparison of regulatory impact across all types of higher education 
institutions. The enrollment standard for a small two-year institution 
is less than 500 full-time-equivalent (FTE) students and for a small 
four-year institution, less than 1,000 FTE students.\286\ We invite 
public comment on whether our Regulatory Flexibility Analysis would 
more accurately reflect the burden on small entities if we instead used 
the revenue standards set out in 13 CFR part 121, sector 61--
Educational Services.
---------------------------------------------------------------------------

    \286\ The Department uses an enrollment-based definition since 
this applies the same metric to all types of institutions, allowing 
consistent comparison across all types. For a further explanation of 
why the Department proposes this alternative size standard, please 
see Student Assistance General Provisions, Federal Perkins Loan 
Program, Federal Family Education Loan Program, and William D. Ford 
Federal Direct Loan Program (Borrower Defense) proposed rule 
published July 31, 2018 (83 FR 37242).

                        Table 10.1--Small Institutions Under Enrollment-Based Definition
----------------------------------------------------------------------------------------------------------------
                                                                       Small           Total          Percent
----------------------------------------------------------------------------------------------------------------
Proprietary.....................................................           1,973           2,331              85
    2-year......................................................           1,734           1,990              87
    4-year......................................................             239             341              70
Private not-for-profit..........................................             983           1,831              54
    2-year......................................................             185             203              91
    4-year......................................................             798           1,628              49
Public..........................................................             380           1,924              20
    2-year......................................................             317           1,145              28
    4-year......................................................              63             779               8
                                                                 -----------------------------------------------
        Total...................................................           3,336           6,086              55
----------------------------------------------------------------------------------------------------------------

    Table 10.1 summarizes the number of institutions affected by these 
proposed regulations. As seen in Table 10.2, the average total revenue 
at small institutions ranges from $2.6 million for proprietary 
institutions to $16.6 million at private institutions.

      Table 10.2--Average and Total Revenues at Small Institutions
------------------------------------------------------------------------
                                           Average           Total
------------------------------------------------------------------------
Proprietary..........................       2,593,382      5,116,742,179
    2-year...........................       1,782,969      3,091,667,694
    4-year...........................       8,473,115      2,025,074,485
Private not-for-profit...............      16,608,849     16,326,498,534
    2-year...........................       3,101,962        573,862,938
    4-year...........................      19,740,145     15,752,635,596
Public...............................       8,644,387      3,284,866,903

[[Page 32476]]

 
    2-year...........................       4,153,842      1,316,767,990
    4-year...........................      31,239,665      1,968,098,913
                                      ----------------------------------
        Total........................       7,412,502     24,728,107,616
------------------------------------------------------------------------

    These proposed regulations require additional reporting and 
compliance by all title IV postsecondary institutions, including all 
small entities, and thus would have a significant impact on a 
substantial number of small entities. Furthermore, GE programs at small 
institutions could be at risk of losing the ability to distribute title 
IV, HEA funds under the proposed regulations if they fail either the 
debt-to-earnings (D/E) or Earnings Premium (EP) metrics, as described 
in the Financial Value and Transparency and GE sections of the proposed 
regulation. Non-GE programs at small institutions that fail the D/E 
metric would be required to have students acknowledge having seen this 
information prior to aid disbursement.
    Thus, all (100 percent) of small entities will be impacted by the 
reporting and compliance aspects of the rule, which we quantify below. 
As we describe in more detail below, the Department estimates that 1.2 
percent of non-GE programs at small institutions would fail the D/E 
metric, thus triggering the acknowledgement requirement. The Department 
also estimates that 15.9 percent of GE programs at small institutions 
would fail either the D/E or EP metric, thus being at risk of losing 
title IV, HEA eligibility. GE programs represent 45 percent of 
enrollment at small institutions.
    The Department's analysis shows programs at small institutions are 
much more likely to have insufficient sample size to compute and report 
D/E and EP metrics, though the rate of failing to pass both metrics is 
higher for programs at such institutions.\287\
---------------------------------------------------------------------------

    \287\ The minimum number of program completers in a two-year 
cohort that is required in order for the Department to compute the 
D/E and EP performance metrics is referred to as the ``n-size.'' An 
n-size of 30 is used in the proposed rule; GE and non-GE programs 
with fewer than 30 completers across two years would not have 
performance metrics computed.
---------------------------------------------------------------------------

    As noted in the net budget estimate section, we do not anticipate 
that the proposed Financial Responsibility, Administrative Capability, 
Certification Procedures, and Ability to Benefit components of the 
regulation would have any significant budgetary impact, this includes 
on a substantial number of small entities. We have, however, run a 
sensitivity analysis of what an effect of the Financial Responsibility 
provisions could be on offsetting the transfers of certain loan 
discharges from the Department to borrowers by obtaining additional 
funds from institutions. We conclude that these provisions could 
increase recoveries via closed school discharges or borrower defense of 
$4 to $5 million from all types of institutions, not just small 
institutions. Since these amounts scale with the number of students, we 
anticipate the impact to be much smaller at small entities.
    Table 10.3 and 10.4 show the number and percentage of non-GE 
enrollees and non-GE programs at small institutions in each status 
relative to the performance standard. The share of non-GE programs that 
have sufficient data and fail the D/E metric is higher for programs at 
small institutions (1.6 percent) than it is for all institutions (0.6 
percent, Table 3.5). Failing the D/E metric for non-GE programs 
initiates a requirement that the institution must have title IV, HEA 
students acknowledge having seen the informational disclosures before 
Federal student aid is disbursed. The share of title IV, HEA enrollment 
in such programs is also higher at small institutions (9.3 percent for 
small institutions vs. 1.9 percent for all institutions, Table 3.5).

  Table 10.3--Number of Enrollees in Non-GE Programs at Small Institutions by Result, by Control and Credential
                                                      Level
----------------------------------------------------------------------------------------------------------------
                                                                 Result in 2019
                               ---------------------------------------------------------------------------------
                                    No data           Pass        Fail D/E only   Fail both D/E    Fail EP only
                               -------------------------------------------------     and EP     ----------------
                                                                                ----------------
                                    N       %       N       %       N       %       N       %        N       %
----------------------------------------------------------------------------------------------------------------
Public:
    Associate's...............    23,000   85.0    3,500   13.0        0    0.0        0    0.0       500    2.0
    Bachelor's................     8,900   75.1    3,000   24.9        0    0.0        0    0.0         0    0.0
    Master's..................       500   32.2    1,100   67.8        0    0.0        0    0.0         0    0.0
    Doctoral..................       300   36.3      600   63.7        0    0.0        0    0.0         0    0.0
    Professional..............     2,100   45.3    1,400   29.8    1,200   24.9        0    0.0         0    0.0
                               ---------------------------------------------------------------------------------
        Total.................    35,000   75.6    9,500   20.7    1,200    2.5        0    0.0       500    1.2
Private, Nonprofit:
    Associate's...............    27,000   58.6   13,500   29.3    2,500    5.5    1,400    3.1     1,600    3.4
    Bachelor's................   160,200   73.9   43,300   19.9    4,600    2.1    5,100    2.4     3,700    1.7
    Master's..................    28,100   58.1   15,400   31.9    3,700    7.6    1,100    2.3        50    0.1
    Doctoral..................     6,300   37.9    3,600   21.3    6,800   40.4       70    0.4         0    0.0
    Professional..............     8,000   22.4    8,300   23.1   19,400   53.8        0    0.0       200    0.7
                               ---------------------------------------------------------------------------------
        Total.................   229,800   63.1   84,100   23.1   37,000   10.2    7,700    2.1     5,600    1.5
Total:
    Associate's...............    50,000   68.4   17,000   23.3    2,500    3.4    1,400    2.0     2,100    2.9
    Bachelor's................   169,100   73.9   46,200   20.2    4,600    2.0    5,100    2.2     3,700    1.6
    Master's..................    28,600   57.3   16,500   33.0    3,700    7.4    1,100    2.2        50    0.1
    Doctoral..................     6,700   37.8    4,200   23.5    6,800   38.3       70    0.4         0    0.0

[[Page 32477]]

 
    Professional..............    10,200   25.0    9,700   23.9   20,500   50.5        0    0.0       200    0.6
                               ---------------------------------------------------------------------------------
        Total.................   264,600   64.5   93,600   22.8   38,100    9.3    7,700    1.9     6,100    1.5
----------------------------------------------------------------------------------------------------------------
Note: Enrollment counts rounded to the nearest 100.


     Table 10.4--Number of Non-GE Programs at Small Institutions by Result, by Control and Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                 Result in 2019
                               ---------------------------------------------------------------------------------
                                    No data           Pass        Fail D/E only   Fail both D/E    Fail EP only
                               -------------------------------------------------     and EP     ----------------
                                                                                ----------------
                                    N       %       N       %       N       %       N       %        N       %
----------------------------------------------------------------------------------------------------------------
Public:
    Associate's...............       700   97.3       20    2.3        0    0.0        0    0.0         3    0.4
    Bachelor's................       200   95.4        9    4.6        0    0.0        0    0.0         0    0.0
    Master's..................        30   81.1        7   18.9        0    0.0        0    0.0         0    0.0
    Doctoral..................        20   89.5        2   10.5        0    0.0        0    0.0         0    0.0
    Professional..............        10   60.0        4   26.7        2   13.3        0    0.0         0    0.0
                               ---------------------------------------------------------------------------------
        Total.................       100   95.6       40    3.9        2    0.2        0    0.0         3    0.3
Private, Nonprofit:
    Associate's...............       700   91.6       50    6.7        3    0.4        5    0.6         6    0.7
    Bachelor's................     4,200   94.7      200    4.1       20    0.4       19    0.4        20    0.4
    Master's..................       900   87.2      100    9.5       30    2.6        6    0.6         2    0.2
    Doctoral..................       200   87.1       10    4.9       20    7.6        1    0.4         0    0.0
    Professional..............        80   65.6       10   10.9       30   21.1        0    0.0         3    2.3
                               ---------------------------------------------------------------------------------
        Total.................     6,100   92.3      400    5.4       90    1.4       31    0.5        30    0.4
Total:
    Associate's...............     1,500   94.3       70    4.6        3    0.2        5    0.3         9    0.6
    Bachelor's................     4,400   94.7      200    4.1       20    0.4       19    0.4        20    0.3
    Master's..................     1,000   86.9      100    9.8       30    2.5        6    0.6         2    0.2
    Doctoral..................       200   87.2       10    5.3       20    7.0        1    0.4         0    0.0
    Professional..............       100   65.0       20   12.6       30   20.3        0    0.0         3    2.1
                               ---------------------------------------------------------------------------------
        Total.................     7,100   92.7      400    5.2      100    1.2       31    0.4        30    0.4
----------------------------------------------------------------------------------------------------------------
Note: Program counts rounded to nearest hundred when above hundred, nearest 10 when below 100, and unrounded
  when below 10.

    Tables 10.5 and 10.6 report similar tabulations for GE programs at 
small institutions. GE programs include non-degree certificate programs 
at all institutions and all degree programs at proprietary 
institutions. GE programs at small institutions are more likely to have 
a failing D/E or EP metrics (15.9 percent of all GE programs at small 
institutions, compared to 5.5 percent for all institutions in Table 
3.9) and have a greater share of enrollment in such programs (45.3 
percent vs. 24.0 percent for all institutions in Table 3.8). GE 
programs that fail the same performance metric in two out of three 
consecutive years will become ineligible to administer Federal title 
IV, HEA student aid.

 Table 10.5--Number of Enrollees in GE Programs at Small Institutions by Result, by Control and Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                Result in 2019
                             -----------------------------------------------------------------------------------
                                   No data            Pass        Fail D/E only   Fail both D/E    Fail EP only
                             ---------------------------------------------------     and EP     ----------------
                                                                                ----------------
                                  N        %        N       %       N       %       N       %        N       %
----------------------------------------------------------------------------------------------------------------
Public:
    UG Cert.................    26,000     71.8    9,300   25.7        0    0.0        0    0.0       900    2.6
    Post-BA Cert............       <30    100.0        0    0.0        0    0.0        0    0.0         0    0.0
    Grad Cert...............       100     77.2       40   22.8        0    0.0        0    0.0         0    0.0
                             -----------------------------------------------------------------------------------
        Total...............    26,100     71.8    9,300   25.6        0    0.0        0    0.0       900    2.6
Private, Nonprofit:
    UG Cert.................     9,100     45.6    5,100   25.8        0    0.0      100    0.6     5,500   27.9
    Post-BA Cert............     1,400    100.0        0    0.0        0    0.0        0    0.0         0    0.0
    Grad Cert...............     1,400     70.3        0    0.0      600   29.7        0    0.0         0    0.0
                             -----------------------------------------------------------------------------------
        Total...............    11,900     51.0    5,100   22.0      600    2.6      100    0.5     5,500   23.8
Proprietary:

[[Page 32478]]

 
    UG Cert.................    44,700     21.6   36,500   17.6       80    0.0   25,200   12.1   101,000   48.7
    Associate's.............    18,800     40.9   12,600   27.4    7,100   15.5    5,200   11.3     2,300    5.0
    Bachelor's..............     8,800     65.1    3,400   25.1    1,100    8.2      200    1.7         0    0.0
    Post-BA Cert............        50     55.8       40   44.2        0    0.0        0    0.0         0    0.0
    Master's................     2,900     74.2      200    3.9      300    8.2      600   13.6         0    0.0
    Doctoral................     1,700     75.4      300   11.3      300   13.3        0    0.0         0    0.0
    Professional............     1,000     37.7      100    3.7    1,600   58.6        0    0.0         0    0.0
    Grad Cert...............       300     77.8        0    0.0        0    0.0        0    0.0        70   22.2
                             -----------------------------------------------------------------------------------
        Total...............    78,200     28.3   53,000   19.2   10,500    3.8   31,100   11.3   103,400   37.4
Total:
    UG Cert.................    79,800     30.3   50,900   19.3       80    0.0   25,300    9.6   107,500   40.8
    Associate's.............    18,800     40.9   12,600   27.4    7,100   15.5    5,200   11.3     2,300    5.0
    Bachelor's..............     8,800     65.1    3,400   25.1    1,100    8.2      200    1.7         0    0.0
    Post-BA Certs...........     1,400     97.4       40    2.6        0    0.0        0    0.0         0    0.0
    Master's................     2,900     74.2      200    3.9      300    8.2      500   13.6         0    0.0
    Doctoral................     1,700     75.4      300   11.3      300   13.3        0    0.0         0    0.0
    Professional............     1,000     37.7      100    3.7    1,600   58.6        0    0.0         0    0.0
    Grad Certs..............     1,800     71.7       30    1.4      600   24.0        0    0.0        70    2.9
                             -----------------------------------------------------------------------------------
        Total...............   116,300     34.6   67,400   20.1   11,100    3.3   31,300    9.3   109,800   32.7
----------------------------------------------------------------------------------------------------------------
Note: Enrollment counts rounded to the nearest 100, except where counts are less than 100, where they are
  rounded to nearest 10 (and suppressed when under 30).


       Table 10.6--Number of GE Programs at Small Institutions by Result, by Control and Credential Level
----------------------------------------------------------------------------------------------------------------
                                                                Result in 2019
                             -----------------------------------------------------------------------------------
                                   No data            Pass        Fail D/E only   Fail both D/E    Fail EP only
                             ---------------------------------------------------     and EP     ----------------
                                                                                ----------------
                                  N        %        N       %       N       %       N       %        N       %
----------------------------------------------------------------------------------------------------------------
Public UG:
Certificates................     1,700     92.4      100    6.3        0    0.0        0    0.0        20    1.3
    Post-BA Certs...........        10    100.0        0    0.0        0    0.0        0    0.0         0    0.0
    Grad Certs..............        10     91.7        1    8.3        0    0.0        0    0.0         0    0.0
                             -----------------------------------------------------------------------------------
        Total...............     1,700     92.5      100    6.3        0    0.0        0    0.0        20    1.2
Private, Nonprofit UG:
Certificates................       300     83.9       40    9.0        0    0.0        1    0.2        30    6.8
    Post-BA Certs...........       100    100.0        0    0.0        0    0.0        0    0.0         0    0.0
    Grad Certs..............       100     98.1        0    0.0        2    1.9        0    0.0         0    0.0
                             -----------------------------------------------------------------------------------
        Total...............       600     89.6       40    5.7        2    0.3        1    0.2        30    4.3
Proprietary UG:
Certificates................     1,000     52.3      200   10.6        1    0.1      100    6.4       600   30.6
    Associate's.............       500     79.6       70    9.6       36    5.3       20    2.9        20    2.5
    Bachelor's..............       200     87.9       20    7.1        9    4.0        2    0.9         0    0.0
    Post-BA Certs...........        10     91.7        1    8.3        0    0.0        0    0.0         0    0.0
    Master's................        90     91.8        2    2.0        2    2.0        4    4.1         0    0.0
    Doctoral................        30     94.3        1    2.9        1    2.9        0    0.0         0    0.0
    Professional............        20     80.0        1    5.0        3   15.0        0    0.0         0    0.0
    Grad Certs..............        20     84.2        0    0.0        0    0.0        0    0.0         3   15.8
                             -----------------------------------------------------------------------------------
        Total...............     1,900     63.3      300    9.7       52    1.7      200    5.0       620   20.4
Total UG
Certificates................     3,100     72.8      400    8.6        1    0.0      100    3.0       650   15.5
    Associate's.............       500     79.6       70    9.6       36    5.3       20    2.9        20    2.5
    Bachelor's..............       200     87.9       20    7.1        9    4.0        2    0.9         0    0.0
    Post-BA Certs...........       200     99.4        1    0.6        0    0.0        0    0.0         0    0.0
    Master's................       100     91.8        2    2.0        2    2.0        4    4.1         0    0.0
    Doctoral................        30     94.3        1    2.9        1    2.9        0    0.0         0    0.0
    Professional............        20     80.0        1    5.0        3   15.0        0    0.0         0    0.0
    Grad Certs..............       100     95.6        1    0.7        2    1.5        0    0.0         3    2.2
                             -----------------------------------------------------------------------------------
        Total...............     4,200     76.1      500    8.1       54    1.0      200    2.8       700   12.1
----------------------------------------------------------------------------------------------------------------
Note: Program counts rounded to nearest hundred when above hundred, nearest 10 when below 100, and unrounded
  when below 10.


[[Page 32479]]

Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Proposed Regulations, Including an 
Estimate of the Classes of Small Entities That Would Be Subject to the 
Requirements and the Type of Professional Skills Necessary for 
Preparation of the Report or Record
    The proposed rule involves four types of reporting and compliance 
requirements for institutions, including small entities. First, under 
proposed Sec.  668.43, institutions would be required to provide 
additional programmatic information to the Department and make this and 
additional information assembled by the Department available to current 
and prospective students by providing a link to a Department-
administered disclosure website. Second, under proposed Sec.  668.407, 
the Department would require acknowledgments from current and 
prospective students prior to the disbursement of title IV, HEA funds 
if an eligible non-GE program leads to high debt outcomes based on its 
D/E rates. Third, under proposed Sec.  668.408, institutions would be 
required to provide new annual reporting about programs, current 
students, and students that complete or withdraw during each award 
year. As described in the Preamble of this proposed rule, reporting 
includes student-level information on enrollment, cost of attendance, 
tuition and fees, allowances for books and supplies, allowances for 
housing, institutional and other grants, and private loans disbursed. 
Finally, under proposed Sec.  668.605, institutions with GE programs 
that fail at least one of the metrics would be required to provide 
warnings to current and prospective students about the risk of losing 
title IV, HEA eligibility and would require that students must 
acknowledge having seen the warning before the institution may disburse 
any title IV, HEA funds.
    Initial estimates of the reporting and compliance burden for these 
four items for small entities are provided in Table 10.7, though these 
are subject to revision as the content of the required reporting is 
refined.\288\
---------------------------------------------------------------------------

    \288\ For subparts 68.43, 668.407, and 668.605, these estimates 
were obtained by proportioning the total PRA burden falling on 
institutions by the share of institutions that are small entities, 
as reported in Table 10.1 (55 percent).

              Table 10.7--Initial and Subsequent Reporting and Compliance Burden for Small Entities
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Sec.   668.43...........  Amend Sec.   668.43 to establish a website for   6,700,807.
                           the posting and distribution of key
                           information and disclosures pertaining to the
                           institution's educational programs, and to
                           require institutions to provide information
                           about how to access that website to a
                           prospective student before the student
                           enrolls, registers, or makes a financial
                           commitment to the institution.
Sec.   668.407..........  Add a new Sec.   668.407 to require current and  25,522.
                           prospective students to acknowledge having
                           seen the information on the disclosure website
                           maintained by the Secretary if an eligible non-
                           GE program has failed the D/E rates measure,
                           to specify the content and delivery of such
                           acknowledgments, and to require that students
                           must provide the acknowledgment before the
                           institution may disburse any title IV, HEA
                           funds.
Sec.   668.408..........  Add a new Sec.   668.408 to establish            31,121,875 initial, 12,689,497
                           institutional reporting requirements for         subsequent years.
                           students who enroll in, complete, or withdraw
                           from a GE program or eligible non-GE program
                           and to establish the reporting timeframe.
Sec.   668.605..........  Add a new Sec.   668.605 to require warnings to  415,809.
                           current and prospective students if a GE
                           program is at risk of losing title IV, HEA
                           eligibility, to specify the content and
                           delivery parameters of such notifications, and
                           to require that students must acknowledge
                           having seen the warning before the institution
                           may disburse any title IV, HEA funds.
----------------------------------------------------------------------------------------------------------------

    As described in the Preamble, much of the necessary information for 
GE programs would already have been reported to the Department under 
the 2014 Prior Rule, and as such we believe the added burden of this 
reporting relative to existing requirements would be reasonable. 
Furthermore, 88 percent of public and 47 percent of private non-profit 
institutions operated at least one GE program and thus have experience 
with similar data reporting for the subset of their students enrolled 
in certificate programs under the 2014 Prior Rule. Moreover, many 
institutions report more detailed information on the components of cost 
of attendance and other sources of financial aid in the Federal 
National Postsecondary Student Aid Survey (NPSAS) administered by the 
National Center for Education Statistics. Finally, the Department 
proposes flexibility for institutions to avoid reporting data on 
students who completed programs in the past for the first year of 
implementation, and instead to use data on more recent completer 
cohorts to estimate median debt levels. In part, this is intended to 
ease the administrative burden of providing this data for programs that 
were not covered by the 2014 Prior Rule reporting requirements, 
especially for the small number of institutions that may not previously 
have had any programs subject to these requirements.
    The Department recognizes that institutions may have different 
processes for record-keeping and administering financial aid, so the 
burden of the GE and financial transparency reporting could vary by 
institution. As noted previously, a high percentage of institutions 
have already reported data related to the 2014 Prior Rule or similar 
variables for other purposes. Many institutions may have systems that 
can be queried or existing reports that can be adapted to meet these 
reporting requirements. On the other hand, some institutions may still 
have data entry processes that are very manual in nature and generating 
the information for their programs could involve many more hours and 
resources. Small entities may be less likely to have invested in 
systems and processes that allow easy data reporting because it is not 
needed for their operations. Institutions may fall in between these 
poles and be able to automate the reporting of some variables but need 
more effort for others.
    We believe that, while the reporting relates to program or student-
level information, the reporting process is likely to be handled at the 
institutional level. There would be a cost to establish the query or 
report and validate it upfront, but then the marginal increase in costs 
to process additional programs or students should not be too 
significant. The reporting process will involve staff members or 
contractors with different skills and levels of responsibility. We have 
estimated this using Bureau of Labor statistics median hourly wage 
rates for postsecondary administrators of $46.59.\289\ Table 10.8 
presents the Department's estimates of the hours associated with the 
reporting requirements.
---------------------------------------------------------------------------

    \289\ Available at https://www.bls.gov/oes/current/oes119033.htm.

[[Page 32480]]



         Table 10.8--Estimated Hours for Reporting Requirements
------------------------------------------------------------------------
           Process                  Hours             Hours basis
------------------------------------------------------------------------
Review systems and existing                10  Per institution.
 reports for adaptability for
 this reporting.
Develop reporting query/
 result template:
    Program-level reporting..              15  Per institution.
    Student-level reporting..              30  Per institution.
Run test reports:                              .........................
    Program-level reporting..            0.25  Per institution.
    Student-level reporting..             0.5  Per institution.
Review/validate test report                    .........................
 results:
    Program-level reporting..              10  Per institution.
    Student-level reporting..              20  Per institution.
Run reports:                                   .........................
    Program-level reporting..            0.25  Per program.
    Student-level reporting..             0.5  Per program.
Review/validate report                         .........................
 results:
    Program-level reporting..               2  Per program.
    Student-level reporting..               5  Per program.
Certify and submit reporting.              10  Per institution.
------------------------------------------------------------------------

    The ability to set up reports or processes that can be rerun in 
future years, along with the fact that the first reporting cycle 
includes information from several prior years, means that the expected 
burden should decrease significantly after the first reporting cycle. 
We estimate that the hours associated with reviewing systems, 
developing or updating queries, and reviewing and validating the test 
queries or reports will be reduced by 35 percent after the first year. 
The queries or reports would have to be run and validated to make sure 
no system changes have affected them and the institution will need to 
confirm there are no program changes in CIP code, credential level, 
preparation for licensure, accreditation, or other items, but we expect 
that would be less burdensome than initially establishing the 
reporting. Table 10.9 presents estimates of reporting burden for small 
entities for the initial year and subsequent years under proposed Sec.  
668.408.

           Table 10.9.1--Estimated Reporting Burden for Small Entities for the Initial Reporting Cycle
----------------------------------------------------------------------------------------------------------------
                                                              Institution    Program
                     Control and level                           count        count        Hours        Amount
----------------------------------------------------------------------------------------------------------------
Private 2-year.............................................           139          393       25,492    1,187,684
Proprietary 2-year.........................................         1,227        2,635      199,170    9,279,342
Public 2-year..............................................           286        2,058       91,183    4,248,193
Private 4-year.............................................           655        6,876      275,872   12,852,888
Proprietary 4-year.........................................           146        1,098       48,018    2,237,135
Public 4-year..............................................            52          751       28,260    1,316,633
                                                            ----------------------------------------------------
    Total..................................................         2,505       13,811      667,995   31,121,875
----------------------------------------------------------------------------------------------------------------


           Table 10.9.2--Estimated Reporting Burden for Small Entities for Subsequent Reporting Cycle
----------------------------------------------------------------------------------------------------------------
                                                              Institution    Program
                     Control and level                           count        count        Hours        Amount
----------------------------------------------------------------------------------------------------------------
Private 2-year.............................................           139          393       12,220      569,318
Proprietary 2-year.........................................         1,227        2,635      101,403    4,724,377
Public 2-year..............................................           286        2,058       34,826    1,622,520
Private 4-year.............................................           655        6,876       96,519    4,496,820
Proprietary 4-year.........................................           146        1,098       18,146      845,399
Public 4-year..............................................            52          751        9,252      431,062
                                                            ----------------------------------------------------
    Total..................................................         2,505       13,811      272,365   12,689,497
----------------------------------------------------------------------------------------------------------------

    The Department welcomes comments from small entities on the 
processes and burden required to meet the reporting requirements under 
the proposed regulations.
Identification, to the Extent Practicable, of All Relevant Federal 
Regulations That May Duplicate, Overlap or Conflict With the Proposed 
Regulations
    The proposed regulations are unlikely to conflict with or duplicate 
existing Federal regulations. Under existing law and regulations, 
institutions are already required to disclose data and provide 
reporting in a number of areas related to the regulations. The 
regulations propose using data that is already reported by institutions 
or collected administratively by the Department wherever possible.
Alternatives Considered
    As described in section 9 of the Regulatory Impact Analysis above,

[[Page 32481]]

``Alternatives Considered'', we evaluated several alternative 
provisions and approaches including using D/E rates only, alternative 
earnings thresholds, no reporting or acknowledgement requirements for 
non-GE programs, and several alternative ways of computing the 
performance metrics (smaller n-sizes and different interest rates or 
amortization periods). Most relevant to small entities was the 
alternative of using a lower n-size, which would result in larger 
effects on programs at small entities, both in terms of risk for loss 
of eligibility for GE programs and greater burden for providing 
warnings and/or disclosure acknowledgement. The alternative of not 
requiring reporting or acknowledgements in the case of failing metrics 
for non-GE programs would result in lower reporting burden for small 
institutions but was deemed to be insufficient to achieve the goal of 
creating greater transparency around program performance.

11. 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 600.21, 668.14, 
668.15, 668.16, 668.23, 668.43, 668.156, 668.157, 668.171, 668.407, 
668.408, and 668.605 of this proposed rule contain information 
collections requirements.
    Under the PRA, the Department has or will at the required time 
submit a copy of these sections and Information Collection requests 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 the final regulations, we would display the control numbers 
assigned by OMB to any information collection requirements proposed in 
this NPRM and adopted in the final regulations.
    Section 600.21--Updating application information.
    Requirements: The proposed change to Sec. Sec.  600.21((1)(11)(v) 
and (vi), would require an institution with GE programs to update any 
changes in certification of those program(s).
    Burden Calculations: The proposed regulatory change would require 
an update to the current institutional application form, 1845-0012. The 
form update would be made available for comment through a full public 
clearance package before being made available for use by the effective 
dates of the regulations. The burden changes would be assessed to OMB 
Control Number 1845-0012, Application for Approval to Participate in 
Federal Student Aid Programs.
    Section 668.14--Program participation agreement.
    Requirements: The NPRM proposes to redesignate current Sec.  
668.14(e) as Sec.  668.14(h). The Department also proposes to add a new 
paragraph (e) that outlines a non-exhaustive list of conditions that we 
may opt to apply to provisionally certified institutions. The NPRM 
proposes that institutions at risk of closure must submit an acceptable 
teach-out plan or agreement to the Department, the State, and the 
institution's recognized accrediting agency. The NPRM proposes that 
institutions at risk of closure must submit an acceptable records 
retention plan that addresses title IV, HEA records, including but not 
limited to student transcripts, and evidence that the plan has been 
implemented, to the Department.
    The NPRM also proposes that an institution at risk of closure that 
is teaching out, closing, or that is not financially responsible or 
administratively capable, would release holds on student transcripts. 
Other conditions for institutions that are provisionally certified and 
may be applied by the Secretary are also proposed.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.14 would add burden to all institutions, domestic and foreign. The 
proposed change in Sec.  668.14(e) would potentially require 
provisionally certified institutions at risk of closure to submit to 
the Department acceptable teach-out plans, and acceptable record 
retention plans. For provisionally certified institutions at risk of 
closure, are teaching out or closing, or are not financially 
responsible or administratively capable, the proposed change requires 
the release of holds on student transcripts.
    We believe that this type of update would require 10 hours for each 
institution to provide the appropriate material, or required action 
based on the proposed regulations. As of January 2023, there were a 
total of 863 domestic and foreign institutions that were provisionally 
certified. We estimate that of that figure 5% or 43 provisionally 
certified institutions may be at risk of closure. We estimate that it 
would take private non-profit institutions 250 hours (25 x 10 = 250) to 
complete the submission of information or required action. We estimate 
that it would take proprietary institutions 130 hours (13 x 10 = 130) 
to complete the submission of information or required action. We 
estimate that it would take public institutions 50 hours (5 x 10 = 50) 
to complete the submission of information or required action.
    The estimated Sec.  668.14(e) total burden is 430 hours with a 
total rounded estimated cost for all institutions of $20,035 (430 x 
$46.59 = $20,033.70).

                       Student Assistance General Provisions--OMB Control Number 1845-0022
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................              25              25              250            $11,648
Proprietary.................................              13              13              130              6,057
Public......................................               5               5               50              2,330
                                             -------------------------------------------------------------------
    Total...................................              43              43              430             20,035
----------------------------------------------------------------------------------------------------------------


[[Page 32482]]

    Section 668.15--Factors of financial responsibility.
    Requirements: This section is being removed and reserved.
    Burden Calculations: With the removal of regulatory language in 
Section 668.15 the Department would remove the associated burden of 
2,448 hours under OMB Control Number 1845-0022.

                       Student Assistance General Provisions--OMB Control Number 1845-0022
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................            -866            -866             -816           -$38,017
Proprietary.................................            -866            -866             -816           -$38,017
Public......................................            -866            -866             -816           -$38,017
                                             -------------------------------------------------------------------
    Total...................................          -2,598          -2,598           -2,448          -$114,051
----------------------------------------------------------------------------------------------------------------

    Section 668.16--Standards of administrative capability.
    Requirements: The Department proposes to amend Sec.  668.16 to 
clarify the characteristics of institutions that are administratively 
capable. The NPRM proposes amending Sec.  668.16(h) which would require 
institutions to provide adequate financial aid counseling and financial 
aid communications to advise students and families to accept the most 
beneficial types of financial assistance available to enrolled 
students. This would include clear information about the cost of 
attendance, sources and amounts of each type of aid separated by the 
type of aid, the net price, and instructions and applicable deadlines 
for accepting, declining, or adjusting award amounts. Institutions 
would also have to provide students with information about the 
institution's cost of attendance, the source and type of aid offered, 
whether it must be earned or repaid, the net price, and deadlines for 
accepting, declining, or adjusting award amounts.
    The NPRM also proposes amending Sec.  668.16(p) which would 
strengthen the requirement that institutions must develop and follow 
adequate procedures to evaluate the validity of a student's high school 
diploma if the institution or the Department has reason to believe that 
the high school diploma is not valid or was not obtained from an entity 
that provides secondary school education. The Department proposes to 
update the references to high school completion in the current 
regulation to high school diploma which would set specific requirements 
to the existing procedural requirement for adequate evaluation of the 
validity of a student's high school diploma.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.16 would add burden to all institutions, domestic and foreign. The 
proposed changes in Sec.  668.16(h) would require an update to the 
financial aid communications provided to students.
    We believe that this update would require 8 hours for each 
institution to review their current communications and make the 
appropriate updates to the material based on the proposed regulations. 
We estimate that it would take private non-profit institutions 15,304 
hours (1,913 x 8 = 15,304) to complete the required review and update. 
We estimate that it would take proprietary institutions 12,302 hours 
(1,504 x 8 = 12,302) to complete the required review and update. We 
estimate that it would take public institutions 14,504 hours (1,813 x 8 
= 14,504) to complete the required review and update. The estimated 
Sec.  668.16(h) total burden is 41,840 hours with a total rounded 
estimated cost for all institutions of $1,949,326 (41,840 x $46.59 = 
1,949,325.60).
    The proposed changes in Sec.  668.16(p) would add requirements for 
adequate procedures to evaluate the validity of a student's high school 
diploma if the institution or the Department has reason to believe that 
the high school diploma is not valid or was not obtained from an entity 
that provides secondary school education.
    We believe that this update would require 3 hours for each 
institution to review their current policy and procedures for 
evaluating high school diplomas and make the appropriate updates to the 
material based on the proposed regulations. We estimate that it would 
take private non-profit institutions 5,739 hours (1,913 x 3 = 5,739) to 
complete the required review and update. We estimate that it would take 
proprietary institutions 4,512 hours (1,504 x 3 = 4,512) to complete 
the required review and update. We estimate that it would take public 
institutions 5,439 hours (1,813 x 3 = 5,439) to complete the required 
review and update. The estimated Sec.  668.16(p) total burden is 15,690 
hours with a total rounded estimated cost for all institutions of 
$730,997 (15,690 x $46.59 = $730,997.10).
    The total estimated increase in burden to OMB Control Number 1845-
0022 for Sec.  668.16 is 57,530 hours with a total rounded estimated 
cost of $2,680,323.

                       Student Assistance General Provisions--OMB Control Number 1845-0022
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................           1,913           3,826           21,043           $980,394
Proprietary.................................           1,504           3,008           16,544            770,785
Public......................................           1,813           3,626           19,943            929,144
                                             -------------------------------------------------------------------
    Total...................................           5,230          10,460           57,530          2,680,323
----------------------------------------------------------------------------------------------------------------

    Section 668.23--Compliance audits and audited financial statements.
    Requirements: The Department proposes to add Sec.  668.23(d)(2)(ii) 
that would require that an institution, domestic or foreign, that is 
owned by a foreign entity holding at least a 50 percent voting or 
equity interest to

[[Page 32483]]

provide documentation of its status under the law of the jurisdiction 
under which it is organized, as well as basic organizational documents. 
The submission of such documentation would better equip the Department 
to obtain appropriate and necessary documentation from an institution 
which has a foreign owner or owners with 50 percent or greater voting 
or equity interest which would provide a clearer picture of the 
institution's legal status to the Department, as well as who exercises 
direct or indirect ownership over the institution.
    The Department also proposes adding new Sec.  668.23(d)(5) that 
would require an institution to disclose in a footnote to its financial 
statement audit the dollar amounts it has spent in the preceding fiscal 
year on recruiting activities, advertising, and other pre-enrollment 
expenditures.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.23(d)(2)(ii) would add burden to foreign institutions and certain 
domestic institutions to submit documentation, translated into English 
as needed.
    We believe this reporting activity would require an estimated 40 
hours of work for affected institutions to complete. We estimate that 
it would take private non-profit institutions 13,520 hours (338 x 40 = 
13,520) to complete the required documentation gathering and 
translation as needed. We estimate that it would take proprietary 
institutions 920 hours (23 x 40 = 920) to complete the required 
footnote activity. The estimated Sec.  668.23(d)(2)(ii) total burden is 
14,440 hours with a total rounded estimated cost for all institutions 
of $672,760 (14,440 x $46.59 = $672,759.60).
    The proposed NPRM regulatory language in Sec.  668.23(d)(5) would 
add burden to all institutions, domestic and foreign. The proposed 
changes in Sec.  668.23(d)(5) would require a footnote to its financial 
statement audit regarding the dollar amount spent in the preceding 
fiscal year on recruiting activities, advertising, and other pre-
enrollment expenditures.
    We believe that this footnote reporting activity would require an 
estimated 8 hours per institution to complete. We estimate that it 
would take private non-profit institutions 15,304 hours (1,913 x 8 = 
15,304) to complete the required footnote activity. We estimate that it 
would take proprietary institutions 12,032 hours (1,504 x 8 = 12,032) 
to complete the required footnote activity. We estimate that it would 
take public institutions 14,504 hours (1,813 x 8 = 14,504) to complete 
the required footnote activity. The estimated Sec.  668.23(d)(5) total 
burden is 41,840 hours with a total rounded estimated cost for all 
institutions of $1,949,326 (41,840 x $46.59 = $1,949,325.60).
    The total estimated increase in burden to OMB Control Number 1845-
0022 for Sec.  668.23 is 56,280 hours with a total rounded estimated 
cost of $2,622,085.

                       Student Assistance General Provisions--OMB Control Number 1845-0022
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................           1,913           2,251           28,824         $1,342,910
Proprietary.................................           1,504           1,527           12,952            603,434
Public......................................           1,813           1,813           14,504            675,742
                                             -------------------------------------------------------------------
    Total...................................           5,230           5,591           56,280          2,622,086
----------------------------------------------------------------------------------------------------------------

    Section 668.43--Institutional and programmatic information.
    Requirements: Under proposed Sec.  668.43(d), the Department would 
establish and maintain a website for posting and distributing key 
information and disclosures pertaining to the institution's educational 
programs. An institution would provide such information as the 
Department prescribes through a notice published in the Federal 
Register for disclosure to prospective and enrolled students through 
the website.
    This information could include, but would not be limited to, the 
primary occupations that the program prepares students to enter, along 
with links to occupational profiles on O*NET or its successor site; the 
program's or institution's completion rates and withdrawal rates for 
full-time and less-than-full-time students, as reported to or 
calculated by the Department; the length of the program in calendar 
time; the total number of individuals enrolled in the program during 
the most recently completed award year; the total cost of tuition and 
fees, and the total cost of books, supplies, and equipment, that a 
student would incur for completing the program within the length of the 
program; the percentage of the individuals enrolled in the program 
during the most recently completed award year who received a title IV, 
HEA loan, a private education loan, or both; whether the program is 
programmatically accredited and the name of the accrediting agency; and 
the supplementary performance measures in proposed Sec.  668.13(e).
    The institution would be required to provide a prominent link and 
any other needed information to access the website on any web page 
containing academic, cost, financial aid, or admissions information 
about the program or institution. The Department could require the 
institution to modify a web page if the information about how to access 
the Department's website is not sufficiently prominent, readily 
accessible, clear, conspicuous, or direct.
    In addition, the Department would require the institution to 
provide the relevant information to access the website to any 
prospective student or third party acting on behalf of the prospective 
student before the prospective student signs an enrollment agreement, 
completes registration, or makes a financial commitment to the 
institution.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.43(d) would add burden to all institutions, domestic and foreign. 
The proposed changes in Sec.  668.43(d) would require institutions to 
supply the Department with specific information about programs it is 
offering as well as disclose to enrolled and prospective students this 
information.
    We believe that this reporting or disclosure activity would require 
an estimated 50 hours per institution. We estimate that it would take 
private non-profit institutions 95,650 hours (1,913 x 50 = 95,650) to 
complete the required reporting or disclosure activity. We estimate 
that it would take proprietary institutions 75,200 hours (1,504 x 50 = 
75,200) to complete the required reporting or disclosure activity. We 
estimate that it would take public institutions 90,650 hours (1,813 x 
50 = 90,650) to complete the required reporting/disclosure activity.

[[Page 32484]]

    The total estimated increase in burden to OMB Control Number 1845-
0022 for Sec.  668.43 is 261,500 hours with a total rounded estimated 
cost of $12,183,286.

                       Student Assistance General Provisions--OMB Control Number 1845-0022
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................           1,913           1,913           95,650         $4,456,334
Proprietary.................................           1,504           1,504           75,200       3,503,568.00
Public......................................           1,813           1,813           90,650          4,223,384
                                             -------------------------------------------------------------------
    Total...................................           5,230           5,230          261,500      12,183,286.00
----------------------------------------------------------------------------------------------------------------

    Section 668.156--Approved State process.
    Requirements: The proposed changes in the NPRM to Sec.  668.156 
would clarify the requirements for the approval of a State process. 
Under proposed Sec.  668.156, a State must apply to the Secretary for 
approval of its State process as an alternative to achieving a passing 
score on an approved, independently administered test or satisfactory 
completion of at least six credit hours or its recognized equivalent 
coursework for the purpose of determining a student's eligibility for 
title IV, HEA program. The State process is one of the three ability to 
benefit alternatives that an individual who is not a high school 
graduate could fulfill to receive title IV, HEA, Federal student aid to 
enroll in an eligible career pathway program.
    The NPRM proposes to amend the monitoring requirement in 
redesignated Sec.  668.156(c) to provide a participating institution 
that has failed to achieve the 85 percent success rate up to three 
years to achieve compliance.
    The NPRM also proposes to amend redesignated Sec.  668.156(e) to 
require that States report information on race, gender, age, economic 
circumstances, and education attainment and permit the Secretary to 
publish a notice in the Federal Register with additional information 
that the Department may require States to submit.
    Burden Calculation: We estimate that it would take a State 160 
hours to create and submit an application for a State Process to the 
Department under the regulations in Section 668.156(a) for a total of 
1,600 hours (160 hours x 10 States).
    We estimate that it would take a State an additional 40 hours 
annually to monitor the compliance of the institution's use of the 
State Process under Section 668.156(c) for a total of 400 hours (40 
hours x 10 States). This time includes the development of any 
Corrective Action Plan for any institution the State finds not be 
complying with the State Process.
    We estimate that it would take a State 120 hours to meet the 
reapplication requirements in Section 668.156(e) for a total of 1,200 
hours (120 hours x 10 States).
    The total hours associated with the change in the regulations as of 
the effective date of the regulations are estimated at a total of 3,200 
hours of burden (320 hours x 10 States) with a total estimated cost of 
$1,149,088.00 in OMB Control Number 1845-NEW1.

                                        Approved State Process--1845-NEW1
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
State.......................................              10              30            3,200           $149,088
                                             -------------------------------------------------------------------
    Total...................................              10              30            3,200            149,088
----------------------------------------------------------------------------------------------------------------

    Section 668.157--Eligible career pathway program.
    Requirements: The NPRM proposes changes to subpart J by adding 
Sec.  668.157 to clarify the documentation requirements for eligible 
career pathway program. This new section would dictate the 
documentation requirements for eligible career pathway programs for 
submission to the Department for approval as a title IV eligible 
program. Under Sec.  668.157(b) we propose that, for career pathways 
programs that do not enroll students through a State process as defined 
in Sec.  668.156, the Secretary would verify the eligibility of 
eligible career pathway programs for title IV, HEA program purposes 
pursuant to proposed Sec.  668.157(a). Under proposed Sec.  668.157(b), 
we would also provide an institution with the opportunity to appeal any 
adverse eligibility decision.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.157 would add burden to institutions to participate in the eligible 
career pathway programs. The proposed regulations in Sec.  668.157 
would require institutions to demonstrate to the Department that the 
eligible career pathways programs being offered meet the regulations as 
proposed.
    We estimate that 1,000 institutions would submit the required 
documentation to determine eligibility for the eligible career pathway 
programs. We believe that this documentation and reporting activity 
would require an estimated 10 hours per program per institution. We 
estimate that each institution would document and report on five 
individual eligible career pathways programs for a total of 50 hours 
per institution. We estimate it would take private non-profit 
institutions 18,000 hours (360 institutions x 5 programs = 1,800 
programs x 10 hours per program = 18,000) to complete the required 
documentation and reporting activity. We estimate that it would take 
proprietary institutions 6,500 hours (130 institutions x 5 programs = 
650 programs x 10 hours per program = 6,500) to complete the required 
documentation and reporting activity. We estimate that it would take 
public institutions 25,500 hours (510 institutions x 5 programs = 2,550 
programs x 10 hours per program = 25,500) to complete the required 
documentation/reporting activity. The total estimated increase in 
burden to OMB Control Number 1845-NEW2 for Sec.  668.157 is 50,000 
hours with a total estimated cost of $2,329,500.00.

[[Page 32485]]



                                   Eligible Career Pathways Program--1845-NEW2
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................             360           1,800           18,000           $838,620
Proprietary.................................             130             650            6,500            302,835
Public......................................             510           2,550           25,500          1,188,045
                                             -------------------------------------------------------------------
    Total...................................           1,000           5,000           50,000          2,329,500
----------------------------------------------------------------------------------------------------------------

    Section 668.171--General.
    Requirements: The NPRM proposes to amend Sec.  668.171(f) by adding 
several new events to the existing reporting requirements, and 
expanding others, that must be reported generally no later than 10 days 
following the event. Implementation of the proposed reportable events 
would make the Department more aware of instances that may impact an 
institution's financial responsibility or stability. The proposed 
reportable events are linked to the financial standards in Sec.  
668.171(b) and the proposed financial triggers in Sec.  668.171(c) and 
(d) where there is no existing mechanism for the Department to know 
that a failure or a triggering event has occurred. Notification 
regarding these events would allow the Department to initiate actions 
to either obtain financial protection, or determine if financial 
protection is necessary, to protect students from the negative 
consequences of an institution's financial instability and possible 
closure.
    The NPRM also proposes to amend Sec.  668.171(g) by adding language 
which would require a public institution to provide to the Department a 
letter from an official of the government entity or other signed 
documentation acceptable to the Department. The letter or documentation 
must state that the institution is backed by the full faith and credit 
of the government entity. The Department also proposes similar 
amendments to apply to foreign institutions.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.171(f) would add burden to institutions regarding evidence of 
financial responsibility. The proposed regulations in Sec.  668.171(f) 
would require institutions to demonstrate to the Department that it met 
the triggers set forth in the regulations. We estimate that domestic 
and foreign, have the potential to hit a trigger that would require 
them to submit documentation to determine eligibility for continued 
participation in the title IV programs. The overwhelming majority of 
reporting would likely stem from the mandatory triggering event on 
gainful employment programs that are failing with limited reporting 
under additional events. We believe that this documentation and 
reporting activity would require an estimated 2 hours per institution. 
We estimate it would take private non-profit institutions 100 hours (50 
institutions x 2 hours = 100) to complete the required documentation 
and reporting activity. We estimate that it would take proprietary 
institutions 1,300 hours (650 institutions x 2 hours = 1,300) to 
complete the required documentation and reporting activity.
    The proposed NPRM regulatory language in Sec.  668.171(g) would add 
burden to public institutions regarding evidence of financial 
responsibility. The proposed regulations in Sec.  668.171(g) would 
require institutions to demonstrate to the Department that the public 
institution is backed by the full faith and credit of the government 
entity. We believe that this document filing would be done by the 
majority of the public institutions upon recertification of currently 
participating institutions. We estimate that 36 public institutions 
(two percent of the currently participating public institutions) would 
be required to recertify in a given year. We further estimate that it 
would take each institution 5 hours to procure the required 
documentation from the appropriate governmental agency for a total of 
180 hours (36 institutions x 5 hours = 180 hours).
    The total estimated increase in burden to OMB Control Number 1845-
0022 for Sec.  668.171 is 1,580 hours with a total rounded estimated 
cost of $73,612.

                       Student Assistance General Provisions--OMB Control Number 1845-0022
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
               Affected entity                  Respondent       Responses      Burden hours      institution
----------------------------------------------------------------------------------------------------------------
Private non-profit..........................              50              50              100              4,659
Proprietary.................................             650             650            1,300             60,567
Public......................................              36              36              180              8,386
                                             -------------------------------------------------------------------
    Total...................................             736             736            1,580             73,612
----------------------------------------------------------------------------------------------------------------

    Section 668.407--Student disclosure acknowledgments.
    Requirements: The NPRM proposes in Subpart Q--Financial Value 
Transparency Sec.  668.407(a)(1) that a student would be required to 
provide an acknowledgment of the D/E rate information for any year for 
which the Secretary notifies an institution that the eligible non-GE 
program has failing D/E rates for the year in which the D/E rates were 
most recently calculated by the Department.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.407 would add burden to institutions. The proposed changes in Sec.  
668.407 would require institutions to develop and provide notices to 
enrolled and prospective students that a program has unacceptable D/E 
rates for non-GE programs or an unacceptable D/E rate and earnings 
premium measure for GE programs for the year in which the D/E rates or 
earnings premium measure were most recently calculated by the 
Department.
    We believe that most institutions would develop the notice 
directing impacted students to the Department's disclosure website and 
make it available electronically to current and prospective students. 
We believe that this action

[[Page 32486]]

would require an estimated 1 hour per affected program. We estimate 
that it would take private institutions 661 hours (661 programs x 1 
hour = 661) to develop and deliver the required notice based on the 
information provided by the Department. We estimate that it would take 
public institutions 335 hours (335 programs x 1 hour = 335) to develop 
and deliver the required notice based on the information provided by 
the Department.
    The proposed changes in Sec.  668.407(a)(1) would require 
institutions to direct prospective and students enrolled in the non-GE 
programs that failed the D/E rates for the year in which the D/E rates 
were most recently calculated by the Department to the Department's 
disclosure website. We estimate that it would take the 401,600 students 
10 minutes to read the notice and go to the disclosure website to 
acknowledge receiving the information for a total of hours (401,600 
students x .17 hours = 68,272).
    The total estimated increase in burden to OMB Control Number 1845-
NEW3 for Sec.  668.407 is 69,268 hours with a total rounded estimated 
cost of $1,548,388.

                        Student Disclosure Acknowledgments--OMB Control Number 1845-NEW3
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
                                                                                                  institution
               Affected entity                  Respondent       Responses      Burden hours       $22.00 per
                                                                                                   individual
----------------------------------------------------------------------------------------------------------------
Individual..................................         401,600         401,600           68,272         $1,501,984
Private non-profit..........................             173             661              661             30,796
Public......................................              74             335              335             15,608
                                             -------------------------------------------------------------------
    Total...................................         401,847         402,596           69,268          1,548,388
----------------------------------------------------------------------------------------------------------------

    Section 668.408--Reporting requirements.
    Requirements: The NPRM proposes in Subpart Q--Financial Value 
Transparency to add a new Sec.  668.408 to establish institutional 
reporting requirements for students who enroll in, complete, or 
withdraw from a GE program or eligible non-GE program and to define the 
timeframe for institutions to report this information.
    Burden Calculations: The proposed regulatory change would require 
an update to a Federal Student Aid data system. The reporting update 
would be made available for comment through a full public clearance 
package before being made available for use on or after the effective 
dates of the regulations. The burden changes would be assessed to the 
OMB Control Number assigned to the system.
    Section 668.605--Student warnings and acknowledgments.
    Requirements: The NPRM adds a new Sec.  668.605 to require warnings 
to current and prospective students if a GE program is at risk of 
losing title IV, HEA eligibility, to specify the content and delivery 
parameters of such notifications, and to require that students must 
acknowledge having seen the warning before the institution may disburse 
any title IV, HEA funds.
    In addition, warnings provided to students enrolled in GE programs 
would include a description of the academic and financial options 
available to continue their education in another program at the 
institution in the event that the program loses eligibility, including 
whether the students could transfer academic credit earned in the 
program to another program at the institution and which course credit 
would transfer; an indication of whether, in the event of a loss of 
eligibility, the institution would continue to provide instruction in 
the program to allow students to complete the program, and refund the 
tuition, fees, and other required charges paid to the institution for 
enrollment in the program; and an explanation of whether, in the event 
that the program loses eligibility, the students could transfer credits 
earned in the program to another institution through an established 
articulation agreement or teach-out.
    The institution would be required to provide alternatives to an 
English-language warning for current and prospective students with 
limited English proficiency.
    Burden Calculations: The proposed NPRM regulatory language in Sec.  
668.605 would add burden to institutions. The proposed changes in Sec.  
668.605 would require institutions to provide warning notices to 
enrolled and prospective students that a GE program has unacceptable D/
E rates or an unacceptable earnings premium measure for the year in 
which the D/E rates or earnings premium measure were most recently 
calculated by the Department along with warnings about the potential 
loss of title IV eligibility.
    We believe that most institutions would develop the warning and 
make it available electronically to current and prospective students. 
We believe that this action would require an estimated 1 hour per 
affected program. We estimate that it would take private institutions 
86 hours (86 programs x 1 hour = 86) to develop and deliver the 
required warning based on the information provided by the Department. 
We estimate that it would take proprietary institutions 1,524 hours 
(1,524 programs x 1 hour = 1,524) to develop and deliver the required 
warning based on the information provided by the Department. We 
estimate that it would take public institutions 193 hours (193 programs 
x 1 hour = 193) to develop and deliver the required warning based on 
the information provided by the Department.
    The proposed changes in Sec.  668.605(d) would require institutions 
to provide alternatives to the English-language warning notices to 
enrolled and prospective students with limited English proficiency.
    We estimate that it would take private institutions 688 hours (86 
programs x 8 hours = 688) to develop and deliver the required alternate 
language the required warning based on the information provided by the 
Department. We estimate that it would take proprietary institutions 
12,192 hours (1,524 programs x 8 hours = 12,192) to develop and deliver 
the required alternate language the required warning based on the 
information provided by the Department. We estimate that it would take 
public institutions 1,544 hours (193 programs x 8 hours = 1,544) to 
develop and deliver the required warning based on the information 
provided by the Department.
    The proposed changes in Sec.  668.605(e) would require institutions 
to provide the warning notices to students enrolled in the GE programs 
with failing metrics. We estimate that it would take the 703,200 
students 10 minutes to read the warning and go to the disclosure 
website to acknowledge receiving the information for a total of 119,544 
hours

[[Page 32487]]

(703,200 students x .17 hours = 119,544).
    The proposed changes in Sec.  668.605 (f) would require 
institutions to provide the warning notices to prospective students who 
express interest in the effected GE programs. We estimate that it would 
take the 808,680 prospective students 10 minutes to read the warning 
and go to the disclosure website to acknowledge receiving the 
information for a total of 137,476 hours (808,680 students x .17 hours 
= 137,476).
    The total estimated increase in burden to OMB Control Number 1845-
NEW4 for Sec.  668.605 is 273,247 hours with a total rounded estimated 
cost of $6,410,456.

                      GE Student Warnings and Acknowledgments--OMB Control Number 1845-NEW4
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost $46.59 per
                                                                                                  institution
               Affected entity                  Respondent       Responses      Burden hours       $22.00 per
                                                                                                   individual
----------------------------------------------------------------------------------------------------------------
Individual..................................       1,511,880       1,511,880          257,020          $5,654,44
                                                                                                               0
Private non-profit..........................              86             172              774             36,061
Proprietary.................................             873           3,048           13,716            639,028
Public......................................             193             386            1,737             80,927
                                             -------------------------------------------------------------------
    Total...................................       1,513,032       1,515,486          273,247          6,410,456
----------------------------------------------------------------------------------------------------------------

    Consistent with the discussions 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 cost of the increased burden for 
institutions, lenders, guaranty agencies and students, using wage data 
developed using Bureau of Labor Statistics (BLS) data. For individuals, 
we have used the median hourly wage for all occupations, $22.00 per 
hour according to BLS. https://www.bls.gov/oes/current/oes_nat.htm#00-0000. For institutions, lenders, and guaranty agencies we have used the 
median hourly wage for Education Administrators, Postsecondary, $46.59 
per hour according to BLS. https://www.bls.gov/oes/current/oes119033.htm.

                        Collection of Information
------------------------------------------------------------------------
                                                          Estimated cost
                                                              $46.59
                                        OMB control No.   institutional
   Regulatory          Information       and  estimated       $22.00
     section           collection            burden         individual
                                                              unless
                                                         otherwise noted
------------------------------------------------------------------------
Sec.   600.21...  Amend Sec.   600.21   Burden will be   Costs will be
                   to require an         cleared at a     cleared
                   institution to        later date       through
                   notify the            through a        separate
                   Secretary within 10   separate         information
                   days of any update    information      collection.
                   to information        collection.
                   included in the GE
                   program's
                   certification.
Sec.   668.14...  Amend Sec.            1845-0022, +430  $+20,035.
                   668.14(e) to          hrs.
                   establish a non-
                   exhaustive list of
                   conditions that the
                   Secretary may apply
                   to provisionally
                   certified
                   institutions, such
                   as the submission
                   of a teach-out plan
                   or agreement. Amend
                   Sec.   668.14(g) to
                   establish
                   conditions that may
                   apply to an
                   initially certified
                   nonprofit
                   institution, or an
                   institution that
                   has undergone a
                   change of ownership
                   and seeks to
                   convert to
                   nonprofit status.
Sec.   668.15...  Remove and reserve    1845-0022, -     $-114,051.
                   Sec.   668.15         2,448 hrs.
                   thereby
                   consolidating all
                   financial
                   responsibility
                   factors, including
                   those governing
                   changes in
                   ownership, under
                   part 668, subpart L.
Sec.   668.16...  Amend Sec.            1845-0022,       $+2,680,323.
                   668.16(h) to          +57,530 hrs.
                   require
                   institutions to
                   provide adequate
                   financial aid
                   counseling and
                   financial aid
                   communications to
                   advise students and
                   families to accept
                   the most beneficial
                   types of financial
                   assistance
                   available. Amend
                   Sec.   668.16(p) to
                   strengthen the
                   requirement that
                   institutions must
                   develop and follow
                   adequate procedures
                   to evaluate the
                   validity of a
                   student's high
                   school diploma.
Sec.   668.23...  Amend Sec.            1845-0022,       $+2,622,086.
                   668.23(d) to          +56,280 hrs.
                   require that any
                   domestic or foreign
                   institution that is
                   owned directly or
                   indirectly by any
                   foreign entity
                   holding at least a
                   50 percent voting
                   or equity interest
                   in the institution
                   must provide
                   documentation of
                   the entity's status
                   under the law of
                   the jurisdiction
                   under which the
                   entity is
                   organized. Amend
                   Sec.   668.23(d) to
                   require an
                   institution to
                   disclose in a
                   footnote to its
                   financial statement
                   audit the dollar
                   amounts it has
                   spent in the
                   preceding fiscal
                   year on recruiting
                   activities,
                   advertising, and
                   other pre-
                   enrollment
                   expenditures.
Sec.   668.43...  Amend Sec.   668.43   1845-0022,       $+12,183,286.
                   to establish a        +261,500 hrs.
                   website for the
                   posting and
                   distribution of key
                   information and
                   disclosures
                   pertaining to the
                   institution's
                   educational
                   programs, and to
                   require
                   institutions to
                   provide information
                   about how to access
                   that website to a
                   prospective student
                   before the student
                   enrolls, registers,
                   or makes a
                   financial
                   commitment to the
                   institution.
Sec.   668.156..  Amend Sec.   668.156  1845-NEW1,       $+149,088.
                   to clarify the        +3,200.
                   requirements for
                   the approval of a
                   State process. The
                   State process is
                   one of the three
                   ability to benefit
                   alternatives that
                   an individual who
                   is not a high
                   school graduate
                   could fulfill to
                   receive title IV,
                   Federal student aid
                   to enroll in an
                   eligible career
                   pathway program.
Sec.   668.157..  Add a new Sec.        1845-NEW2,       $+2,329,500.
                   668.157 to clarify    +50,000.
                   the documentation
                   requirements for
                   eligible career
                   pathway programs.

[[Page 32488]]

 
Sec.   668.171..  Amend Sec.            1845-0022,       $+73,612.
                   668.171(f) to         +1,580 hrs.
                   revise the set of
                   conditions whereby
                   an institution must
                   report to the
                   Department that a
                   triggering event,
                   described in Sec.
                   668.171(c) and (d),
                   has occurred. Amend
                   Sec.   668.171(g)
                   to require public
                   institutions to
                   provide
                   documentation from
                   a government entity
                   that confirms that
                   the institution is
                   a public
                   institution and is
                   backed by the full
                   faith and credit of
                   that government
                   entity to be
                   considered as
                   financially
                   responsible.
Sec.   668.407..  Add a new Sec.        1845-NEW3,       $+1,548,388.
                   668.407 to require    +69,268.
                   current and
                   prospective
                   students to
                   acknowledge having
                   seen the
                   information on the
                   disclosure website
                   maintained by the
                   Secretary if an
                   eligible non-GE
                   program has failed
                   the D/E rates
                   measure, to specify
                   the content and
                   delivery of such
                   acknowledgments,
                   and to require that
                   students must
                   provide the
                   acknowledgment
                   before the
                   institution may
                   disburse any title
                   IV, HEA funds.
Sec.   668.408..  Add a new Sec.        Burden will be   Costs will be
                   668.408 to            cleared at a     cleared
                   establish             later date       through
                   institutional         through a        separate
                   reporting             separate         information
                   requirements for      information      collection.
                   students who enroll   collection.
                   in, complete, or
                   withdraw from a GE
                   program or eligible
                   non-GE program and
                   to establish the
                   reporting timeframe.
Sec.   668.605..  Add a new Sec.        1845-NEW4,       $6,410,456.
                   668.605 to require    +273,247.
                   warnings to current
                   and prospective
                   students if a GE
                   program is at risk
                   of losing title IV,
                   HEA eligibility, to
                   specify the content
                   and delivery
                   parameters of such
                   notifications, and
                   to require that
                   students must
                   acknowledge having
                   seen the warning
                   before the
                   institution may
                   disburse any title
                   IV, HEA funds.
------------------------------------------------------------------------

    The total burden hours and change in burden hours associated with 
each OMB Control number affected by the final regulations follows: 
1845-0022, 1845-NEW1, 1845-NEW2, 1845-NEW3, 1845-NEW4.

------------------------------------------------------------------------
                                          Total burden      Change in
              Control No.                    hours         burden hours
------------------------------------------------------------------------
1845-0022.............................        2,663,120         +374,872
1845-NEW1.............................            3,200           +3,200
1845-NEW2.............................           50,000          +50,000
1845-NEW3.............................           69,268          +69,268
1845-NEW4.............................          273,247         +273,247
                                       ---------------------------------
    Total.............................        3,058,835          770,587
------------------------------------------------------------------------

    If you want to comment on the information collection requirements, 
please send your comments to the Office of Information and Regulatory 
Affairs in OMB, Attention: Desk Officer for the U.S. Department of 
Education. Send these comments by email to [email protected] or 
by fax to (202)395-6974. You may also send a copy of these comments to 
the Department contact named in the ADDRESSES section of the preamble.
    We have prepared the Information Collection Request (ICR) for these 
collections. You may review the ICR which is available at 
www.reginfo.gov. Click on Information Collection Review. These 
collections are identified as collections 1845-022, 1845-NEW1, 1845-
NEW2, 1845-NEW3, 1845-NEW4.
Intergovernmental Review
    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
Order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document provides early notification of our specific plans and 
actions for this program.
Assessment of Educational Impact
    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these proposed regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Accessible Format: On request to one of the program contact persons 
listed under FOR FURTHER INFORMATION CONTACT, individuals with 
disabilities can obtain this document in an accessible format. The 
Department will provide the requestor with an accessible format that 
may include Rich Text Format (RTF) or text format (txt), a thumb drive, 
an MP3 file, braille, large print, audiotape, or compact disc, or other 
accessible format.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. 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 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.

List of Subjects

34 CFR Part 600

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

[[Page 32489]]

34 CFR Part 668

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

Miguel A. Cardona,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary proposes 
to amend parts 600 and 668 of title 34 of the Code of Federal 
Regulations as follows:

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 600.10, amended October 28, 2022 at 87 FR 65426, is further 
amended by:
0
a. In paragraph (c)(1)(iii) removing the word ``and'' at the end of the 
paragraph;
0
b. Revising paragraph (c)(1)(iv); and
0
c. Adding paragraph (c)(1)(v).
    The revisions and addition read as follows:


Sec.  600.10  Date, extent, duration, and consequence of eligibility.

* * * * *
    (c) * * *
    (1) * * *
    (iv) For the first eligible prison education program under subpart 
P of 34 CFR part 668 offered at the first two additional locations (as 
defined in Sec.  600.2) at a Federal, State, or local penitentiary, 
prison, jail, reformatory, work farm, juvenile justice facility, or 
other similar correctional institution; and
    (v) For a gainful employment program under 34 CFR part 668, subpart 
S, subject to any restrictions in 34 CFR 668.603 on establishing or 
reestablishing the eligibility of the program, update its application 
under Sec.  [thinsp]600.21.
* * * * *
0
3. Section 600.21 is amended by:
0
a. Revising paragraph (a) introductory text.
0
b. In paragraph (a)(11)(iv) by removing the word ``or''.
0
c. Revising paragraph (a)(11)(v).
0
d. Adding paragraph (a)(11)(vi).
    The revisions and addition read as follows:


Sec.  600.21  Updating application information.

    (a) Reporting requirements. Except as provided in paragraph (b) of 
this section, an eligible institution must report to the Secretary, in 
a manner prescribed by the Secretary and no later than 10 days after 
the change occurs, any change in the following:
* * * * *
    (11) * * *
    (v) Changing the program's name, CIP code, or credential level; or
    (vi) Updating the certification pursuant to 34 CFR 668.604.
* * * * *

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

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

    Authority:  20 U.S.C. 1001-1003, 1070g, 1085, 1088, 1091, 1092, 
1094, 1099c, 1099c-1, 1221e-3, and 1231a, unless otherwise noted.
    Section 668.14 also issued under 20 U.S.C. 1085, 1088, 1091, 
1092, 1094, 1099a-3, 1099c, and 1141.
    Section 668.41 also issued under 20 U.S.C. 1092, 1094, 1099c.
    Section 668.91 also issued under 20 U.S.C. 1082, 1094.
    Section 668.171 also issued under 20 U.S.C. 1094 and 1099c and 
section 4 of Pub. L. 95-452, 92 Stat. 1101-1109.
    Section 668.172 also issued under 20 U.S.C. 1094 and 1099c and 
section 4 of Pub. L. 95-452, 92 Stat. 1101-1109.
    Section 668.175 also issued under 20 U.S.C. 1094 and 1099c.

0
5. In Sec.  668.2 amend paragraph (b) by adding, in alphabetical order, 
definitions of ``Annual debt-to-earnings rate,'' ``Classification of 
instructional program (CIP) code,'' ``Cohort period,'' ``Credential 
level,'' ``Debt-to-earnings rates (D/E rates),'' ``Discretionary debt-
to-earnings rate (Discretionary D/E rate)'', ``Earnings premium,'' 
``Earnings threshold,'' ``Eligible career pathway program,'' ``Eligible 
non-GE program,'' ``Federal agency with earnings data,'' ``Financial 
exigency'', ``Gainful employment program (GE program),'' 
``Institutional grants and scholarships,'' ``Length of the program,'' 
``Metropolitan statistical area,'' ``Poverty Guideline,'' ``Prospective 
student,'' ``Student,'' and ``Title IV loan'' to read as follows:


Sec.  668.2  General definitions.

* * * * *
    (b) * * *
    Annual debt-to-earnings rate (Annual D/E rate): The ratio of a 
program's annual loan payment amount to the annual earnings of the 
students who completed the program, expressed as a percentage, as 
calculated under Sec.  668.404.
* * * * *
    Classification of instructional program (CIP) code. A taxonomy of 
instructional program classifications and descriptions developed by the 
U.S. Department of Education's National Center for Education Statistics 
(NCES). Specific programs offered by institutions are classified using 
a six-digit CIP code.
    Cohort period. The set of award years used to identify a cohort of 
students who completed a program and whose debt and earnings outcomes 
are used to calculate debt-to earnings rates and the earnings premium 
measure under subpart Q of this part. The Secretary uses a two-year 
cohort period to calculate the debt-to-earnings rates and earnings 
premium measure for a program when the number of students (after 
exclusions identified in Sec. Sec.  668.403(e) and 668.404(c)) in the 
two-year cohort period is 30 or more. The Secretary uses a four-year 
cohort period to calculate the debt-to-earnings rates and earnings 
premium measure when the number of students completing the program in 
the two-year cohort period is fewer than 30 and when the number of 
students completing the program in the four-year cohort period is 30 or 
more. The cohort period covers consecutive award years that are--
    (1) For the two-year cohort period--
    (i) The third and fourth award years prior to the year for which 
the most recent data are available from the Federal agency with 
earnings data at the time the D/E rates and earnings premium measure 
are calculated, pursuant to Sec. Sec.  668.403 and 668.404; or
    (ii) For a program whose students are required to complete a 
medical or dental internship or residency, the sixth and seventh award 
years prior to the year for which the most recent data are available 
from the Federal agency with earnings data at the time the D/E rates 
and earnings premium measure are calculated. For this purpose, a 
required medical or dental internship or residency is a supervised 
training program that--
    (A) Requires the student to hold a degree as a doctor of medicine 
or osteopathy, or as a doctor of dental science;
    (B) Leads to a degree or certificate awarded by an institution of 
higher education, a hospital, or a health care facility that offers 
post-graduate training; and
    (C) Must be completed before the student may be licensed by a State 
and board certified for professional practice or service.

[[Page 32490]]

    (2) For the four-year cohort period--
    (i) The third, fourth, fifth, and sixth award years prior to the 
year for which the most recent data are available from the Federal 
agency with earnings data at the time the D/E rates and earnings 
premium measure are calculated, pursuant to Sec. Sec.  668.403 and 
668.404; or
    (ii) For a program whose students are required to complete a 
medical or dental internship or residency, the sixth, seventh, eighth, 
and ninth award years prior to the year for which the most recent 
earnings data are available from the Federal agency with earnings data 
at the time the D/E rates and earnings premium measure are calculated. 
For this purpose, a required medical or dental internship or residency 
is a supervised training program that meets the requirements in 
paragraph (1)(ii) of this definition.
    Credential level. The level of the academic credential awarded by 
an institution to students who complete the program. For the purposes 
of this subpart, the undergraduate credential levels are: undergraduate 
certificate or diploma, associate degree, bachelor's degree, and post-
baccalaureate certificate; and the graduate credential levels are 
master's degree, doctoral degree, first-professional degree (e.g., MD, 
DDS, JD), and graduate certificate (including a postgraduate 
certificate).
    Debt-to-earnings rates (D/E rates). The discretionary debt-to-
earnings rate and annual debt-to-earnings rate as calculated under 
Sec.  668.403.
* * * * *
    Discretionary debt-to-earnings rate (Discretionary D/E rate). The 
percentage of a program's annual loan payment compared to the 
discretionary earnings of the students who completed the program, as 
calculated under Sec.  668.403.
    Earnings premium. The amount by which the median annual earnings of 
students who recently completed a program exceed the earnings 
threshold, as calculated under Sec.  668.404. If the median annual 
earnings of recent completers is equal to the earnings threshold, the 
earnings premium is zero. If the median annual earnings of recent 
completers is less than the earnings threshold, the earnings premium is 
negative.
    Earnings threshold. Based on data from a Federal agency with 
earnings data, the median earnings for working adults aged 25-34, who 
either worked during the year or indicated they were unemployed when 
interviewed, with only a high school diploma (or recognized 
equivalent)--
    (1) In the State in which the institution is located; or
    (2) Nationally, if fewer than 50 percent of the students in the 
program are located in the State where the institution is located while 
enrolled.
    Eligible career pathway program. A program that combines rigorous 
and high-quality education, training, and other services that--
    (1) Align with the skill needs of industries in the economy of the 
State or regional economy involved;
    (2) Prepare an individual to be successful in any of a full range 
of secondary or postsecondary education options, including 
apprenticeships registered under the Act of August 16, 1937 (commonly 
known as the ``National Apprenticeship Act''; 50 Stat. 664, chapter 
663; 29 U.S.C. 50 et seq.);
    (3) Include counseling to support an individual in achieving the 
individual's education and career goals;
    (4) Include, as appropriate, education offered concurrently with 
and in the same context as workforce preparation activities and 
training for a specific occupation or occupational cluster;
    (5) Organize education, training, and other services to meet the 
particular needs of an individual in a manner that accelerates the 
educational and career advancement of the individual to the extent 
practicable;
    (6) Enable an individual to attain a secondary school diploma or 
its recognized equivalent, and at least one recognized postsecondary 
credential; and
    (7) Help an individual enter or advance within a specific 
occupation or occupational cluster.
    Eligible non-GE program. For purposes of subpart Q of this part, an 
educational program other than a GE program offered by an institution 
and approved by the Secretary to participate in the title IV, HEA 
programs, identified by a combination of the institution's six-digit 
Office of Postsecondary Education ID (OPEID) number, the program's six-
digit CIP code as assigned by the institution or determined by the 
Secretary, and the program's credential level. Includes all coursework 
associated with the program's credential level.
* * * * *
    Federal agency with earnings data. A Federal agency with which the 
Department enters into an agreement to access earnings data for the D/E 
rates and earnings threshold measure. The agency must have individual 
earnings data sufficient to match with title IV, HEA recipients who 
completed any title IV-eligible program during the cohort period and 
may include agencies such as the Treasury Department (including the 
Internal Revenue Service), the Social Security Administration (SSA), 
the Department of Health and Human Services (HHS), and the Census 
Bureau.
* * * * *
    Financial exigency. A status declared by an institution to a 
governmental entity or its accrediting agency representing severe 
financial distress that, absent significant reductions in expenditures 
or increases in revenue, reductions in administrative staff or faculty, 
or the elimination of programs, departments, or administrative units, 
could result in the closure of the institution.
* * * * *
    Gainful employment program (GE program). An educational program 
offered by an institution under Sec.  668.8(c)(3) or (d) and identified 
by a combination of the institution's six-digit Office of Postsecondary 
Education ID (OPEID) number, the program's six-digit CIP code as 
assigned by the institution or determined by the Secretary, and the 
program's credential level.
* * * * *
    Institutional grants and scholarships. Assistance that the 
institution or its affiliate controls or directs to reduce or offset 
the original amount of a student's institutional costs and that does 
not have to be repaid. Typically a grant, scholarship, fellowship, 
discount, or fee waiver.
* * * * *
    Length of the program. The amount of time in weeks, months, or 
years that is specified in the institution's catalog, marketing 
materials, or other official publications for a student to complete the 
requirements needed to obtain the degree or credential offered by the 
program.
* * * * *
    Metropolitan statistical area: A core area containing a substantial 
population nucleus, together with adjacent communities having a high 
degree of economic and social integration with that core.
* * * * *
    Poverty Guideline. The Poverty Guideline for a single person in the 
continental United States, as published by the U.S. Department of 
Health and Human Services and available at https://aspe.hhs.gov/poverty 
or its successor site.
* * * * *
    Prospective student. An individual who has contacted an eligible 
institution for the purpose of requesting information about enrolling 
in a program or who has been contacted directly by the institution or 
by a third

[[Page 32491]]

party on behalf of the institution about enrolling in a program.
* * * * *
    Student. For the purposes of subparts Q and S of this part, an 
individual who received title IV, HEA program funds for enrolling in 
the program.
* * * * *
    Title IV loan. A loan authorized under the William D. Ford Direct 
Loan Program (Direct Loan).
* * * * *
0
6. Section 668.13 is amended by:
0
a. Removing paragraph (b)(3).
0
b. Revising paragraphs (c)(1) an (2).
0
c. Revising paragraph (d)(2)(ii).
0
d. Adding paragraph (e).
    The revisions and addition read as follows:


Sec.  668.13  Certification procedures.

* * * * *
    (c) * * *
    (1)(i) The Secretary may provisionally certify an institution if--
    (A) The institution seeks initial participation in a Title IV, HEA 
program;
    (B) The institution is an eligible institution that has undergone a 
change in ownership that results in a change in control according to 
the provisions of 34 CFR part 600;
    (C) The institution is a participating institution that is applying 
for a renewal of certification--
    (1) That the Secretary determines has jeopardized its ability to 
perform its financial responsibilities by not meeting the factors of 
financial responsibility under subpart L of this part or the standards 
of administrative capability under Sec.  668.16;
    (2) Whose participation has been limited or suspended under subpart 
G of this part; or
    (3) That voluntarily enters into provisional certification;
    (D) The institution seeks to be reinstated to participate in a 
Title IV, HEA program after a prior period of participation in that 
program ended;
    (E) The institution is a participating institution that was 
accredited or preaccredited by a nationally recognized accrediting 
agency on the day before the Secretary withdrew the Secretary's 
recognition of that agency according to the provisions contained in 34 
CFR part 602; or
    (F) The Secretary has determined that the institution is at risk of 
closure.
    (G) The institution is under the provisions of subpart L.
    (ii) An institution's certification becomes provisional upon 
notification from the Secretary if--
    (A) The institution triggers one of the financial responsibility 
events under Sec.  668.171(c) or (d) and, as a result, the Secretary 
requires the institution to post financial protection; or
    (B) Any owner or interest holder of the institution with control 
over that institution, as defined in 34 CFR 600.31, also owns another 
institution with fines or liabilities owed to the Department and is not 
making payments in accordance with an agreement to repay that 
liability.
    (iii) A proprietary institution's certification automatically 
becomes provisional at the start of a fiscal year if it did not derive 
at least 10 percent of its revenue for its preceding fiscal year from 
sources other than Federal educational assistance funds, as required 
under Sec.  668.14(b)(16).
    (2) If the Secretary provisionally certifies an institution, the 
Secretary also specifies the period for which the institution may 
participate in a Title IV, HEA program. Except as provided in paragraph 
(c)(3) of this section or subpart L, a provisionally certified 
institution's period of participation expires--
    (i) Not later than the end of the first complete award year 
following the date on which the Secretary provisionally certified the 
institution for its initial certification;
    (ii) Not later than the end of the second complete award year 
following the date on which the Secretary provisionally certified an 
institution for reasons related to substantial liabilities owed or 
potentially owed to the Department for discharges related to borrower 
defense to repayment or false certification, or arising from claims 
under consumer protection laws;
    (iii) Not later than the end of the third complete award year 
following the date on which the Secretary provisionally certified the 
institution as a result of a change in ownership, recertification, 
reinstatement, automatic re-certification, or a failure under 
668.14(b)(32); and
    (iv) If the Secretary provisionally certified the institution as a 
result of its accrediting agency losing recognition, not later than 18 
months after the date that the Secretary withdrew recognition from the 
institution's nationally recognized accrediting agency.
* * * * *
    (d) * * *
    (2) * * *
    (ii) The revocation takes effect on the date that the Secretary 
transmits the notice to the institution.
* * * * *
    (e) Supplementary performance measures. In determining whether to 
certify, or condition the participation of, an institution under 
Sec. Sec.  668.13 and 668.14, the Secretary may consider the following, 
among other information at the program or institutional level:
    (i) Withdrawal rate. The percentage of students who withdrew from 
the institution within 100 percent or 150 percent of the published 
length of the program.
    (ii) Debt-to-earnings rates. The debt-to-earnings rates under Sec.  
668.403, if applicable.
    (iii) Earnings premium measure. The earnings premium measure under 
Sec.  668.404, if applicable.
    (iv) Educational and pre-enrollment expenditures. The amounts the 
institution spent on instruction and instructional activities, academic 
support, and support services, and the amounts spent on recruiting 
activities, advertising, and other pre-enrollment expenditures, as 
provided through a disclosure in the audited financial statements 
required under Sec.  668.23(d).
    (v) Licensure pass rate. If a program is designed to meet 
educational requirements for a specific professional license or 
certification that is required for employment in an occupation, and the 
institution is required by an accrediting agency or State to report 
passage rates for the licensure exam for the program, such passage 
rates.
* * * * *
0
7. Section 668.14 is amended by:
0
a. Adding paragraph (a)(3).
0
b. Revising paragraphs (b)(5), (17), (18), and (26).
0
c. In paragraph (b)(30)(ii)(C) removing the word ``and'' at the end of 
the paragraph.
0
d. Adding paragraphs (b)(32) through (b)(34).
0
e. Redesignating paragraphs (e) through (h) as paragraphs (h) through 
(k), respectively.
0
f. Adding new paragraphs (e) through (g).
    The revisions and additions read as follows:


Sec.  668.14  Program participation agreement.

    (a) * * *
    (3) An institution's program participation agreement must be signed 
by--
    (i) An authorized representative of the institution; and
    (ii) For a proprietary or private nonprofit institution, an 
authorized representative of an entity with direct or indirect 
ownership of the institution if that entity has the power to exercise 
control over the institution. The Secretary considers the following as 
examples of circumstances in which an entity has such power:
    (A) If the entity has at least 50 percent control over the 
institution through

[[Page 32492]]

direct or indirect ownership, by voting rights, by its right to appoint 
board members to the institution or any other entity, whether by itself 
or in combination with other entities or natural persons with which it 
is affiliated or related, or pursuant to a proxy or voting or similar 
agreement.
    (B) If the entity has the power to block significant actions.
    (C) If the entity is the 100 percent direct or indirect interest 
holder of the institution.
    (D) If the entity provides or will provide the financial statements 
to meet any of the requirements of 34 CFR 600.20(g) or (h), or subpart 
L of this part.
    (b) * * *
    (5) It will comply with the provisions of subpart L relating to 
factors of financial responsibility;
* * * * *
    (17) The Secretary, guaranty agencies and lenders as defined in 34 
CFR part 682, nationally recognized accrediting agencies, Federal 
agencies, State agencies recognized under 34 CFR part 603 for the 
approval of public postsecondary vocational education, State agencies 
that legally authorize institutions and branch campuses or other 
locations of institutions to provide postsecondary education, and State 
attorneys general have the authority to share with each other any 
information pertaining to the institution's eligibility for or 
participation in the title IV, HEA programs or any information on 
fraud, abuse, or other violations of law;
    (18) It will not knowingly--
    (i) Employ in a capacity that involves the administration of the 
title IV, HEA programs or the receipt of funds under those programs, an 
individual who has been
    (A) Convicted of, or pled nolo contendere or guilty to, a crime 
involving the acquisition, use, or expenditure of Federal, State, or 
local government funds;
    (B) Administratively or judicially determined to have committed 
fraud or any other material violation of law involving Federal, State, 
or local government funds;
    (C) An owner, director, officer, or employee who exercised 
substantial control over an institution, or a direct or indirect parent 
entity of an institution, that owes a liability for a violation of a 
title IV, HEA program, requirement and is not making payments in 
accordance with an agreement to repay that liability; or
    (D) A Ten-percent-or-higher equity owner, director, officer, 
principal, executive, or contractor at an institution in any year in 
which the institution incurred a loss of Federal funds in excess of 5 
percent of the participating institution's annual title IV, HEA program 
funds.
    (ii) Contract with any institution, third-party servicer, 
individual, agency, or organization that has, or whose owners, officers 
or employees have--
    (A) Been convicted of, or pled nolo contendere or guilty to, a 
crime involving the acquisition, use, or expenditure of Federal, State, 
or local government funds;
    (B) Been administratively or judicially determined to have 
committed fraud or any other material violation of law involving 
Federal, State, or local government funds;
    (C) Had its participation in the title IV programs terminated, 
certification revoked, or application for certification or 
recertification for participation in the title IV programs denied;
    (D) Been an owner, director, officer, or employee who exercised 
substantial control over an institution, or a direct or indirect parent 
entity of an institution, that owes a liability for a violation of a 
title IV, HEA program requirement and is not making payments in 
accordance with an agreement to repay that liability; or
    (E) Been a ten-percent-or-higher equity owner, director, officer, 
principal, executive, or contractor affiliated with another institution 
in any year in which the other institution incurred a loss of Federal 
funds in excess of 5 percent of the participating institution's annual 
title IV, HEA program funds.
* * * * *
    (26) If an educational program offered by the institution is 
required to prepare a student for gainful employment in a recognized 
occupation, the institution must--
    (i) Establish the need for the training for the student to obtain 
employment in the recognized occupation for which the program prepares 
the student; and
    (ii) Demonstrate a reasonable relationship between the length of 
the program and entry level requirements for the recognized occupation 
for which the program prepares the student by limiting the number of 
hours in the program to the greater of--
    (A) The required minimum number of clock hours, credit hours, or 
the equivalent required for training in the recognized occupation for 
which the program prepares the student, as established by the State in 
which the institution is located, if the State has established such a 
requirement, or as established by any Federal agency or the 
institution's accrediting agency; or
    (B) Another State's required minimum number of clock hours, credit 
hours, or the equivalent required for training in the recognized 
occupation for which the program prepares the student, if certain 
criteria is met. This exception to paragraph (A) would only be 
applicable if the institution documents, with substantiation by a 
certified public accountant who prepares the institution's compliance 
audit report as required under Sec.  668.23 that--
    (1) A majority of students resided in that State while enrolled in 
the program during the most recently completed award year;
    (2) A majority of students who completed the program in the most 
recently completed award year were employed in that State; or
    (3) The other State is part of the same metropolitan statistical 
area as the institution's home State and a majority of students, upon 
enrollment in the program during the most recently completed award 
year, stated in writing that they intended to work in that other State;
* * * * *
    (32) In each State in which the institution is located or in which 
students enrolled by the institution are located, as determined at the 
time of initial enrollment in accordance with 34 CFR 600.9(c)(2), the 
institution must determine that each program eligible for title IV, HEA 
program funds--
    (i) Is programmatically accredited if the State or a Federal agency 
requires such accreditation, including as a condition for employment in 
the occupation for which the program prepares the student, or is 
programmatically pre-accredited when programmatic pre-accreditation is 
sufficient according to the State or Federal agency;
    (ii) Satisfies the applicable educational prerequisites for 
professional licensure or certification requirements in the 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; and
    (iii) Complies with all State consumer protection laws related to 
closure, recruitment, and misrepresentations, including both generally 
applicable State laws and those specific to educational institutions;
    (33) It will not withhold transcripts or take any other negative 
action against a student related to a balance owed by the student that 
resulted from an error in

[[Page 32493]]

the institution's administration of the title IV, HEA programs, any 
fraud or misconduct by the institution or its personnel, or returns of 
title IV, HEA funds required under Sec.  668.22 unless the balance owed 
was the result of fraud on the part of the student; and
    (34) It will not maintain policies and procedures to encourage, or 
condition institutional aid or other student benefits in a manner that 
induces, a student to limit the amount of Federal student aid, 
including Federal loan funds, that the student receives, except that 
the institution may provide a scholarship on the condition that a 
student forego borrowing if the amount of the scholarship provided is 
equal to or greater than the amount of Federal loan funds that the 
student agrees not to borrow.
* * * * *
    (e) If an institution is provisionally certified, the Secretary may 
apply such conditions as are determined to be necessary or appropriate 
to the institution, including, but not limited to--
    (1) For an institution that the Secretary determines may be at risk 
of closure--
    (i) Submission of an acceptable teach-out plan or agreement to the 
Department, the State, and the institution's recognized accrediting 
agency; and
    (ii) Submission to the Department of an acceptable records 
retention plan that addresses title IV, HEA records, including but not 
limited to student transcripts, and evidence that the plan has been 
implemented;
    (2) For an institution that the Secretary determines may be at risk 
of closure, that is teaching out or closing, or that is not financially 
responsible or administratively capable, the release of holds on 
student transcripts;
    (3) Restrictions or limitations on the addition of new programs or 
locations;
    (4) Restrictions on the rate of growth, new enrollment of students, 
or Title IV, HEA volume in one or more programs;
    (5) Restrictions on the institution providing a teach-out on behalf 
of another institution;
    (6) Restrictions on the acquisition of another participating 
institution, which may include, in addition to any other required 
financial protection, the posting of financial protection in an amount 
determined by the Secretary but not less than 10 percent of the 
acquired institution's Title IV, HEA volume for the prior fiscal year;
    (7) Additional reporting requirements, which may include, but are 
not limited to, cash balances, an actual and protected cash flow 
statement, student rosters, student complaints, and interim unaudited 
financial statements;
    (8) Limitations on the institution entering into a written 
arrangement with another eligible institution or an ineligible 
institution or organization for that other eligible institution or 
ineligible institution or organization to provide between 25 and 50 
percent of the institution's educational program under Sec.  668.5(a) 
or (c); and
    (9) For an institution alleged or found to have engaged in 
misrepresentations to students, engaged in aggressive recruiting 
practices, or violated incentive compensation rules, requirements to 
hire a monitor and to submit marketing and other recruiting materials 
(e.g., call scripts) for the review and approval of the Secretary.
    (f) If a proprietary institution seeks to convert to nonprofit 
status following a change in ownership, the following conditions will 
apply to the institution following the change in ownership, in addition 
to any other conditions that the Secretary may deem appropriate:
    (1) The institution must continue to meet the requirements under 
Sec.  668.28(a) until the Department has accepted, reviewed, and 
approved the institution's financial statements and compliance audits 
that cover two complete consecutive fiscal years in which the 
institution meets the requirements of Sec.  668.14(b)(16) under its new 
ownership, or until the Department approves the institution's request 
to convert to nonprofit status, whichever is later.
    (2) The institution must continue to meet the gainful employment 
requirements of subpart S of this part until the Department has 
accepted, reviewed, and approved the institution's financial statements 
and compliance audits that cover two complete consecutive fiscal years 
under its new ownership, or until the Department approves the 
institution's request to convert to nonprofit status, whichever is 
later.
    (3) The institution must submit regular and timely reports on 
agreements entered into with a former owner of the institution or a 
natural person or entity related to or affiliated with the former owner 
of the institution, so long as the institution participates as a 
nonprofit institution.
    (4) The institution may not advertise that it operates as a 
nonprofit institution for the purposes of Title IV, HEA until the 
Department approves the institution's request to convert to nonprofit 
status.
    (g) If an institution is initially certified as a nonprofit 
institution, or if it has undergone a change of ownership and seeks to 
convert to nonprofit status, the following conditions will apply to the 
institution upon initial certification or following the change in 
ownership, in addition to any other conditions that the Secretary may 
deem appropriate:
    (1) The institution must submit reports on accreditor and State 
authorization agency actions and any new servicing agreements within 10 
business days of receipt of the notice of the action or of entering 
into the agreement, as applicable, until the Department has accepted, 
reviewed, and approved the institution's financial statements and 
compliance audits that cover two complete consecutive fiscal years 
following initial certification, or two complete fiscal years after a 
change in ownership, or until the Department approves the institution's 
request to convert to nonprofit status, whichever is later.
    (2) The institution must submit a report and copy of the 
communications from the Internal Revenue Service or any State or 
foreign country related to tax-exempt or nonprofit status within 10 
business days of receipt so long as the institution participates as a 
nonprofit institution.
* * * * *


Sec.  668.15  [Removed and Reserved]

0
8. Remove and reserve Sec.  668.15.
0
9. Section 668.16 is amended by:
0
a. Revising the introductory text, and paragraphs (h_, (k), (m), (n) 
and (p); and
0
 b. Adding paragraphs (q) through (v).
    The revisions and additions read as follows:


Sec.  668.16  Standards of administrative capability.

    To begin and to continue to participate in any title IV, HEA 
program, an institution must demonstrate to the Secretary that the 
institution is capable of adequately administering that program under 
each of the standards established in this section. The Secretary 
considers an institution to have that administrative capability if the 
institution--
* * * * *
    (h) Provides adequate financial aid counseling with clear and 
accurate information to students who apply for title IV, HEA program 
assistance. In determining whether an institution provides adequate 
counseling, the Secretary considers whether its counseling and 
financial aid communications advise students and families to accept the 
most beneficial types of financial assistance available to them and 
include information regarding--

[[Page 32494]]

    (1) The cost of attendance of the institution as defined under 
section 472 of the HEA, including the individual components of those 
costs and a total of the estimated costs that will be owed directly to 
the institution, for students, based on their attendance status;
    (2) The source and amount of each type of aid offered, separated by 
the type of the aid and whether it must be earned or repaid;
    (3) The net price, as determined by subtracting total grant or 
scholarship aid included in paragraph (h)(2) of this section from the 
cost of attendance in paragraph (h)(1) of this section;
    (4) The method by which aid is determined and disbursed, delivered, 
or applied to a student's account, and instructions and applicable 
deadlines for accepting, declining, or adjusting award amounts; and
    (5) The rights and responsibilities of the student with respect to 
enrollment at the institution and receipt of financial aid, including 
the institution's refund policy, the requirements for the treatment of 
title IV, HEA program funds when a student withdraws under Sec.  
668.22, its standards of satisfactory progress, and other conditions 
that may alter the student's aid package;
* * * * *
    (k)(1) Is not, and has not been--
    (i) Debarred or suspended under Executive Order (E.O.) 12549 (3 
CFR, 1986 Comp., p. 189) or the Federal Acquisition Regulations (FAR), 
48 CFR part 9, subpart 9.4; or
    (ii) Engaging in any activity that is a cause under 2 CFR 180.700 
or 180.800, as adopted at 2 CFR 3485.12, for debarment or suspension 
under Executive Order (E.O.) 12549 (3 CFR, 1986 Comp., p. 189) or the 
FAR, 48 CFR part 9, subpart 9.4; and
    (2) Does not have any principal or affiliate of the institution (as 
those terms are defined in 2 CFR parts 180 and 3485), or any individual 
who exercises or previously exercised substantial control over the 
institution as defined in Sec.  668.174(c)(3), who--
    (i) Has been convicted of, or has pled nolo contendere or guilty 
to, a crime involving the acquisition, use, or expenditure of Federal, 
State, Tribal, or local government funds, or has been administratively 
or judicially determined to have committed fraud or any other material 
violation of law involving those funds; or
    (ii) Is a current or former principal or affiliate (as those terms 
are defined in 2 CFR parts 180 and 3485), or any individual who 
exercises or exercised substantial control as defined in Sec.  
668.174(c)(3), of another institution whose misconduct or closure 
contributed to liabilities to the Federal government in excess of 5 
percent of its title IV, HEA program funds in the award year in which 
the liabilities arose or were imposed;
* * * * *
    (m)(1) Has a cohort default rate--
    (i) That is less than 25 percent for each of the three most recent 
fiscal years during which rates have been issued, to the extent those 
rates are calculated under subpart M of this part;
    (ii) On or after 2014, that is less than 30 percent for at least 
two of the three most recent fiscal years during which the Secretary 
has issued rates for the institution under subpart N of this part; and
    (iii) As defined in 34 CFR 674.5, on loans made under the Federal 
Perkins Loan Program to students for attendance at that institution 
that does not exceed 15 percent;
    (2) Provided that--
    (i) if the Secretary determines that an institution's 
administrative capability is impaired solely because the institution 
fails to comply with paragraph (m)(1) of this section, and the 
institution is not subject to a loss of eligibility under Sec.  
668.187(a) or Sec.  668.206(a), the Secretary allows the institution to 
continue to participate in the title IV, HEA programs. In such a case, 
the Secretary may provisionally certify the institution in accordance 
with Sec.  668.13(c) except as provided in paragraphs (m)(2)(ii) 
through (v) of this section;
    (ii) An institution that fails to meet the standard of 
administrative capability under paragraph (m)(1)(ii) of this section 
based on two cohort default rates that are greater than or equal to 30 
percent but less than or equal to 40 percent is not placed on 
provisional certification under paragraph (m)(2)(i) of this section if 
it--
    (A) Has timely filed a request for adjustment or appeal under Sec.  
668.209, Sec.  668.210, or Sec.  668.212 with respect to the second 
such rate, and the request for adjustment or appeal is either pending 
or succeeds in reducing the rate below 30 percent;
    (B) Has timely filed an appeal under Sec.  668.213 after receiving 
the second such rate, and the appeal is either pending or successful; 
or
    (C)(1) Has timely filed a participation rate index challenge or 
appeal under Sec.  668.204(c) or Sec.  668.214 with respect to either 
or both of the two rates, and the challenge or appeal is either pending 
or successful; or
    (2) If the second rate is the most recent draft rate, and the 
institution has timely filed a participation rate challenge to that 
draft rate that is either pending or successful;
    (iii) The institution may appeal the loss of full participation in 
a title IV, HEA program under paragraph (m)(2)(i) of this section by 
submitting an erroneous data appeal in writing to the Secretary in 
accordance with and on the grounds specified in Sec.  668.192 or Sec.  
668.211 as applicable;
    (iv) If the institution has 30 or fewer borrowers in the three most 
recent cohorts of borrowers used to calculate its cohort default rate 
under subpart N of this part, we will not provisionally certify it 
solely based on cohort default rates; and
    (v) If a rate that would otherwise potentially subject the 
institution to provisional certification under paragraphs (m)(1)(ii) 
and (2)(i) of this section is calculated as an average rate, we will 
not provisionally certify it solely based on cohort default rates;
    (n) Has not been subject to a significant negative action or a 
finding as by a State or Federal agency, a court or an accrediting 
agency where the basis of the action is repeated or unresolved, such as 
non-compliance with a prior enforcement order or supervisory directive, 
and the institution has not lost eligibility to participate in another 
Federal educational assistance program due to an administrative action 
against the institution.
* * * * *
    (p) Develops and follows adequate procedures to evaluate the 
validity of a student's high school diploma if the institution or the 
Secretary has reason to believe that the high school diploma is not 
valid or was not obtained from an entity that provides secondary school 
education, consistent with the following requirements:
    (1) Adequate procedures to evaluate the validity of a student's 
high school diploma must include--
    (i) Obtaining documentation from the high school that confirms the 
validity of the high school diploma, including at least one of the 
following--
    (A) Transcripts;
    (B) Written descriptions of course requirements; or
    (C) Written and signed statements by principals or executive 
officers at the high school attesting to the rigor and quality of 
coursework at the high school;
    (ii) If the high school is regulated or overseen by a State agency, 
Tribal agency, or Bureau of Indian Education, confirming with, or 
receiving documentation from that agency that the high school is 
recognized or meets

[[Page 32495]]

requirements established by that agency; and
    (iii) If the Secretary has published a list of high schools that 
issue invalid high school diplomas, confirming that the high school 
does not appear on that list; and
    (2) A high school diploma is not valid if it--
    (i) Did not meet the applicable requirements established by the 
appropriate State agency, Tribal agency, or Bureau of Indian Education 
in the State where the high school is located and, if the student does 
not attend in-person classes, the State where the student was located 
at the time the diploma was obtained;
    (ii) Has been determined to be invalid by the Department, the 
appropriate State agency in the State where the high school was 
located, or through a court proceeding;
    (iii) Was obtained from an entity that requires little or no 
secondary instruction or coursework to obtain a high school diploma, 
including through a test that does not meet the requirements for a 
recognized equivalent of a high school diploma under 34 CFR 600.2; or
    (iv) Was obtained from an entity that--
    (A) Maintains a business relationship or is otherwise affiliated 
with the eligible institution at which the student is enrolled; and
    (B) Is not accredited.
    (q) Provides adequate career services to eligible students who 
receive title IV, HEA program assistance. In determining whether an 
institution provides adequate career services, the Secretary 
considers--
    (1) The share of students enrolled in programs designed to prepare 
students for gainful employment in a recognized occupation;
    (2) The number and distribution of career services staff;
    (3) The career services the institution has promised to its 
students; and
    (4) The presence of institutional partnerships with recruiters and 
employers who regularly hire graduates of the institution;
    (r) Provides students, within 45 days of successful completion of 
other required coursework, geographically accessible clinical or 
externship opportunities related to and required for completion of the 
credential or licensure in a recognized occupation;
    (s) Disburses funds to students in a timely manner that best meets 
the students' needs. The Secretary does not consider the manner of 
disbursements to be consistent with students' needs if, among other 
conditions--
    (1) The Secretary is aware of multiple verified and relevant 
student complaints;
    (2) The institution has high rates of withdrawals attributable to 
delays in disbursements;
    (3) The institution has delayed disbursements until after the point 
at which students have earned 100 percent of their eligibility for 
title IV, HEA funds, in accordance with the return to title IV, HEA 
requirements in 34 CFR 668.22; or
    (4) The institution has delayed disbursements with the effect of 
ensuring the institution passes the 90/10 ratio;
    (t) Offers gainful employment (GE) programs subject to subpart S of 
this part and--
    (1) At least half of its total title IV, HEA funds in the most 
recent award year are not from programs that are ``failing'' under 
subpart S; and
    (2) At least half of its full-time equivalent title IV-receiving 
students are not enrolled in programs that are ``failing'' under 
subpart S;
    (u) Does not engage in misrepresentations, as defined in subpart F 
of this part, or aggressive and deceptive recruitment tactics or 
conduct, including as defined in subpart R of this part; or
    (v) Does not otherwise appear to lack the ability to administer the 
title IV, HEA programs competently.
* * * * *
0
10. Section 668.23 amended October 28, 2022 at 87 FR 65426, is further 
amended by
0
a. Revising paragraphs (a)(4), (a)(5), (d)(1), and (d)(2).
0
b. Adding paragraph (d)(5).
    The revisions and addition read as follows:


Sec.  668.23  Compliance audits and audited financial statements.

    (a) * * *
    (4) Submission deadline. Except as provided by the Single Audit 
Act, chapter 75 of title 31, United States Code, an institution must 
submit annually to the Department its compliance audit and its audited 
financial statements by the date that is the earlier of--
    (i) Thirty days after the later of the date of the auditor's report 
for the compliance audit and the date of the auditor's report for the 
audited financial statements; or
    (ii) Six months after the last day of the institution's fiscal 
year.
    (5) Audit submission requirements. In general, the Department 
considers the compliance audit and audited financial statements 
submission requirements of this section to be satisfied by an audit 
conducted in accordance with 2 CFR part 200--Uniform Administrative 
Requirements, Cost Principles, And Audit Requirements For Federal 
Awards, or the audit guides developed by and available from the 
Department of Education's Office of Inspector General, whichever is 
applicable to the entity, and provided that the Federal student aid 
functions performed by that entity are covered in the submission.
* * * * *
    (d) * * *
    (1) General. To enable the Department to make a determination of 
financial responsibility, an institution must, to the extent requested 
by the Department, submit to the Department a set of acceptable 
financial statements for its latest complete fiscal year (or such 
fiscal years as requested by the Department or required by these 
regulations), as well as any other documentation the Department deems 
necessary to make that determination. Financial statements submitted to 
the Department must match the fiscal year end of the entity's annual 
return(s) filed with the Internal Revenue Service. Financial statements 
submitted to the Department must include the Supplemental Schedule 
required under Sec.  668.172(a) and section 2 of Appendix A and B to 
subpart L of this part, and be prepared on an accrual basis in 
accordance with generally accepted accounting principles, and audited 
by an independent auditor in accordance with generally accepted 
government auditing standards, issued by the Comptroller General of the 
United States and other guidance contained in 2 CFR part 200--Uniform 
Administrative Requirements, Cost Principles, And Audit Requirements 
For Federal Awards; or in audit guides developed by and available from 
the Department of Education's Office of Inspector General, whichever is 
applicable to the entity, and provided that the Federal student aid 
functions performed by that entity are covered in the submission. As 
part of these financial statements, the institution must include a 
detailed description of related entities based on the definition of a 
related entity as set forth in Accounting Standards Codification (ASC) 
850. The disclosure requirements under this provision extend beyond 
those of ASC 850 to include all related parties and a level of detail 
that would enable the Department to readily identify the related party. 
Such information must include, but is not limited to, the name, 
location and a description of the related entity including the nature 
and amount of any

[[Page 32496]]

transactions between the related party and the institution, financial 
or otherwise, regardless of when they occurred.
    (2) Submission of additional information. (i) In determining 
whether an institution is financially responsible, the Department may 
also require the submission of audited consolidated financial 
statements, audited full consolidating financial statements, audited 
combined financial statements, or the audited financial statements of 
one or more related parties that have the ability, either individually 
or collectively, to significantly influence or control the institution, 
as determined by the Department.
    (ii) For a domestic or foreign institution that is owned directly 
or indirectly by any foreign entity holding at least a 50 percent 
voting or equity interest in the institution, the institution must 
provide documentation of the entity's status under the law of the 
jurisdiction under which the entity is organized, including, at a 
minimum, the date of organization, a current certificate of good 
standing, and a copy of the authorizing statute for such entity status. 
The institution must also provide documentation that is equivalent to 
articles of organization and bylaws and any current operating or 
shareholders' agreements. The Department may also require the 
submission of additional documents related to the entity's status under 
the foreign jurisdiction as needed to assess the entity's financial 
status. Documents must be translated into English.
* * * * *
    (5) Disclosure of amounts spent on recruiting activities, 
advertising, and other pre-enrollment expenditures. An institution must 
disclose in a footnote to its financial statement audit the dollar 
amounts it has spent in the preceding fiscal year on recruiting 
activities, advertising, and other pre-enrollment expenditures.
* * * * *
0
11. Section 668.32, amended October 28, 2022 at 87 FR 65426, is further 
amended by revising paragraphs (e)(2), (e)(3), and (e)(5) to read as 
follows:


Sec.  668.32  Student eligibility.

* * * * *
    (e) * * *
    (2) Has obtained a passing score specified by the Secretary on an 
independently administered test in accordance with subpart J of this 
part, and either--
    (i) Was first enrolled in an eligible program before July 1, 2012; 
or
    (ii) Is enrolled in an eligible career pathway program as defined 
in Sec.  668.2;
    (3) Is enrolled in an eligible institution that participates in a 
State process approved by the Secretary under subpart J of this part, 
and either--
    (i) Was first enrolled in an eligible program before July 1, 2012; 
or
    (ii) Is enrolled in an eligible career pathway program as defined 
in Sec.  668.2;
* * * * *
    (5) Has been determined by the institution to have the ability to 
benefit from the education or training offered by the institution based 
on the satisfactory completion of 6 semester hours, 6 trimester hours, 
6 quarter hours, or 225 clock hours that are applicable toward a degree 
or certificate offered by the institution, and either--
    (i) Was first enrolled in an eligible program before July 1, 2012; 
or
    (ii) Is enrolled in an eligible career pathway program as defined 
in Sec.  668.2.
* * * * *
0
12. Section 668.43, amended October 28, 2022 at 87 FR 65426, is further 
amended by:
0
a. Revising the section heading.
0
b. Revising paragraph (a)(5)(v).
0
c. Adding paragraph (d).
    The revisions and addition read as follows:


Sec.  668.43  Institutional and programmatic information.

    (a) * * *
    (5) * * *
    (v) If an educational program is designed to meet educational 
requirements for a specific professional license or certification that 
is required for employment in an occupation, or is advertised as 
meeting such requirements, a list of all States where the institution 
is aware that the program does and does not meet such requirements;
* * * * *
    (d)(1) Disclosure website. An institution must provide such 
information about the institution and educational programs it offers as 
the Secretary prescribes through a notice published in the Federal 
Register for disclosure to prospective students and enrolled students 
through a website established and maintained by the Secretary. The 
Secretary may conduct consumer testing to inform the design of the 
website. The Secretary may include on the website the following items, 
among others:
    (i) The primary occupations (by name, SOC code, or both) that the 
program prepares students to enter, along with links to occupational 
profiles on O*NET (www.onetonline.org) or its successor site.
    (ii) As reported to or calculated by the Secretary, the program's 
or institution's completion rates and withdrawal rates for full-time 
and less-than-full-time students.
    (iii) The published length of the program in calendar time (i.e., 
weeks, months, years).
    (iv) The total number of individuals enrolled in the program during 
the most recently completed award year.
    (v) As calculated by the Secretary, the program's debt-to-earnings 
rates;
    (vi) As calculated by the Secretary, the program's earnings premium 
measure.
    (vii) As calculated by the Secretary, the loan repayment rate for 
students or graduates who entered repayment on title IV loans during a 
period determined by the Secretary.
    (viii) The total cost of tuition and fees, and the total cost of 
books, supplies, and equipment, that a student would incur for 
completing the program within the published length of the program.
    (ix) Of the individuals enrolled in the program during the most 
recently completed award year, the percentage who received a title IV 
loan, a private loan, or both for enrollment in the program.
    (x) As calculated by the Secretary, the median loan debt of 
students who completed the program during the most recently completed 
award year or for all students who completed or withdrew from the 
program during that award year.
    (xi) As provided by the Secretary, the median earnings of students 
who completed the program or of all students who completed or withdrew 
from the program, during a period determined by the Secretary.
    (xii) Whether the program is programmatically accredited and the 
name of the accrediting agency, as reported to the Secretary.
    (xiii) The supplementary performance measures in Sec.  668.13(e).
    (xiv) A link to the U.S. Department of Education's College 
Navigator website, or its successor site, or other similar Federal 
resource.
    (2) Program web pages. The institution must provide a prominent 
link to, and any other needed information to access, the website 
maintained by the Secretary on any web page containing academic, cost, 
financial aid, or admissions information about the program or 
institution. The Secretary may require the institution to modify a web 
page if the information is not sufficiently prominent, readily 
accessible, clear, conspicuous, or direct.
    (3) Distribution to prospective students. The institution must 
provide the relevant information to access the website maintained by 
the Secretary to

[[Page 32497]]

any prospective student, or a third party acting on behalf of the 
prospective student, before the prospective student signs an enrollment 
agreement, completes registration, or makes a financial commitment to 
the institution.
    (4) Distribution to enrolled students. The institution must provide 
the relevant information to access the website maintained by the 
Secretary to any enrolled title IV, HEA recipient prior to the start 
date of the first payment period associated with each subsequent award 
year in which the student continues enrollment at the institution.
* * * * *
0
 13. Section 668.91 is amended by:
0
a. In paragraph (a)(3)(v)(B)(2) removing the period at the end of the 
paragraph and adding, in its place, ``; and''.
0
b. Adding paragraph (a)(3)(vi).
    The addition reads as follows:


Sec.  668.91  Initial and final decisions.

    (a) * * *
    (3) * * *
    (vi) In a termination action against a GE program based upon the 
program's failure to meet the requirements in Sec.  668.403 or Sec.  
668.404, the hearing official must terminate the program's eligibility 
unless the hearing official concludes that the Secretary erred in the 
applicable calculation.
* * * * *
0
14. Revise Sec.  668.156 to read as follows:


Sec.  668.156  Approved State process.

    (a)(1) A State that wishes the Secretary to consider its State 
process as an alternative to achieving a passing score on an approved, 
independently administered test or satisfactory completion of at least 
six credit hours or its recognized equivalent coursework for the 
purpose of determining a student's eligibility for title IV, HEA 
program funds must apply to the Secretary for approval of that process.
    (2) A State's application for approval of its State process must 
include--
    (i) The institutions located in the State included in the proposed 
process, which need not be all of the institutions located in the 
State;
    (ii) The requirements that participating institutions must meet to 
offer eligible career pathway programs through the State process;
    (iii) A certification that, as of the date of the application, each 
proposed career pathway program intended for use through the State 
process constitutes an ``eligible career pathway program'' as defined 
in Sec.  668.2 and as documented pursuant to Sec.  668.157;
    (iv) The criteria used to determine student eligibility for 
participation in the State process; and
    (v) For an institution listed for the first time on the 
application, an assurance that not more than 33 percent of the 
institution's undergraduate regular students withdrew from the 
institution during the institution's latest completed award year. For 
purposes of calculating this rate, the institution must count all 
regular students who were enrolled during the latest completed award 
year, except those students who, during that period--
    (A) Withdrew from, dropped out of, or were expelled from the 
institution; and
    (B) Were entitled to and actually received in a timely manner, a 
refund of 100 percent of their tuition and fees.
    (3) Before approving the State process, the Secretary will verify 
that a sample of the proposed eligible career pathway programs 
constitute an ``eligible career pathway program'' as defined in Sec.  
668.2 and as documented pursuant to Sec.  668.157.
    (b) For a State applying for approval for the first time, the 
Secretary may approve the State process for a two-year initial period 
if--
    (1) The State's process satisfies the requirements contained in 
paragraphs (a), (c), and (d) of this section; and
    (2) The State agrees that the total number of students who enroll 
through the State process during the initial period will total no more 
than the greater of 25 students or 1.0 percent of enrollment at each 
institution participating in the State process.
    (c) A State process must--
    (1) Allow the participation of only those students eligible under 
Sec.  668.32(e)(3);
    (2) Monitor on an annual basis each participating institution's 
compliance with the requirements and standards contained in the State's 
process, including the success rate as calculated in paragraph (f) of 
this section;
    (3) Require corrective action if an institution is found to be in 
noncompliance with the State process requirements;
    (4) Provide a participating institution that has failed to achieve 
the success rate required under paragraphs (e)(1) and (f) up to three 
years to achieve compliance;
    (5) Terminate an institution from the State process if the 
institution refuses or fails to comply with the State process 
requirements, including exceeding the total number of students 
referenced in paragraph (b)(2) of this section; and
    (6) Prohibit an institution from participating in the State process 
for at least five years after termination.
    (d)(1) The Secretary responds to a State's request for approval of 
its State process within six months after the Secretary's receipt of 
that request. If the Secretary does not respond by the end of six 
months, the State's process is deemed to be approved.
    (2) An approved State process becomes effective for purposes of 
determining student eligibility for title IV, HEA program funds under 
this subpart--
    (i) On the date the Secretary approves the process; or
    (ii) Six months after the date on which the State submits the 
process to the Secretary for approval, if the Secretary neither 
approves nor disapproves the process during that six-month period.
    (e) After the initial two-year period described in paragraph (b) of 
this section, the State must reapply for continued participation and, 
in its application--
    (1) Demonstrate that the students it admits under that process at 
each participating institution have a success rate as determined under 
paragraph (f) of this section that is within 85 percent of the success 
rate of students with high school diplomas;
    (2) Demonstrate that the State's process continues to satisfy the 
requirements in paragraphs (a), (c), and (d) of this section; and
    (3) Report information to the Department on the enrollment and 
success of participating students by eligible career pathway program 
and by race, gender, age, economic circumstances, and educational 
attainment, to the extent available.
    (f) The State must calculate the success rate for each 
participating institution as referenced in paragraph (e)(1) of this 
section by--
    (1) Determining the number of students with high school diplomas or 
equivalent who, during the applicable award year described in paragraph 
(g)(1) of this section, enrolled in the same programs as students 
participating in the State process at each participating institution 
and--
    (i) Successfully completed education or training programs;
    (ii) Remained enrolled in education or training programs at the end 
of that award year; or
    (iii) Successfully transferred to and remained enrolled in another 
institution at the end of that award year;
    (2) Determining the number of students with high school diplomas or 
equivalent who, during the applicable award year described in paragraph 
(g)(1) of this section, enrolled in the same programs as students 
participating in

[[Page 32498]]

the State process at each participating institution;
    (3) Determining the number of students calculated in paragraph 
(f)(2) of this section who remained enrolled after subtracting the 
number of students who subsequently withdrew or were expelled from each 
participating institution and received a 100 percent refund of their 
tuition under the institution's refund policies;
    (4) Dividing the number of students determined under paragraph 
(f)(1) of this section by the number of students determined under 
paragraph (f)(3) of this section; and
    (5) Making the calculations described in paragraphs (f)(1) through 
(f)(4) of this section for students who enrolled through a State 
process in each participating institution.
    (g)(1) For purposes of paragraph (f) of this section, the 
applicable award year is the latest complete award year for which 
information is available.
    (2) If no students are enrolled in an eligible career pathway 
program through a State process, then the State will receive a one-year 
extension to its initial approval of its State process.
    (h) A State must submit reports on its State process, in accordance 
with deadlines and procedures established and published by the 
Secretary in the Federal Register, with such information as the 
Secretary requires.
    (i) The Secretary approves a State process as described in 
paragraph (e) of this section for a period not to exceed five years.
    (j)(1) The Secretary withdraws approval of a State process if the 
Secretary determines that the State process violated any terms of this 
section or that the information that the State submitted as a basis for 
approval of the State process was inaccurate.
    (i) If a State has not terminated an institution from the State 
process under paragraph (c)(5) of this section for failure to meet the 
success rate, then the Secretary withdraws approval of the State 
process, except in accordance with paragraph (j)(1)(ii) of this 
section.
    (ii) At the Secretary's discretion, under exceptional 
circumstances, the State process may be approved once for a two-year 
period.
    (iii) If 50 percent or more participating institutions across all 
States do not meet the success rate in a given year, then the Secretary 
may lower the success rate to no less than 75 percent for two years.
    (2) The Secretary provides a State with the opportunity to contest 
a finding that the State process violated any terms of this section or 
that the information that the State submitted as a basis for approval 
of the State process was inaccurate.
    (3) If the Secretary upholds the withdrawal of approval of a State 
process, then the State cannot reapply to the Secretary for a period of 
five years.

(Approved by the Office of Management and Budget under control 
number 1845-0049)
(Authority: 20 U.S.C. 1091(d))

0
15. Adding Sec.  668.157 to subpart J to read as follows:


Sec.  668.157  Eligible career pathway program.

    (a) An institution demonstrates to the Secretary that a student is 
enrolled in an eligible career pathway program by documenting that--
    (1) The student has enrolled in or is receiving all three of the 
following elements simultaneously--
    (i) An eligible postsecondary program as defined in Sec.  668.8;
    (ii) Adult education and literacy activities under the Workforce 
Innovation and Opportunity Act as described in 34 CFR 463.30 that 
assist adults in attaining a secondary school diploma or its recognized 
equivalent and in the transition to postsecondary education and 
training; and
    (iii) Workforce preparation activities as described in 34 CFR 
463.34;
    (2) The program aligns with the skill needs of industries in the 
State or regional labor market in which the institution is located, 
based on research the institution has conducted, including--
    (i) Government reports identifying in-demand occupations in the 
State or regional labor market;
    (ii) Surveys, interviews, meetings, or other information obtained 
by the institution regarding the hiring needs of employers in the State 
or regional labor market; and
    (iii) Documentation that demonstrates direct engagement with 
industry;
    (3) The skill needs described in paragraph (a)(2) of this section 
align with the specific coursework and postsecondary credential 
provided by the postsecondary program or other required training;
    (4) The program provides academic and career counseling services 
that assist students in pursuing their credential and obtaining jobs 
aligned with skill needs described in paragraph (a)(2) of this section, 
and identifies the individuals providing the career counseling 
services;
    (5) The appropriate education is offered, concurrently with and in 
the same context as workforce preparation activities and training for a 
specific occupation or occupational cluster through an agreement, 
memorandum of understanding, or some other evidence of alignment of 
postsecondary and adult education providers that ensures the secondary 
education is aligned with the students' career objectives; and
    (6) The program is designed to lead to a valid high school diploma 
as defined in Sec.  668.16(p) or its recognized equivalent.
    (b) For career pathway programs that do not enroll students through 
a State process as defined in Sec.  668.156, the Secretary will verify 
the eligibility of eligible career pathway programs for title IV, HEA 
program purposes pursuant to paragraph (a) of this section. The 
Secretary provides an institution with the opportunity to appeal any 
adverse eligibility decision.
0
 16. Section 668.171, as amended October 28, 2022 at 87 FR 65495, is 
further amended by revising paragraph (b) introductory text, paragraphs 
(b)(3), and (c) through (i) to read as follows:


Sec.  668.171  General

* * * * *
    (b) General standards of financial responsibility. Except as 
provided in paragraph (h) of this section, the Department considers an 
institution to be financially responsible if the Department determines 
that--
* * * * *
    (3) The institution is able to meet all of its financial 
obligations and provide the administrative resources necessary to 
comply with title IV, HEA program requirements. An institution is not 
deemed able to meet its financial or administrative obligations if--
    (i) It fails to make refunds under its refund policy, return title 
IV, HEA program funds for which it is responsible under Sec.  668.22, 
or pay title IV, HEA credit balances as required under Sec.  
668.164(h)(2);
    (ii) It fails to make repayments to the Department for any debt or 
liability arising from the institution's participation in the title IV, 
HEA programs;
    (iii) It fails to make a payment in accordance with an existing 
undisputed financial obligation for more than 90 days;
    (iv) It fails to satisfy payroll obligations in accordance with its 
published payroll schedule;
    (v) It borrows funds from retirement plans or restricted funds 
without authorization; or
    (vi) It is subject to an action or event described in paragraph (c) 
of this section (mandatory triggering events), or an action or event 
that the Department has determined to have a material adverse effect on 
the financial condition

[[Page 32499]]

of the institution under paragraph (d) of this section (discretionary 
triggering events); and
* * * * *
    (c) Mandatory triggering events. (1) Except for the mandatory 
triggers that require a recalculation of the institution's composite 
score, the mandatory triggers in this paragraph (c) constitute 
automatic failures of financial responsibility. For any mandatory 
triggers under this paragraph (c) that result in a recalculated 
composite score of less than 1.0, and for those mandatory triggers that 
constitute automatic failures of financial responsibility, the 
Department will require the institution to provide financial protection 
as set forth in this subpart. The financial protection required under 
this paragraph is not less than 10 percent of the total title IV, HEA 
funding in the prior fiscal year. If the Department requires financial 
protection as a result of more than one mandatory or discretionary 
trigger, the Department will require separate financial protection for 
each individual trigger. The Department will consider whether the 
financial protection can be released following the institution's 
submission of two full fiscal years of audited financial statements 
following the Department's notice that requires the posting of the 
financial protection. In making this determination, the Department 
considers whether the administrative or financial risk caused by the 
event has ceased or been resolved, including full payment of all 
damages, fines, penalties, liabilities, or other financial relief.
    (2) The following are mandatory triggers:
    (i) Debts, liabilities, and losses. (A) For an institution or 
entity with a composite score of less than 1.5, other than a composite 
score calculated under 34 CFR 600.20(g) and Sec.  668.176, that is 
required to pay a debt or incurs a liability from a settlement, 
arbitration proceeding, or a final judgment in a judicial proceeding, 
and as a result of the debt or liability, the recalculated composite 
score for the institution or entity is less than 1.0, as determined by 
the Department under paragraph (e) of this section;
    (B) The institution or any entity whose financial statements were 
submitted in the prior fiscal year to meet the requirements of 34 CFR 
600.20(g) or this subpart, is sued by a Federal or State authority to 
impose an injunction, establish fines or penalties, or to obtain 
financial relief such as damages, or through a qui tam lawsuit in which 
the Federal government has intervened, and the action was brought on or 
after July 1, 2024, and the action has been pending for 120 days, or a 
qui tam has been pending for 120 days following intervention, and no 
motion to dismiss has been filed, or if a motion to dismiss has been 
filed within 120 days and denied, upon such denial.
    (C) The Department has initiated action to recover from the 
institution the cost of adjudicated claims in favor of borrowers under 
the loan discharge provisions in 34 CFR part 685 and, the recalculated 
composite score for the institution or entity as a result of the 
adjudicated claims is less than 1.0, as determined by the Department 
under paragraph (e) of this section; or
    (D) For an institution or entity that has submitted an application 
for a change in ownership under 34 CFR 600.20 that is required to pay a 
debt or incurs a liability from a settlement, arbitration proceeding, 
final judgment in a judicial proceeding, or a determination arising 
from an administrative proceeding described in paragraph (c)(2)(i)(B) 
or (C) of this section, at any point through the end of the second full 
fiscal year after the change in ownership has occurred.
    (ii) Withdrawal of owner's equity. (A) For a proprietary 
institution whose composite score is less than 1.5, or for any 
proprietary institution through the end of the first full fiscal year 
following a change in ownership, and there is a withdrawal of owner's 
equity by any means, including by declaring a dividend, unless the 
withdrawal is a transfer to an entity included in the affiliated entity 
group on whose basis the institution's composite score was calculated; 
or is the equivalent of wages in a sole proprietorship or general 
partnership or a required dividend or return of capital; and
    (B) As a result of that withdrawal, the institution's recalculated 
composite score for the entity whose financial statements were 
submitted to meet the requirements of Sec.  668.23 for the annual 
submission, or Sec.  600.20(g) or (h) for a change in ownership, is 
less than 1.0, as determined by the Department under paragraph (e) of 
this section.
    (iii) Gainful employment. As determined annually by the Department, 
the institution received at least 50 percent of its title IV, HEA 
program funds in its most recently completed fiscal year from gainful 
employment (GE) programs that are ``failing'' under subpart S of this 
part.
    (iv) Teach-out plans. The institution is required to submit a 
teach-out plan or agreement, by a State or Federal agency, an 
accrediting agency or other oversight body.
    (v) State actions. The institution is cited by a State licensing or 
authorizing agency for failing to meet State or agency requirements and 
the agency provides notice that it will withdraw or terminate the 
institution's licensure or authorization if the institution does not 
take the steps necessary to come into compliance with that requirement.
    (vi) Publicly listed entities. For an institution that is directly 
or indirectly owned at least 50 percent by an entity whose securities 
are listed on a domestic or foreign exchange, the entity is subject to 
one or more of the following actions or events:
    (A) SEC actions. The U.S. Securities and Exchange Commission (SEC) 
issues an order suspending or revoking the registration of any of the 
entity's securities pursuant to section 12(j) of the Securities 
Exchange Act of 1934 (the ``Exchange Act'') or suspends trading of the 
entity's securities pursuant to section 12(k) of the Exchange Act.
    (B) Other SEC actions. The SEC files an action against the entity 
in district court or issues an order instituting proceedings pursuant 
to section 12(j) of the Exchange Act.
    (C) Exchange actions. The exchange on which the entity's securities 
are listed notifies the entity that it is not in compliance with the 
exchange's listing requirements, or its securities are delisted.
    (D) SEC reports. The entity failed to file a required annual or 
quarterly report with the SEC within the time period prescribed for 
that report or by any extended due date under 17 CFR 240.12b-25.
    (E) Foreign exchanges or Oversight Authority. The entity is subject 
to an event, notification, or condition by a foreign exchange or 
oversight authority that the Department determines is equivalent to 
those identified in paragraphs (c)(2)(vi)(A)-(D) of this section.
    (vii) Non-Federal educational assistance funds. For its most 
recently completed fiscal year, a proprietary institution did not 
receive at least 10 percent of its revenue from sources other than 
Federal educational assistance, as provided under Sec.  668.28(c). The 
financial protection provided under this requirement will remain in 
place until the institution passes the 90/10 revenue requirement for 
two consecutive years.
    (viii) Cohort default rates. The institution's two most recent 
official cohort default rates are 30 percent or greater, as determined 
under subpart N of this part, unless--
    (A) The institution files a challenge, request for adjustment, or 
appeal under

[[Page 32500]]

subpart N of this part with respect to its rates for one or both of 
those fiscal years; and
    (B) That challenge, request, or appeal remains pending, results in 
reducing below 30 percent the official cohort default rate for either 
or both of those years or precludes the rates from either or both years 
from resulting in a loss of eligibility or provisional certification.
    (ix) Loss of eligibility. The institution has lost eligibility to 
participate in another Federal educational assistance program due to an 
administrative action against the school.
    (x) Contributions and distributions. (A) An institution's financial 
statements required to be submitted under Sec.  668.23 reflect a 
contribution in the last quarter of the fiscal year, and the 
institution then made a distribution during the first two quarters of 
the next fiscal year; and
    (B) The offset of such distribution against the contribution 
results in a recalculated composite score of less than 1.0, as 
determined by the Department under paragraph (e) of this section.
    (xi) Creditor events. As a result of an action taken by the 
Department, the institution or any entity included in the financial 
statements submitted in the current or prior fiscal year under 34 CFR 
600.20(g) or (h), Sec.  668.23, or this subpart is subject to a default 
or other adverse condition under a line of credit, loan agreement, 
security agreement, or other financing arrangement.
    (xii) Declaration of financial exigency. The institution declares a 
state of financial exigency to a Federal, State, Tribal or foreign 
governmental agency or its accrediting agency.
    (xiii) Receivership. The institution, or an owner or affiliate of 
the institution that has the power, by contract or ownership interest, 
to direct or cause the direction of the management of policies of the 
institution, files for a State or Federal receivership, or an 
equivalent proceeding under foreign law, or has entered against it an 
order appointing a receiver or appointing a person of similar status 
under foreign law.
    (d) Discretionary triggering events. The Department may determine 
that an institution is not able to meet its financial or administrative 
obligations if the Department determines that a discretionary 
triggering event is likely to have a significant adverse effect on the 
financial condition of the institution. For those discretionary 
triggers that the Department determines will have a significant adverse 
effect on the financial condition of the institution, the Department 
will require the institution to provide financial protection as set 
forth in this subpart. The financial protection required under this 
paragraph is not less than 10 percent of the total title IV, HEA 
funding in the prior fiscal year. If the Department requires financial 
protection as a result of more than one mandatory or discretionary 
trigger, the Department will require separate financial protection for 
each individual trigger. The Department will consider whether the 
financial protection can be released following the institution's 
submission of two full fiscal years of audited financial statements 
following the Department's notice that requires the posting of the 
financial protection. In making this determination, the Department 
considers whether the administrative or financial risk caused by the 
event has ceased or been resolved, including full payment of all 
damages, fines, penalties, liabilities, or other financial relief. The 
discretionary triggers include, but are not limited to, the following 
events:
    (1) Accrediting agency and government agency actions. The 
institution's accrediting agency or a Federal, State, local or Tribal 
authority places the institution on probation or issues a show-cause 
order or places the institution in a comparable status that poses an 
equivalent or greater risk to its accreditation, authorization or 
eligibility.
    (2) Other defaults, delinquencies, creditor events, and judgments.
    (i) Except as provided in paragraph (c)(2)(xi) of this section, the 
institution or any entity included in the financial statements 
submitted in the current or prior fiscal year under 34 CFR 600.20(g) or 
(h), Sec.  668.23, or this subpart is subject to a default or other 
condition under a line of credit, loan agreement, security agreement, 
or other financing arrangement;
    (ii) Under that line of credit, loan agreement, security agreement, 
or other financing arrangement, a monetary or nonmonetary default or 
delinquency or other event occurs that allows the creditor to require 
or impose on the institution or any entity included in the financial 
statements submitted in the current or prior fiscal year under 34 CFR 
600.20(g) or (h), Sec.  668.23, or this subpart, an increase in 
collateral, a change in contractual obligations, an increase in 
interest rates or payments, or other sanctions, penalties, or fees;
    (iii) Any creditor of the institution or any entity included in the 
financial statements submitted in the current or prior fiscal year 
under 34 CFR 600.20(g) or (h), Sec.  668.23, or this subpart takes 
action to terminate, withdraw, limit, or suspend a loan agreement or 
other financing arrangement or calls due a balance on a line of credit 
with an outstanding balance;
    (iv) The institution or any entity included in the financial 
statements submitted in the current or prior fiscal year under 34 CFR 
600.20(g) or (h), Sec.  668.23, or this subpart enters into a line of 
credit, loan agreement, security agreement, or other financing 
arrangement whereby the institution or entity may be subject to a 
default or other adverse condition as a result of any action taken by 
the Department; or
    (v) The institution or any entity included in the financial 
statements submitted in the current or prior fiscal year under 34 CFR 
600.20(g) or (h), Sec.  668.23, or this subpart has a judgment awarding 
monetary relief entered against it that is subject to appeal or under 
appeal.
    (3) Fluctuations in Title IV volume. There is a significant 
fluctuation between consecutive award years, or a period of award 
years, in the amount of Direct Loan or Pell Grant funds, or a 
combination of those funds, received by the institution that cannot be 
accounted for by changes in those programs.
    (4) High annual dropout rates. As calculated by the Department, the 
institution has high annual dropout rates.
    (5) Interim reporting. For an institution required to provide 
additional financial reporting to the Department due to a failure to 
meet the financial responsibility standards in this subpart or due to a 
change in ownership, there are negative cash flows, failure of other 
liquidation ratios, cash flows that significantly miss the projections 
submitted to the Department, withdrawal rates that increase 
significantly, or other indicators of a material change in the 
financial condition of the institution.
    (6) Pending borrower defense claims. There are pending claims for 
borrower relief discharge under 34 CFR 685.400 from students or former 
students of the institution and the Department has formed a group 
process to consider claims under 34 CFR 685.402 and, if approved, those 
claims could be subject to recoupment.
    (7) Discontinuation of programs. The institution discontinues 
academic programs, that affect more than 25 percent of enrolled 
students.
    (8) Closure of locations. The institution closes more than 50 
percent of its locations or closes locations that enroll more than 25 
percent of its students.
    (9) State citations. The institution is cited by a State licensing 
or authorizing

[[Page 32501]]

agency for failing to meet State or agency requirements.
    (10) Loss of program eligibility. One or more programs at the 
institution has lost eligibility to participate in another Federal 
educational assistance program due to an administrative action against 
the school or its programs.
    (11) Exchange disclosures. If an institution is directly or 
indirectly owned at least 50 percent by an entity whose securities are 
listed on a domestic or foreign exchange, the entity discloses in a 
public filing that it is under investigation for possible violations of 
State, Federal or foreign law.
    (12) Actions by another Federal agency. The institution is cited 
and faces loss of education assistance funds from another Federal 
agency if it does not comply with the agency's requirements.
    (e) Recalculating the composite score. When a recalculation of an 
institution's most recent composite score is required by the mandatory 
triggering events described in paragraph (c) of this section, the 
Department makes the recalculation as follows:
    (1) For a proprietary institution, debts, liabilities, and losses 
(including cumulative debts, liabilities, and losses for all triggering 
events) since the end of the prior fiscal year incurred by the entity 
whose financial statements were submitted in the prior fiscal year to 
meet the requirements of Sec.  668.23 or this subpart, and debts, 
liabilities, and losses (including cumulative debts, liabilities, and 
losses for all triggering events) through the end of the first full 
fiscal year following a change in ownership incurred by the entity 
whose financial statements were submitted for 34 CFR 600.20(g) or (h), 
will be adjusted as follows:
    (i) For the primary reserve ratio, increasing expenses and 
decreasing adjusted equity by that amount.
    (ii) For the equity ratio, decreasing modified equity by that 
amount.
    (iii) For the net income ratio, decreasing income before taxes by 
that amount.
    (2) For a nonprofit institution, debts, liabilities, and losses 
(including cumulative debts, liabilities, and losses for all triggering 
events) since the end of the prior fiscal year incurred by the entity 
whose financial statements were submitted in the prior fiscal year to 
meet the requirements of Sec.  668.23 or this subpart, and debts, 
liabilities, and losses (including cumulative debts, liabilities, and 
losses for all triggering events) through the end of the first full 
fiscal year following a change in ownership incurred by the entity 
whose financial statements were submitted for 34 CFR 600.20(g) or (h), 
will be adjusted as follows:
    (i) For the primary reserve ratio, increasing expenses and 
decreasing expendable net assets by that amount.
    (ii) For the equity ratio, decreasing modified net assets by that 
amount.
    (iii) For the net income ratio, decreasing change in net assets 
without donor restrictions by that amount.
    (3) For a proprietary institution, the withdrawal of equity 
(including cumulative withdrawals of equity) since the end of the prior 
fiscal year from the entity whose financial statements were submitted 
in the prior fiscal year to meet the requirements of Sec.  668.23 or 
this subpart, and the withdrawal of equity (including cumulative 
withdrawals of equity) through the end of the first full fiscal year 
following a change in ownership from the entity whose financial 
statements were submitted for 34 CFR 600.20(g) or (h), will be adjusted 
as follows:
    (i) For the primary reserve ratio, decreasing adjusted equity by 
that amount.
    (ii) For the equity ratio, decreasing modified equity by that 
amount.
    (4) For a proprietary institution, a contribution and distribution 
in the entity whose financial statements were submitted in the prior 
fiscal year to meet the requirements of Sec.  668.23, this subpart, or 
34 CFR 600.20(g) will be adjusted as follows:
    (i) For the primary reserve ratio, decreasing adjusted equity by 
the amount of the distribution.
    (ii) For the equity ratio, decreasing modified equity by the amount 
of the distribution.
    (f) Reporting requirements. (1) In accordance with procedures 
established by the Department, an institution must timely notify the 
Department of the following actions or events:
    (i) For a liability incurred under paragraph (c)(2)(i)(A) of this 
section, no later than 10 days after the date of written notification 
to the institution or entity of the final judgment or determination.
    (ii) For a lawsuit described in paragraph (c)(2)(i)(B) of this 
section, no later than 10 days after the institution or entity is 
served with the complaint, and an updated notice must be provided 10 
days after the suit has been pending for 120 days.
    (iii) No later than 10 days after the institution receives a civil 
investigative demand, subpoena, request for documents or information, 
or other formal or informal inquiry from any local, State, Tribal, 
Federal, or foreign government or government entity.
    (iv) For a withdrawal of owner's equity described in paragraph 
(c)(2)(ii) of this section--
    (A) For a capital distribution that is the equivalent of wages in a 
sole proprietorship or general partnership, no later than 10 days after 
the date the Department notifies the institution that its composite 
score is less than 1.5. In response to that notice, the institution 
must report the total amount of the wage-equivalent distributions it 
made during its prior fiscal year and any distributions that were made 
to pay any taxes related to the operation of the institution. During 
its current fiscal year and the first six months of its subsequent 
fiscal year (18-month period), the institution is not required to 
report any distributions to the Department, provided that the 
institution does not make wage-equivalent distributions that exceed 150 
percent of the total amount of wage-equivalent distributions it made 
during its prior fiscal year, less any distributions that were made to 
pay any taxes related to the operation of the institution. However, if 
the institution makes wage-equivalent distributions that exceed 150 
percent of the total amount of wage-equivalent distributions it made 
during its prior fiscal year less any distributions that were made to 
pay any taxes related to the operation of the institution at any time 
during the 18-month period, it must report each of those distributions 
no later than 10 days after they are made, and the Department 
recalculates the institution's composite score based on the cumulative 
amount of the distributions made at that time;
    (B) For a distribution of dividends or return of capital, no later 
than 10 days after the dividends are declared or the amount of return 
of capital is approved; or
    (C) For a related party receivable/other assets, no later than 10 
days after that receivable/other assets are booked or occur.
    (v) For a contribution and distribution described in paragraph 
(c)(2)(x) of this section, no later than 10 days following each 
transaction.
    (vi) For the provisions relating to a publicly listed entity under 
paragraph (c)(2)(vi) or (d)(11) of this section, no later than 10 days 
after the date that such event occurs.
    (vii) For any action by an accrediting agency, Federal, State, 
local or Tribal authority that is either a mandatory or discretionary 
trigger, no later than 10 days after the date on which the institution 
is notified of the action.
    (viii) For the creditor events described in paragraph (c)(2)(xi) of 
this section, no later than 10 days after the date on

[[Page 32502]]

which the institution is notified of the action by its creditor.
    (ix) For the other defaults, delinquencies, or creditor events 
described in paragraph (d)(2)(i), (ii), (iii), and (iv) of this 
section, no later than 10 days after the event occurs, with an update 
no later than 10 days after the creditor waives the violation, or the 
creditor imposes sanctions or penalties, including sanctions or 
penalties imposed in exchange for or as a result of granting the 
waiver. For a monetary judgment subject to appeal or under appeal 
described in paragraph (d)(2)(v), no later than 10 days after the court 
enters the judgment, with an update no later than 10 days after the 
appeal is filed or the period for appeal expires without a notice of 
appeal being filed. If an appeal is filed, no later than 10 days after 
the decision on the appeal is issued.
    (x) For the non-Federal educational assistance funds provision in 
paragraph (c)(2)(vii) of this section, no later than 45 days after the 
end of the institution's fiscal year, as provided in Sec.  
668.28(c)(3).
    (xi) For an institution or entity that has submitted an application 
for a change in ownership under 34 CFR 600.20 that is required to pay a 
debt or incurs a liability from a settlement, arbitration proceeding, 
final judgment in a judicial proceeding, or a determination arising 
from an administrative proceeding described in paragraph (c)(2)(i)(B) 
or (C) of this section, the institution must report this no later than 
ten days after the action. This reporting requirement is applicable to 
any action described herein occurring through the end of the second 
full fiscal year after the change in ownership has occurred.
    (xii) For a discontinuation of academic programs described in 
paragraph (d)(7) of this section, no later than 10 days after the 
discontinuation of programs.
    (xiii) For a failure to meet any of the standards in paragraph (b) 
of this section, no later than 10 days after the institution ceases to 
meet the standard.
    (xiv) For a declaration of financial exigency, no later than 10 
days after the institution communicates its declaration to a Federal, 
State, Tribal or foreign governmental agency or its accrediting agency.
    (xv) If the institution, or an owner or affiliate of the 
institution that has the power, by contract or ownership interest, to 
direct or cause the direction of the management of policies of the 
institution, files for a State or Federal receivership, or an 
equivalent proceeding under foreign law, or has entered against it an 
order appointing a receiver or appointing a person of similar status 
under foreign law, no later than 10 days after either the filing for 
receivership or the order appointing a receiver or appointing a person 
of similar status under foreign law, as applicable.
    (xvi) The institution closes more than 50 percent of its locations 
or closes locations that enroll more than 25 percent of its students no 
later than 10 days after the closure that meets or exceeds these 
thresholds.
    (xvii) If the institution is directly or indirectly owned at least 
50 percent by an entity whose securities are listed on a domestic or 
foreign exchange, and the entity discloses in a public filing that it 
is under investigation for possible violations of State, Federal or 
foreign law, no later than ten days after the public filing.
    (2) The Department may take an administrative action under 
paragraph (i) of this section against an institution, or determine that 
the institution is not financially responsible, if it fails to provide 
timely notice to the Department as provided under paragraph (f)(1) of 
this section, or fails to respond, within the timeframe specified by 
the Department, to any determination made, or request for information, 
by the Department under paragraph (f)(3) of this section.
    (3)(i) In its notice to the Department under this paragraph, or in 
its response to a preliminary determination by the Department that the 
institution is not financially responsible because of a triggering 
event under paragraph (c) or (d) of this section, in accordance with 
procedures established by the Department, the institution may--
    (A) Show that the creditor waived a violation of a loan agreement 
under paragraph (d)(2) of this section. However, if the creditor 
imposes additional constraints or requirements as a condition of 
waiving the violation, or imposes penalties or requirements under 
paragraph (d)(2)(ii) of this section, the institution must identify and 
describe those penalties, constraints, or requirements and demonstrate 
that complying with those actions will not significantly affect the 
institution's ability to meet its financial obligations;
    (B) Show that the triggering event has been resolved, or 
demonstrate that the institution has insurance that will cover all or 
part of the liabilities that arise under paragraph (c)(2)(i)(A) of this 
section; or
    (C) Explain or provide information about the conditions or 
circumstances that precipitated a triggering event under paragraph (c) 
or (d) of this section that demonstrates that the triggering event has 
not had, or will not have, a material adverse effect on the financial 
condition of the institution.
    (ii) The Department will consider the information provided by the 
institution in determining whether to issue a final determination that 
the institution is not financially responsible.
    (g) Public institutions. (1) The Department considers a domestic 
public institution to be financially responsible if the institution--
    (i) Notifies the Department that it is designated as a public 
institution by the State, local, or municipal government entity, Tribal 
authority, or other government entity that has the legal authority to 
make that designation; and
    (ii) Provides a letter or other documentation acceptable to the 
Department and signed by an official of that government entity 
confirming that the institution is a public institution and is backed 
by the full faith and credit of the government entity. This letter must 
be submitted before the institution's initial certification, upon a 
change in ownership and request to be recognized as a public 
institution, and for the first re-certification of a public institution 
after the effective date of these regulations. Thereafter, the letter 
must be submitted--
    (A) When the institution submits an application for re-
certification following any period of provisional certification;
    (B) Within 10 business days following a change in the governmental 
status of the institution whereby the institution is no longer backed 
by the full faith and credit of the government entity; or
    (C) Upon request by the Department;
    (iii) Is not subject to a condition of past performance under Sec.  
668.174; and
    (iv) Is not subject to an automatic mandatory triggering event as 
described in paragraph (c) of this section or a discretionary 
triggering event as described in paragraph (d) of this section that the 
Department determines will have a significant adverse effect on the 
financial condition of the institution.
    (2) The Department considers a foreign public institution to be 
financially responsible if the institution--
    (i) Notifies the Department that it is designated as a public 
institution by the country or other government entity that has the 
legal authority to make that designation; and
    (ii) Provides a letter or other documentation acceptable to the 
Department and signed by an official of that country or other 
government entity confirming that the institution is a public 
institution and is backed by the

[[Page 32503]]

full faith and credit of the country or other government entity. This 
letter must be submitted before the institution's initial 
certification, upon a change in ownership and request to be recognized 
as a public institution, and for the first re-certification of a public 
institution after the effective date of these regulations. Thereafter, 
the letter must be submitted in the following circumstances--
    (A) When the institution submits an application for re-
certification following any period of provisional certification;
    (B) Within 10 business days following a change in the governmental 
status of the institution whereby the institution is no longer backed 
by the full faith and credit of the government entity; or
    (C) Upon request by the Department;
    (iii) Is not subject to a condition of past performance under Sec.  
668.174 and
    (iv) Is not subject to an automatic mandatory triggering event as 
described in paragraph (c) of this section or a discretionary 
triggering event as described in paragraph (d) of this section that the 
Department determines will have a significant adverse effect on the 
financial condition of the institution.
    (h) Audit opinions and disclosures. Even if an institution 
satisfies all of the general standards of financial responsibility 
under paragraph (b) of this section, the Department does not consider 
the institution to be financially responsible if the institution's 
audited financial statements--
    (1) Include an opinion expressed by the auditor that was an 
adverse, qualified, or disclaimed opinion, unless the Department 
determines that the adverse, qualified, or disclaimed opinion does not 
have a significant bearing on the institution's financial condition; or
    (2) Include a disclosure in the notes to the institution's or 
entity's audited financial statements about the institution's or 
entity's diminished liquidity, ability to continue operations, or 
ability to continue as a going concern, unless the Department 
determines that the diminished liquidity, ability to continue 
operations, or ability to continue as a going concern has been 
alleviated. The Department may conclude that diminished liquidity, 
ability to continue operations, or ability to continue as a going 
concern has not been alleviated even if the disclosure provides that 
those concerns have been alleviated.
    (i) Administrative actions. If the Department determines that an 
institution is not financially responsible under the standards and 
provisions of this section or under an alternative standard in Sec.  
668.175, or the institution does not submit its financial statements 
and compliance audits by the date and in the manner required under 
Sec.  668.23, the Department may--
    (1) Initiate an action under subpart G of this part to fine the 
institution, or limit, suspend, or terminate the institution's 
participation in the title IV, HEA programs;
    (2) For an institution that is provisionally certified, take an 
action against the institution under the procedures established in 
Sec.  668.13(d); or
    (3) Deny the institution's application for certification or 
recertification to participate in the title IV, HEA programs.
0
17. Section 668.174 is amended by:
0
a. Revising paragraphs (a)(2) and (b)(2)(i);
0
b. Adding paragraph (b)(3); and
0
c. Revising paragraph (c)(1).
    The revisions and addition read as follows:


Sec.  668.174  Past performance

    (a) * * *
    (2) In either of its two most recently submitted compliance audits 
had a final audit determination or in a Departmentally issued report, 
including a final program review determination report, issued in its 
current fiscal year or either of its preceding two fiscal years, had a 
program review finding that resulted in the institution's being 
required to repay an amount greater than five percent of the funds that 
the institution received under the title IV, HEA programs during the 
year covered by that audit or program review;
* * * * *
    (b) * * *
    (2) * * *
    (i) The institution notifies the Department, within the time 
permitted and as provided under 34 CFR 600.21, that the person or 
entity referenced in paragraph (b)(1) of this section exercises 
substantial control over the institution; and
* * * * *
    (3) An institution is not financially responsible if an owner who 
exercises substantial control, or the owner's spouse, has been in 
default on a Federal student loan, including parent PLUS loans, in the 
preceding five years, unless--
    (i) The defaulted Federal student loan has been fully repaid and 
five years have elapsed since the repayment in full;
    (ii) The defaulted Federal student loan has been approved for, and 
the borrower is in compliance with, a rehabilitation agreement and has 
been current for five consecutive years; or
    (iii) The defaulted Federal student loan has been discharged, 
canceled or forgiven by the Department.
    (c) * * *
    (1) An ownership interest is defined in 34 CFR 600.31(b).
* * * * *
0
18. Section 668.175 is amended by revising paragraphs (b), (c), (d), 
(f)(1) and (2) to read as follows:


Sec.  668.175  Alternative standard and requirements.

* * * * *
    (b) Letter of credit or cash escrow alternative for new 
institutions. A new institution that is not financially responsible 
solely because the Department determines that its composite score is 
less than 1.5, qualifies as a financially responsible institution by 
submitting an irrevocable letter of credit that is acceptable and 
payable to the Department, or providing other surety described under 
paragraph (h)(2)(i) of this section, for an amount equal to at least 
one-half of the amount of title IV, HEA program funds that the 
Department determines the institution will receive during its initial 
year of participation. A new institution is an institution that seeks 
to participate for the first time in the title IV, HEA programs.
    (c) Financial protection alternative for participating 
institutions. A participating institution that is not financially 
responsible, either because it does not satisfy one or more of the 
standards of financial responsibility under Sec.  668.171(b), (c), or 
(d), or because of an audit opinion or disclosure about the 
institution's liquidity, ability to continue operations, or ability to 
continue as a going concern described under Sec.  668.171(h), qualifies 
as a financially responsible institution by submitting an irrevocable 
letter of credit that is acceptable and payable to the Department, or 
providing other financial protection described under paragraph 
(h)(2)(i) of this section, for an amount determined by the Department 
that is not less than one-half of the title IV, HEA program funds 
received by the institution during its most recently completed fiscal 
year, except that this requirement does not apply to a public 
institution. For purposes of a failure under Sec.  668.171(b)(2) or 
(3), the institution must also remedy the issue(s) that gave rise to 
the failure to the Department's satisfaction.
    (d) Zone alternative. (1) A participating institution that is not 
financially responsible solely because the Department determines that 
its composite score under Sec.  668.172 is less than 1.5 may 
participate in the title IV,

[[Page 32504]]

HEA programs as a financially responsible institution for no more than 
three consecutive years, beginning with the year in which the 
Department determines that the institution qualifies under this 
alternative.
    (i)(A) An institution qualifies initially under this alternative 
if, based on the institution's audited financial statements for its 
most recently completed fiscal year, the Department determines that its 
composite score is in the range from 1.0 to 1.4; and
    (B) An institution continues to qualify under this alternative if, 
based on the institution's audited financial statements for each of its 
subsequent two fiscal years, the Department determines that the 
institution's composite score is in the range from 1.0 to 1.4.
    (ii) An institution that qualified under this alternative for three 
consecutive years, or for one of those years, may not seek to qualify 
again under this alternative until the year after the institution 
achieves a composite score of at least 1.5, as determined by the 
Department.
    (2) Under the zone alternative, the Department--
    (i) Requires the institution to make disbursements to eligible 
students and parents, and to otherwise comply with the provisions, 
under either the heightened cash monitoring or reimbursement payment 
method described in Sec.  668.162;
    (ii) Requires the institution to provide timely information 
regarding any of the following oversight and financial events--
    (A) Any event that causes the institution, or related entity as 
defined in Accounting Standards Codification (ASC) 850, to realize any 
liability that was noted as a contingent liability in the institution's 
or related entity's most recent audited financial statements; or
    (B) Any losses that are unusual in nature or infrequently occur, or 
both, as defined in accordance with Accounting Standards Update (ASU) 
No. 2015-01 and ASC 225;
    (iii) May require the institution to submit its financial statement 
and compliance audits earlier than the time specified under Sec.  
668.23(a)(4); and
    (iv) May require the institution to provide information about its 
current operations and future plans.
    (3) Under the zone alternative, the institution must--
    (i) For any oversight or financial event described in paragraph 
(d)(2)(ii) of this section for which the institution is required to 
provide information, in accordance with procedures established by the 
Department, notify the Department no later than 10 days after that 
event occurs; and
    (ii) As part of its compliance audit, require its auditor to 
express an opinion on the institution's compliance with the 
requirements under the zone alternative, including the institution's 
administration of the payment method under which the institution 
received and disbursed title IV, HEA program funds.
    (4) If an institution fails to comply with the requirements under 
paragraph (d)(2) or (3) of this section, the Department may determine 
that the institution no longer qualifies under this alternative.
* * * * *
    (f) Provisional certification alternative. (1) The Department may 
permit an institution that is not financially responsible to 
participate in the title IV, HEA programs under a provisional 
certification for no more than three consecutive years if--
    (i) The institution is not financially responsible because it does 
not satisfy the general standards under Sec.  668.171(b), its 
recalculated composite score under Sec.  668.171(e) is less than 1.0, 
it is subject to an action or event under Sec.  668.171(c), or an 
action or event under paragraph (d) has an adverse material effect on 
the institution as determined by the Department, or because of an audit 
opinion or going concern disclosure described in Sec.  668.171(h); or
    (ii) The institution is not financially responsible because of a 
condition of past performance, as provided under Sec.  668.174(a), and 
the institution demonstrates to the Department that it has satisfied or 
resolved that condition; and
    (2) Under this alternative, the institution must--
    (i) Provide to the Department an irrevocable letter of credit that 
is acceptable and payable to the Department, or provide other financial 
protection described under paragraph (h) of this section, for an amount 
determined by the Department that is not less than 10 percent of the 
title IV, HEA program funds received by the institution during its most 
recently completed fiscal year, except that this requirement does not 
apply to a public institution that the Department determines is backed 
by the full faith and credit of the State or equivalent governmental 
entity;
    (ii) Remedy the issue(s) that gave rise to its failure under Sec.  
668.171(b)(2) or (3) to the Department's satisfaction; and
    (iii) Comply with the provisions under the zone alternative, as 
provided under paragraph (d)(2) and (3) of this section.
* * * * *


Sec.  668.176  [Redesignated]

0
19. Redsignate Sec.  668.176 as Sec.  668.177.
0
20. Add Sec.  668.176 to read as follows:


Sec.  668.176  Change in Ownership.

    (a) Purpose. To continue participation in the title IV, HEA 
programs during and following a change in ownership, institutions must 
meet the financial responsibility requirements in this section.
    (b) Materially complete application. To meet the requirements of a 
materially complete application under 34 CFR 600.20(g)(3)(iii) and 
(iv)--
    (1) An institution undergoing a change of ownership and control as 
provided under 34 CFR 600.31 must submit audited financial statements 
of its two most recently completed fiscal years prior to the change in 
ownership, at the level of the change in ownership or the level of 
financial statements required by the Department, that are prepared and 
audited in accordance with the requirements of Sec.  668.23(d);
    (2) The institution must submit audited financial statements of the 
institution's new owner's two most recently completed fiscal years 
prior to the change in ownership that are prepared and audited in 
accordance with the requirements of Sec.  668.23 at the highest level 
of unfractured ownership or at the level required by the Department.
    (i) If the institution's new owner does not have two years of 
acceptable audited financial statements, the institution must provide 
financial protection in the form of a letter of credit or cash to the 
Department in the amount of 25 percent of the title IV, HEA program 
funds received by the institution during its most recently completed 
fiscal year;
    (ii) If the institution's new owner only has one year of acceptable 
financial statements, the institution must provide financial protection 
in the form of a letter of credit or cash to the Department in the 
amount of 10 percent of the title IV, HEA program funds received by the 
institution during its most recently completed fiscal year; or
    (iii) For an entity where no individual new owner obtains control, 
but the combined ownership of the new owners is equal to or exceeds the 
ownership share of the existing ownership, financial protection in the 
form of a letter of credit or cash to the Department in the amount of 
25 percent of the title IV, HEA program funds received by the 
institution during its most recently completed fiscal year, based on 
the

[[Page 32505]]

combined ownership share of the new owners, except for any new owner 
that submits two years or one year of acceptable audited financial 
statements as described in paragraphs (b)(2)(i) and (ii) of this 
section.
    (3) The institution must meet the financial responsibility 
requirements. In general, the Department considers an institution to be 
financially responsible only if it--
    (i) For a for-profit institution evaluated at the ownership level 
required by the Department for the new owner--
    (A) Has not had operating losses in either or both of its two 
latest fiscal years that in sum result in a decrease in tangible net 
worth in excess of 10 percent of the institution's tangible net worth 
at the beginning of the first year of the two-year period. The 
Department may calculate an operating loss for an institution by 
excluding prior period adjustment and the cumulative effect of changes 
in accounting principle. For purposes of this section, the calculation 
of tangible net worth must exclude all related party accounts 
receivable/other assets and all assets defined as intangible in 
accordance with the composite score;
    (B) Has, for its two most recent fiscal years, a positive tangible 
net worth. In applying this standard, a positive tangible net worth 
occurs when the institution's tangible assets exceed its liabilities. 
The calculation of tangible net worth excludes all related party 
accounts receivable/other assets and all assets classified as 
intangible in accordance with the composite score; and
    (C) Has a passing composite score and meets the other financial 
requirements of this subpart for its most recently completed fiscal 
year.
    (ii) For a nonprofit institution evaluated at the ownership level 
required by the Department for the new owner--
    (A) Has, at the end of its two most recent fiscal years, positive 
net assets without donor restrictions. The Department will exclude all 
related party receivables/other assets from net assets without donor 
restrictions and all assets classified as intangibles in accordance 
with the composite score;
    (B) Has not had an excess of net assets without donor restriction 
expenditures over net assets without donor restriction revenues over 
both of its two latest fiscal years that results in a decrease 
exceeding 10 percent in either the net assets without donor 
restrictions from the start to the end of the two-year period or the 
net assets without donor restriction in either one of the two years. 
The Department may exclude from net changes in fund balances for the 
operating loss calculation prior period adjustment and the cumulative 
effect of changes in accounting principle. In calculating the net 
assets without donor restriction, the Department will exclude all 
related party accounts receivable/other assets and all assets 
classified as intangible in accordance with the composite score; and
    (C) Has a passing composite score and meets the other financial 
requirements of this subpart for its most recently completed fiscal 
year.
    (iii) For a public institution, has its liabilities backed by the 
full faith and credit of a State or equivalent governmental entity.
    (4) For a for-profit or nonprofit institution that is not 
financially responsible under paragraph (b)(3) of this section, provide 
financial protection in the form of a letter of credit or cash in an 
amount that is not less than 10 percent of the prior year title IV, HEA 
funding or an amount determined by the Department, and follow the zone 
requirements in Sec.  668.175(d).
    (c) Acquisition debt. (1) Notwithstanding any other provision in 
this section, the Department may determine that the institution is not 
financially responsible following a change in ownership if the amount 
of debt assumed to complete the change in ownership requires payments 
(either periodic or balloon) that are inconsistent with available cash 
to service those payments based on enrollments for the period prior to 
when the payment is or will be due.
    (2) For a for-profit or nonprofit institution that is not 
financially responsible under this provision, provide financial 
protection in the form of a letter of credit or cash in an amount that 
is not less than 10 percent of the prior year title IV, HEA funding or 
an amount determined by the Department, and follow the zone 
requirements in Sec.  668.175(d).
    (d) Terms of the extension. To meet the requirements for a 
temporary provisional program participation agreement following a 
change in ownership, as described in 34 CFR 600.20(h)(3)(i), an 
institution must meet the following requirements:
    (1) For a proprietary institution or a nonprofit institution--
    (i) The institution must provide the Department a same-day balance 
sheet for a proprietary institution or a statement of financial 
position for a nonprofit institution that shows the financial position 
of the institution under its new owner, as of the day after the change 
in ownership, and that meets the following requirements:
    (A) The same-day balance sheet or statement of financial position 
must be prepared in accordance with Generally Accepted Accounting 
Principles (GAAP) published by the Financial Accounting Standards Board 
and audited in accordance with Generally Accepted Government Auditing 
Standards (GAGAS) published by the U.S. Government Accountability 
Office (GAO);
    (B) As part of the same-day balance sheet or statement of financial 
position, the institution must include a disclosure that includes all 
related-party transactions, and such details as would enable the 
Department to identify the related party in accordance with the 
requirements of Sec.  668.23(d). Such information must include, but is 
not limited to, the name, location, and description of the related 
entity, including the nature and amount of any transaction between the 
related party and the institution, financial or otherwise, regardless 
of when it occurred;
    (C) Such balance sheet or statement of financial position must be a 
consolidated same-day financial statement at the level of highest 
unfractured ownership or at a level determined by the Department for an 
ownership of less than 100 percent;
    (D) The same-day balance sheet or statement of financial position 
must demonstrate an acid test ratio of at least 1:1. The acid test 
ratio must be calculated by adding cash and cash equivalents to current 
accounts receivable and dividing the sum by total current liabilities. 
The calculation of the acid test ratio must exclude all related party 
receivables/other assets and all assets classified as intangibles in 
accordance with the composite score;
    (E) A proprietary institution's same-day balance sheet must 
demonstrate a positive tangible net worth the day after the change in 
ownership. A positive tangible net worth occurs when the tangible 
assets exceed liabilities. The calculation of tangible net worth must 
exclude all related party accounts receivable/other assets and all 
assets classified as intangible in accordance with the composite score; 
and
    (F) A nonprofit institution's statement of financial position must 
have positive net assets without donor restriction the day after the 
change in ownership. The calculation of net assets without donor 
restriction must exclude all related party accounts receivable/other 
assets and all assets classified as intangible in accordance with the 
composite score.

[[Page 32506]]

    (ii) If the institution fails to meet the requirements in 
paragraphs (d)(1)(i) of this section, the institution must provide 
financial protection in the form of a letter of credit or cash to the 
Department in the amount of at least 25 percent of the title IV, HEA 
program funds received by the institution during its most recently 
completed fiscal year, or an amount determined by the Department, and 
must follow the zone requirements of Sec.  668.175(d); and
    (2) For a public institution, the institution must have its 
liabilities backed by the full faith and credit of a State, or by an 
equivalent governmental entity, or must follow the requirements of this 
section for a proprietary or nonprofit institution.
0
21. Add subpart Q to part 668 to read as follows:
Subpart Q--Financial Value Transparency
Sec.
668.401 Financial value transparency scope and purpose.
668.402 Financial value transparency framework.
668.403 Calculating D/E rates.
668.404 Calculating earnings premium measure.
668.405 Process for obtaining data and calculating D/E rates and 
earnings premium measure.
668.406 Determination of the D/E rates and earnings premium measure.
668.407 Student disclosure acknowledgements.
668.408 Reporting requirements.
668.409 Severability.

Subpart Q--Financial Value Transparency


Sec.  668.401  Financial value transparency scope and purpose.

    This subpart applies to a GE program or eligible non-GE program 
offered by an eligible institution, and establishes the rules and 
procedures under which--
    (a) An institution reports information about the program to the 
Secretary; and
    (b) The Secretary assesses the program's debt and earnings 
outcomes.


Sec.  668.402  Financial value transparency framework.

    (a) General. The Secretary assesses the program's debt and earnings 
outcomes using debt-to-earnings rates (D/E rates) and an earnings 
premium measure.
    (b) Debt-to-earnings rates. The Secretary calculates for each award 
year two D/E rates for an eligible program, the discretionary debt-to-
earnings rate and the annual debt-to-earnings rate, using the 
procedures in Sec. Sec.  668.403 and 668.405.
    (c) Outcomes of the D/E rates. (1) A program passes the D/E rates 
if--
    (i) Its discretionary debt-to-earnings rate is less than or equal 
to 20 percent;
    (ii) Its annual debt-to-earnings rate is less than or equal to 8 
percent; or
    (iii) The denominator (median annual or discretionary earnings) of 
either rate is zero and the numerator (median debt payments) is zero.
    (2) A program fails the D/E rates if--
    (i) Its discretionary debt-to-earnings rate is greater than 20 
percent or the income for the denominator of the rate (median 
discretionary earnings) is negative or zero and the numerator (median 
debt payments) is positive; and
    (ii) Its annual debt-to-earnings rate is greater than 8 percent or 
the denominator of the rate (median annual earnings) is zero and the 
numerator (median debt payments) is positive.
    (d) Earnings premium measure. For each award year, the Secretary 
calculates the earnings premium measure for an eligible program, using 
the procedures in Sec.  668.404 and 668.405.
    (e) Outcomes of the earnings premium measure.(1) A program passes 
the earnings premium measure if the median annual earnings of the 
students who completed the program exceed the earnings threshold.
    (2) A program fails the earnings premium measure if the median 
annual earnings of the students who completed the program are equal to 
or less than the earnings threshold.


Sec.  668.403  Calculating D/E rates.

    (a) General. Except as provided under paragraph (f) of this 
section, for each award year, the Secretary calculates D/E rates for a 
program as follows:
    (1) Discretionary debt-to-earnings rate = annual loan payment/(the 
median annual earnings-(1.5 x Poverty Guideline)). For the purposes of 
this paragraph, the Secretary applies the Poverty Guideline for the 
most recent calendar year for which annual earnings are obtained under 
paragraph (c) of this section.
    (2) Annual debt-to-earnings rate = annual loan payment/the median 
annual earnings.
    (b) Annual loan payment. The Secretary calculates the annual loan 
payment for a program by--
    (1)(i) Determining the median loan debt of the students who 
completed the program during the cohort period, based on the lesser of 
the loan debt incurred by each student as determined under paragraph 
(d) of this section or the total amount for tuition and fees and books, 
equipment, and supplies for each student, less the amount of 
institutional grant or scholarship funds provided to that student;
    (ii) Removing, if applicable, the appropriate number of largest 
loan debts as described in Sec.  668.405(d)(2); and
    (iii) Calculating the median of the remaining amounts;
    (2) Amortizing the median loan debt--
    (i)(A) Over a 10-year repayment period for a program that leads to 
an undergraduate certificate, a post-baccalaureate certificate, an 
associate degree, or a graduate certificate;
    (B) Over a 15-year repayment period for a program that leads to a 
bachelor's degree or a master's degree; or
    (C) Over a 20-year repayment period for any other program; and
    (ii) Using an annual interest rate that is the average of the 
annual statutory interest rates on Federal Direct Unsubsidized Loans 
that were in effect during--
    (A) The three consecutive award years, ending in the final year of 
the cohort period, for undergraduate certificate programs, post-
baccalaureate certificate programs, and associate degree programs. For 
these programs, the Secretary uses the Federal Direct Unsubsidized Loan 
interest rate applicable to undergraduate students;
    (B) The three consecutive award years, ending in the final year of 
the cohort period, for graduate certificate programs and master's 
degree programs. For these programs, the Secretary uses the Federal 
Direct Unsubsidized Loan interest rate applicable to graduate students;
    (C) The six consecutive award years, ending in the final year of 
the cohort period, for bachelor's degree programs. For these programs, 
the Secretary uses the Federal Direct Unsubsidized Loan interest rate 
applicable to undergraduate students; and
    (D) The six consecutive award years, ending in the final year of 
the cohort period, for doctoral programs and first professional degree 
programs. For these programs, the Secretary uses the Federal Direct 
Unsubsidized Loan interest rate applicable to graduate students.
    (c) Annual earnings.(1) The Secretary obtains from a Federal agency 
with earnings data, under Sec.  668.405, the most currently available 
median annual earnings of the students who completed the program during 
the cohort period and who are not excluded under paragraph (e) of this 
section; and
    (2) The Secretary uses the median annual earnings to calculate the 
D/E rates.
    (d) Loan debt and assessed charges. (1) In determining the loan 
debt for a student, the Secretary includes--
    (i) The amount of title IV loans that the student borrowed (total 
amount disbursed less any cancellations or adjustments except for those 
related to false certification, borrower defense

[[Page 32507]]

discharges, or debt relief initiated by the Secretary as a result of a 
national emergency) for enrollment in the program, excluding Direct 
PLUS Loans made to parents of dependent students and Direct 
Unsubsidized Loans that were converted from TEACH Grants;
    (ii) Any private education loans as defined in 34 CFR 601.2, 
including private education loans made by the institution, that the 
student borrowed for enrollment in the program and that are required to 
be reported by the institution under Sec.  668.408; and
    (iii) The amount outstanding, as of the date the student completes 
the program, on any other credit (including any unpaid charges) 
extended by or on behalf of the institution for enrollment in any 
program attended at the institution that the student is obligated to 
repay after completing the program, including extensions of credit 
described in clauses (1) and (2) of the definition of, and excluded 
from, the term ``private education loan'' in 34 CFR 601.2;
    (2) The Secretary attributes all the loan debt incurred by the 
student for enrollment in any--
    (i) Undergraduate program at the institution to the highest 
credentialed undergraduate program subsequently completed by the 
student at the institution as of the end of the most recently completed 
award year prior to the calculation of the D/E rates under this 
section; and
    (ii) Graduate program at the institution to the highest 
credentialed graduate program completed by the student at the 
institution as of the end of the most recently completed award year 
prior to the calculation of the D/E rates under this section; and
    (3) The Secretary excludes any loan debt incurred by the student 
for enrollment in any program at any other institution. However, the 
Secretary may include loan debt incurred by the student for enrollment 
in programs at other institutions if the institution and the other 
institutions are under common ownership or control, as determined by 
the Secretary in accordance with 34 CFR 600.31.
    (e) Exclusions. The Secretary excludes a student from both the 
numerator and the denominator of the D/E rates calculation if the 
Secretary determines that--
    (1) One or more of the student's title IV loans are under 
consideration by the Secretary, or have been approved, for a discharge 
on the basis of the student's total and permanent disability, under 34 
CFR 674.61, 682.402, or 685.212;
    (2) The student was enrolled full time in any other eligible 
program at the institution or at another institution during the 
calendar year for which the Secretary obtains earnings information 
under paragraph (c) of this section;
    (3) For undergraduate programs, the student completed a higher 
credentialed undergraduate program at the institution subsequent to 
completing the program as of the end of the most recently completed 
award year prior to the calculation of the D/E rates under this 
section;
    (4) For graduate programs, the student completed a higher 
credentialed graduate program at the institution subsequent to 
completing the program as of the end of the most recently completed 
award year prior to the calculation of the D/E rates under this 
section;
    (5) The student is enrolled in an approved prison education 
program;
    (6) The student is enrolled in a comprehensive transition and 
postsecondary program; or
    (7) The student died.
    (f) D/E rates not issued. The Secretary does not issue D/E rates 
for a program under Sec.  668.406 if--
    (1) After applying the exclusions in paragraph (e) of this section, 
fewer than 30 students completed the program during the two-year or 
four-year cohort period; or
    (2) The Federal agency with earnings data does not provide the 
median earnings for the program as provided under paragraph (c) of this 
section.


Sec.  668.404  Calculating earnings premium measure.

    (a) General. Except as provided under paragraph (d) of this 
section, for each award year, the Secretary calculates the earnings 
premium measure for a program by determining whether the median annual 
earnings of the title IV, HEA recipients who completed the program 
exceed the earnings threshold.
    (b) Median annual earnings; earnings threshold. (1) The Secretary 
obtains from a Federal agency with earnings data, under Sec.  668.405, 
the most currently available median annual earnings of the students who 
completed the program during the cohort period and who are not excluded 
under paragraph (c) of this section; and
    (2) The Secretary uses the median annual earnings of students with 
a high school diploma or GED using data from the Census Bureau to 
calculate the earnings threshold described in Sec.  668.2.
    (3) The Secretary determines the earnings thresholds and publishes 
the thresholds annually through a notice in the Federal Register.
    (c) Exclusions. The Secretary excludes a student from the earnings 
premium measure calculation if the Secretary determines that--
    (1) One or more of the student's title IV loans are under 
consideration by the Secretary, or have been approved, for a discharge 
on the basis of the student's total and permanent disability, under 34 
CFR 674.61, 682.402, or 685.212;
    (2) The student was enrolled full-time in any other eligible 
program at the institution or at another institution during the 
calendar year for which the Secretary obtains earnings information 
under paragraph (b)(1) of this section;
    (3) For undergraduate programs, the student completed a higher 
credentialed undergraduate program at the institution subsequent to 
completing the program as of the end of the most recently completed 
award year prior to the calculation of the earnings premium measure 
under this section;
    (4) For graduate programs, the student completed a higher 
credentialed graduate program at the institution subsequent to 
completing the program as of the end of the most recently completed 
award year prior to the calculation of the earnings premium measure 
under this section;
    (5) The student is enrolled in an approved prison education 
program;
    (6) The student is enrolled in a comprehensive transition and 
postsecondary program; or
    (7) The student died.
    (d) Earnings premium measures not issued. The Secretary does not 
issue the earnings premium measure for a program under Sec.  668.406 
if--
    (1) After applying the exclusions in paragraph (c) of this section, 
fewer than 30 students completed the program during the two-year or 
four-year cohort period; or
    (2) The Federal agency with earnings data does not provide the 
median earnings for the program as provided under paragraph (b) of this 
section.


Sec.  668.405  Process for obtaining data and calculating D/E rates and 
earnings premium measure.

    (a) Administrative data. In calculating the D/E rates and earnings 
premium measure for a program, the Secretary uses student enrollment, 
disbursement, and program data, or other data the institution is 
required to report to the Secretary to support its administration of, 
or participation in, the title IV, HEA programs. In accordance with 
procedures established by the Secretary, the institution must update or 
otherwise correct any reported data no later than 60 days after the end 
of an award year.
    (b) Process overview. The Secretary uses the administrative data 
to--
    (1) Compile a list of students who completed each program during 
the cohort period. The Secretary--

[[Page 32508]]

    (i) Removes from those lists students who are excluded under 
Sec. Sec.  668.403(e) or 668.404(c);
    (ii) Provides the list to institutions; and
    (iii) Allows the institution to correct the information about the 
students on the list, as provided in paragraph (a) of this section;
    (2) Obtain from a Federal agency with earnings data the median 
annual earnings of the students on each list, as provided in paragraph 
(c) of this section; and
    (3) Calculate the D/E rates and the earnings premium measure and 
provide them to the institution.
    (c) Obtaining earnings data. For each list submitted to the Federal 
agency with earnings data, the agency returns to the Secretary--
    (1) The median annual earnings of the students on the list whom the 
Federal agency with earnings data has matched to earnings data, in 
aggregate and not in individual form; and
    (2) The number, but not the identities, of students on the list 
that the Federal agency with earnings data could not match.
    (d) Calculating D/E rates and earnings premium measure. (1) If the 
Federal agency with earnings data includes reports from records of 
earnings on at least 30 students, the Secretary uses the median annual 
earnings provided by the Federal agency with earnings data to calculate 
the D/E rates and earnings premium measure for each program.
    (2) If the Federal agency with earnings data reports that it was 
unable to match one or more of the students on the final list, the 
Secretary does not include in the calculation of the median loan debt 
for D/E rates the same number of students with the highest loan debts 
as the number of students whose earnings the Federal agency with 
earnings data did not match. For example, if the Federal agency with 
earnings data is unable to match three students out of 100 students, 
the Secretary orders by amount the debts of the 100 listed students and 
excludes from the D/E rates calculation the three largest loan debts.


Sec.  668.406  Determination of the D/E rates and earnings premium 
measure.

    (a) Notice of determination. For each award year for which the 
Secretary calculates D/E rates and the earnings premium measure for a 
program, the Secretary issues a notice of determination.
    (b) The notice of determination informs the institution of the 
following:
    (1) The D/E rates for each program as determined under Sec.  
668.403.
    (2) The earnings premium measure for each program as determined 
under Sec.  668.404.
    (3) The determination by the Secretary of whether each program is 
passing or failing, as described in Sec.  668.402, and the consequences 
of that determination.
    (4) For non-GE programs, whether the student acknowledgement is 
required under Sec.  668.407.
    (5) For GE programs, whether the institution is required to provide 
the student warning under Sec.  668.605.
    (6) For GE programs, whether the program could become ineligible 
under subpart S of this part based on its final D/E rates or earnings 
premium measure for the next award year for which D/E rates or the 
earnings premium measure are calculated for the program.


Sec.  668.407  Student disclosure acknowledgments.

    (a) Events requiring an acknowledgment from students.
    (1) Eligible non-GE programs. The student must provide an 
acknowledgment with respect to an eligible non-GE program in the manner 
specified in this section for any year for which the Secretary notifies 
an institution that the eligible non-GE program has failed the D/E 
rates for the year in which the D/E rates were most recently calculated 
by the Department.
    (2) GE Programs. Warnings and acknowledgments with respect to GE 
programs are required under the conditions and in the manner specified 
in Sec.  668.605.
    (b) Content and mechanism of acknowledgment.
    (1) The student must acknowledge having seen the information about 
the program provided through the disclosure website established and 
maintained by the Secretary described in Sec.  668.43(d).
    (2) The Department will administer and collect the acknowledgment 
through the disclosure website established and maintained by the 
Secretary described in Sec.  668.43(d).
    (c) An institution may not disburse title IV, HEA funds to the 
student until the student provides the acknowledgment required in 
paragraph (a)(1) of this section.
    (d) The acknowledgment required in paragraph (a)(1) of this section 
does not mitigate the institution's responsibility to provide accurate 
information to students concerning program status, nor will it be 
considered as evidence against a student's claim if applying for a loan 
discharge.


Sec.  668.408  Reporting requirements.

    (a) General. In accordance with procedures established by the 
Secretary, an institution must report to the Department--
    (1) For each GE program and eligible non-GE program--
    (i) The name, CIP code, credential level, and length of the 
program;
    (ii) Whether the program is programmatically accredited and, if so, 
the name of the accrediting agency;
    (iii) Whether the program meets licensure requirements or prepares 
students to sit for a licensure examination in a particular occupation 
for each State in the institution's metropolitan statistical area;
    (iv) The total number of students enrolled in the program during 
the most recently completed award year, including both recipients and 
non-recipients of title IV, HEA funds; and
    (v) Whether the program is a medical or dental program whose 
students are required to complete an internship or residency, as 
described in the definition of ``cohort period'' under Sec.  668.2.
    (2) For each student--
    (i) Information needed to identify the student and the institution;
    (ii) The date the student initially enrolled in the program;
    (iii) The student's attendance dates and attendance status (e.g., 
enrolled, withdrawn, or completed) in the program during the award 
year; and
    (iv) The student's enrollment status (e.g., full time, three 
quarter time, half time, less than half time) as of the first day of 
the student's enrollment in the program;
    (v) The student's total annual cost of attendance;
    (vi) The total tuition and fees assessed to the student for the 
award year;
    (vii) The student's residency tuition status by State or district;
    (viii) The student's total annual allowance for books, supplies, 
and equipment from their cost of attendance under HEA section 472;
    (ix) The student's total annual allowance for housing and food from 
their cost of attendance under HEA section 472;
    (x) The amount of institutional grants and scholarships disbursed 
to the student;
    (xi) The amount of other State, Tribal, or private grants disbursed 
to the student; and
    (xii) The amount of any private education loans disbursed, 
including private education loans made by the institution;
    (3) If the student completed or withdrew from the program during 
the award year--

[[Page 32509]]

    (i) The date the student completed or withdrew from the program;
    (ii) The total amount the student received from private education 
loans, as described in Sec.  668.403(d)(1)(ii), for enrollment in the 
program that the institution is, or should reasonably be, aware of;
    (iii) The total amount of institutional debt, as described in Sec.  
668.403(d)(1)(iii), the student owes any party after completing or 
withdrawing from the program;
    (iv) The total amount of tuition and fees assessed the student for 
the student's entire enrollment in the program;
    (v) The total amount of the allowances for books, supplies, and 
equipment included in the student's title IV Cost of Attendance (COA) 
for each award year in which the student was enrolled in the program, 
or a higher amount if assessed the student by the institution for such 
expenses; and
    (vi) The total amount of institutional grants and scholarships 
provided for the student's entire enrollment in the program; and
    (4) As described in a notice published by the Secretary in the 
Federal Register, any other information the Secretary requires the 
institution to report.
    (b)(1) Reporting deadlines. Except as provided under paragraph (c) 
of this section, an institution must report the information required 
under paragraph (a) of this section no later than--
    (i) For programs other than medical and dental programs that 
require an internship or residency, July 31, following the date these 
regulations take effect, for the second through seventh award years 
prior to that date;
    (ii) For medical and dental programs that require an internship or 
residency, July 31, following the date these regulations take effect, 
for the second through eighth award years prior to that date; and
    (iii) For subsequent award years, October 1, following the end of 
the award year, unless the Secretary establishes different dates in a 
notice published in the Federal Register.
    (2) For any award year, if an institution fails to provide all or 
some of the information required under paragraph (a) of this section, 
the institution must provide to the Secretary an explanation, 
acceptable to the Secretary, of why the institution failed to comply 
with any of the reporting requirements.
    (c) Transitional reporting period and metrics.
    (1) For the initial award year for which D/E rates and the earnings 
premium are calculated under this part, institutions may opt to report 
the information required under paragraph (a) of this section for its 
eligible programs that are not GE programs either--
    (i) For the time periods described in paragraph (b)(1)(i) and (ii) 
of this section; or
    (ii) For only the two most recently completed award years.
    (2) If an institution provides transitional reporting under 
paragraph (c)(1)(ii) of this section, the Department will calculate 
transitional D/E rates and earnings premium measures based on the 
period reported.


Sec.  668.409  Severability.

    If any provision of this subpart or its application to any person, 
act, or practice is held invalid, the remainder of the part and this 
subpart, and the application of this subpart's provisions to any other 
person, act, or practice, will not be affected thereby.
0
22. Add subpart S to part 668 to read as follows:
Subpart S--Gainful Employment (GE)
Sec.
668.601 Gainful employment (GE) scope and purpose.
668.602 Gainful employment criteria.
668.603 Ineligible GE programs.
668.604 Certification requirements for GE programs.
668.605 Student warnings and acknowledgments
668.606 Severability.

Subpart S--Gainful Employment


Sec.  668.601  Gainful employment (GE) scope and purpose.

    This subpart applies to an educational program offered by an 
eligible institution that prepares students for gainful employment in a 
recognized occupation and establishes rules and procedures under which 
the Secretary determines that the program is eligible for title IV, HEA 
program funds.


Sec.  668.602  Gainful employment criteria.

    (a) A GE program provides training that prepares students for 
gainful employment in a recognized occupation if the program--
    (1) Satisfies the applicable certification requirements in Sec.  
668.604;
    (2) Is not a failing program under the D/E rates measure in Sec.  
668.402 in two out of any three consecutive award years for which the 
program's D/E rates are calculated; and
    (3) Is not a failing program under the earnings premium measure in 
Sec.  668.402 in two out of any three consecutive award years for which 
the program's earnings premium measure is calculated.
    (b) If the Secretary does not calculate or issue D/E rates for a 
program for an award year, the program receives no result under the D/E 
rates for that award year and remains in the same status under the D/E 
rates as the previous award year.
    (c) If the Secretary does not calculate D/E rates for the program 
for four or more consecutive award years, the Secretary disregards the 
program's D/E rates for any award year prior to the four-year period in 
determining the program's eligibility.
    (d) If the Secretary does not calculate or issue earnings premium 
measures for a program for an award year, the program receives no 
result under the earnings premium measure for that award year and 
remains in the same status under the earnings premium measure as the 
previous award year.
    (e) If the Secretary does not calculate the earnings premium 
measure for the program for four or more consecutive award years, the 
Secretary disregards the program's earnings premium for any award year 
prior to the four-year period in determining the program's eligibility.


Sec.  668.603  Ineligible GE programs.

    (a) Ineligible programs. If a GE program is a failing program under 
the D/E rates measure in Sec.  668.402 in two out of any three 
consecutive award years for which the program's D/E rates are 
calculated, or the earnings premium measure in Sec.  668.402 in two out 
of any three consecutive award years for which the program's earnings 
premium measure is calculated, the program becomes ineligible and its 
participation in the title IV, HEA programs ends upon the earliest of--
    (1) The issuance of a new Eligibility and Certification Approval 
Report that does not include that program;
    (2) The completion of a termination action of program eligibility, 
if an action is initiated under subpart G of this part; or
    (3) A revocation of program eligibility, if the institution is 
provisionally certified.
    (b) Basis for appeal. If the Secretary initiates an action under 
paragraph (a)(2) of this section, the institution may initiate an 
appeal under subpart G of this part if it believes the Secretary erred 
in the calculation of the program's D/E rates under Sec.  668.403 or 
the earnings premium measure under Sec.  668.404. Institutions may not 
dispute a program's ineligibility based upon its D/E rates or the 
earnings premium measure except as described in this paragraph (b).
    (c) Restrictions--(1) Ineligible program. Except as provided in 
Sec.  668.26(d), an institution may not

[[Page 32510]]

disburse title IV, HEA program funds to students enrolled in an 
ineligible program.
    (2) Period of ineligibility. An institution may not seek to 
reestablish the eligibility of a failing GE program that it 
discontinued voluntarily either before or after D/E rates or the 
earnings premium measure are issued for that program, or reestablish 
the eligibility of a program that is ineligible under the D/E rates or 
the earnings premium measure, until three years following the earlier 
of the date the program loses eligibility under paragraph (a) of this 
section or the date the institution voluntarily discontinued the 
failing program.
    (3) Restoring eligibility. An ineligible program, or a failing 
program that an institution voluntarily discontinues, remains 
ineligible until the institution establishes the eligibility of that 
program under Sec.  668.604(c).


Sec.  668.604  Certification requirements for GE programs.

    (a) Transitional certification for existing programs. (1) Except as 
provided in paragraph (a)(2) of this section, an institution must 
provide to the Secretary no later than December 31 of the year in which 
this regulation takes effect, in accordance with procedures established 
by the Secretary, a certification signed by its most senior executive 
officer that each of its currently eligible GE programs included on its 
Eligibility and Certification Approval Report meets the requirements of 
paragraph (d) of this section. The Secretary accepts the certification 
as an addendum to the institution's program participation agreement 
with the Secretary under Sec.  668.14.
    (2) If an institution makes the certification in its program 
participation agreement pursuant to paragraph (b) of this section 
between July 1 and December 31 of the year in which this regulation 
takes effect, it is not required to provide the transitional 
certification under this paragraph.
    (b) Program participation agreement certification. As a condition 
of its continued participation in the title IV, HEA programs, an 
institution must certify in its program participation agreement with 
the Secretary under Sec.  668.14 that each of its currently eligible GE 
programs included on its Eligibility and Certification Approval Report 
meets the requirements of paragraph (d) of this section. An institution 
must update the certification within 10 days if there are any changes 
in the approvals for a program, or other changes for a program that 
render an existing certification no longer accurate.
    (c) Establishing eligibility and disbursing funds. (1) An 
institution establishes a GE program's eligibility for title IV, HEA 
program funds by updating the list of the institution's eligible 
programs maintained by the Department to include that program, as 
provided under 34 CFR 600.21(a)(11)(i). By updating the list of the 
institution's eligible programs, the institution affirms that the 
program satisfies the certification requirements in paragraph (d) of 
this section. Except as provided in paragraph (c)(2) of this section, 
after the institution updates its list of eligible programs, the 
institution may disburse title IV, HEA program funds to students 
enrolled in that program.
    (2) An institution may not update its list of eligible programs to 
include a GE program, or a GE program that is substantially similar to 
a failing program that the institution voluntarily discontinued or 
became ineligible as described in Sec.  668.603(c), that was subject to 
the three-year loss of eligibility under Sec.  668.603(c), until that 
three-year period expires.
    (d) GE program eligibility certifications. An institution certifies 
for each eligible GE program included on its Eligibility and 
Certification Approval Report, at the time and in the form specified in 
this section, that such program is approved by a recognized accrediting 
agency or is otherwise included in the institution's accreditation by 
its recognized accrediting agency, or, if the institution is a public 
postsecondary vocational institution, the program is approved by a 
recognized State agency for the approval of public postsecondary 
vocational education in lieu of accreditation.


Sec.  668.605  Student warnings and acknowledgments.

    (a) Events requiring a warning to students and prospective 
students. The institution must provide a warning with respect to a GE 
program to students and prospective students for any year for which the 
Secretary notifies an institution that the GE program could become 
ineligible under this subpart based on its final D/E rates or earnings 
premium measure for the next award year for which D/E rates or the 
earnings premium measure are calculated for the GE program.
    (b) Subsequent warning. If a student or prospective student 
receives a warning under paragraph (a) of this section with respect to 
a GE program, but does not seek to enroll until more than 12 months 
after receiving the warning, the institution must again provide the 
warning to the student or prospective student, unless, since providing 
the initial warning, the program has passed both the D/E rates and 
earnings premium measures for the two most recent consecutive award 
years in which the metrics were calculated for the program.
    (c) Content of warning. The institution must provide in the 
warning--
    (1) A warning, as specified by the Secretary in a notice published 
in the Federal Register, that--
    (i) The program has not passed standards established by the U.S. 
Department of Education based on the amounts students borrow for 
enrollment in the program and their reported earnings, as applicable; 
and
    (ii) The program could lose access to Federal grants and loans 
based on the next calculated program metrics;
    (2) The relevant information to access the disclosure website 
maintained by the Secretary described in Sec.  668.43(d);
    (3) A statement that the student must acknowledge having seen the 
warning through the disclosure website maintained by the Secretary 
described in Sec.  668.43(d) before the institution may disburse any 
title IV, HEA funds;
    (4) A description of the academic and financial options available 
to students to continue their education in another program at the 
institution, including whether the students could transfer credits 
earned in the program to another program at the institution and which 
course credits would transfer, in the event that the program loses 
eligibility for title IV, HEA program funds;
    (5) An indication of whether, in the event that the program loses 
eligibility for title IV, HEA program funds, the institution will--
    (i) Continue to provide instruction in the program to allow 
students to complete the program; and
    (ii) Refund the tuition, fees, and other required charges paid to 
the institution by, or on behalf of, students for enrollment in the 
program; and
    (6) An explanation of whether, in the event that the program loses 
eligibility for title IV, HEA program funds, the students could 
transfer credits earned in the program to another institution in 
accordance with an established articulation agreement or teach-out plan 
or agreement.
    (d) Alternative languages. In addition to providing the English-
language warning, the institution must also provide translations of the 
English-language student warning for those students and prospective 
students who have limited proficiency in English.
    (e) Delivery to enrolled students. An institution must provide the 
warning required under this section in writing,

[[Page 32511]]

by hand delivery, mail, or electronic means, to each student enrolled 
in the program no later than 30 days after the date of the Secretary's 
notice of determination under Sec.  668.406 and maintain documentation 
of its efforts to provide that warning. The warning must be the only 
substantive content contained in these written communications.
    (f) Delivery to prospective students. (1) An institution must 
provide the warning as required under this section to each prospective 
student or to each third party acting on behalf of the prospective 
student at the first contact about the program between the institution 
and the student or the third party acting on behalf of the student by--
    (i) Hand-delivering the warning as a separate document to the 
prospective student or third party individually, or as part of a group 
presentation;
    (ii) Sending the warning to the primary email address used by the 
institution for communicating with the prospective student or third 
party about the program, provided that the warning is the only 
substantive content in the email and that the warning is sent by a 
different method of delivery if the institution receives a response 
that the email could not be delivered; or
    (iii) Providing the warning orally to the student or third party if 
the contact is by telephone.
    (2) An institution may not enroll, register, or enter into a 
financial commitment with the prospective student with respect to the 
program earlier than three business days after the institution delivers 
the warning as described in paragraph (f) of this section.
    (g) Restriction on disbursement. An institution may not disburse 
title IV, HEA funds to the student until the student completes the 
acknowledgment described in paragraph (c)(3) of this section, as 
administered and collected through the disclosure website maintained by 
the Secretary described in Sec.  668.43(d).
    (h) Disclaimer. The provision of a student warning or the 
acknowledgment described in paragraph (c)(3) of this section does not 
mitigate the institution's responsibility to provide accurate 
information to students concerning program status, nor will it be 
considered as evidence against a student's claim if applying for a loan 
discharge.


Sec.  668.606  Severability.

    If any provision of this subpart or its application to any person, 
act, or practice is held invalid, the remainder of the part and this 
subpart, and the application of this subpart's provisions to any other 
person, act, or practice, will not be affected thereby.

[FR Doc. 2023-09647 Filed 5-18-23; 8:45 am]
 BILLING CODE 4000-01-P