Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

Institutional Eligibility and Administrative Requirements - Institutional and Program Eligibility

AwardYear: 1995-1996
EnterChapterNo: 3
EnterChapterTitle: Institutional Eligibility and Administrative Requirements
SectionNumber: 1
SectionTitle: Institutional and Program Eligibility
PageNumbers: 5-32


This section will discuss the three types of institutions that are
eligible to participate in the SFA programs, and the effect of
program eligibility requirements on institutional eligibility . You
cannot assume that every program at an eligible institution is an
eligible program, or that every eligible program at the school must
have the same minimum program length or admissions standards.

If your school is applying for approval to participate for the first
time, please refer to Section Ten of this Chapter. Section Ten also
discusses other changes in participation, loss of eligibility, and
ownership changes.


THE THREE DEFINITIONS OF ELIGIBLE INSTITUTIONS

Previously, the Institutional Eligibility regulations (34 CFR Part
600) defined four types of eligible institutions; however, the Higher
Education Amendments of 1992 made several changes regarding
institutional participation, including eliminating one of the four
types of eligible institutions. The definition of VOCATIONAL
SCHOOL was removed and such schools can no longer participate
in the SFA programs, unless they qualify under one of the remaining
definitions. (Refer to the chart on pg. 3-6.) Under the remaining
three definitions, schools are eligible to participate in all the SFA
programs, provided they offer the appropriate type of eligible
program. This section covers the key elements of the three
definitions, with special attention to those requirements that affect
the definition of an eligible program.

Although the participation criteria defined for each of the three
types of institutions differ somewhat, these eligible school
definitions are not mutually exclusive. That is, a school can meet
the definition of more than one type of institution.

[[The chart "Eligible School Definitions" on page 3-6 is currently
unavailable for viewing. Please reference your paper document
for additional information.]]

CONTROL AND LEGAL AUTHORIZATION

[[Public/private, nonprofit/for-profit]]
The "control" of an institution distinguishes whether the school is
public or private, nonprofit or for-profit. Under the institutional
definitions, an INSTITUTION OF HIGHER EDUCATION or a
POSTSECONDARY VOCATIONAL INSTITUTION can be either
public or private, but is always nonprofit. A PROPRIETARY
INSTITUTION OF HIGHER EDUCATION is always a private, for-
profit institution.

A nonprofit institution --

1 is owned and operated by one or more nonprofit corporation or
association whose net earnings does not benefit any private
shareholder or individual,

2 is legally authorized to operate as a nonprofit organization by
each State in which it is physically located, and

3 is determined by IRS to be eligible for tax-deductible
contributions.


[[ School's main campus must be located "in a State"]]
With the exception of certain foreign schools that are eligible only
under the Federal Family Education Loan (FFEL) programs, an
eligible institution under any of the three definitions must be located
in a State. The definition of a "State" includes not only the 50 States
of the Union, but also American Samoa, Puerto Rico, the District of
Columbia, Guam, the Virgin Islands, and the Northern Mariana
Islands. (For the purposes of the Federal Pell Grant [Pell Grant],
FSEOG, and FWS programs, a "State" also includes the Federated
States of Micronesia, the Marshall Islands, and Palau.)
GENERALLY THE DETERMINING FACTOR IS THE
PHYSICAL LOCATION OF THE MAIN CAMPUS OR PLACE OF
INSTRUCTION. For instance, if a school's main campus is in a
State, as defined above, the school can still have an additional
location in a foreign country. (For more information on additional
locations and branch campuses, see Section Ten of this Chapter.)
However, a correspondence school is considered to be located in the
State where its administrative office is located.

[[Authorization by a State]]
To qualify under any of the three institutional definitions, a school
must be legally authorized by the State in which it offers an
educational program to provide the program. The State's legal
authorization may be provided by the licensing board or educational
agency. In some cases, the institution's charter is its legal
authorization. In other cases, a school is considered to be legally
authorized if State law does not require it to have a license or other
formal approval.


ACCREDITATION

Generally, an institution must be accredited by a nationally
recognized accrediting agency to be eligible. (See alternatives listed
below.) The Department has published regulations governing the
procedures and criteria for recognizing accrediting agencies. For
more information, see the Accreditation regulations (Section 602),
published in the April 29, 1994 Federal Register. The Department
periodically publishes a list of recognized accrediting bodies in the
Federal Register, based on criteria given in CFR Part 602. Copies of
this list are also available from:

U.S. Department of Education
Accrediting and State Liaison Division
600 Independence Ave., S.W., Room 3915 (ROB-3)
Washington, D.C. 20202-5244

Previously, the law provided three statutory alternatives to
accreditation; NOW THERE ARE ONLY TWO First, an
institution may be pre-accredited by an agency or association that
has been approved by the Secretary to grant such pre-accreditation.
Secondly, unaccredited postsecondary vocational institutions may be
eligible for SFA funds if approved by a State agency that the
Secretary determines to be a reliable authority. Schools wishing to
apply under these procedures should contact the Institutional
Participation Division (IPD) at (202)401-6485 for further
information.

NATIONALLY RECOGNIZED ACCREDITING AGENCY OR
ASSOCIATION -- An accrediting agency or association which
the Secretary of Education has recognized to accredit or pre-
accredit a particular category of institution, school, or educational
program in accordance with the provisions in 34 CFR Parts 602
and 603.

PRE-ACCREDITED -- A status granted by a nationally
recognized accrediting agency or association to a public or private
nonprofit institution that is progressing towards accreditation
within a reasonable period of time. The pre-accredited status
must be recognized by the Department.

[[Changes in accreditation may affect eligibility]]
[[Dual accreditation]]
If a school loses its accreditation, it is ineligible to participate in the
SFA programs and must notify the Department within 30 days.*1*
However, if your accrediting agency loses its Departmental
approval, you have up to 18 months in which to obtain accreditation
from another approved agency. Other changes in accreditation may
also jeopardize institutional participation. If a school changes
accrediting agencies, it may be subject to termination unless the
school submits to the Department all materials relating to the prior
accreditation, including materials demonstrating reasonable cause
for changing accrediting agencies. If a school is accredited by two
agencies at the same time, the school must designate which agency's
accreditation will be used in determining institutional eligibility for
SFA funds and inform the Department of such designation. Further,
the school must provide to the Department (and to both agencies
involved) all materials documenting sufficient reason and cause for
dual accreditation. See Section Ten of this Chapter for more on loss
of accreditation and loss of eligibility.


ADMISSIONS STANDARDS

[[Admissions standards]]
Each eligible institution definition includes a provision specifying
the admissions standards that apply to that type of postsecondary
school. An eligible school may admit as regular students only
persons who have a high school diploma or its recognized
equivalent, or who are beyond the age of compulsory school
attendance.

REGULAR STUDENT -- A person who is enrolled (or is
accepted for enrollment) in an eligible program for the purpose of
obtaining a degree, certificate, or other recognized credential.

Students who are beyond the age of compulsory attendance, but who
do not have a high school diploma or General Education
Development Certificate (GED), must pass a written test to be
eligible for SFA. For more information on this student eligibility
requirement, see Chapter Two of this Handbook under "Ability to
Benefit."

[[Student may certify that H.S. diploma/GED was granted]]
For SFA purposes, the school is not required to keep a copy of a
student's high school diploma or GED. Rather, the school may rely
on the student's certification that he or she has received the
credential, and a copy of the certification must be kept on file. (This
certification need not be a separate document. It may be collected
on the school's admissions application.) The school may also
require the student to provide supporting documentation.

[[Alternatives for special cases]]
Generally, a RECOGNIZED EQUIVALENT OF A HIGH SCHOOL
DIPLOMA is either a GED, or a State certificate (received after the
student has passed a State authorized test) that the State recognizes
as equal to a high school diploma. However, the Department
recognizes that there are special cases. If a student has successfully
completed at least a two-year program that is acceptable for full
credit toward a bachelor's degree, the student's academic transcript
is considered equivalent to a high school diploma. A student who
has excelled academically in high school and who has met
formalized, written admissions policies of the school is also
considered to have the equivalent of a high school diploma. These
students may be eligible to receive SFA funds without having to pass
a Department-approved test, provided they are no longer enrolled in
high school.

A school that admits students who do not have a high school
diploma or recognized equivalent has some additional
considerations. An otherwise eligible institution does NOT qualify
as an eligible institution if--

- it does not provide a four-year or two-year program leading to a
bachelor's or associate degree, and

- for its latest complete award year, 50% or more of its regular
enrolled students had neither a high school diploma or
equivalent.

[[School must make GED program available]]
Also, a school that admits students without a high school diploma or
its equivalent must make a GED preparatory program available to
its students. The course does not have to be provided by the school
itself, and the school is not required to pay the costs of the program.
The GED program must be offered at a place that is convenient for
the students and the school must take reasonable steps to ensure that
its students have access to the program, such as coordinating the
timing of its program offerings with that of the GED program. The
school must provide information about the availability of the GED
program to affected students. The GED program must be proven
successful -- such programs include GED programs that are
conducted by State and local secondary school authorities, as well as
programs for which the school has documentation that statistically
demonstrates the program's success.

The law does not require a school to verify that a student is enrolled
in a GED program, or to monitor the student's progress in the
program. A student without a high school diploma or recognized
equivalent is not required by law to enroll in a GED program, but
the school may choose to make this an admissions requirement. A
student may not receive SFA funds for the GED program, although
he or she may be paid for postsecondary courses taken at the same
time as the GED coursework, including remedial coursework at the
secondary level or higher.

It is the school's responsibility to determine whether a remedial
program is at the secondary level. However, if either the State, the
school's accrediting agency, or the State agency recognized for the
approval of public postsecondary vocational education determines
that a remedial program is at the elementary level, the school must
abide by that determination. For more on remedial coursework,
including the admission of ability-to-benefit students, see Chapter
Two of this Handbook.


OTHER ELIGIBILITY FACTORS

The Higher Education Amendments of 1992 added some
requirements for institutional eligibility, which have been
incorporated into the Institutional Eligibility regulations, published
April 29, 1994. These requirements are here named: the 85 Percent
Rule, the Correspondence Course Limitation, the Correspondence
STUDENT Limitation, the Incarcerated Student Limitation, and the
Ability-To-Benefit Student Limitation.

[[School calculations must be attested to by CPA]]
All of these requirements involve certain percentage calculations,
which are performed by the school either to demonstrate compliance
with a requirement or to demonstrate eligibility for a limitation
waiver. In each instance, a calculation performed by the school
must be attested to by the certified public accountant (CPA) who
prepares its audited financial statement or its SFA compliance audit.
The CPA's report must be part of the audit record, and must include
a recalculation if a school's initial calculation was in error. The
CPA's attestation report must indicate whether the school's
determinations (including any relevant waiver or exception) are
accurate.

[[School required to notify the Department]]
For each of the requirements and limitations given below, the school
is required to notify the Department of its failure to meet a
requirement, its falling within a prohibited limitation, or its
ineligibility for a continued limitation waiver. Except for the
specific notification requirements under the 85 Percent Rule, this
notification must occur by July 31 following the end of an award
year.

[[Requirements to regain eligibility]]
To regain its eligibility lost due to the requirements or limitations
listed below, the school must demonstrate its compliance with all
eligibility requirements and its ability to stay outside prohibited
limits for at least one award year. Further, it must also show how its
administrative practices and policies have been changed to ensure
that it will not fall within prohibited limits in the future.

THE 85 PERCENT RULE. To be eligible for SFA participation, a
Proprietary Institution can derive no more than 85% of its revenues
from the SFA programs. As specified in Section 600.5(d), a school
must determine its revenue percentages using the following formula:

[[The formula on page 3-12 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

[[Refunds not counted in fraction]]
In determining whether a school satisfies the 85 Percent Rule, the
totals used in the fraction do NOT include refunds paid to or on
behalf of students who have withdrawn, dropped out, been expelled,
or otherwise failed to complete the period of enrollment. Charges
for books, supplies, and equipment are not included in the fraction
unless the amount is part of the tuition, fees, or other institutional
charges.

In figuring what SFA funds were used to pay tuition, fees, and other
institutional charges, a school may assume that any SFA funds
disbursed (or delivered) to or on behalf of a student were used for
such costs, unless those costs were otherwise paid by--

- Grant funds provided by non-Federal public agencies,

- Grant funds provided by independent private sources, or

- Funds from qualified government agency job training contracts.

[[Revenues from school activities]]
In figuring revenues generated by school activities, include only
revenue from activities that are conducted on campus or at a facility
under the control of the school, that are performed under the
supervision of a faculty member, and that are required for all
students in a specific educational program at the school. The
school's "85 Percent Rule" calculation must be attested to by a CPA,
as discussed previously.

[[Dear Colleague Letter]]
The 85 Percent Rule was published in final regulations on April 29,
1994. However, P. L.. 103-333 precluded the Department from
implementing the 85 Percent Rule regulations until July 1, 1995. As
of July 1, 1995, the 85 Percent Rule will apply to all institutional
eligibility determinations for Proprietary Institutions. The statutory
delay in implementing the 85 Percent Rule will require special
considerations for reporting and determining eligibility for the 1995-
96 award year. A discussion of these considerations is contained in
a Dear Colleague Letter (DCL) scheduled for publication in the
Spring of 1995. A summary of the information provided in the DCL
follows—

- A Proprietary Institution must determine whether it satisfied
the 85 Percent Rule during its most recently completed fiscal
year, completed as of July 1, 1995. For example, for schools
using a calendar year as their fiscal year, their most recently
completed fiscal year is the one that ended on December 31,
1994. For those schools using the award year as their fiscal
year, their most recently completed fiscal year will be the one
that ends on June 30, 1995.

- Schools that fail to satisfy the 85 Percent Rule lose their
eligibility on the last day of that fiscal year. However, because
of the statutory delay in implementing the 85 Percent Rule,
schools that otherwise would have lost their eligibility prior to
June 30, 1995 will be considered as losing their eligibility as of
June 30, 1995. Thus, those schools will be ineligible to
participate in the SFA programs beginning with the 1995-96
award year.

- Schools have 90 days after their most recently completed fiscal
year has ended to report to the Secretary if they did not satisfy
the 85 Percent Rule for that period. However, because of the
statutory delay in implementing the 85 Percent Rule, schools
that otherwise would have had to notify the Department
regarding their failure to satisfy the 85 Percent Rule prior to
July 1, 1995 will have until July 10, 1995 or 90 days after the
end of their fiscal year, whichever is later, to provide that notice
to the Department.

- Schools that determine that they satisfied the 85 Percent Rule
during their most recently completed fiscal year must have the
auditor who prepares their audited financial statement report on
the accuracy of that determination based upon performing an
"agreed-upon procedures attestation engagement." That report
is submitted as part of the audited financial statement.
However, if a school did not have its auditor make that report as
part of the audited financial statement because of the temporary
delay in implementing the 85 Percent Rule, the school has until
July 31, 1995 or 90 days after the end of their fiscal year,
whichever is later, to have that report submitted.

- Finally, because the Department will implement the 85 Percent
Rule starting with the 1995-96 award year, the Department will
not hold any Proprietary Institution liable for any SFA program
funds it received for the 1994-95 award year solely because it
failed to satisfy the 85 Percent Rule in that year.

A school must notify the Department of its failure to satisfy the 85
Percent Rule or, if it does satisfy the 85 Percent Rule, the school
must submit the auditor's report to the Department at the following
address:

U.S. Department of Education
Institutional Participation Division
Room 3522, ROB-3
600 Independence Avenue, S.W.
Washington, D.C. 20202


CORRESPONDENCE COURSE LIMITATION. An otherwise
eligible institution is NOT eligible for SFA program participation if,
for its latest complete award year, more than 50% of its COURSES
are taught through correspondence.*2*

CORRESPONDENCE COURSE -- A home study course
provided to students who are not physically attending classes at
the school; a course that is part residential and part
correspondence. (Includes video courses unless students
physically in attendance at the school receive the same video
instruction in the same award year.)

TELECOMMUNICATIONS COURSE -- A course offered
principally through television, audio, or computer transmission,
including open broadcast, closed circuit, cable, microwave,
satellite, or audio or computer conferences. (Includes video
courses if students physically attending the school also receive the
video courses in the same award year.)

[[Exceptions for certain institutions]]
This requirement is waived for a school that offers a two-year
associate degree or four-year baccalaureate degree program, if the
students enrolled in correspondence courses receive no more than
5% of the total SFA funds received by all that school's students.
This requirement also does not apply to an institution that mainly
provides vocational adult education or job training (as defined under
the Carl D. Perkins Vocational and Applied Technology Education
Act).

In calculating the percentage of correspondence courses, a
correspondence course can be either a complete educational program
offered by correspondence, or a single course offered by
correspondence that is part of a larger, on-campus (residential)
program. Regardless of how many times a course or program is
offered during the award year, it is counted only once. (A course
offered both through correspondence and on campus is counted as
two courses when determining the total number of courses offered by
the school.) The school's "Correspondence Course" calculation must
be attested to by a CPA, as discussed previously.


[[Head count]]
CORRESPONDENCE STUDENT LIMITATION. An otherwise
eligible institution is also not eligible for SFA program
participation if, for its latest complete award year, 50% or more of
its regular students are enrolled in correspondence courses.
Telecommunications courses may be considered to be
correspondence courses (see definitions and footnote on previous
page). The rules for calculation of this percentage are the same as
given previously for the calculation of the correspondence course
percentage. The calculation should reflect a straight "head count" of
students. That is, each regular student must be counted regardless
of full-time or part-time attendance, and will be counted only once
during an award year, regardless of withdrawal and re-enrollment.
(Students who enrolled, withdrew, and subsequently received a full
refund should not be included in the count.) The school's
"Correspondence Student" calculation must be attested to by a CPA,
as discussed previously.


[[Waiver possible]]
INCARCERATED STUDENT LIMITATION. An otherwise
eligible institution is NOT eligible for SFA program participation if,
for its latest complete award year, 25% or more of its regular
STUDENTS are incarcerated.*3* If requested by the school, the
Department may waive this limitation for a nonprofit school offering
a two-year associate degree or a four-year baccalaureate degree
program, upon the school's request. (For the purposes of this
waiver, NONPROFIT includes public institutions.) For information
on the eligibility of incarcerated students for SFA assistance, see
Chapter Two.

For a school offering ONLY four-year or two-year programs that
lead to bachelor's or associate degrees, respectively, the waiver
would apply to all programs offered at the school. However, if the
school offers other types of programs, the waiver would apply to any
of the school's four-year and two-year programs leading to a
bachelor's or associate degree, respectively, and also to any other
programs in which the incarcerated regular students enrolled have a
50% or greater completion rate. (The calculation of this completion
rate is specified in Section 600.7(e)(2) of the Institutional Eligibility
regulations, and must be attested to by a certified public accountant
(CPA), as discussed previously.) If granted, the waiver extends as
long as the school continues to meet the waiver requirements each
award year.


ABILITY-TO-BENEFIT LIMITATION. An otherwise eligible
institution that does NOT offer a two-year associate degree or a four-
year baccalaureate degree program is NOT eligible for SFA program
participation if 50% or more of its regular enrolled students are
admitted without a high school diploma or its equivalent (here
called ability-to-benefit students).

[[Waiver possible]]
The Department may waive this limitation for a nonprofit school if
it exceeds the limitation because it serves significant numbers of
ability-to-benefit students through government agency contracts,
such as a contract under the Job Training Partnership Act. Such a
waiver is only possible if no more than 40% of the school's regular
enrollment consists of ability-to-benefit students who are not served
under the above-mentioned contracts. If granted, the waiver extends
as long as the school continues to meet the waiver requirements each
award year. The school's "Ability-To-Benefit" calculation must be
attested to by a CPA, as discussed previously.


"TWO-YEAR" RULE

To be eligible as a Proprietary Institution or a Postsecondary
Vocational Institution, the applicant institution must have provided
continuous postsecondary instruction (and been legally authorized to
do so) for at least two consecutive years. The educational
program(s) offered must remain substantially the same in length and
subject matter, except for changes made because of new technology
or other Federal agencies' requirements. An additional location
must also satisfy the two-year rule by operating independently for
two years before it may be evaluated to be considered a free-standing
institution. (Time as an additional location of an eligible
Proprietary Institution or Postsecondary Vocational Institution does
not count toward the two-year rule, but time as an eligible Institution
of Higher Education or its additional location does.)

A branch campus*4* seeking status as a main campus or free-
standing institution is subject to the two-year rule, but its time as a
branch campus counts toward the two years. (For more information
on additional locations and branch campuses, including definitions
of these two terms, see Section Ten of this Chapter.)


FOREIGN SCHOOLS ELIGIBLE FOR FFEL PROGRAMS

Subpart E of the Institutional Eligibility regulations establishes the
eligibility criteria for foreign schools. In general, by law, foreign
schools can participate in FFEL programs if they are comparable to
an Institution of Higher Education as defined earlier in this section
(also see Chapter Ten of this Handbook) and have been approved by
the Secretary. Additionally, the above regulations added specific
requirements for foreign medical schools.*5*

[[Requirements for foreign medical schools]]
To be eligible for FFEL participation, a foreign medical school must
meet the same requirements as other foreign schools and must
also--

- provide, and require its students to complete, a medical
program of clinical and classroom instruction, not less than 32
months long,

- have graduated classes during each of the two years preceding
the school's application for eligibility,

- for the above-mentioned medical program, employ only faculty
members whose credentials are equivalent to the credentials of
faculty teaching similar courses in U.S. medical schools, and

- be accredited, for a public or private nonprofit school, by a
recognized agency, or for all other schools, by an authorized
agency whose standards have been determined, by a panel
approved by the Department, to be comparable to U.S.
standards of accreditation for medical schools.

In addition, the law specifies the following requirements for foreign
medical schools--

- at least 60% of the full-time regular students enrolled in the
previous year (and 60% of the most recent graduates) must be
other than U.S. citizens or nationals, permanent residents, or
eligible non-citizens of the United States, and

- at least 60% of the students and graduates (for the past three
years) who took any step of an exam from the Educational
Commission for Foreign Medical Graduates (ECFMG)—
including the ECFMG English test—in the previous year must
have received a passing score.

A school not meeting all the 60% requirements can still be eligible
if the school's clinical training program was approved by a State as
of January 1, 1992 and is currently approved. Continued eligibility
is dependent upon annual submission of the data and information
that demonstrates compliance with these 60% requirements (or the
exception).


REPORTING INFORMATION ON FOREIGN SOURCES

[[DCL GEN-95-12]]
The law requires certain postsecondary schools (whether or not the
school is eligible to participate in the SFA programs) to report
ownership or control by foreign sources. The law also requires these
postsecondary schools to report contracts with, or gifts from the
same foreign source that, alone or combined, have a value of
$250,000 or more for a calendar year. These reports must be filed
with the Department by the January 31 or July 31, whichever is
sooner, after the date of receipt of the gifts, date of the contract, or
date of ownership or control.

[[Definitions of gift and contract]]
CONTRACT -- Any agreement for the acquisition by purchase,
lease, or barter of property or services for the direct benefit or use
of either of the parties.

GIFT -- Any gift of money or property.

A school (and each campus of a multicampus school) must report
this information if the school--

- Is legally authorized to provide a program beyond the secondary
level within a State,

[[Who must report]]
- Provides a program for which it awards a bachelor's degree or a
more advanced degree, or at least a 2-year program acceptable
for full credit toward a bachelor's degree,

- Is accredited by a nationally recognized accrediting agency, and

- Is extended any Federal financial assistance (directly or
indirectly through another entity or person), or receives support
from the extension of any Federal financial assistance to the
school's subunits.

Each disclosure report to the Department must contain--

- For gifts received from or contracts entered into with a foreign
source other than a foreign government, the aggregate dollar
amount of the gifts and contracts attributable to a particular
country.*6*

[[Contents of disclosure report]]
- In the case of a school that is owned or controlled by a foreign
source, the identity of the foreign source, the date on which the
foreign source assumed ownership or control, and any changes
in program or structure resulting from the change in ownership
or control.

- For gifts received from or contracts entered into with a foreign
government, the aggregate amount of the gifts and contracts
received from each foreign government.

- For restricted or conditional gifts received from or restricted or
conditional contracts entered into with a foreign source (other
than a foreign government), the amount, date of receipt of the
gift or date of the contract, and description of the conditions
and restrictions.

- For restricted or conditional gifts received from or restricted or
conditional contracts entered into with a foreign government,
the amount, the date of receipt of the gift or date of the contract,
a description of the conditions or restrictions, and the name of
the foreign government.

RESTRICTED OR CONDITIONAL GIFT OR CONTRACT -
any endowment, gift, grant, contract, award, present, or property
of any kind which includes provisions regarding--

- the employment, assignment, or termination of faculty,

- the establishment of departments, centers, research or lecture
programs, or new faculty positions,

- the selection or admission of students, or

- the award of grants, loans, scholarships, fellowships, or other
forms of financial aid restricted to students of a specified
country, religion, sex, ethnic origin, or political opinion.

In lieu of the reporting requirements listed above--

- If a school is in a State that has substantially similar laws for
public disclosure of gifts from, or contracts with, a foreign
source, a copy of the report to the State may be filed with the
Department. The school must provide the Department with a
statement from the appropriate State official indicating that the
school has met the State requirements.

- If another department, agency or bureau of the Executive
Branch of the Federal Government has substantially similar
requirements for public disclosure of gifts from, or contracts
with, a foreign source, the school may submit a copy of this
report to the Department.

Because Dear Colleague GEN-95-12 was the first official
notification to schools of these reporting procedures, the reports due
July 31, 1995 should include an itemization of all gifts received and
contracts entered into, and ownership or control by a foreign source
since July 23, 1992 (the effective date of the law). However, a
school is required to report gifts or contracts only if the value is
$250,000 or more from any single foreign source in any of these
calendar year periods: July 23, 1992--December 31, 1992; January
1, 1993--December 31, 1993; January 1, 1994--December 31,
1994; and/or January 1, 1995--July 31, 1995.

For subsequent reports, the January 31 report should cover the
period July 1--December 31 of the previous year, and the July 31
report should cover January 1--June 30 of the same year.

Reports should be sent to--

[[Where to send reports]]
If by mail...

U.S. Department of Education
Institutional Participation Division
Foreign Gift Team
600 Independence Avenue, S.W.
Washington, D.C. 20202-5323

If by fax...

(202)260-6107
ATTN: Foreign Gift Team

If by overnight mail or courier delivery...

U.S. Department of Education
Institutional Participation Division
Foreign Gift Team
7th and D Streets, S.W.
GSA Building Room 3030
Washington, D.C. 20407

If by Internet...

forgift@sfa.ope.ed.gov

If a school fails to comply with the requirements of this law in a
timely manner, the Department is authorized to undertake a civil
action in Federal District Court to ensure compliance. Following a
knowing or willful failure to comply, a school must reimburse the
Treasury of the United States for the full costs of obtaining
compliance with the law.

All information provided by schools under this law is open to
inspection and duplication by members of the public.

PROGRAM ELIGIBILITY REQUIREMENTS

To qualify as an eligible institution, a school must offer at least one
eligible program. As stated previously, not all programs at an
eligible institution will necessarily be eligible, but at least one of the
programs at the school must meet the eligible program
requirements.

[[Institution of Higher Education]]
A school qualifies as an Institution of Higher Education if (in
addition to meeting all other eligibility requirements) it offers a
program that leads to an associate, bachelor's, professional, or
graduate degree. For such programs, there are no minimum
program length requirements.

However, a school may also qualify as an Institution of Higher
Education if it offers a program of at least two academic years in
duration that is acceptable for full credit toward a bachelor's degree,
or a program of at least one academic year in duration that leads to a
certificate, degree, or other recognized credential and prepares
students for gainful employment in a recognized occupation.*7*

[[Proprietary or Postsecondary Vocational Schools]]
There are three types of eligible programs that will qualify an
otherwise eligible school as a Proprietary Institution or a
Postsecondary Vocational Institution. All of these three programs
are required to have a specified number of weeks of instruction, and
must provide training that prepares a student for gainful
employment in a recognized occupation.

[[Undergraduate programs]]
The FIRST TYPE of eligible program is one that must provide at
least 600 clock hours, 16 semester or trimester hours or 24 quarter
hours of undergraduate instruction offered during a minimum of 15
weeks. The program MAY admit as regular students persons who
have not completed the equivalent of an associate degree.

[[Shorter programs]]
The SECOND TYPE of eligible program is one that must provide at
least 300 clock hours, 8 semester hours, or 12 quarter hours of
instruction offered during a minimum of 10 weeks. The program
must be a graduate or professional program OR admit as regular
students ONLY persons who have completed the equivalent of an
associate degree. Effective July 1, 1993, this type of program may
qualify for purposes of ALL the SFA programs, not just the FFEL
programs.

[["Short-term" programs]]
The THIRD TYPE of program is the "short-term program." A
SHORT-TERM PROGRAM QUALIFIES FOR THE FFEL AND
DIRECT LOAN PROGRAMS ONLY. A short-term program must
provide at least 300 but less than 600 clock hours of instruction
offered during a minimum of 10 weeks. The program must admit as
regular students SOME persons who have not completed the
equivalent of an associate degree. These programs must also satisfy
the qualitative factors for completion rates, placement rates, length
of the program and period of existence of the program. Specifically,
these programs must--

[[Qualitative factors for short-term programs]]
- Have a verified completion and placement rate of at least 70%,

- Be not more than 50% longer than the minimum training
period required by the State (or Federal agency), if any, for the
occupation for which the program of instruction is intended,
and

- Have been in existence for at least one year.

For the purpose of demonstrating compliance with these qualitative
factors, a school must calculate the completion and placement rates
FOR THE AWARD YEAR, as explained below. As discussed
previously in this Section (in relation to the 85 Percent Rule) the
CPA who prepares its compliance audit report must attest to the
accuracy of the school's calculation of completion and placement
rates.

[[The "Completion Rate Calculation" on page 3-23 is currently
unavailable for viewing. Please reference your paper document
for additional information.]]

[[The "Placement Rate Calculation" on page 3-24 is currently
unavailable for viewing. Please reference your paper document
for additional information.]]

[[School must document employment]]
The school must document the employment of any student it
includes as "employed" in the placement rate calculation. Examples
of such documentation would include, but are not limited to, a
written statement from the employer, signed copies of State or
Federal income tax forms, or written evidence of payments of Social
Security taxes.

[[Definition of comparable occupation]]
The school must reasonably determine whether a related occupation
is comparable. For instance, for a student who was trained as an
auto mechanic, it is reasonable to determine that a job as a boat
mechanic is comparable. However, for a person trained in retail
sales management, a counter-service job at a fast-food restaurant is
not comparable.


THE 12-HOUR RULE

The three types of eligible programs discussed above, which qualify
an otherwise eligible school as a Proprietary Institution or a
Postsecondary Vocational Institution, are required to have a
specified number of "weeks of instruction." The requirements for a
"week of instruction" are similar to those for a "week of instructional
time" for the academic year definition. (See the discussion of
academic year on pg 3-26.)

[[Week of instruction]]
For all programs except those measured in credit hours without
standard terms, a "week of instruction" is any seven-day period in
which at least one day of regularly scheduled instruction,
examination, or preparation for examinations occurs.

Instruction does not include periods of orientation, counseling,
vacation, or other activity not related to class preparation or
examination.

[[Final Rule 11-29-94]]
For the 1994-95 award year, for educational programs measured in
credit hours without standard terms (semesters, trimesters, or
quarters), a week of instruction had to include at least five days of
instruction, examinations, or preparation for examinations within a
consecutive seven-day period. Beginning with the 1995-96 award
year, a week of instruction for these programs must instead include
at least 12 HOURS of instruction, examinations, or preparation for
examination within a consecutive seven-day period.

[[Minimum number of weeks, minimum number of hours]]
The 12-hour rule in effect requires a school to demonstrate that
certain programs have not only a minimum number of weeks, but
also a minimum number of hours. For example, in order for a
program to meet the eligible program definition that requires at least
600 clock hours, 16 semester or trimester hours, or 24 quarter hours
of instruction, examinations, or preparation for examinations offered
during a minimum of 15 weeks of instruction, the program must
meet for a minimum of 15 calendar weeks over which a MINIMUM
OF 180 HOURS OF INSTRUCTION, examinations, or preparation
for examinations occur (12 hours of instruction, examinations, or
preparation for examinations for 15 calendar weeks).

A school that wants to set its program to be only 15 calendar weeks
long would therefore have to meet an average of 12 hours per week
for the 15 calendar week period in order for the program to be
eligible. A school with a program that meets less frequently than 12
hours a week would have to meet for enough weeks to provide 180
hours of instruction, examinations, or preparation for examinations.
For example, a program meeting six hours per week would have to
be 30 calendar weeks long in order to be eligible under this
provision.

[[Inclusion of holidays]]
Because the 12-hour rule does not require a school to offer
instruction, examinations, or preparation for examinations on
specific days, an institution may not include a holiday for these
calculations unless regularly scheduled instruction, examinations, or
preparation for examinations occurs on that day.


ACADEMIC YEAR REQUIREMENTS

[[30-week minimum of instructional time]]
Every eligible program, including graduate programs, must have an
academic year that contains a minimum of 30 weeks of instructional
time. In addition, for undergraduate programs, the law requires
that, over the minimum of 30 weeks of instructional time, a full-time
student must be expected to complete at least 24 semester or
trimester hours, 36 quarter hours, or 900 clock hours. A school may
determine on its own the amount of work a full-time graduate or
professional student is expected to complete over an academic year.

[[Determining academic year length]]
A school may have different academic years for different programs,
but must use the same academic year (1) for calculating all SFA
awards for students enrolled in a particular program and (2) for all
other SFA program purposes. To determine the number of weeks of
instructional time, a school must count the period that begins on the
first day of classes and ends on the last day of classes or
examinations.

[[Definition of a week]]
For all programs except those measured in credit hours without
standard terms, a "week of instructional time" is any seven day
period in which at least one day of regularly scheduled instruction,
examination, or preparation for examinations occurs. (Instructional
time does not include periods of orientation, counseling, vacation, or
other activity not related to class preparation or examination.) The
requirements for a "week of instructional time" are similar to those
for a "week of instruction" for the eligible program definitions (see
pg. 3-24).

[[Final Rule 11-29-94]]
For the 1994-95 award year, for educational programs measured in
credit hours without standard terms (semesters, trimesters, or
quarters), a week of instructional time had to include at least five
days of instruction, examinations, or preparation for examinations
within a consecutive seven-day period. Beginning with the 1995-96
award year, a week of instruction for these programs must instead
include at least 12 HOURS of instruction, examinations, or
preparation for examinations within a consecutive seven-day period.

[[30 calendar-week year assumes
class meets 13 hours per week]]
This requirement is to be implemented in the same manner as the 5-
day rule. For example, a school wishing to set its academic year to
be only 30 calendar weeks long (for this purpose a calendar week is
seven consecutive days) would have to meet an average of 12 hours
per week for the 30 calendar-week period. A school with a program
that meets less frequently than 12 hours a week would have to meet
enough calendar weeks to provide 360 hours of instruction,
examinations, or preparation for examinations (30 calendar weeks x
12 hours per week) in order to have a program offered over a full
academic year (equivalent to 30 weeks of INSTRUCTIONAL time).

For example, if a school wants to establish an academic year of 30
weeks of instructional time for a credit-hour, nonterm program that
meets 10 hours a week, the school would need to have
approximately 36 calendar weeks (36 calendar weeks x 10 hours per
week = 360 hours of instruction, examinations, or preparation for
examinations) in order to have the equivalent of 30 weeks of
instructional time for a full academic year. Therefore, in this
example, a student enrolled in this program would not be eligible to
take out another Stafford loan until he or she had completed the
required amount of work and 36 calendar weeks had elapsed. A
school must also use this method to determine when one-third and
two-thirds of an academic year have occurred.

[[Pell Calculations]]
When calculating awards under the Pell Grant program, a school
must always use weeks of instructional time (see Chapter Four of
this Handbook). However, the length of the academic year in
calendar weeks will probably exceed the number of weeks of
instructional time.

[[Inclusion of holidays]]
Because the 12-hour rule does not require a school to offer
instruction, examinations, or preparation for examinations on
specific days, a school may not include a holiday as a day of
instruction unless regularly scheduled instruction, examinations, or
preparation for examinations occurs on that day.

For more information on the effects of the 12-hour rule on a
particular SFA program, see the relevant program chapter in this
Handbook.

[[Reductions in academic year length]]
The law permits schools that provide two-year or four-year associate
or baccalaureate degree programs to apply to the Department if they
want to establish a full academic year of less than 30 weeks of
instructional time. The Department is permitted to grant a
reduction in the length of an academic year to no less than 26 weeks
of instructional time. Under the law, these schools would be
permitted to have an academic year of less than 30 weeks of
instructional time (but no less than 26 weeks of instructional time)
without any reduction in the amount of SFA funds that a student
enrolled in those programs is eligible to receive for an entire
academic year. Currently, there are two types of reductions.

[[Transitional reductions]]
A TRANSITIONAL REDUCTION is available to schools that had
an academic year of 26-29 weeks as of July 1, 1994, and need a
period of transition to lengthen the academic year of their programs
to 30 weeks. A transitional reduction cannot extend beyond July 1,
1996.

[[Long-term reductions]]
A LONG-TERM REDUCTION is available to schools that want to
begin or continue to operate with a reduced academic year on a
long-term basis. This type of reduction must be renewed each time a
school is required to apply for recertification.

When evaluating a school's application for a reduction, the
Department will consider factors such as--

- the school's compliance with awarding and disbursement
procedures based on the academic year requirements of the
Higher Education Amendments of 1992,

- the approval of the academic year by the school's accrediting
agency or State agency,

- the hours of attendance and other coursework that a full-time
student is required to complete in the academic year, and

- any unique circumstances the justify granting the request.

For further details on the information required for submission of a
request for a reduction, see CFR 668.3.

[[Final Rule 11-29-94]]
The November 29, 1994 final regulations clarify that a school that is
ineligible for a reduction in the length of an academic year because
the school was not in compliance with awarding and disbursement
procedures, may be eligible if the school makes arrangements with
the Department to repay any resulting liabilities.


CLOCK HOUR/CREDIT HOUR CONVERSIONS

[[Units of measurement --clock hours vs.
credit hours]]
A student's period of attendance is measured according to several
commonly accepted academic standards. A clock hour is based on
an actual hour of attendance, though each hour may include a ten-
minute break. Credit hours are typically based on two hours of
homework for each hour of class attendance.

It is not allowable to count more than one clock hour per 60-minute
period; in other words, a school cannot schedule several hours of
instruction without breaks, and then count clock hours in 50-minute
increments. The result would be that seven hours of consecutive
instruction would count as 8.4 clock hours (420 minutes ¸ 50
minutes = 8.4 hours). Seven real-time attendance hours CANNOT
count for more than seven clock hours.

[[Credit hours --semester hours vs. quarter hours]]
The difference between semester hours and quarter hours is
significant. A semester term at a traditional school may last 16
weeks, allowing for 15 weeks of classes and an exam week. Thus,
one semester hour would consist of 15 hours of class and 30 hours of
preparation. Since an academic quarter consists of 10 weeks of class
and an exam week, a quarter hour would be made up of 10 hours of
class and 20 hours of preparation. Based on this comparison, a
quarter hour represents 2/3 of the academic work required by a
semester hour. The difference between semester and quarter hours
is reflected in the standards for minimum program length -- a 15-
week training program must be at least 16 semester hours or 24
quarter hours. (The same distinction is made when defining an
academic year and full-time enrollment.)

[[Clock hour measurement required for some]]
In 1989, the Institutional Eligibility regulations were amended to
require a school to use clock hours for determining SFA program
eligibility if the school's State licensing agency required a school to
measure its educational programs in clock hours in order to be
legally authorized or as part of applying for a license or charter.
THE REGULATIONS PUBLISHED APRIL 29, 1994 OMITTED
THE SPECIFIC LANGUAGE OF THIS REQUIREMENT;
however, schools must still comply with this requirement if
mandated by the school's State licensing agency.

[[Clock-to-credit conversion requirements]]
Further, Sections 668.8 and 668.9 of the General Provisions
regulations, published on July 23, 1993, required certain institutions
that offer an undergraduate vocational program in credit hours to
use a specific clock-to-credit hour formula to determine if that
program meets the SFA program eligibility criteria and to determine
the total number of credit hours in that program, for SFA program
purposes. This change was made in response to past program
abuses, and was intended to prevent a school from artificially
inflating a program's length by converting from clock hours to credit
hours.

[[Exceptions]]
[[Final Rule 11-29-94]]
Undergraduate associate, bachelor's, or professional programs of at
least two years are exempt from these requirements. A program is
also exempt if each course within the program is fully acceptable for
credit toward one of those degree programs at the school. The
November 29, 1994 final regulations reinstate an additional
exemption (removed for the 1994-95 award year) for programs that
lead to a degree and that are equivalent to an associate, bachelor's,
or professional program of at least two years. A program is also
exempt if each course within the program is fully acceptable for
credit toward the equivalent degree program at the school. THIS
FINAL EXEMPTION DOES NOT PERMIT A NON-DEGREE
PROGRAM TO SEEK A DETERMINATION THAT IT IS
EQUIVALENT TO A DEGREE PROGRAM.

Finally, P. L. 103-382 exempts public or private nonprofit hospital-
based diploma schools of nursing from using any clock-to-credit
hour formula to calculate awards for the SFA programs. Although
this law was signed by the President on October 20, 1994, it is
effective retroactively to July 1, 1994.

[[Ongoing litigation]]
These clock to credit hour conversion final regulations are currently
under litigation and their enforcement is subject to a preliminary
injunction. A decision from the District Court is pending. The
Department will not enforce these regulations unless a favorable
decision is issued by the courts.


INTERPRETING ELIGIBLE PROGRAM REQUIREMENTS

[[Program length and educational credentials]]
Generally, a student must be enrolled in an eligible program to
receive SFA funds. A school's eligibility does not necessarily extend
to all its programs, as is illustrated on the facing page. Two of the
basic characteristics of an eligible program are its length and the
educational credentials it offers. As discussed earlier, certain
eligible programs must meet minimum program length
requirements.

[[Programs that meet more than one definition]]
A school's eligibility extends to all eligible programs and locations
that were identified on the school's application for participation,
unless the Department determined that certain school programs or
locations did not meet the eligibility requirements. In general, the
school's eligible non-degree programs and locations are specifically
named on the approval notice. Locations and program can be added
later; the related requirements and procedures are discussed in
Section Ten of this Chapter.

The school is ultimately responsible for ensuring that a program is
eligible BEFORE awarding SFA funds to students in that program.
The school should review such factors as the length of the program,
the program's admissions requirements, and the degree or certificate
awarded upon completion. In addition, the school should make
certain that the program is included under the notice of accreditation
from a nationally recognized accrediting agency (unless the agency
does not require that particular programs be accredited), and is
authorized by the appropriate State agency to offer the program (if
the State licenses individual programs at postsecondary institutions).
As noted previously, a school's educational programs may meet
more than one statutory definition. It is imperative to understand the
various requirements and know which take precedence.

[[The chart on page 3-31 is currently unavailable for viewing. Please
reference your paper document for additional information.]]


ADDITIONAL ELIGIBLE PROGRAM REQUIREMENTS

Several SFA programs have additional requirements that an
educational program must meet to be eligible. For example, only
UNDERGRADUATE EDUCATIONAL PROGRAMS are eligible
under the Pell Grant and FSEOG programs. Further,
CORRESPONDENCE PROGRAMS are not eligible unless they
meet the general requirements for an eligible program and are
required for the student's regular program of study, leading to a
degree or certificate. As mentioned earlier in this Section, certain
telecommunications courses may be considered correspondence
courses and therefore may be subject to the same requirements.

[[ESL programs]]
[[Final Rule 11-29-94]]
An ENGLISH AS A SECOND LANGUAGE program is eligible
ONLY for Pell Grant assistance. It must meet the general
requirements for an eligible program (leads to a degree or other
credential) and may admit only students who need instruction in
English to be able to use the knowledge, training, or skills they
already have. (The school must document its determination that the
ESL instruction is necessary for each student enrolled.) For the
1994-95 award year, schools were required to test each student at the
end of the program to substantiate that the student had attained
adequate proficiency in written and spoken English to use already
existing knowledge, training, or skills. This requirement has been
removed beginning with the 1995-96 award year.

A school may request an eligibility determination from IPD for an
ESL program. (Remember, a student may receive SFA funds for
ESL coursework that is part of a larger eligible program.)

[[Study abroad programs]]
In previous years, schools have had difficulty determining the
eligibility of Study Abroad programs. However, the law clarifies
that Study Abroad courses are eligible for SFA funds, regardless of
whether they are REQUIRED for the student's program of study, as
long as they are ACCEPTED FOR CREDIT in the student's
program. Other language in the law requires schools to notify Study
Abroad students of the availability of such assistance, and to certify
on the new Program Participation Agreement that they will not deny
SFA funds to such students. (An eligible Study Abroad program
must also meet the contractual requirements discussed in Section
Six of this Chapter.)

[[Flight school]]
Under the FFEL programs, a FLIGHT SCHOOL PROGRAM must
maintain current valid certification by the Federal Aviation
Administration to be eligible.

*1* An accredited or pre-accredited school must agree to submit,
for any dispute involving the termination of accreditation, to binding
arbitration before initiating any other legal action.

*2* A telecommunications course is considered to be a
correspondence course if the sum of telecommunications courses and
other correspondencecourses provided by the school during its latest
complete award year was equal to or more than 50% of the total
courses provided that year.

*3* An "incarcerated student" is a student who is serving a
criminal sentence in a Federal, State, or local penitentiary, prison,
jail, reformatory, work farm or other similar correctional institution.
(Does not include detention in a halfway house, home detention, or
weekend-only sentences.)

*4* A "branch campus" is geographically apart and independent of
the main campus of an institution. It must be permanent in nature,
offer courses in educational programs leading to a degree, have its
own faculty and administration, and have its own budgetary and
hiring authority.

*5* A "foreign medical school" is defined as a school that is not
located in a State, and is qualified and listed as a medical school in
the most current World Directory of Medical Schools, published by
the World Health Organization (WHO).

*6* The country to which a gift or a contract is attributable is the
country of citizenship, or, if unknown, the principal residence for a
foreign source who is a natural person and the country of
incorporation, or if unknown, the principal place of business for a
foreign source which is a legal entity.

*7* A "recognized occupation" is either one that is listed in the
"occupational division" of the Dictionary of Occupational Titles
(published by the U.S. Department of Labor), or one that is
considered by the Department, in consultation with the Department
of Labor, to be a recognized occupation.