(GEN-22-07) Written Arrangements Between Title IV-Eligible Institutions and Ineligible Third-Party Entities Providing a Portion of an Academic Program

Publication Date
June 16, 2022
DCL ID
GEN-22-07
Subject
Written Arrangements Between Title IV-Eligible Institutions and Ineligible Third-Party Entities Providing a Portion of an Academic Program
Summary
This letter provides guidance to institutions about certain types of written arrangements between eligible institutions and third-party entities that are not eligible for Title IV funds under the Higher Education Act (HEA) and Department of Education regulations. It also reminds institutions about accreditation requirements that apply to distance education, and disclosure requirements that apply to all written arrangements.

Dear Colleague: 

Title IV-eligible institutions (eligible institutions) may enter into written arrangements with outside entities, including institutions or organizations that are not eligible for Title IV, HEA funds (ineligible entities), for the outside entities to provide a portion of an academic program. Under 34 CFR § 668.5, if an eligible domestic institution enters into a written arrangement with an ineligible entity, the ineligible entity is generally limited to providing 25 percent or less of the eligible institution’s academic program. This limitation expands to allow an ineligible entity to provide more than 25 percent, but less than 50 percent, of the program when the eligible institution and the ineligible entity are not owned or controlled by the same individual, partnership, or corporation, provided that the eligible institution’s accrediting agency has specifically determined that the institution's arrangement meets the agency's standards for executing a written arrangement with an ineligible entity. Eligible foreign institutions should also consult 34 CFR § 600.54(c)(1) to review additional applicable requirements.

The Department is aware of at least two categories of written arrangements that are not compliant with Title IV of the HEA. One category is a written arrangement where the ineligible entity provides a percentage of the academic program that exceeds the allowable regulatory limit, but the institution incorrectly characterizes the portion of the program offered by the ineligible entity as being offered by the eligible institution. A second category is where an eligible institution enters a written arrangement with an entity that provides what is sometimes referred to as a “gap-year experience,” and the eligible institution provides Title IV, HEA assistance to students who are not regular students and are instead enrolled primarily for the gap-year experience, itself.

Written Arrangements Incorrectly Characterized as Offered by the Eligible Institution

The requirements in 34 CFR § 668.5 are designed to offer flexibility to institutions in contracting with other entities to provide a portion of an academic program while ensuring the institution maintains control of that program and any associated instruction, assessment, or curricular design. The requirements also protect students who have reason to believe that, while enrolled at an eligible institution, the academic programs are provided by that institution and meet minimum bars for accreditation as well as regulatory standards defined by the Department.

34 CFR § 668.5(g) describes how the ineligible entity’s portion of a program is calculated. The hours, whether credit or clock hours, that comprise the academic program must be attributed to one of the partners in the arrangement, either the eligible institution or the ineligible entity. The ineligible entity provides the course if it has authority over the design, administration, or instruction of the course, which may include (among other things):

  • Establishing the requirements for completion of the course;

  • Delivering instruction or mandatory tutoring;

  • Assessing student learning, including through electronic means; or

  • Developing curricula or course materials, where the institution and its instructors cannot make changes to the materials.

It has come to our attention that institutions and their accrediting agencies do not always accurately account for the percentage of a program that is provided by an ineligible entity, including in written arrangements where the ineligible entity provides services or activities related to credit or clock hours that should be attributed to the ineligible entity, but that are instead attributed to the eligible institution. The apparent goal of this practice is to make it appear that the ineligible entity’s portion of an academic program does not exceed the regulatory limitations. If the Department determines that an educational program operated through an arrangement with an ineligible entity has exceeded the regulatory threshold, we may determine that the program is ineligible for Title IV, HEA funds and assess liabilities for all funds disbursed through that program while the arrangement was in place. In addition, if the Department determines that the institution misrepresented the portion of the program offered by the ineligible entity, we may initiate a fine action or an administrative action to terminate the institution’s ability to continue in the Title IV, HEA programs.

We are aware of several arrangements between eligible institutions and ineligible entities that have exceeded the regulatory limitations in 34 CFR § 668.5. Examples of these situations include the following:

  1. A program is offered in its entirety by an ineligible entity, but the program is inaccurately represented as being offered by the eligible institution for the primary purpose of obtaining Title IV, HEA funds for an otherwise ineligible program.

  2. The ineligible entity provided the instructors for the program and directly or indirectly compensated those individuals, but the eligible institution treated those instructors as employees of the eligible institution. In some instances, the eligible institution classified these individuals as “adjunct faculty.”

  3. The eligible institution designated one of its own employees as the “instructor of record,” or a similar designation, while the actual instruction was performed by staff employed by the ineligible entity. Often, these staff members were called “teaching assistants,” “tutors,” “coaches,” or a similar title.

  4. The eligible institution agreed to serve as the “institution of record” for the purposes of transcribing hours for an ineligible entity’s program in order to access Title IV, HEA funds.

  5. The eligible institution purchased curriculum or curricular materials from an ineligible entity for a program of study and agreed that the curriculum could not be modified by the institution or its instructors, effectively surrendering its control over the program’s curriculum.

In all of these arrangements, credit or clock hours were incorrectly attributed to the eligible institution and not the ineligible entity. When the ineligible entity is the de facto provider of instruction to students, those hours must be attributed to the ineligible entity. The individual who interacts with the student through instructional activities is the instructor, and institutions must determine if this individual is correctly associated with the eligible institution as a true employee or associated with the ineligible entity for attribution purposes. 

If any part of the compensation of an instructor for a course is paid directly or indirectly by the ineligible entity, the hours associated with that course are attributable to the ineligible entity. An instructor may be indirectly compensated by an ineligible entity where the ineligible entity reimburses the institution for compensation to the instructor. In that case, the hours in that course would be attributable to the ineligible entity. 

Similarly, referring to a faculty member as an “instructor of record” for a course does not absolve an institution from the responsibility of determining whether other individuals compensated by the ineligible entity designed curricula, assessed student coursework, or otherwise provided instruction to students in that course. An institution is also not permitted to term itself an “institution of record” and merely give credit for a program offered entirely by an ineligible entity for the purpose of providing Title IV, HEA funds for those credits, as this is prohibited under the definition of an educational program in 34 CFR § 600.2.

Institutions must ensure that the portion of any program that is provided by an ineligible entity does not exceed the regulatory maximum for a written arrangement, or the program of study must be considered ineligible for Title IV, HEA funds. The Department will monitor and enforce the regulatory limitation applicable to this type of written arrangement through its compliance activities.

Written Arrangements in Which Eligible Institutions Partner with Ineligible Entities to Provide Title IV, HEA Funds for an Experience Prior to the Matriculation of Conventional Studies

Some students elect to pursue a period of travel, leisure, and/or experiential activity prior to commencement of conventional studies (frequently called a “gap year”). Those who partake in such an experience may delay applying for postsecondary education or defer admission to a postsecondary institution until after the end of the gap-year experience. The Department’s regulations do not govern the aforementioned activity as it does not generally involve Title IV, HEA funds.

We are, however, concerned with written arrangements between eligible postsecondary institutions and entities that specialize in organizing and conducting gap-year experiences where Title IV, HEA funds are involved. Some gap-year experiences provide an option to earn academic credit, where the eligible institution agrees in the written arrangement to be the institution of record and to admit the student, administer the student’s financial aid, if any, and offer academic credit to the student for academic activity occurring during the gap-year experience. However, under these circumstances the ineligible entity typically provides most or all of the instruction for those credits.

In these types of arrangements, the student’s enrollment in the institution of record is used as an avenue for the student to obtain Title IV, HEA funds to help finance the gap-year experience. In many of these arrangements, the gap-year participant is urged to pursue admission to the institution of record only if the student is interested in applying for Title IV, HEA benefits, making clear that the admission to a postsecondary institution is not a requirement to participate in the gap-year experience or to earn transferable college credit. In some instances, emphasis is placed on the ability of the student to be automatically admitted to a postsecondary institution other than the institution of record at the conclusion of the gap-year experience, suggesting that students do not intend to earn a credential at the institution of record.

A student applying for Title IV, HEA assistance solely to finance a gap-year experience does not meet the criteria to be considered a regular student. To establish eligibility for Title IV, HEA funds, a student must be a regular student in an eligible program of study. 34 CFR § 600.2 defines a “regular student” as follows:

“A person who is enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate, or other recognized educational credential offered by that institution.”

To receive Title IV, HEA funds, a student must meet this definition of a regular student, regardless of whether the student is enrolled in a gap-year experience or a similar offering. The eligible institution, acting in its role as a fiduciary of federal funds and administrator of the federal student aid programs, must determine whether a student has met this basic eligibility factor.

In addition, we remind institutions that the definition of “educational program” in 34 CFR § 600.2 specifically prohibits the awarding of Title IV, HEA assistance if the institution itself does not provide instruction but merely gives credit for instruction provided by other entities or for other accomplishments, like life experience.

The Department will monitor and enforce the regulatory limitations applicable to this type of written arrangement through its compliance activities.

Accreditation Requirements for Written Arrangements Involving Distance Education

When an institution offers distance education for the first time, under 34 CFR § 668.8(m) it must obtain approval from a recognized accrediting agency that has distance education within the scope of its recognition from the Secretary. A program that is offered even in part through distance education coursework is not Title IV-eligible if the institution’s offering of distance education has not been evaluated and approved by such an accrediting agency. An accrediting agency is also required to perform a substantive change evaluation when an institution offers at least 50 percent of a program through distance education, enrolls at least 50 percent of its students through distance education, or offers 50 percent of its courses through distance education.

Coursework offered through distance education by an ineligible entity can trigger either of these requirements. For example, if an institution includes distance education in one of its programs for the first time through a written arrangement with an ineligible entity, this would trigger the requirement under 34 CFR § 668.8(m) for an accrediting agency to review and approve the institution’s offering of distance education in order for the programs offered through distance education to remain Title IV-eligible. Similarly, distance education coursework offered by an ineligible entity is included in the 50 percent thresholds described above and could trigger a requirement for an accrediting agency to perform a substantive change evaluation of an institution’s offering of distance education.

However, an institution’s accrediting agency is not permitted to evaluate an ineligible entity’s offering of distance education in the context of a written arrangement for Title IV purposes if it does not also accredit that entity. Therefore, an institution must ensure that when it offers a program that uses distance education for the first time, the coursework provided using distance education is not provided by an unaccredited ineligible entity.

Disclosure Requirements for Institutions Engaged in Written Arrangements

Institutions that are engaged in any written arrangement, whether with an eligible institution or an ineligible entity, are reminded that they are subject to disclosure requirements in 34 CFR § 668.43(a)(12), which require that an institution provide a description, in the program description, of written arrangements the school has entered into, including information related to the portion of the educational program that the other institution or ineligible entity provides; the name or location of other institutions or organizations providing portions of the program; the method of delivery for the portion of the program that the institution does not provide; and estimated additional costs that students may incur as a result of enrolling in a program offered through the written arrangement.

Compliance with this requirement in 34 CFR § 668.43(a)(12) is critical to ensure that students are made aware of the nature of such written arrangements entered into by their institutions. Institutions should make such disclosures prominently in locations such as on their website and in publications.

Questions and Answers Related to this Dear Colleague Letter

No. Gap-year arrangements that do not enroll regular students should not be confused with study-abroad programs. The Federal Student Aid Handbook, Volume 2, Chapter 2 provides examples of different types of study-abroad programs. A study-abroad program is typically preceded by enrollment at an eligible institution, and following the experience abroad, the student continues to attend an eligible program at that institution for purposes of obtaining a degree or academic credential from that institution. Thus, there is rarely a question about whether a student enrolled in a traditional study-abroad program has enrolled as a regular student.

Not necessarily. Institutions frequently employ individuals to provide supplementary academic support to students. These individuals are commonly referred to as tutors, coaches, assistants, or other similar titles. If these individuals are employed by, or indirectly or directly compensated by, an ineligible entity and are engaged in required academic activities for a course, including instruction, the hours associated with that course must be associated with the ineligible entity. In such cases, the institution must ensure the portion of the program provided by that ineligible entity remains within the regulatory limits. However, if the tutors are not associated with an ineligible entity, or if the academic activities provided by tutors are optional for students and do not fulfill program requirements, then the hours in courses where these individuals perform academic support activities would not be associated with an ineligible entity.

Typically, no. Institutions sometimes purchase from an outside vendor curricula or course materials that the institution’s instructors use during their teaching. Such arrangements would not be considered written arrangements if the institution has control of the curriculum and delivers instruction itself. However, if the vendor maintains control of the program of study after it has sold the package to the institution or involves itself with delivering the actual instruction to the institution’s students, the arrangement would be a written arrangement that is covered by the regulations. If an institution establishes a written arrangement with the vendor that prohibits the institution or its instructors from modifying or adapting the course materials, the vendor is treated as an ineligible entity that maintains authority over the design of the courses associated with the purchased materials.

 

The experience by itself is typically not Title IV eligible, but it is not automatically ineligible. As outlined above, a program must meet the definition of an educational program, and a student enrolled in such a program must also meet the definition of a regular student. An institution must meet these Title IV, HEA requirements before disbursing Title IV, HEA funds to students, including those enrolled in gap-year experiences.

Send an email describing your written arrangement to CaseTeams@ed.gov.

If you have further questions about written arrangements discussed in this letter, please use the Contact Customer Support form in FSA’s Partner Connect Help Center. To submit a question, enter your name, email address, topic, and question. When submitting a question related to this Dear Colleague Letter, please select the topic “FSA Ask-A-FED/Policy.”

Thank you for your continued support of the Title IV, HEA programs.

Sincerely,

Annmarie Weisman
Deputy Assistant Secretary
for Policy, Planning, and Innovation