PageNumbers: 49133-49154
Summary: NPRM, Institutional Eligibility; Student Assistance General Provisons;Federal Work-Study Programs; Federal Family Education Loan Program; William D. Ford Federal Direct Loan Program; and the Federal Pell Grant Program; Proposed Rule. Comments Due on September 25, 2000.
CommentDueDate: 9/25/2000
This file contains this Federal Register in Portable Document Format (PDF). It can be viewed with version 3.0 or greater of the free Adobe Acrobat Reader software. Scroll down to see a text version of this document.
[
[Federal Register: August 10, 2000 (Volume 65, Number 155)]
[Proposed Rules]
[Page 49133-49154]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10au00-32]
[[Page 49133]]
-----------------------------------------------------------------------
Part IV
Department of Education
-----------------------------------------------------------------------
34 CFR Part 600, et al.
Institutional Eligibility; Student Assistance General Provisons;
Federal Work-Study Programs; Federal Family Education Loan Program;
William D. Ford Federal Direct Loan Program; and the Federal Pell Grant
Program; Proposed Rule
[[Page 49134]]
-----------------------------------------------------------------------
DEPARTMENT OF EDUCATION
34 CFR Parts 600, 668, 675, 682, 685, and 690
RIN 1845-AA19
Institutional Eligibility; Student Assistance General Provisions;
Federal Work-Study Programs; Federal Family Education Loan Program;
William D. Ford Federal Direct Loan Program; and the Federal Pell Grant
Program
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Secretary proposes to amend the Institutional Eligibility,
the Student Assistance General Provisions, the Federal Work-Study, the
William D. Ford Federal Direct Loan, the Federal Family Education Loan,
and the Federal Pell Grant regulations. These proposed regulations
implement changes negotiated with the financial aid, higher education,
and other related community members in the negotiated rulemaking
process mandated by Congress under section 492 of the Higher Education
Act of 1965, as amended, (HEA). These changes would streamline the
application, reapplication and certification processes for institutions
that wish to participate in the title IV, HEA programs; reduce burden,
under specific circumstances, for the reporting of additional
locations; clarify the reporting responsibilities for institutions that
experience a change in ownership that results in a change of control;
expand the possibilities for institutions to create written agreements
with certain other entities to have part or all of their eligible
programs provided by those entities; revise the process for determining
a transfer student's financial aid history; recognize electronic
certification and record retention options for FWS program
administration; add flexibility to the training requirements for
institutional certification; change loan proceeds disbursement rules
for programs using non-standard terms; clarify notification
requirements when title IV loan proceeds are credited to a student's
institutional account; and add flexibility to lender disbursement
requirements and eligibility determinations for students receiving loan
proceeds.
DATES: We must receive your comments on or before September 25, 2000.
ADDRESSES: Address all comments about these proposed regulations to:
Mark Washington, U.S. Department of Education, P.O. Box 23272,
Washington, DC 20026-3272. If you prefer to send your comments through
the Internet please use the following address: GPNPRM@ed.gov
You must use the term, ``Team 2--General Provisions'' in the
subject line of your electronic mail message.
If you want to comment on the information collection requirements,
you must send your comments to the Office of Management and Budget at
the address listed in the Paperwork Reduction Act section of this
preamble. You may also send a copy of these comments to the Department
representative named in this section.
FOR FURTHER INFORMATION CONTACT: Mark Washington, U.S. Department of
Education, 400 Maryland Avenue, SW, Room 3045, ROB-3, Washington, DC
20202-5447. Telephone: (202)-260-9321.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an alternate
format (e.g., Braille, large print, audiotape, or computer diskette) on
request to the contact person listed above.
SUPPLEMENTARY INFORMATION:
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 identify clearly 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 Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
take to reduce potential costs or increase potential benefits while
preserving the effective and efficient administration of the programs.
During and after the comment period, you may inspect all public
comments about these proposed regulations in Room 3045, Regional Office
Building 3, 7th & D Streets, SW, Washington, DC, between the hours of
8:30 a.m. and 4:00 p.m., Eastern time, Monday through Friday of each
week except Federal holidays.
Assistance to Individuals With Disabilities in Reviewing the
Rulemaking Record
On request, we will supply an appropriate aid, such as a reader or
print magnifier, 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 aid, you may call (202)-205-
8113 or (202)-260-9895. If you use a TDD, you may call the Federal
Information Relay Service at 1-800-877-8339.
Negotiated Rulemaking
Section 492 of the HEA requires that, before publishing any
proposed regulations to implement programs under title IV of the HEA,
the Secretary obtain public involvement in the development of the
proposed regulations. After obtaining advice and recommendations, the
Secretary must conduct a negotiated rulemaking process to develop the
proposed regulations. To the extent that agreements are reached during
that process, all published proposed regulations must conform to those
agreements unless the Secretary reopens the negotiated rulemaking
process or provides a written explanation to the participants in that
process outlining the reasons why the Secretary has decided to depart
from the agreements.
To obtain public involvement in the development of the proposed
regulations, we held listening sessions in Washington, DC, Atlanta,
Chicago and San Francisco. Four half-day sessions were held on
September 13 and 14, 1999, in Washington, DC. In addition, we held
three regional sessions in Atlanta on September 17, in Chicago on
September 24, and in San Francisco on September 27, 1999. The Office of
Student Financial Assistance's Customer Service Task Force also
conducted listening sessions to obtain public involvement in the
development of our regulations.
We then published a notice in the Federal Register (64 FR 73458,
December 30, 1999) to announce our intention to establish two
negotiated rulemaking committees to draft proposed regulations
affecting title IV of the HEA. The notice requested nominations for
participants from anyone who believed that his or her organization or
group should participate in this negotiated rulemaking process. The
notice announced that we would select participants for the process from
the nominees of those organizations or
[[Page 49135]]
groups. The notice also announced a tentative list of issues each
committee was likely to address.
Once the two committees were established they met to develop
proposed regulations over the course of several months, beginning in
February.
Committee I--This notice of proposed rulemaking (NPRM) includes two
proposed provisions that were discussed as part of negotiated
rulemaking by Committee I (Loan Issues). They would make changes to the
Federal Family Education Loan (FFEL) Program regulations by providing
flexibility to schools and lenders in the disbursement of loan funds.
Since the proposed changes would affect both schools and lenders, they
have been included in this NPRM. Including these proposed changes in
this NPRM will allow all affected parties a better opportunity to
review and provide comment on these issues. For a listing of the
members of Committee I please see the NPRM published in the Federal
Register (65 FR 46316) on July 27, 2000 that relates to guaranty agency
and other FFEL issues.
As stated in the committee protocols, consensus means that there
must be no dissent by any member in order for the committee to be
considered to have reached agreement. Consensus was not achieved on the
proposed changes that would provide flexibility to schools and lenders
in the disbursement of loan funds during the negotiated rulemaking
process for Committee I.
A full discussion of these proposed provisions are included in the
section of this document titled ``SIGNIFICANT PROPOSED REGULATIONS''
under the discussion of changes to Secs. 682.207 and 682.604.
Committee II--Except as noted, the proposed regulations contained
in this notice of proposed rulemaking (NPRM) reflect the final
consensus of Committee II, which was made up of the following members:
American Association of Collegiate Registrars and Admissions
Officers
American Association of Cosmetology Schools
American Association of State Colleges and Universities (in
coalition with American Association of Community Colleges)
American Council on Education
Association of Jesuit Colleges and Universities
Career College Association
Coalition of Higher Education Assistance Organizations
Coalition of Publicly Traded Educational Institutions
Consumer Bankers Association
Legal Services
NAFSA: Association of International Educators
National Accrediting Commission of Cosmetology Arts and Sciences,
Inc.
National Association of College and University Business Officers
National Association of Independent Colleges and Universities
National Association of Student Financial Aid Administrators
National Association for State Student Grant and Aid Programs
National Association of State Universities and Land-Grant Colleges
National Council of Higher Education Loan Programs
National Direct Student Loan Coalition
Sallie Mae, Inc.
Student Loan Servicing Alliance
The College Fund/United Negro College Fund
United States Department of Education
United States Student Association
United States Public Interest Research Group
University Continuing Education Association.
Consensus was reached on all of the proposed regulations in this
document that were discussed by Committee II, except for three issues,
two of which allow certain exemptions for public institutions. The
other addressed incentive compensation related to securing student
enrollments.
The first item in Committee II where consensus was not reached is
proposed Sec. 600.20(d)(1) which exempts public institutions from the
requirement to apply for approval of their additional locations, if
those locations are licensed and accredited, and are in the same State
as the main campus. The second item where consensus was not reached is
in proposed Sec. 600.31(c)(7), which states that we do not consider a
change in governance at a public institution to be a change in
ownership resulting in a change of control, if the institution remains
a public institution after that change in governance. These two issues
will be examined more fully in the following section. Since the
committee did not reach consensus on these two provisions, any
references to them which may be contained within topics where the
committee reached agreement do not represent agreement by the non-
federal negotiators with the two regulatory provisions where consensus
was not reached. Finally, no consensus was reached regarding whether,
or to what extent, we should modify the regulations in
Sec. 668.14(b)(22) governing incentive compensation payments made by
institutions, related to securing student enrollments. Subsequent to
the negotiations, we have decided not to propose regulatory changes in
this area.
Significant Proposed Regulations
We discuss substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
regulatory provisions that are technical or otherwise minor in effect.
The following paragraphs are organized by topic, and in some cases
divided further into subtopics, with appropriate headings. Statutory
provisions that apply to a particular topic may not be restated after
the subtopical categories.
Section 600.10(b)--Additional Locations
Statute: Section 498 of the HEA authorizes the Secretary to
determine whether an institution meets the qualifications to be
designated as an eligible institution for purposes of the programs
authorized by the HEA. This section also outlines the procedures the
Secretary uses to certify an institution to participate in the title
IV, HEA programs.
Current Regulations: As provided in Sec. 600.10(b)(3)(i) and (ii),
when a participating institution wishes to add a location that was not
previously eligible where it offers fifty percent or more of an
eligible program, it must notify us about the new additional location,
and may be required to submit an application for eligibility of the new
location. We consider such a location to be eligible to participate
only as of the date we certify it to participate.
Proposed Regulations: The proposed regulations revise the
provisions that currently exist in Sec. 600.10(b)(3)(i) and (ii).
The revisions clarify that an institution's eligibility does not
extend to an additional location it establishes after the institution
is designated as eligible if that location provides at least 50 percent
of an educational program, unless we approve the location under
proposed Sec. 600.20(f)(5) or if the institution is not required to
report it to us under proposed Sec. 600.20(d).
Reasons: This section clarifies that an institution must apply for
approval to have its eligibility extended to additional locations that
are not included in its most recent certification if the institution
will offer 50% or more of an education program at those locations. Such
additional locations are not considered eligible until the Secretary
has approved them as eligible or they meet the exemptions provided in
proposed Sec. 600.20(d).
Section 600.20--Application Procedures for Establishing,
Reestablishing, Maintaining, or Expanding Institutional Eligibility and
Certification
Initial Eligibility Application
Statute: Section 498(b) of the HEA states that the Secretary shall
prepare a single application for institutions to
[[Page 49136]]
request eligibility, and specifies the information that must be
collected from applicant institutions.
Current Regulations: Section 600.20 establishes the procedures for
an institution to apply for participation in any title IV, HEA program.
Initially, the institution must apply to us to be designated as an
eligible institution. Additional requirements for certification to
participate in the title IV, HEA programs are described in part 668,
subpart B. However, the requirements in the regulations related to
eligibility and those related to certification, found in Sec. 600.20(a)
and Sec. 668.13, respectively do not make clear that (1) determination
of eligibility and certification are separate processes, and (2) an
institution may apply for both determinations at the same time by using
the Department's application for approval to participate.
Proposed Regulations: These proposed regulations set forth the
administrative procedures necessary for submitting the eligibility
application, as well as obtaining certification for participation in
the title IV, HEA programs.
Section 600.20(a), as proposed, also clearly indicates that
eligibility and certification are separate distinguishable processes,
requiring specific actions for successful completion.
This revision also clarifies that we determine whether an applicant
institution meets the participation standards (in part 668, subpart B)
and the financial responsibility standards (in part 668, subpart L), of
the current regulations, before we certify the institution. As required
under current regulations, our internal administrative processes
already include these standards, but the proposed regulation clarifies
that the review is based upon the regulatory requirements.
Reasons: We are consolidating related provisions for eligibility
and certification mandated by the HEA and current regulations. We
believe a more uniform construction will make these regulations easier
to understand and to implement.
Reapplication Process
Statute: Section 498(g) of the HEA addresses issues regarding the
renewal of institutional eligibility. Section 498(i) outlines the
requirements that must be met when an institution experiences a change
in ownership that results in a change of control.
Eligible But Not Participating Institutions
Current Regulations: Section 600.20(b) provides that all eligible
institutions, whether they participate in the title IV HEA programs or
not, must reapply if they want to continue their eligibility, and
certification to participate if applicable, under conditions specified
in the regulation (e.g., adding a new location or change of ownership).
Proposed Regulations: We propose in Sec. 600.20(b)(1) that a
currently designated eligible institution that is not participating in
the title IV, HEA programs, is only required to apply to us for a
determination that it continues to be eligible, if we request the
institution to reapply.
Reasons: In discussions regarding the reapplication process, we
proposed to continue the current requirement in Sec. 600.20(b) that all
institutions would be required to reapply if we so requested. However,
we suggested that eligible but non-participating institutions would not
need to automatically reapply for any of the current reasons provided
in Sec. 600.20. These institutions may qualify to participate in
certain non-title IV, HEA programs, and their students may qualify for
loan deferments. Since they are not administering federal student aid,
they are only required to reapply for their eligibility determination
upon our request, otherwise their eligibility status continues
indefinitely.
Participating Institutions
Current Regulations: As noted above, Sec. 600.20 provides that all
participating institutions must apply if they want to continue their
eligibility and certification to participate. Included among the
reasons why a participating institution must reapply is where we
request it to do so (Sec. 600.20(b)(1)). Additionally, Sec. 600.20(c)
includes a number of other conditions under which an institution must
reapply.
Proposed Regulations: Proposed Sec. 600.20(b)(2) would require a
currently eligible institution that participates in title IV, HEA
programs to apply for a determination that it continues to meet the
requirements of 34 CFR parts 600 and 668 as provided in paragraphs
(b)(2)(i) through (iii) of Sec. 600.20.
Section 600.20(b)(2)(i) of the proposed regulations would apply
when a participating institution wishes to continue its participation
beyond the expiration of the current eligibility and certification.
Section 600.20(b)(2)(ii) would require a participating institution to
reapply to reestablish its eligibility and certification as a private
nonprofit or private for-profit institution, after a change in
ownership that results in a change of control, as described in
Sec. 600.31. Section 600.20(b)(2)(iii) would require a reapplication if
the participating institution experienced any changes in its status as
a proprietary, nonprofit, or public institution (e.g., changed its
status from for-profit to nonprofit).
Reasons: In order to clarify and to make easier for institutions to
comply with the rules, we propose to consolidate the regulatory
requirements for the reapplication process into one section,
Sec. 600.20(b).
We initially proposed to continue the current requirements that
prescribe when a participating institution must reapply for a
determination that it continues to meet the standards necessary to
participate in the title IV, HEA programs. One of these requirements
was when the Secretary, at his discretion, required reapplication.
Although this proposed regulation was substantially equivalent to the
existing regulation found at Sec. 600.20(b)(1), several members of the
committee objected to what they believed was an overly broad extension
of the Secretary's authority to regulate, beyond the scope of authority
expressly granted or intended by the HEA.
While affirming that we would not use this authority to require
reapplication in a capricious or arbitrary manner, we explained that
the Secretary must reserve the right to require a review of any
institution that gives cause for concern. We indicated that the
reapplication process affords us an opportunity for such a review.
Various committee members believed we already have that authority under
other existing regulations.
The committee ultimately agreed that a narrower regulatory approach
that differentiated application requirements between eligible, non-
participating institutions and eligible participating institutions,
would accommodate concerns regarding fair and consistent application of
our authority to review. The proposed regulation makes clear that the
Secretary may request reapplication from eligible non-participating
institutions at any time, because they are not subject to the ordinary
reapplication cycle.
In proposed Sec. 600.20(b)(2)(ii), we would not require a public
institution to reapply for approval if its governance changed and that
change included an acknowledgment by the new governing entity, on
behalf of the institution, of the institution's continuing
responsibilities under its program participation agreement. Other
changes in governance that do not acknowledge the public institution's
ongoing responsibilities under its program participation agreement
would be changes of ownership that require reapplication. Additional
information on the effect of
[[Page 49137]]
the change of governance for public institutions can be found under the
discussion of Sec. 600.31(c)(7).
Finally, several of the non-federal negotiators expressed concern
about the corporate and legal interpretations of ``ownership'', and
whether such terms or phrases as ``a change of ownership'' even apply
to certain types of educational institutions.
Several non-federal negotiators contested the notion that a
``change in ownership'' applies to a nonprofit entity. They felt
strongly that those in the nonprofit sector do not identify with the
concept of ``ownership.'' Moreover, one committee member suggested that
many nonprofit institutions might fail to comply with the change in
ownership regulations, because those institutions may not believe that
the regulations apply to them, by virtue of their nonprofit status. We
note that the HEA does not exempt non-profit institutions from the
change of ownership provisions. However, we understand that clarity in
this matter is needed.
To resolve any confusion on this issue the committee evaluated
various terms to convey the unique nature and organization of nonprofit
entities. One proposal sought to uniformly replace the existing phrase,
``change of ownership'' with ``change in structure, governance, or
ownership.'' Although we appreciate that nonprofit entities may not
consider the existing regulatory language as properly describing their
legal structure and operations, we cautioned that adopting a new phrase
for one sector might actually be confused with other commonly accepted
terms used in other sectors. Using the phrase ``change of governance'',
for example, could possibly indicate something totally different for
public institutions.
Ultimately, the committee agreed to use the phrase ``changes its
status'' in Sec. 600.20(b)(2)(iii), signaling an organizational change
so substantial that it would be a change of ownership resulting in a
change in control under the HEA.
Application to Expand Eligibility
Statute: Sections 498(b) and (j) of the HEA outline the application
requirements when an institution wishes to expand its eligibility,
particularly to branch campuses.
Current Regulations: Section 600.30(a) requires an institution to
notify the Secretary of any significant changes it has experienced
since its most recent eligibility application. Section 600.20 lists
various instances where an institution must make an application to
expand its designated eligibility and certification to include
additional locations and programs.
Proposed Regulations: Proposed Sec. 600.20(b)(2) lists the events
that require an institution to submit a new application. Proposed
Sec. 600.20(c) describes the events that require an application to
expand eligibility. Except for two new provisions under proposed
Sec. 600.20(c), the proposed regulations are very similar to current
regulations.
First, at Sec. 600.20(c)(2), we would require an institution to
report any increase in the level of program offerings it adds. Second,
Sec. 600.20(c)(5) clarifies that an institution must apply for approval
if it wishes to convert an existing location to a branch campus.
Reasons: We believe the proposed regulations offer greater clarity
on this topic by consolidating all of the related regulations into one
section. The current regulations that address expansion of an
institution's designated eligibility status are within Secs. 600.20 and
600.30, and are not as detailed.
The expansion of an institution's eligibility through the increase
of the level of program offerings in Sec. 600.20 (c)(2) was added as
one of the requirements for reapplication because this type of change
often requires an institution to modify its financial aid and other
administrative processes. For example, a change in level of program
offerings could affect the institution's determination of program
length because of the requirements for ``credit hour conversions''.
Similarly, such a change could impact the institution's ability to use
the multi-year features of the new master promissory notes in the FFEL
and Direct Loan programs.
Finally, the non-federal negotiators suggested that the conversion
of an otherwise eligible location to a branch campus be added as
Sec. 600.20(c)(5) to address this type of expansion of institutional
eligibility.
Exemptions From Applying for Additional Locations
Exemption for public institutions:
Current Regulations: Under Sec. 600.20(c)(3) an institution must
apply to add a location not currently a part of its eligibility
designation. Those rules do not distinguish among the types of
institutions that must apply.
Proposed Regulations: We have proposed in Sec. 600.20(d)(1) that
public institutions do not have to apply to the Secretary for approval
of an additional location under Sec. 600.20(c)(1), if the additional
location is properly licensed and accredited, and is located within the
same State as the main campus of the currently designated eligible
institution.
Reasons: As noted earlier, the committee did not reach consensus on
this issue. During the negotiated rulemaking sessions, we noted that we
are not aware of any problems that placed federal funds at risk when a
public institution has added additional locations. The public entities
that govern these institutions generally apply responsible oversight
and systems of control over these institutions, especially with regard
to the establishment of additional locations. The additional level of
planning, approval, and review generally required by public entities
helps to limit rapid growth that could adversely impact educational
quality or cause fiscal instability in the administration of title IV
funds. Moreover, we believe that the extent of fiscal resources
generally made available to public institutions by the public entities
that govern them are likely to be substantial enough to safeguard the
taxpayers from any potential losses in title IV, HEA program funds.
This exemption only applies to additional locations that are in the
same State as the main campus of the public institution, because those
locations share the same oversight entities. These additional locations
must, of course, be licensed and accredited.
We believe these proposed regulations will enhance efficiency and
provide administrative relief for a sizable segment of the population
of eligible institutions, by not requiring them to report locations
they add until the next scheduled recertification.
Some members of the committee saw this proposed exemption as a
benefit unfairly and unduly afforded to a select segment of eligible
institutions. One committee member considered the sector-based
distinction to be discriminatory, and questioned the legality of the
proposed regulations on this basis.
A few committee members suggested that any institution, regardless
of its structure or control, that meets the licensing and accreditation
standards, and whose additional location was in the same State as the
main campus, should receive the same exemption as that being proposed
for public institutions.
Several non-federal negotiators added that many private nonprofit
and private for-profit institutions have maintained stellar performance
records in their administration of the title IV, HEA programs. They
also believed that many of these institutions were subject to
reasonable oversight from States, accrediting agencies, and industry
associations. They argued that any
[[Page 49138]]
school that demonstrated consistent compliance with our regulations,
and had sufficient systems to meet administrative and financial
capability standards should be entitled to the same exemption being
offered to the public institutions.
We maintained that it was neither novel nor extraordinary for a
federal agency to rely upon the oversight and financial backing
provided to public institutions. We believe that this governmental
oversight over public institutions limits risks to federal funds.
While it is true that some non-public institutions administer their
programs in a way that does not pose any fiscal risk to the federal
taxpayers, that is not the case for all such institutions. On the other
hand, all public institutions have considerable financial support
available to help them meet their title IV, HEA program obligations.
Non-public institutions operate in environments that pose
significantly higher financial risks than do public institutions. Our
experience includes situations where some non-public institutions grew
so rapidly that the integrity of their educational and student aid
programs was compromised. The level of growth and expansion strained
those institutions' financial resources and administrative capability
and, ultimately, they failed, causing great harm to students and losses
to taxpayers of title IV student assistance funds.
During the discussion on this exemption for public institutions,
the amount of burden associated with reporting additional locations was
considered. While the actual reporting of proposed additional locations
does not involve much burden (the school simply uses our web-based
application screens), the school representatives on the committee
pointed out that the need to wait for our approval of the new location
before title IV aid could be disbursed could create an unnecessary
delay. Even though we generally provide our response within about 35
days, the representatives of public institutions noted that, since we
have virtually always approved such sites, there is no need for a
public institution to report its addition of new locations. Conversely,
it was noted by some other members of the committee that, since the
burden to report is not significant, all institutions should be
required to report so that the Secretary has knowledge of all locations
where students are receiving title IV funds.
Again, this specific provision--an exemption for public
institutions from the requirement to report additional locations--was
one where consensus was not reached by the negotiated rulemaking
committee. Consistent with the committee's protocols addressing the
issuance of proposed rules when consensus is not reached, we are
including in these proposed rules the full exemption for public
institutions. However, in addition to soliciting general comments on
the issue of the proposed exemption for public institutions, we
especially wish to receive comment on whether the proposal should be
modified to require public institutions to notify the Secretary of a
new additional location, but exempt them from the requirement to wait
for our approval before making disbursements of title IV aid to
students enrolled at the new location.
Exemptions for temporary additional locations:
Proposed Regulations: The proposed Sec. 600.20(d)(2) would exempt
non-public institutions from applying for approval of licensed and
accredited temporary locations if the following specific conditions are
met: (1) The institution intends to use the location for not more than
12 months; (2) the institution has not added more than six locations
offering at least fifty percent of an educational program since it was
last certified; (3) the institution does not have any outstanding title
IV, HEA program liabilities; (4) the institution did not acquire the
assets of another institution that formerly provided educational
programs at that location (and that participated in title IV, HEA
programs at that location) within the preceding year; (5) the
institution would, if it adds that location, not be subject to a loss
of eligibility under proposed Sec. 668.188 (Proposed Sec. 668.188 would
apply a loss of eligibility, due to high loan cohort default rates,
that was previously imposed against one institution to another
institution following a change in status.); and (6) we do not currently
prohibit the institution from adding locations without advance notice.
Paragraph (d)(3) of Sec. 600.20 explains what happens when an
institution that did not apply for approval of a new location because
it did not intend to conduct business longer than twelve months
realizes that it will continue for more than one year at that location.
The institution must apply as soon as it determines it will be at a
location for more than 12 months, but not later than 35 days before the
end of the initial twelve-month period. In any case, the institution
may not disburse title IV, HEA program funds for attendance at that
location beyond the twelve-month period without our approval of that
location.
We especially request comment on whether an institution that has
provided notification to us that it intends to remain at an additional
location for more than one year should immediately stop making title IV
disbursements until it receives our approval of that location, as would
be the case with any other notification of a permanent additional
location.
Reasons: An institution may provide training on a temporary basis
at off-campus sites, in order to be responsive to the needs of its
community. The negotiators agreed that allowing institutions to open a
limited number of temporary training locations without reapplication
assists the community in meeting its goal of partnering with
institutions to accommodate the workforce training requirements of
business and industry. We believe that the specific conditions in the
proposed rule provide assurance that temporary additional locations
will not adversely affect the institution.
When discussing this issue of providing a limited exemption to the
reporting of temporary additional locations for non-public
institutions, the committee considered several options. We ultimately
agreed upon language that provides that a non-public institution does
not have to apply to the Secretary for approval of a licensed and
accredited temporary additional location under certain conditions.
Among those conditions is that the institution has not added more than
six locations at which it offered more than 50 percent of an
educational program since it was last certified to participate in the
title IV, HEA programs.
We are interested in receiving specific comment on whether the six
locations proposed is the proper number. Also, since the period between
certifications could be up to six years, we also wish to receive
comment on whether there should be a limit on the number of such
locations added during any one year.
While we are proposing this limited exception to the requirement
that institutions report and get our approval of new additional
locations before they disburse title IV aid, we do have some concerns
about the impact this exception might have on our oversight
responsibility. One issue is whether we, as the agency responsible for
administering title IV funds, should know about all locations at which
these funds are being disbursed. Another concern is whether all non-
public institutions should be able to add temporary locations without
prior approval, including institutions that may not meet the standards
of administrative capability or financial
[[Page 49139]]
responsibility. An additional concern is that the proposed temporary
location exception could be used by schools that would otherwise be
unable to obtain our approval to establish new permanent locations or
that had been denied such approval in the past.
While the proposed exception requires that the new location be
accredited and licensed, some institutions are licensed or accredited
by agencies that do not require affirmative prior approval to add new
locations. In such cases, therefore, a school would be able to disburse
title IV funds to students enrolled at a location that had not received
approval from any of the three entities that normally provide
oversight--the Department of Education, the State licensing agency, and
the accreditation agency. In such cases there would be no external
record that the temporary location existed.
In light of the concerns, we are interested in receiving comment on
whether requiring notice to the Department, but not prior approval,
would create an undue burden, and whether there are certain categories
of institutions that should not be able to take advantage of the
proposed exception due to problems with their past performance. In
addition, we are considering obtaining information on temporary
locations through the annual compliance audit and invite comment on
such an approach.
Secretary's Responses to Applications
Current Regulations: Under Sec. 600.21(a), (b) and (c), we notify
the institution in writing as to its eligibility status.
Proposed Regulations: Proposed Sec. 600.20(f) discusses our various
responses to an institution's application (or reapplication) for
eligibility or certification. It describes the range of notifications
that we will send in response to an institution's application, based
upon the type or reason of the application.
Reasons: While the existing Sec. 600.21(a), (b), and (c) address
the notifications we provide, the level of specificity is more precise
in the proposed regulations. We believe that a clearer connection
between the specific reason for the institution's application and the
related notification from the Secretary responding to that application
will be very useful and practical for applicant institutions.
Disbursement Rules
Current Regulations: Under Sec. 600.40 an institution becomes
ineligible to continue to participate in any title IV, HEA program as
of the day the institution's period of participation under Sec. 668.13
expires, or if the institution's provisional certification is revoked
under Sec. 668.26. However, the current regulations provide certain
exemptions and timeframes that allow an ineligible institution to
continue to make disbursements of title IV aid funds.
Proposed Regulations: These proposed regulations restate and
clarify the existing regulations in Sec. 600.40 and Sec. 668.13 that
address the impact of a loss of eligibility and certification on an
institution's ability to disburse student financial assistance.
Generally, if an institution's eligibility lapses the institution
may not continue to disburse title IV, HEA program funds until it
receives our notification that it is eligible to participate in the
programs again. However, an institution may make lawful disbursements
if it has submitted a materially complete renewal application to us at
least ninety days prior to the expiration of its current program
participation agreement, and is awaiting our determination of
eligibility on its reapplication.
Likewise, a private nonprofit or private for-profit institution may
not continue to make lawful disbursements if it experiences a change in
ownership or change in status that causes a change in control. But,
such an institution may continue to make disbursements lawfully, if it
has submitted a materially complete renewal application, received a
temporary program participation agreement, and is awaiting our final
determination.
Also, when an institution is required to make application to add a
program or location, or increase the level of program offering, it may
not make any disbursements for that program or location until it
receives our notification that the program or location is eligible to
participate.
An institution would be permitted to continue making title IV, HEA
program disbursements when the institution is simply applying to
convert an eligible location to a branch, as permitted under the
proposed Sec. 600.20(c)(5).
Finally, if an institution is required to submit an application or
reapplication or certification and participation and does not, or has a
program that is not determined to be an eligible program, or has added
a location that is not approved, the institution is liable for all
title IV, HEA program funds disbursed to students enrolled at that
institution, in that program, or at that location or branch.
Reasons: We do not want students or institutions to experience any
adverse impact from an abrupt disruption of programs, services, or
financial assistance, caused by an institution's temporary loss of
eligibility to participate in our programs. We also want to limit such
impact from the expiration of an institution's program participation
agreement if a new application is being reviewed. Acceptance of a
timely submitted, materially complete application assures a consistent
flow of funds and program services for the students who depend upon
them.
Section 600.21--Updating Application Information
Current Regulations: Section 600.30 requires an institution to
notify us no later than 10 days after changes occur in the information
it provided to us in its last eligibility application.
Proposed Regulations: The proposed regulations would remove
Sec. 600.30, but keep most of its core elements, and expand them in a
newly revised Sec. 600.21. The expanded section would require
additional information about changes relating to an institution's other
locations, as well as, the main campus itself. Included in the proposed
language is a requirement that a decrease in the level of program
offered requires the institution to notify the Secretary.
Reasons: While much of proposed Sec. 600.21 remains unchanged from
the current regulations in Sec. 600.30, the proposed regulations
slightly alter a number of things. For instance, the proposed
regulation would amend the list of positions or persons that are now
deemed to substantially affect the actions of the institution,
eliminating members of an institution's board of directors or trustees.
However, those regulations would now clearly identify the chief
executive officer, chief financial officer, and the individual
designated as the lead program administrator for title IV, HEA programs
at the institution. We believe that this approach more effectively
identifies those individuals that have the ability to substantially
affect an institution's administration of the title IV, HEA programs.
Discussion occurred regarding when an institution owned by a
publicly-traded corporation could be expected to know about and report
changes that occur, particularly related to change of ownership issues.
Currently, a publicly-traded institution is required to notify us when
it notifies its accrediting agency, but no later than 10 days after the
corporation learns of the change. Some committee members questioned how
these institutions could be held
[[Page 49140]]
responsible to notify us within ten days after a change occurs, since
the institution's administration might not always have current
information to identify changes in the position of the major
shareholders. Others contended that it was likely that the institutions
would be aware of material changes to the corporations that owned them.
Ultimately, we decided to require in Sec. 600.21(b) that the
institution must notify us of the material changes described in
Sec. 600.21 (a)(5) when it notifies its accrediting agency, but no
later than 10 days after the change is known to the institution.
Section 600.21(d) clarifies the consequences of an institution's
failure to notify the Secretary as required.
Section 600.31--Change in Ownership Resulting in a Change in Control
for Private Nonprofit and Private for-Profit Institutions
Statute: Section 498(i) of the HEA provides that an institution
that undergoes a change in ownership resulting in a change in control
ceases to qualify as an eligible institution after the change in
control until it establishes that it meets eligibility and
certification requirements.
Publicly-Traded Corporations
Current Regulations: Section 600.31(c)(2) treats a change in
ownership and control of a publicly-traded corporation as occurring
when a transaction takes place that causes the filing of a Form 8-K
with the Securities and Exchange Commission (SEC).
Proposed Regulations: The proposed rule at Sec. 600.31(c)(2) would
clarify the circumstances in which a reduction in an ownership interest
in a publicly-traded corporation results in a change of control within
the meaning of section 498(i) of the HEA.
Currently, those changes are predicated upon an event that requires
a publicly-traded corporation to file a Form 8-K with the SEC. The
proposed regulations would augment that condition with another, which
would consider such a change to have occurred if one who was a
controlling shareholder of the corporation ceases to be a controlling
shareholder.
For these purposes, we would consider a controlling shareholder to
be a person who holds or controls twenty-five percent or more of the
total outstanding voting stock of the corporation. This proposed
regulation would use that percentage as a ``bright line'' in
determining whether a person is in fact a controlling shareholder. This
definition would not apply to ``institutional investors'' or to
shareholders whose sole stock ownership is held in mutual funds,
profit-sharing plans, or Employee Stock Option Plans (ESOPs).
Reasons: Although changes in ownership and control that occur when
a person acquires a controlling interest in the corporate owner of an
institution seem to be readily identified, other transactions may cause
a change impacting which person holds a controlling interest, without
that person having acquired new stock that would have triggered a Form
8-K filing with the SEC.
For example, stock sales by other shareholders or stock repurchases
by the parent corporation may alter the currently largest shareholder's
majority position so that that person is no longer the largest
shareholder. Other corporate actions, such as the spin-off of a
subsidiary corporation, may cause a significant change in the identity
of the persons who can control the corporation, even if the transaction
results in no single person holding enough of an interest to be easily
identified as a controlling shareholder.
We continue to believe that the eligibility of institutions must be
reassessed when these changes occur, just as current regulations
require for those institutions owned by closely held and other
corporations. However, for institutions owned by publicly-traded
corporations, identifying the circumstances in which a reduction in an
ownership interest actually causes a change in ownership and control to
occur poses significant practical difficulties. The change proposed
here would adopt a ``bright line'' test to identify those ownership
interests that are large enough to be considered controlling interests
in a publicly-traded corporate owner of an institution. This proposed
change will only apply to situations where a change in controlling
interests does not arise through the traditional stock acquisition that
would trigger a Form 8-K filing with the SEC. The changes in control
arising from the acquisition of an ownership interest that trigger the
Form 8-K filing will continue to be identified by the facts specific to
that corporation. Current rules regarding acquisition of an ownership
interest, except as specifically noted here, are not affected by these
changes.
The proposed ``bright line'' test only applies to controlling
shareholders that own or control at least 25 percent of the
corporation. We considered that some generally accepted accounting
principles (GAAP) treat a 20 percent ownership interest as sufficient
to create a presumption of control of a publicly-traded corporation.
See, Accounting Practices Board Opinion 18, para.17.
Using that standard, a reduction in ownership interest to less than
20 percent would also create a presumption of loss of control. However,
this accounting benchmark would be used to create a rebuttable
presumption that a change of control had occurred; more analysis would
sometimes be needed to tell whether control had actually been lost at
the point when ownership interest fell below that threshold.
As a result of the negotiated rulemaking meetings, we listened to
representatives from the institutions who argued that the 20 percent
threshold might be too low for a ``bright line'' test, and agreed to
simplify the measure by raising the threshold to 25 and changing it to
be a ``bright line'' test.
Therefore, since our current regulations already associate
controlling interests with ownership of at least 25 percent of a
publicly-traded corporation, the proposed rule will treat a 25 percent
interest as giving rise to a conclusive presumption of control, for
purposes of analyzing reductions in control, if that holding is also
the largest ownership interest in the corporation.
Under the proposed rule, any transaction that causes the holder of
at least a 25 percent ownership interest that is also the largest
interest in the corporation to reduce that interest to less than 25
percent, or less than the interest of any other shareholder,
constitutes a change in ownership and control within the meaning of
section 498(i) of the HEA.
In addition, we recognize that when an institution undergoes a
complete or partial change in ownership and control, it must apply to
reestablish its eligibility and certification to participate in the
title IV, HEA programs, and if approved, may remain provisionally
certified for not more than three years. In that application, the
institution must identify those shareholders with substantial interests
in the institution. The provisional certification gives us an
opportunity to conduct some assessment of the potential influence of
those shareholders on institutional affairs.
Therefore, if a reduction in ownership interest of the controlling
shareholder causes a change in ownership to occur within the term of
this provisional certification, the institution must reapply for
certification, but the term of the following provisional certification
will not extend beyond the term of the initial provisional
certification, if the person who thereby becomes the
[[Page 49141]]
controlling shareholder was identified on the prior application.
Recognizing that publicly traded corporations currently file
financial reports with the SEC, a publicly-traded institution that
undergoes a change in ownership due to a reduction in ownership
interest may submit its most recent quarterly financial statement filed
with the SEC, together with copies of all other SEC filings made since
the close of the fiscal year for which the institution last submitted a
compliance audit, when the prospects of obtaining a ``same day''
balance sheet are impractical.
Public Institutions
Current Regulations: Section 600.31(c)(7) provides that an
institution that is owned by a public entity changes ownership and
control when that entity is transferred to another governmental entity
or other person.
Proposed Regulations: The proposed regulation provides that a
change in governance at a public institution is not a change in
ownership, if the institution's new governing body is in the same State
included in the public institution's program participation agreement
and the new governing body has acknowledged the institution's
continuing responsibilities under its program participation agreement.
Reasons: Our original position on this issue was met with
significant opposition from some of the non-federal negotiators, as we
related earlier in our discussions on proposed Sec. 600.20(d)(1), and
the committee did not reach consensus on this point. We are including
in these proposed rules, substantially the same proposal we submitted
to the negotiating committee. The only difference is the inclusion of a
provision that makes it clear that we would not consider a change in
governance at a public institution to be a change of ownership only if
the new governing authority is in the same State included in the public
institution's program participation agreement and the new governing
body has acknowledged the institution's continuing responsibilities
under its program participation agreement.
As we stated there, we believe the fiscal resources available to
public institutions and their history of compliance allows us to
provide this limited regulatory relief.
A change of governance at a public institution is not a change in
ownership if the institution's new governing body is in the same State
included in the program participation agreement and the new governance
has acknowledged that the institution continues to be bound by its
program participation agreement. Under such circumstances, we believe
the possibilities for fiscal or administrative instability to occur are
remote, and there is virtually no threat to taxpayers' funds.
A change in ownership resulting in a change of control would occur,
however, if a public institution's governance changes, and that new
governing body is not located in the same State identified in the
institution's program participation agreement or the new governing body
has not acknowledged the institution's continuing obligations under the
terms of the institution's program participation agreement. In such
cases, the institution would be required to comply with the change of
ownership provisions of Sec. 600.20(b)(2)(iii).
Several non-federal negotiators felt that our position was biased
in favor of public institutions. One committee member suggested that as
more State and municipal governments create partnerships with corporate
or non-profit entities, the traditional attributes of public governance
are often lost, and therefore, the stabilizing factors that we rely
upon for our position will be undermined.
Another non-federal negotiator suggested that the trend of
privatization and divestiture of public units and institutions should
give us reason for caution, in terms of the reliance we have placed on
the history of compliance of such entities. He suggested that some
schools might actually decrease the level or extent of compliance,
based upon its governance by a different entity that might have lower
thresholds or standards for compliance.
We considered these arguments, but noted that the situations
described by the negotiators would not result from the proposed
exception. The provision does not apply to a change in governance in a
public entity that involves the transfer of the institution to any
hybrid entity, such as a special corporation with limited liability, a
public-private partnership, or that results in joint ownership with any
out-of-state entities. Also, the exemption is not available if the new
governing body does not, in the process of gaining control of the
public institution, acknowledge the institution's continuing
responsibilities under its program participation agreement with us.
We understand that a change in governance at a public institution
could arise in many different ways. Such a change could come from a
directive by an executive agency, a change in law by a State
legislature, through a voter referendum, or through a contractual
agreement between two governmental entities. The proposed regulation
does not require the governing bodies or the institution to notify us
of a change in governance, so long as the conditions set out in the
regulation are satisfied.
The regulation requires the new governing body to have acknowledged
the institution's continuing responsibilities under its program
participation agreement, but does not specify any particular format for
the acknowledgment. The acknowledgment that the institution continues
to be responsible for meeting its obligations in its program
participation agreement must be written, and must be a part of the
documents that transfer control to the new governing body.
Where the formal transfer of governing authority did not
acknowledge this requirement, the institution under its new governance
could submit a written notice to us advising that it was acknowledging
its continuing responsibilities under its program participation
agreement. This separate notice to us would also satisfy the
requirement. We invite comment on whether a particular form of
acknowledgment should be required under any of these situations.
Section 668.2--General Definitions (Academic Year); and Section 668.8--
Eligible Program
Statute: Section 481 of the HEA requires an academic year to have
at least 30 weeks of instructional time. For certain program
eligibility purposes, the HEA requires a minimum of ten or fifteen
weeks of instructional time.
Current Regulations: Sections 668.2(b) and 668.8 reflect the
statutory requirement that, in order for an educational program to meet
the definition of both an academic year and an eligible program, it has
to include a minimum number of weeks of instructional time. The
existing regulations provide criteria that address what activity, and
what amount of that activity, is needed to determine a week of
instructional time.
An educational program that uses a semester, trimester, or quarter
system, (or one that measures academic progress in clock hours) must
have at least one day of instructional time in a week for that week to
count as a week of instructional time. This requirement is often
referred to as the ``one-day rule''. Full-time students at schools with
programs offered in semesters, trimesters and quarters are generally
presumed to be in class for 12 hours each week. For purposes of
consistency, an educational program that measures
[[Page 49142]]
academic progress in credit hours but does not use a semester,
trimester, or quarter system, must have at least 12 hours of
instructional time in a week for that week to count as a week of
instructional time. This requirement is generally referred to as the
``twelve-hour rule''.
Proposed Regulations: The proposed regulations would amend
Sec. 668.2(b)(2)(ii) in the definition of an academic year, and
Sec. 668.8(b) (3) and (4) to clarify that homework does not count as
instructional time, and that, in terms of ``preparation for
examinations'', only study for final examinations that occurs after the
last scheduled day of classes for a payment period would count as
instructional time.
Reasons: Several negotiators pointed out that the current
regulatory approach does not adequately address newer, non-traditional
approaches to the delivery of postsecondary education to students, such
as distance education. They urged us to eliminate or substantially
modify our current regulations in this area, especially the so-called
``twelve-hour rule.'' While we understood and appreciated the comments
of the non-federal negotiators, we remained concerned about possible
abuse if institutions that did not use semester, trimester or quarter
systems were, without any other controlling factor, able to construct
academic programs that included only a minimal amount of instructional
time each week. Thus, after considerable discussion during the
negotiations we decided that we did not have enough information on
alternative measures to responsively propose substantive changes in
these regulations at this time. No changes were proposed to the current
regulatory requirement. We invited the negotiators and other interested
parties to participate in future discussions to address the issues
surrounding the one-day and twelve-hour rules, and other related
issues. The efforts of this workgroup may result in recommended changes
to the HEA or our regulations, subject to a future negotiated
rulemaking process.
Consequently, the only modifications to the definition of an
academic year and an eligible program that are proposed here are
clarifications of: (1) Homework in the determination of weeks of
instructional time; and, (2) study for final examinations that occurs
after the last scheduled day of classes for a payment period.
It was never intended that homework should count as instructional
time in determining whether a program meets the definition of an
academic year, since the 12-hour rule was designed to quantify the in-
class component of an academic program. For that reason, the only time
spent in ``preparation for exams'' that could count as instructional
time was the preparation time that some institutions schedule as study
days in lieu of scheduled classes between the end of formal class work
and the beginning of final exams.
Section 668.5--Written Arrangements To Provide Educational Programs
Statute: Section 484(a) of the HEA provides that a recipient of
title IV program funds must be enrolled in an eligible academic program
leading to a degree or certificate at an eligible institution.
Current Regulations: Read literally, the statutory language could
suggest that a student may only receive title IV funding for academic
work offered by the eligible institution that has accepted the student
into a degree or certificate program. However, in order to provide
flexibility to both students and institutions and to allow for the
benefits that can accrue when a student takes classes at different
institutions, the regulations include provisions whereby students may
receive title IV aid while taking a part of their academic program
outside of the institution that admitted them.
Section 600.9 of the Institutional Eligibility regulations and
Sec. 690.9 of the Federal Pell Grant Program regulations govern written
agreements between an eligible institution and another institution or
organization when all or part of a student's educational program is
provided by the other school or organization. These agreements are
commonly referred to as consortium and contractual agreements.
Proposed Regulations: We propose to delete Secs. 600.9 and 690.9
and consolidate most of the provisions currently contained in those
sections into a new Sec. 668.5 of the Student Assistance General
Provisions regulations.
In addition, we propose a new provision in Sec. 668.5(b) to provide
that an eligible institution may have a written arrangement with a
study abroad organization that represents one or more foreign
institutions instead of separate agreements directly with each foreign
institution its students are attending.
Finally, we would create a new provision in Sec. 668.5(d) that, in
cases of a written arrangement between eligible institutions, would
allow any of the institutions participating in the written arrangement
to make title IV, HEA program calculations and disbursements without
that institution being considered to be a third-party servicer for the
institution at which the student is enrolled as a regular student.
Reasons: One reason for proposing the consolidation of the
provisions covering these arrangements is to simplify the title IV, HEA
program regulations. This consolidation, in addition to making the
regulations easier to use, will also make it clear that the provisions
apply to all of the title IV student assistance programs and not just
to the Federal Pell Grant Program which is regulated in part 690.
The main reason for proposing that institutions may enter into
written agreements with study abroad organizations instead of directly
with a foreign institution is to provide more flexibility to
institutions in structuring their study abroad programs.
Currently, if an eligible institution wants to enter into a written
arrangement with one or more foreign institutions under which those
foreign institutions provide part of the educational program for
students enrolled in the eligible institution, the eligible institution
must have a written agreement directly with each foreign institution
its students will be attending. However, in many cases study abroad
organizations represent foreign institutions by facilitating enrollment
arrangements, including managing required student payments to the
foreign institution.
Under proposed Sec. 668.5(b), if an eligible institution has a
written agreement with a study abroad organization that represents one
or more foreign institutions that provide part of the educational
program of students enrolled in the eligible institution, the eligible
institution would no longer be required to have an agreement directly
with the foreign institutions. The written agreement between the
eligible institution and the study abroad organization would be
sufficient for purposes of the administration of the title IV, HEA
programs, provided that the written agreement between the eligible
institution and the study abroad organization, adequately describes the
duties and responsibilities of each entity and meets the requirements
of the regulations.
Consistent with current regulations, proposed Sec. 668.5(d)(2)
would allow an eligible institution that enters into an arrangement
with one or more other eligible institutions to choose which of them
calculates and disburses title IV, HEA aid. However, under existing
regulations the student must be taking courses at the institution that
calculates and disburses the aid. The proposed regulations would allow
any of the
[[Page 49143]]
eligible institutions in the arrangement to calculate and disburse the
aid, even if the student is not taking courses at the institution that
is calculating and disbursing the aid. This is to allow and support the
diverse ways in which institutions are partnering to enable students to
have greater access to postsecondary education. We support these
arrangements and wish to facilitate these partnerships by allowing them
to choose who best to administer their aid programs.
Section 668.13--Certification Procedures [Training Requirements]
Current Regulations: Section 668.13(a)(4) requires that, under
certain circumstances (e.g., a new institution or change of ownership,
participation in a new title IV, HEA program), specified institutional
staff must attend and complete title IV, HEA program training. Under
those circumstances, all institutions must send their financial aid
administrator to the training. Additionally, institutions that are
nonprofit must send either their chief administrator, or someone he or
she designates to this training. In addition to the financial aid
administrator, for-profit institutions are required to send the chief
administrator of the school for training. The regulations allow for an
on-site certification review as an alternative to meeting the training
requirement, if one or more of the required individuals has previously
completed such training.
Proposed Regulations: In addition to a restructuring of paragraph
(a) of Sec. 668.13, the proposed regulations modify and simplify the
certification training requirements for chief executive officers and
financial aid administrators.
First, the proposed regulations limit the conditions under which
this training is required to only when an institution wishes to
participate in the title IV, HEA programs for the first time and when
there is a change of ownership. We propose to remove the current
requirement that training is also required when a currently
participating institution wishes to participate in a new title IV, HEA
program.
Second, these proposed regulations provide that, for all
institutions the chief executive may elect to send for title IV
certification training another executive level officer of the
institution in his or her stead. Both the chief financial aid
administrator and the chief executive of the institution, or designee,
must attend the certification training within twelve months after the
institution executes its program participation agreement. In addition,
the institution may request a waiver of the training requirement for
either the financial aid administrator or the chief administrator.
The proposed rules provide that we may grant or deny the waiver for
the required individual, require another official to take the training,
or require alternative training.
Reasons: We believe that it is unnecessary to require senior
administrators from institutions that already participate in some of
our programs to attend specialized training, simply because the
institution wishes to add a title IV, HEA program in which they do not
currently participate.
We recognized and agreed with the non-federal negotiators that the
current regulations could, in some cases, impose an impractical burden
on the chief administrators of for-profit institutions by requiring
their attendance at the title IV certification training. Thus, we now
propose to give those chief administrators the same ability to
designate another senior institutional official to attend the training,
as is now allowed for nonprofit institutions.
Also, if the chief administrator or his designee, or the person
designated as the title IV administrator has recently completed the
required title IV HEA program certification training, there currently
is no training alternative for the participating institution to
otherwise meet the training requirement. As proposed, Sec. 668.13(a)
allows the institution to request a waiver of the training requirement
and provides that we may either grant the waiver or require alternative
training that would be more beneficial.
Section 668.19--Financial Aid History
Statute: Section 484 of the HEA contains a number of student
eligibility provisions that a student must satisfy, or not violate, to
receive aid under any of the title IV, HEA programs. Included are
provisions that deny additional title IV, HEA program assistance to a
student who is in default on a title IV loan or owes an overpayment of
title IV aid. In addition, most of the title IV, HEA student aid
programs have annual or aggregate maximum amounts, or both, that a
student may not exceed.
Current Regulations: Section 668.19 requires institutions to obtain
student eligibility information for transfer students by either
requesting a financial aid transcript (FAT) from each institution the
student previously attended or, under certain conditions, obtaining
information from the National Student Loan Data System (NSLDS). Use of
NSLDS, while allowed is not required. Thus, institutions that receive
FAT requests from other institutions or from students must complete and
return them.
Additionally, current requirements distinguish between two types of
transfer students: a student who attended another institution in a
prior award year (prior-year transfer) and a student who transfers from
one institution to another institution during the same award year
(current-year transfer). For a prior-year transfer, an institution may
use the Institutional Student Information Record (ISIR) information it
receives for that student or obtain that information by requesting a
paper FAT from the other institutions attended by the prior-year
transfer student. Generally, for a current-year transfer student an
institution must request a paper FAT from the institution the student
previously attended during the award year.
In all cases where an institution or student requests a paper FAT,
the regulations require the other institution to complete and promptly
return the FAT.
Proposed Regulations: The proposed regulations eliminate the paper
FAT requirement for all students and mandate the use of NSLDS data for
purposes of obtaining financial aid history information. However, the
proposed regulations make a distinction between the two types of
transfer students. Thus, for a prior-year transfer, an institution
could continue to rely on the ISIR financial aid history information it
receives for that student. But, for a current-year transfer student,
instead of requesting a paper FAT from the other institution, an
institution would request updated student eligibility information from
NSLDS.
In addition, the proposed regulations would replace the various
certification, origination, and disbursement provisions in the current
rules with only one requirement: an institution may not make a
disbursement of title IV, HEA program funds to a current-year transfer
student for seven days after it requests updated information from
NSLDS. The proposed rules would, however, allow an institution to make
a disbursement to a student who is otherwise eligible if, within the
seven-day period, NSLDS provides the updated information to the
institution, or the institution obtains the information itself directly
from NSLDS.
Finally, the proposed regulations eliminate the requirement that an
institution that receives a request for the completion of a paper FAT,
must respond to that request.
Reasons: We believe that it is no longer necessary for an
institution to
[[Page 49144]]
request student eligibility information from another institution when
that information is available from NSLDS, particularly in view of the
burden imposed on an institution in complying with the paper FAT
requirements.
During the negotiations we submitted a draft proposal to the
committee under which an institution would obtain student eligibility
information for a current-year transfer directly from NSLDS. However,
because institutions and guaranty agencies report student aid
disbursement data to NSLDS only periodically, we wanted to limit the
number of instances where NSLDS could not provide accurate data at the
time an institution would seek that data for a current-year transfer.
Therefore, we proposed than an institution had to query NSLDS no
earlier than 30 days before it could disburse aid to a current-year
transfer in order to ensure, to the greatest extent possible, that
NSLDS would have the aid disbursement data from prior institutions at
that time.
Although the non-federal negotiators appreciated our effort to
eliminate the paper FAT requirements, most believed that the draft fell
short of its intended benefits. Several negotiators suggested that
requiring an institution to query NSLDS within the 30-day period was
too restrictive, particularly in view of the current rules where an
institution may request an FAT at any time. Moreover, some negotiators
felt the draft plan would create rather than reduce burden, because for
many institutions the query and subsequent review of the NSLDS data
would occur at a time between terms when a financial aid staff is at
its busiest. Another negotiator believed that eliminating the burden
now imposed on institutions in responding to FAT requests outweighed
the burden of query and review of NSLDS data. The negotiators suggested
that the we find a way to provide student eligibility data directly to
an institution that needs it, rather than requiring institutions to
request and review information for all current-year transfer students
within a very specific timeframe.
We adopted the non-federal negotiators' suggestions. Under proposed
Sec. 668.19, an institution would, at any time, request NSLDS to
provide it with eligibility data for a current-year transfer. We
expect, but do not require, that this request would be made as soon as
the institution determines that a student is interested in transferring
during the current year. In making its request, the institution would
provide information identifying the student, such as name, social
security number, and date of birth. After receiving the institution's
request, NSLDS would compare the disbursement data it has at that time
to the most recent ISIR generated for the student that contained
disbursement data. If NSLDS has more recent disbursement data, or later
acquires disbursement data for that student, it would provide that
updated information directly to the requesting institution. Thus, NSLDS
would provide updated disbursement data that was not previously
provided to the institution whenever it acquires that data from other
institutions or guaranty agencies. We believe that this will greatly
reduce burden on institutions, because once they submit the identifiers
for their current-year transfers, they will only receive NSLDS
information for those students that had current year disbursements not
already reported to the institution.
The proposed rules provide that, after making its request, an
institution has to wait seven days before it could make a disbursement
of title IV, HEA programs funds to a student. This timeframe was
established to ensure that NSLDS could process the requests, query its
database, and report back to an institution before aid is disbursed.
However, if the student is otherwise eligible, an institution is
allowed to make a disbursement within the seven-day period if it
receives the updated information from NSLDS, or queries NSLDS on-line
to obtain that information.
The negotiators supported this proposal and agreed that we should
hold further discussions with institutions, outside of the negotiated
rulemaking process, over the next several months regarding the
following administrative matters:
<bullet> The way or ways an institution would request NSLDS to
provide it with updated data;
<bullet> The types of data changes within NSLDS that would
generate a record to the school;
<bullet> The way or ways NSLDS would provide the data to
institutions and the contents and format of that data; and
<bullet> The period for which NSLDS would continue to provide
updated data for a student.
Section 668.165--Notices and Authorizations
Current Regulations: Section 668.165(a)(3)(ii) requires an
institution to provide a notice to a student or parent borrower when
title IV, HEA program loan proceeds are used to credit the student's
account at the institution. The regulation allows this notice to be
sent electronically, but with the requirement that the institution must
require the student or parent to confirm receipt of the notice and the
institution must maintain a copy of that confirmation.
Proposed Regulations: Under the proposed regulation, the
institution must confirm receipt by the student or parent of the
electronic notification and must maintain documentation of that
confirmation. This is a change from the requirement that the
institution require the student or parent to confirm receipt.
Reasons: During negotiated rulemaking some of the non-federal
negotiators suggested that the current regulations in this area did not
support their constituents' efforts to take advantage of advances in
electronics.
They specifically objected that, with regard to the notice required
when loan funds are credited to a student's account, if the school
notified the borrower electronically, the school was required to obtain
and maintain a copy of the confirmation of receipt from the student or
parent. They pointed out that this level of confirmation and
documentation was not required when the same notice was sent via the
U.S. Postal Service. They asked why they could not simply send the
required notification electronically, and monitor any ``returned
mail'', just as they do with mail sent through the U.S. Postal Service.
We noted the long-standing precedent that mail deposited with the
U.S. Postal Service is presumed to have been delivered unless it is
returned to the sender. We shared our concern about the lack of a
standard for the handling of undeliverable electronic messages in the
different email systems that schools use. Just because a school sends a
message electronically does not assure that it was received. For
example, some email systems report as ``undeliverable'' any message
that does not make it all the way to the intended recipient's email
account. However, other systems may only send an ``undeliverable''
message if the transmission does not make it to the recipient's email
provider, regardless of whether the provider is able to deliver the
mail to the recipient's account. In other instances, an
``undeliverable'' message might not be sent to the institution even if
the message never reaches the email provider. Thus, relying only upon
the lack of an ``undeliverable'' message, would not be sufficient to
ensure that these important consumer protection messages were actually
received by the borrower. Therefore, we declined to make the changes
suggested by the non-federal negotiators.
At the last round of the negotiations we were asked to at least
change the retention requirement so that all an institution needed to
do was to
[[Page 49145]]
demonstrate that it had used a system that monitored receipt. The
presenter of that proposal suggested that, while she would prefer a
more drastic relaxation of the requirement, at least this suggestion
would not require schools to create and maintain a system that tracks
and retains these electronic transmissions for several years.
We believe that ensuring that these important messages were
actually delivered to the recipients' email account requires confirming
that the individual messages are sent and received, rather than simply
monitoring the presence of a reliable notification system. Thus, we do
not feel that changing the current requirement to simply require
documentation of a school process can be made at this time.
However, in reviewing this issue we decided that some
clarifications could be made to reflect policy guidance that has been
provided in this area. Specifically, the current rule states that the
institution must require the recipient of the message to confirm that
the message has been received. We have consistently interpreted that
provision to only require confirmation that the notice was received by
the student or parent, that is, that the electronic mail was delivered
to the correct address.
Therefore, we are proposing that the regulation simply require the
school to confirm receipt by the student or parent of the electronic
notification and maintain documentation of that confirmation.
Federal Work-Study Program
Section 675.19--Fiscal Procedures and Records
Current Regulations: Section 675.19(b)(2)(i) requires an
institution to establish and maintain program and fiscal records that
include, among other things, a certification that each FWS student has
worked and earned the amount being paid. This certification must be
signed by the FWS student's supervisor, who is either an official of
the institution or off-campus agency. For students paid on an hourly
basis, this certification must be part of, or supported by, a time
record showing the hours each student worked in clock time sequence or
the total hours worked per day.
Proposed Regulations: These proposed regulations would amend
Sec. 675.19(b)(2)(i) by removing the requirement that the certification
must have the handwritten signature of the FWS student's supervisor.
This change provides flexibility to institutions by allowing the use of
an electronic certification or a certification through other
appropriate means. The proposed regulation still allows institutions
the option of continuing to have the FWS student's supervisor sign his
or her name on a paper certification.
We expect an institution that chooses to use a system that
incorporates an electronic certification to adopt reasonable safeguards
against possible fraud and abuse. The institution should provide a
secure electronic certification through an electronic payroll system
that includes:
<bullet> Password protection;
<bullet> Password changes at set intervals;
<bullet> Access revocation for unsuccessful log-ins;
<bullet> User identification and entry point tracking;
<bullet> Random audit surveys with supervisors; and
<bullet> Security tests of the code access.
Reasons: The current requirement for a handwritten signature from
the FWS student's supervisor predates the development of electronic
alternatives to indicate that the supervisor certified the time record.
A number of institutions have expressed the desire to implement an
electronic system that can process time records for all its employees,
including FWS students.
However, the current requirement of collecting a handwritten
signature from an FWS student's supervisor on a paper certification
often prevents, or at least diminishes, the effectiveness of an
automated electronic payroll system.
The proposed regulatory change does not remove the certification
requirement. The certification requirement helps ensure that the
supervisor is reviewing the time record prior to paying an FWS student.
This is an important safeguard to help maintain the integrity of the
FWS Program by paying only students who worked and by paying only the
correct amount of funds earned by the students.
Federal Family Education Loan Programs and Federal Direct Loan
Program
Section 682.201 and 685.200--Eligible Borrowers
Statute: Section 428B(a)(1)(A) of the HEA states, among other
things, that parents of dependent students are eligible to borrow PLUS
loans in the FFEL and Direct Loan programs, if they do not have an
adverse credit history.
Current Regulations: Sections 682.201(b)(1) and 685.200(b)(1) list
the criteria that a parent borrower must meet to be eligible to borrow
a PLUS Program loan. One criterion for a Federal PLUS loan made on or
after July 1, 1993, is that the parent borrower must not have an
adverse credit history.
The regulation further indicates that, unless the lender determines
that extenuating circumstances exist, the lender must consider that an
applicant has an adverse credit history based on several enumerated
reasons that may appear in the applicant's credit report.
If the lender does determine that extenuating circumstances exist,
the regulation requires the lender to retain documentation
demonstrating its basis for making that determination.
Proposed Regulations: The proposed regulation would amend
Sec. 682.201(b)(1)(vii)(F) to require that the lender retain a record
(instead of documentation) demonstrating its basis for determining that
extenuating circumstances exist in such a situation. Similarly, where
the regulation indicates what that documentation may include, the
proposed regulation would indicate what such a record may include.
Reasons: This change in the two places noted to the word ``record''
in place of the word ``documentation,'' is a clarification of the
existing regulation.
A lender has never had to maintain original documents that showed
what its basis was for determining that extenuating circumstances
existed, although it could do so.
The proposed regulation provides some examples of what the record
of such a determination may include (an updated credit report, a
statement from the creditor that the borrower has made satisfactory
arrangements to repay the debt, or a satisfactory statement from the
borrower explaining any delinquencies with outstanding balances of less
than $500). This record that demonstrates the lender's determination
that extenuating circumstances existed could be the original applicable
document. However, it could also be an electronic (or other type of)
copy of such a document.
Section 682.207--Due Diligence in Disbursing a loan
Statute: Section 428G of the HEA establishes the requirements for
the disbursement of student loans under the FFEL Program.
Current Regulations: Under Sec. 682.207(b)(1) and (c)(3), a lender
is required to disburse loan proceeds to a school in accordance with
the disbursement schedule provided by the school.
Proposed Regulations: Proposed changes to Sec. 682.207(b)(1) and
(C)(3) would explicitly allow a lender to disburse loan proceeds either
in accordance with the disbursement schedule or in accordance with
another request made by a school that modifies that schedule.
[[Page 49146]]
Reasons: Under proposed Sec. 682.207(b)(1) and (c)(3), a lender
could continue to provide loan proceeds to a school based solely on the
disbursement schedule provided by the school on a loan certification.
Or, the school and the lender could agree that loan proceeds would be
provided at the school's request under an alternate process like the
current ``hold and release'' process used by some FFEL lenders and
guaranty agencies. Under the hold and release process, a school
instructs the lender not to provide the loan funds for a borrower
according to the disbursement schedule provided in the loan
certification. Rather, the lender holds the funds until the school
requests the lender to release those funds for that borrower.
Although the current regulations do not prohibit schools and
lenders from using the hold and release process, we wish to make
explicit in the regulations that schools have the flexibility to
request a modification to the original disbursement schedule, and
lenders have the authority to provide FFEL loan proceeds, in a manner
that best meets their administrative needs. Thus, the proposal would
allow FFEL lenders to release loan funds upon the specific request of
the school to modify the original schedule, rather than according to
the disbursement schedule originally presented in the loan
certification.
Current Regulations: Section 682.207(f) allows a lender to disburse
loan proceeds after the student has ceased to be enrolled on at least a
half-time basis if, among other things, the school certifies the
borrower's loan eligibility before the date the borrower became
ineligible and the loan funds will be used to pay educational costs
that the school determines the student incurred for the period in which
the student was enrolled and eligible. The regulation requires the
lender to give notice to the school that the loan proceeds are being
disbursed based on the above noted situation.
Proposed Regulations: The proposed regulation would amend
Sec. 682.207(f) by dropping the requirement for the lender to give
notice to the school of the reason that the loan proceeds are being
disbursed in this situation.
Reasons: In order for the lender to disburse the loan proceeds in
this situation, the school must determine that there are educational
costs (that are intended to be covered by the loan) that the student
incurred for the period in which the student was enrolled and eligible.
Therefore, since it makes the determination about the student's
incurred educational costs, the school will know the reason that the
loan proceeds are being disbursed by the lender in this situation.
Thus, requiring the lender to give notice of that fact is not
necessary.
Section 682.604(b)--Releasing Loan Proceeds
Current Regulations: Before a school may release FFEL Program loan
proceeds to a student, it must determine that the student has
continuously maintained eligibility, as provided in Sec. 682.201. The
current regulations specifically require the school to make this
determination after it receives the loan proceeds from the lender.
Proposed Regulations: Proposed Sec. 682.604(b)(2)(i) would not
require a school to determine a student's eligibility after it receives
loan proceeds from a lender.
Reasons: As part of the negotiations of Committee I, the FFEL
industry recommended that the regulations be revised in several ways to
better accommodate the processes under which lenders and the Secretary
provide title IV program funds to schools. In response, we submitted a
proposal to Committee I describing a new payment method that
incorporated many of the FFEL industry's recommendations.
We and the non-federal negotiators reached tentative agreements on
many of the provisions of the proposed payment method. However,
consensus was not reached on our entire proposal, nor on alternatives
to that proposal that were put forth by some non-federal negotiators.
Under the protocols adopted by the committee, when consensus is not
reached we may publish proposed regulations that may or may not reflect
any tentative agreements, or that address all or some of the issues
discussed during the negotiated rulemaking sessions. Consistent with
these protocols, we propose to make a revision to Sec. 682.604(b)(2) of
the FFEL Program regulations.
Under the General Provisions regulations, and in each of the
program regulations, a school may disburse Title IV, HEA program funds
only to, or on behalf of, an eligible student. The specific provision
in the FFEL Program regulation at Sec. 682.604(b)(2) is the only one in
the regulations that requires a school to make an eligibility
determination after it receives program funds. Under all of the other
regulations, a school has the flexibility to implement policies and
procedures that ensure that a student meets all of the eligibility
requirements before it disburses funds. This proposed change would
extend this flexibility to FFEL Program funds as well.
In addition, the proposed change would eliminate a conflict between
the current provisions in Sec. 682.604(b)(2) and the General Provisions
regulations in Sec. 668.164(a). Under Sec. 668.164(a), a school makes a
disbursement of Title IV, HEA program funds whenever it credits a
student's account, regardless of whether the school has received
program funds from the Secretary or a lender. As discussed above, a
school must ensure that it only disburses Title IV, HEA program funds
to eligible students. However, under current Sec. 682.604(b)(2) a
school that makes a disbursement of FFEL Program funds to, or on behalf
of, an eligible student by crediting the student's account before it
receives the funds from a lender, must make another eligibility
determination after it receives those funds from the lender. We are
proposing to modify the current regulation to make clear that since the
General Provisions regulations in Sec. 668.164(a) apply to
disbursements of all program funds, the school in the example above
does not need to make another eligibility determination.
Section 682.604(c)(6)--Processing the Borrower's Loan Proceeds and
Counseling Borrowers; and Section 685.301--Origination of a Loan by a
Direct Loan Program School
Statute: Section 428G(a)(2) of the HEA provides that FFELP loans
generally must be disbursed in at least two installments. The second
installment cannot be made any earlier than half-way through the loan
period except for semester, quarter, or similar term situations. Then
the second installment is allowed to be made at the beginning of the
second semester, quarter, or similar term. Federal Direct Loan Program
loans are made under the same conditions pursuant to section 455 of the
HEA.
Current Regulations: In the FFEL Program, except for the situation
in which the date of one or more scheduled disbursements has passed
before a lender makes a disbursement, Sec. 682.604(c)(6) requires,
among other things, that the school deliver loan proceeds at least once
in each payment period when a loan period is more than one payment
period. Section 682.604(c)(7) states that in cases where a school uses
credit hours and terms other than semesters, trimesters, or quarters,
it may not deliver a second loan disbursement until the later of the
calendar midpoint of the loan period or the date when the student has
completed half of the academic coursework in the loan period. Section
685.301(b) has similar provisions for the Direct Loan Program.
[[Page 49147]]
Proposed Regulations: In the FFEL Program, the proposed change to
Sec. 682.604(c)(6) adds Sec. 682.604(c)(7) as one exception to the rule
that a school deliver loan proceeds at least once in each payment
period. In the Direct Loan Program, Sec. 685.301(b)(2) already includes
a reference to a provision corresponding to Sec. 682.604(c)(7).
In addition, in the FFEL Program and in the Direct Loan Program,
the proposed regulations would amend Secs. 682.604(c)(7) and
685.301(b)(5) so that they do not preclude a school from delivering
loan proceeds in each term in those situations in which the school
measures progress in credit hours and uses terms other than semesters,
trimesters, or quarters as long as those non-standard terms are
substantially equal in length throughout the loan period.
Credit hour schools that do not use terms, or use terms that are
not substantially equal in length, would continue to be required to
wait until the later of the calendar midpoint of the loan period or the
date that the student has completed half of the academic coursework in
the loan period before delivering the second disbursement of the loan.
Terms within a loan period would be considered to be substantially
equal in length if no term in the period was more than two weeks
shorter than any other term in the period.
Reasons: Since all terms in which a school uses credit hours are
considered to be payment periods according to Sec. 668.4 of the Student
Assistance General Provisions regulations, there is an inconsistency in
the FFEL Program regulations between Secs. 682.604(c)(6) and (c)(7) in
some situations. This inconsistency does not exist in the Direct Loan
Program regulations as noted above.
In the FFEL Program for example, if a school uses credit hours and
has five terms in its academic year, Sec. 682.604(c)(6) indicates that
the school should deliver loan proceeds at least once each term. But,
Sec. 682.604(c)(7) indicates that the school may not deliver a second
disbursement until the later of the calendar midpoint of the loan
period or the date by which the student has completed half of the
academic coursework in the loan period. We have removed that
inconsistency.
With regard to the change in the treatment of terms other than
semesters, trimesters, or quarters, that are of substantially equal
length, we have proposed the same treatment for those terms as is
currently provided for semesters, trimesters, or quarters. We have done
this because it appears reasonable to treat all terms in the same
manner, without regard to the number of terms that a school has, as
long as all of the terms in the loan period are substantially equal in
length.
However, for terms that are not substantially equal in length, we
have retained the current requirement that there be two disbursements,
with the second disbursement being made at the later of the calendar
midpoint of the loan period or the date that the student has completed
half of the academic coursework of the loan period. We have done this
to prevent a second or subsequent disbursement from being made too
early in a student's loan period when the earlier disbursement would be
for an amount that substantially exceeds the amount that would be
proportional to the period for which it is made.
For example, if a school had two terms in a 30-week academic year,
one of which was 10 weeks and the other was 20 weeks long, we would not
want the second disbursement (equal to half of the loan amount) to be
made in the eleventh week, the beginning of the second term.
Executive Order 12866
1. Potential Costs and Benefits
Under Executive Order 12866, we have assessed the potential costs
and benefits of this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those we have
determined as necessary for administering these programs effectively
and efficiently.
As more fully described elsewhere in this preamble, these proposed
regulations, developed through a negotiated rulemaking process with the
higher education community, would implement a variety of streamlining
and clarifying provisions to provide institutions additional
flexibility in the administration of the title IV, HEA programs. In
assessing the potential costs and benefits of this regulatory action--
both quantitative and qualitative--we have determined that the benefits
would justify the costs.
We have also determined that this regulatory action would not
unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
2. Clarity of the Regulations
Executive Order 12866 and the President's Memorandum of June 1,
1998 on ``Plain Language in Government Writing'' require each agency to
write regulations that are easy to understand.
We invite comments on how to make these proposed regulations easier
to understand, including answers to questions such as the following:
<bullet> Are the requirements in the proposed regulations clearly
stated?
<bullet> Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
<bullet> Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
<bullet> 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. 675.19 Fiscal procedures and records.)
<bullet> 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?
<bullet> What else could we do to make the proposed regulations
easier to understand?
Send any comments that concern how the Department could make these
proposed regulations easier to understand to the person listed in the
ADDRESSES section of the preamble.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. Entities affected by these regulations are institutions of
higher education that participate in the title IV, HEA programs. The
institutions are defined as small entities, according to the U.S. Small
Business Administration, if they are: for-profit or nonprofit entities
with total revenue of $5,000,000 or less; or entities controlled by
governmental entities with populations of 50,000 or less. These
proposed regulations would not impose a significant economic impact on
a substantial number of small entities. The regulations would benefit
both small and large institutions by providing additional flexibility
in the administration of: the Institutional Eligibility requirements;
the certification procedures for institutions; the financial aid
history verification requirements; the cash management requirements;
the written arrangements requirements; the FFEL Programs; Direct Loan
Program and Federal Work-Study Programs, without requiring significant
changes to current institutional system operations.
These proposed regulations would ease administrative burden and
augment
[[Page 49148]]
student benefits by: consolidating and streamlining procedures for
establishing, reestablishing, maintaining or expanding institutional
eligibility and certification; expanding options for institutions that
enter contractual agreements with other entities for the delivery of
eligible programs and title IV, HEA program funds disbursement;
improving the process to verify the financial aid history of title IV,
HEA program fund recipients; streamlining the disbursement rules for
non-traditional programs that participate in either the FFEL or Direct
Loan programs; expanding electronic options for notifications in cash
management; providing flexibility to schools and lenders in the
disbursement of loan funds; and streamlining the collection of hours
worked by FWS Program hourly employees through allowing institutions to
implement an automated timekeeper system using electronic signatures to
verify hours worked.
We invite comments from small institutions as to whether the
proposed changes would have a significant economic impact on them.
Paperwork Reduction Act of 1995
Proposed Secs. 600.20, 600.21, 600.31, 668.13, 668.19 and 675.19
contain information collection requirements. Under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department of Education
has submitted a copy of these sections to the Office of Management and
Budget (OMB) for its review. These sections contain the recordkeeping
and reporting provisions for various title IV, HEA programs, detailed
in the following paragraph.
Collection of information: Student Assistance General Provisions--
Sec. 600.20--Application procedures for establishing, reestablishing,
maintaining, or expanding institutional eligibility and certification.
The proposed regulations would streamline the application and
reapplication procedures that institutions must follow to obtain
eligibility and certification to participate in the title IV, HEA
programs. New flexibility is proposed regarding the format of the
application, the process of adding additional and temporary locations,
and an institution's ability to make disbursements after its
eligibility or certification has expired.
Section 600.21--Updating application information. The proposed
regulations in this section clarify the instances requiring
notification of updated information, and the procedures for making such
notification. The reporting timeframes for institutions owned by
publicly traded corporations are significantly altered in these
proposed regulations.
Section 600.31--Change in ownership resulting in a change in
control for private nonprofit and private for-profit institutions.
These regulations specifically address procedures and requirements
institutions must follow when they have experienced a change in
ownership, resulting in a change of the people or entities that govern
those institutions. Generally, schools must reapply when such a change
occurs. These proposed regulations modify the criteria an institution
must consider to determine if, or to what extent, such a change
occurred.
Section 668.13--Certification procedures [training requirements].
The proposed regulations offer alternatives to the training
requirements for institutional certification, and the option to request
a waiver from the training.
Section 668.19--Financial Aid History. The proposed regulations
amend the process for confirming a transfer student's financial aid
history, eliminating the need to use paper forms to meet the
requirements.
Federal Work-Study Program--Sec. 675.19--Fiscal procedures and
records. The proposed regulations allow a FWS student's supervisor to
certify electronically or through other means, that each student has
worked and earned the amount being paid. This proposed change
eliminates the restriction that the FWS certification must have a
handwritten signature and reduces the administrative burden for
certifying FWS time records.
Federal Family Education Loan Program and William D. Ford Direct
Loan Program--Sec. 682.201--Eligible borrowers. The proposed
regulations revise this section to allow greater flexibility to FFEL
Program lenders in record retention regarding the documentation
required to establish an adverse credit history for a parent borrower.
Section 682.207--Due diligence in disbursing a loan. We propose to
change this section to allow a lender in the FFEL Program to disburse
funds to a school based upon the school's modification to the
disbursement schedule originally provided in the loan certification.
Another proposed change to this section eliminates the requirement that
a lender in the FFEL Program provide notice to the school when it
disburses funds to the school after the student is no longer enrolled
on at least a half-time basis.
Section 682.604--Processing the borrower's loan proceeds and
counseling borrowers and Sec. 685.301--Origination of a loan by a
Direct Loan Program school. These proposed changes clarify and
eliminate a regulatory contradiction in the loan disbursement rules for
nontraditional programs under the FFEL and Direct Loan programs.
Our current estimate is that the existing total annual
recordkeeping and reporting burden hours for all of the affected
sections listed above will not change. We do not anticipate any
significant changes in these hours as a result of the proposed
regulations that would result in an increase in the current estimates.
We believe the additional flexibilities these regulations propose may
reduce the annual recordkeeping and burden hours for many institutions.
We will monitor the impact of the proposed flexibilities to
determine the nature and extent of any impact upon institutions.
If you want to comment on the information collection requirements,
please send your comments to the Office of Information and Regulatory
Affairs, OMB, room 10235, New Executive Office Building, Washington, DC
20503; Attention: Desk Officer for U.S. Department of Education. You
may also send a copy of these comments to the Department representative
named in the ADDRESSES section of this preamble.
We consider your comments on these proposed collections of
information in--
<bullet> Deciding whether the proposed collections are necessary
for the proper performance of our functions, including whether the
information will have practical use;
<bullet> Evaluating the accuracy of our estimate of the burden of
the proposed collections, including the validity of our methodology and
assumptions;
<bullet> Enhancing the quality, usefulness, and clarity of the
information we collect; and
<bullet> Minimizing the burden on those who must respond. This
includes exploring the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology; e.g., permitting electronic submission of
responses.
OMB is required to make a decision concerning the collections of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, to ensure that OMB gives your comments full consideration,
it is important that OMB receives the comments within 30 days of
publication. This does not affect the deadline for your comments to us
on the proposed regulations.
[[Page 49149]]
Intergovernmental Review
These title IV, HEA program funds are not subject to the
requirements of Executive Order 12372 and the regulations in 34 CFR
part 79.
Assessment of Educational Impact
The Secretary particularly requests comments on whether the
proposed regulations would require transmission of information that any
other agency or authority of the United States gathers or makes
available.
Electronic Access to This Document
You may view this document, as published in the Federal Register,
in text or Adobe Portable Document Format (PDF) on the Internet at the
following sites:
http://ocfo.ed.gov/fedreg.htm
http://ifap.ed.gov/csb__html/fedlreg.htm
To use the PDF you must have the Adobe Acrobat Reader Program with
Search, which is available free at the first of the previous sites. If
you have questions about using the PDF, call the U.S. Government
Printing Office (GPO), toll free, at 1-888-293-6498; or in the
Washington, DC, area at (202)-512-1530.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://
www.access.gpo.gov/nara/index.html
(Catalog of Federal Domestic Assistance Number: 84.007 Federal
Supplemental Educational Opportunity Grant Program; 84.032 Federal
Family Education Loan Program; 84.032 Consolidation Program; 84.032
Federal PLUS Program; 84.032 Federal Supplemental Loans for Students
Program; 84.033 Federal Work-Study Program; 84.037 Federal Perkins
Loan Cancellation Program; 84.038 Federal Perkins Loan Program;
84.063 Federal Pell Grant Program; 84.069 Leveraging Educational
Assistance Partnership Program; 84.268 Federal William D. Ford
Federal Direct Loan Program)
List of Subjects
34 CFR Part 600
Administrative practice and procedure, Colleges and universities,
Consumer protection, Grant programs--education, Loan programs--
education, Reporting and recordkeeping requirements, Student aid.
34 CFR Part 668
Administrative practice and procedure, Colleges and universities,
Consumer protection, Grant programs--education, Loan programs--
education, Reporting and recordkeeping requirements, Student aid.
34 CFR Part 675
Colleges and universities, Employment, Grant programs--education,
Reporting and recordkeeping requirements, Student aid.
34 CFR Part 682
Administrative practice and procedure, College and universities,
Loan programs--education, Student aid, Vocational education, Reporting
and recordkeeping requirements.
34 CFR Part 685
Administrative practice and procedure, College and universities,
Loan programs--education, Student aid, Vocational education, Reporting
and recordkeeping requirements.
34 CFR Part 690
Grant programs--education, Reporting and recordkeeping
requirements, Student aid.
Dated: August 4, 2000.
Richard W. Riley,
Secretary of Education.
For the reasons stated in the preamble, the Secretary proposes to
amend title 34 of the Code of Federal Regulations by amending parts
600, 668, 675, 682, 685 and 690 as follows:
PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT
OF 1965, AS AMENDED
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.
Secs. 609.9 and 600.30 [Removed]
2. Sections 600.9 and 600.30 are removed.
3. Section 600.10 is amended by removing and reserving paragraph
(a)(2) and by revising paragraphs (b)(3)(i) and (b)(3)(ii) to read as
follows:
Sec. 600.10 Date, extent, duration, and consequence of eligibility.
* * * * *
(b) * * *
(3) * * *
(i) The Secretary approves that location under Sec. 600.20(f)(5);
or
(ii) The location is licensed and accredited and the institution
does not have to notify the Secretary about that location under
Sec. 600.20(d).
* * * * *
4. Section 600.20 is revised to read as follows:
Sec. 600.20 Application procedures for establishing, reestablishing,
maintaining, or expanding institutional eligibility and certification.
(a) Initial eligibility application. An institution that wishes to
establish its eligibility to participate in any HEA program must submit
an application to the Secretary for a determination that it qualifies
as an eligible institution under this part. If the institution also
wishes to be certified to participate in the title IV, HEA programs, it
must indicate that intent on the application, and submit all the
documents indicated on the application to enable the Secretary to
determine that it satisfies the relevant certification requirements
contained in 34 CFR part 668, subparts B and L.
(b)(1) Reapplication. A currently designated eligible institution
that is not participating in the title IV, HEA programs must apply to
the Secretary for a determination that the institution continues to
meet the requirements in this part if the Secretary requests the
institution to reapply.
(2) A currently designated eligible institution that participates
in the title IV, HEA programs must apply to the Secretary for a
determination that the institution continues to meet the requirements
in this part and 34 CFR part 668 if the institution wishes to--
(i) Continue to participate in the title IV, HEA programs beyond
the scheduled expiration of the institution's current eligibility/
certification designation;
(ii) Reestablish eligibility/certification as a private nonprofit
or private for-profit institution following a change in ownership that
results in a change in control as described in Sec. 600.31; or
(iii) Reestablish eligibility/certification after the institution
changes its status as a proprietary, nonprofit, or public institution.
(c) Application to expand eligibility. A currently designated
eligible institution that wishes to expand the scope of its
eligibility/certification and disburse title IV, HEA Program funds to
students enrolled in that expanded scope must apply to the Secretary
for approval to--
(1) Add a location at which the institution offers 50 percent or
more of an educational program, unless the institution is exempt from
this requirement under paragraph (d) of this section;
(2) Increase its level of program offerings (e.g., adding graduate
degree programs when it previously offered only baccalaureate degree
programs);
(3) Add an educational program if the institution is required to
apply to the Secretary for approval under Sec. 600.10(c);
[[Page 49150]]
(4) Add a branch campus at a location that is not currently
included in the institution's eligibility/certification designation; or
(5) Convert an eligible location to a branch campus.
(d) Exemptions from applying for additional locations--(1)
Exemption for public institutions. A public institution does not have
to apply to the Secretary for approval of a licensed and accredited
additional location under paragraph (c)(1) of this section if the
additional location is in the same State as the main campus. The
institution must report those locations in its next recertification
application.
(2) Exemption for temporary additional locations for non-public
institutions. A non-public institution does not have to apply to the
Secretary for approval of a licensed and accredited temporary
additional location under paragraph (c)(1) of this section if--
(i) The institution intends to use that location for not more than
12 months and has not yet used that location for more than 12 months;
(ii) The institution has not added more than six locations at which
it offered more than 50 percent of an educational program since it was
last certified to participate in the title IV, HEA programs;
(iii) The institution does not have any outstanding title IV, HEA
program liability;
(iv) The institution did not acquire the assets of an institution
that provided educational programs at that location during the
preceding year and participated in the title IV, HEA programs during
that year;
(v) The institution would not be subject to a loss of eligibility
under 34 CFR 668.188 if it adds that location; and
(vi) The Secretary does not currently preclude the institution from
opening additional locations without notice to the Secretary.
(3) More than one year at a temporary location. If an institution
does not apply to the Secretary for approval of a temporary additional
location under the provisions of paragraph (c)(1) of this section
because it did not intend to operate at that location for more than 12
months, and the institution will stay at that location for more than 12
months, the institution--
(i) Must apply to the Secretary for approval of that additional
location as soon as it determines that it will stay at that location
for more than 12 months, but not later than 35 days before the end of
that 12-month period; and
(ii) May not disburse title IV, HEA program funds after the 12-
month period has expired to students enrolled at that location until
the Secretary approves that location.
(e) Application format. To satisfy the requirements of paragraphs
(a), (b), and (c) of this section, an institution must apply in a
format prescribed by the Secretary for that purpose and provide all the
information and documentation requested by the Secretary to make a
determination of its eligibility and certification.
(f) Secretary's response to applications. (1) If the Secretary
receives an application under paragraph (a) or (b)(1) of this section,
the Secretary notifies an institution--
(i) Whether the applicant institution qualifies in whole or in part
as an eligible institution under the appropriate provisions in
Secs. 600.4 through 600.7; and
(ii) The locations and educational programs that qualify as the
eligible institution if only a portion of the applicant qualifies as an
eligible institution;
(2) If the Secretary receives an application under paragraph (a) of
this section and that institution applies also to participate in the
title IV, HEA programs, the Secretary notifies the institution--
(i) Whether the institution is certified to participate in those
programs;
(ii) The title IV, HEA programs in which it is eligible to
participate;
(iii) The title IV, HEA programs in which it is eligible to apply
for funds;
(iv) The effective date of its eligibility to participate in those
programs; and
(v) The conditions under which it may participate in those
programs;
(3) If the Secretary receives an application under paragraph (b)(2)
of this section, the Secretary notifies the institution whether it
continues to be certified, or whether it reestablished its eligibility/
certification, to participate in the title IV, HEA programs.
(4) If the Secretary receives an application to have a branch
campus certified to participate in the title IV, HEA programs as a
branch campus, the Secretary notifies the institution whether that
branch campus is certified to participate and the date that the branch
campus is eligible to begin participation;
(5) If the Secretary receives an application under paragraph (c)(1)
of this section for an additional location, the Secretary notifies the
institution whether the location is eligible or ineligible to
participate in the title IV, HEA programs, and the date of eligibility
if the location is determined eligible; and
(6) If the Secretary receives an application under paragraph (c)(2)
of this section for an increase in the level of program offerings, or
for an additional educational program under Sec. 600.10(c) and
paragraph (c)(3) of this section, the Secretary notifies the
institution whether the program qualifies as an eligible program, and
if the program qualifies, the date of eligibility.
(g) Disbursement rules related to applications. (1)(i) Except as
provided under paragraph (g)(1)(ii) of this section and 34 CFR 668.26,
if an institution submits an application under paragraph (b)(2)(i) of
this section because its participation period is scheduled to expire,
after that expiration date the institution may not disburse title IV,
HEA program funds to students attending that institution until the
institution receives the Secretary's notification that the institution
is again eligible to participate in those programs.
(ii) An institution described in paragraph (g)(1)(i) of this
section may disburse title IV, HEA program funds to its students if the
institution submits to the Secretary a materially complete renewal
application in accordance with the provisions of 34 CFR 668.13(b)(2),
and has not received a final decision from the Secretary on that
application.
(2)(i) Except as provided under paragraph (g)(2)(ii) of this
section and 34 CFR 668.26, if a private nonprofit or private for-profit
institution submits an application under paragraph (b)(2)(ii) or
(b)(2)(iii) of this section because it has undergone or will undergo a
change in ownership that results in a change of control or a change in
status, the institution may not disburse title IV, HEA program funds to
students attending that institution after the change of ownership or
status until the institution receives the Secretary's notification that
the institution is eligible to participate in those programs.
(ii) An institution described in paragraph (g)(2)(i) of this
section may disburse title IV, HEA program funds to its students if the
Secretary approves the institution's materially complete application
under paragraph (i) of this section, and has not received a final
decision from the Secretary on that application.
(3) If an institution must apply to the Secretary under paragraphs
(c)(1) through (c)(4) of this section, the institution may not disburse
title IV, HEA program funds to students attending the subject location,
program, or branch before the institution receives the Secretary's
notification that the location, program, or branch is eligible
[[Page 49151]]
to participate in the title IV, HEA programs.
(4) If an institution applies to the Secretary under paragraph
(c)(5) of this section to convert an eligible location to a branch
campus, the institution may continue to disburse title IV, HEA program
funds to students attending that eligible location.
(5) If an institution does not apply to the Secretary to obtain the
Secretary's approval of a new location, program, increased level of
program, or branch, and the location, program, or branch does not
qualify as an eligible location, program, or branch of that institution
under this part and 34 CFR part 668, the institution is liable for all
title IV, HEA program funds it disburses to students enrolled at that
location or branch or in that program.
(Authority: 20 U.S.C. 1001, 1002, 1088, and 1099c)
5. Section 600.21 is revised to read as follows:
Sec. 600.21 Updating application information.
(a) Notice requirements. Except as provided in paragraph (b) of
this section for the information described in paragraph (a)(5) of this
section, an eligible institution must notify the Secretary in a manner
prescribed by the Secretary, no later than 10 days after the change
occurs, of any change in the following:
(1) Its name, the name of a branch, or the name of a previously
reported location.
(2) Its address, the address of a branch, or the address of a
previously reported location.
(3) The way it measures program length (e.g., from clock hours to
credit hours, or from semester hours to quarter hours).
(4) A decrease in the level of program offerings (e.g. the
institution drops its graduate programs).
(5) A person's ability to affect substantially the actions of the
institution if that person did not previously have this ability. The
Secretary considers a person to have this ability if the person--
(i) Holds alone or together with another member or members of his
or her family, at least a 25 percent ``ownership interest'' in the
institution as defined in Sec. 600.31(b);
(ii) Represents or holds, either alone or together with other
persons, under a voting trust, power of attorney, proxy, or similar
agreement at least a 25 percent ``ownership interest'' in the
institution, as defined in Sec. 600.31(b); or
(iii) Is a general partner, the chief executive officer, or chief
financial officer of the institution.
(6) The individual the institution designates under 34 CFR
668.16(b)(1) as its title IV, HEA Program administrator.
(b) Institution's notice to the Secretary. An institution that is
owned by a publicly traded corporation must notify the Secretary of any
change in the information described in paragraph (a)(5) of this section
when it notifies its accrediting agency, but no later than 10 days
after the institution learns of the change.
(c) Secretary's response to notice. The Secretary notifies an
institution if any reported change affects the institution's
eligibility, and the effective date of that change.
(d) Consequence of failure to notify. An institution's failure to
inform the Secretary of a change described in paragraph (a) of this
section within the time period stated in that paragraph may result in
adverse action against the institution.
(e) Definition. For purposes of this section, the Secretary
considers a member of a person's family to be his or her--
(1) Parent, sibling, spouse or child;
(2) Spouse's parent or sibling;
(3) Child's spouse; and
(4) Sibling's spouse.
(Authority: 20 U.S.C. 1001, 1002, 1088, and 1099c)
6. Section 600.31 is amended by:
A. Revising the section heading.
B. Revising the first sentence of paragraph (a)(1).
C. Redesignating paragraph (a)(2) as paragraph (a)(3) and adding a
new paragraph (a)(2).
D. Removing the definition of ``ownership'' in paragraph (b) and
adding, in its place, the definition of ``ownership or ownership
interest''.
E. Revising paragraphs (c)(2), (c)(6), and (c)(7).
F. Removing the word ``or'' at the end of paragraph (d)(6).
G. Revising paragraph (d)(7) and adding paragraph (d)(8).
The additions and revisions read as follows:
Sec. 600.31 Change in ownership resulting in a change in control for
private nonprofit and private for-profit institutions.
(a) * * *
(1) Except as provided in paragraph (a)(2) of this section, a
private nonprofit or private for-profit institution that undergoes a
change in ownership that results in a change in control ceases to
qualify as an eligible institution upon the change in ownership and
control. * * *
(2) If a private nonprofit or private for-profit institution has
undergone a change in ownership that results in a change in control,
the Secretary may, under the provisions of Sec. 600.20(h) and (i),
continue the institution's participation in the title IV, HEA programs
on a provisional basis, provided that the institution submits under the
provisions of Sec. 600.20(h) a materially complete application--
(i) No later than 10 business days after the change occurs; or
(ii) For an institution owned by a publicly traded corporation, no
later than 10 business days after the institution knew, or should have
known of the change based upon SEC filings, that the change occurred.
* * * * *
(b) * * *
Ownership or ownership interest. (1) Ownership or ownership
interest means a legal or beneficial interest in an institution or its
corporate parent, or a right to share in the profits derived from the
operation of an institution or its corporate parent.
(2) Ownership or ownership interest does not include an ownership
interest held by--
(i) A mutual fund that is regularly and publicly traded;
(ii) An institutional investor, such as a pension fund or insurance
company;
(iii) A profit-sharing plan of the institution or its corporate
parent, provided that all full-time permanent employees of the
institution or corporate parent are included in the plan; or
(iv) An Employee Stock Ownership Plan (ESOP).
* * * * *
(c) * * *
(2) Publicly traded corporations required to be registered with the
Securities and Exchange Commission (SEC). A change in ownership and
control occurs when--
(i) A person acquires such ownership and control of the corporation
so that the corporation is required to file a Form 8K with the SEC
notifying that agency of the change in control; or
(ii)(A) A person who is a controlling shareholder of the
corporation ceases to be a controlling shareholder. A controlling
shareholder is a shareholder who holds or controls through agreement
both 25 percent or more of the total outstanding voting stock of the
corporation and more shares than any other shareholder. A controlling
shareholder for this purpose does not include a shareholder whose sole
stock ownership is held as an institutional investor, held in mutual
funds, held through a profit-sharing plan, or held in an Employee Stock
Ownership Plan (ESOP).
[[Page 49152]]
(B) When a change of ownership occurs as a result of paragraph
(c)(2)(ii)(A) of this section, the institution may submit its most
recent quarterly financial statement as filed with the SEC, along with
copies of all other SEC filings made after the close of the fiscal year
for which a compliance audit has been submitted to the Department of
Education, instead of the ``same day'' balance sheet.
(C) If a publicly traded institution is provisionally certified due
to a change in ownership under paragraph (c)(2)(ii) of this section,
and that institution experiences another change of ownership under
paragraph (c)(2)(ii) of this section, an approval of the subsequent
change in ownership does not extend the original expiration date for
the provisional certification provided that any current controlling
shareholder was listed on the change of ownership application for which
the original provisional approval was granted.
* * * * *
(6) Nonprofit institution. A nonprofit institution changes
ownership and control when a change takes place that is described in
paragraph (d) of this section.
(7) Public institution. The Secretary does not consider that a
public institution undergoes a change in ownership that results in a
change of control if there is a change in governance and the
institution after the change remains a public institution, provided:
(i) The new governing authority is in the same State as approved in
the institution's program participation agreement; and
(ii) The new governing authority has acknowledged the public
institution's continued responsibilities under its program
participation agreement.
(d) * * *
(7) A change in status from a for-profit to a nonprofit
institution; or
(8) A change in status from a nonprofit to a for-profit
institution.
* * * * *
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
7. The authority citation for part 668 is revised to read as
follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1085, 1091, 1091b, 1092,
1094, 1099c, and 1099c-1, unless otherwise noted.
8. Section 668.2(b) is amended by revising paragraphs (2)(ii) and
(iii) and adding paragraph (2)(iv) to the definition of the term
``academic year'' to read as follows:
Sec. 668.2 General definitions.
* * * * *
(b) * * *
Academic year: * * *
(2) * * *
(ii) If an institution provides an educational program using a
semester, trimester, or quarter system, or in clock hours, the
Secretary considers that the institution provides one week of
instructional time in that program during any week the institution
provides for that program--
(A) At least one day of regularly scheduled instruction or
examinations; or
(B) After the last scheduled day of classes for a term, at least
one day of study for final examinations.
(iii) If an institution provides an educational program using
credit hours but not a semester, trimester, or quarter system, the
Secretary considers that the institution provides one week of
instructional time in that program during any week the institution
provides for that program--
(A) At least 12 hours of regularly scheduled instruction or
examinations; or
(B) After the last scheduled day of classes for a payment period,
at least 12 hours of study for final examinations.
(iv) Instructional time does not include any vacation periods,
homework, or periods of orientation or counseling.
* * * * *
9. A new Sec. 668.5 is added to read as follows:
Sec. 668.5 Written arrangements to provide educational programs.
(a) Written arrangements between eligible institutions. If an
eligible institution enters into a written arrangement with another
eligible institution, or with a consortium of eligible institutions,
under which the other eligible institution or consortium provides all
or part of the educational program of students enrolled in the former
institution, the Secretary considers that educational program to be an
eligible program if it otherwise satisfies the requirements of
Sec. 668.8.
(b) Written arrangements for study abroad. Under a study abroad
program, if an eligible institution enters into a written arrangement
with a foreign institution, or an organization acting on behalf of a
foreign institution, under which the foreign institution provides part
of the educational program of students enrolled in the eligible
institution, the Secretary considers that educational program to be an
eligible program if it otherwise satisfies the requirements of
paragraphs (c)(1) through (c)(3) of this section.
(c) Written arrangements between an eligible institution and an
ineligible institution or organization. If an eligible institution
enters into a written arrangement with an institution or organization
that is not an eligible institution under which the ineligible
institution or organization provides part of the educational program of
students enrolled in the eligible institution, the Secretary considers
that educational program to be an eligible program if--
(1) The ineligible institution or organization has not had its
eligibility to participate in the title IV, HEA programs terminated by
the Secretary, or has not voluntarily withdrawn from participation in
those programs under a termination, show-cause, suspension, or similar
type proceeding initiated by the institution's State licensing agency,
accrediting agency, guarantor, or by the Secretary;
(2) The educational program otherwise satisfies the requirements of
Sec. 668.8; and
(3)(i) The ineligible institution or organization provides not more
than 25 percent of the educational program; or
(ii)(A) The ineligible institution or organization provides more
than 25 percent but not more than 50 percent of the educational
program;
(B) The eligible institution and the ineligible institution or
organization are not owned or controlled by the same individual,
partnership, or corporation; and
(C) The eligible institution's accrediting agency, or if the
institution is a public postsecondary vocational educational
institution, the State agency listed in the Federal Register in
accordance with 34 CFR part 603, has specifically determined that the
institution's arrangement meets the agency's standards for the
contracting out of educational services.
(d) Administration of title IV, HEA programs. (1) If an institution
enters into a written arrangement as described in paragraph (a), (b),
or (c) of this section, except as provided in paragraph (d)(2) of this
section, the institution at which the student is enrolled as a regular
student must determine the student's eligibility for title IV, HEA
program funds, and must calculate and disburse those funds to that
student.
(2) In the case of a written arrangement between eligible
institutions, the institutions may agree in writing to have any
eligible institution in the written arrangement make those calculations
and disbursements, and the Secretary does not consider that institution
to be a
[[Page 49153]]
third party servicer for that arrangement.
(3) The institution that calculates and disburses a student's title
IV, HEA program assistance under paragraph (d)(1) or (d)(2) of this
section must--
(i) Take into account all the courses in which the student enrolls
at each institution that apply to the student's degree or certificate
when determining the student's enrollment status and cost of
attendance; and
(ii) Maintain all records regarding the student's eligibility for
and receipt of title IV, HEA program funds.
(Authority: 20 U.S.C. 1094)
10. Section 668.8 is amended by revising paragraphs (b)(3) and
(b)(4) to read as follows:
Sec. 668.8 Eligible program.
* * * * *
(b) * * *
(3)(i) If an institution provides an educational program using a
semester, trimester, or quarter system, or in clock hours, the
Secretary considers that the institution provides one week of
instructional time in that program during any week the institution
provides--
(A) At least one day of regularly scheduled instruction or
examinations; or
(B) After the last scheduled day of classes for a term, at least
one day of study for final examinations.
(ii) If an institution provides an educational program using credit
hours but not a semester, trimester, or quarter system, the Secretary
considers that the institution provides one week of instructional time
in that program during any week the institution provides--
(A) At least 12 hours of regularly scheduled instruction or
examinations; or
(B) After the last scheduled day of classes for a payment period,
at least 12 hours of study for final examinations.
(4) Instructional time does not include any vacation periods,
homework, or periods of orientation or counseling.
* * * * *
Sec. 668.12 [Amended]
11. Section 668.12 is amended by:
A. Redesignating paragraphs (f) and (g) as paragraphs (h) and (i)
of Sec. 600.20.
B. In newly redesignated paragraph (h)(1) of Sec. 600.20, removing
``an institution'' and adding, in its place, ``a private nonprofit
institution or private for-profit institution'' the first time
``institution'' appears.
C. In newly redesignated paragraph (h)(2) of Sec. 600.20, removing
``an institution'' and adding, in its place, ``a private nonprofit
institution or private for-profit institution''.
D. In newly redesignated paragraph (i)(2)(iii) of Sec. 600.20,
removing ``(f)(3)'' and adding, in its place, ``(h)(3)''.
E. Removing the remainder of Sec. 668.12.
12. Section 668.13 is amended by revising paragraph (a) to read as
follows:
Sec. 668.13 Certification procedures.
(a) Requirements for certification. (1) The Secretary certifies an
institution to participate in the title IV, HEA programs if the
institution qualifies as an eligible institution under 34 CFR part 600,
meets the standards of this subpart and subpart L of 34 CFR part 668,
and satisfies the requirements of paragraph (a)(2) of this section.
(2) Except as provided in paragraph (a)(3) of this section, if an
institution wishes to participate for the first time in the title IV,
HEA programs or has undergone a change in ownership that results in a
change in control as described in 34 CFR 600.31, the institution must
require the following individuals to complete title IV, HEA program
training provided or approved by the Secretary no later than 12 months
after the institution executes its program participation agreement
under Sec. 668.14:
(i) The individual the institution designates under
Sec. 668.16(b)(1) as its title IV, HEA program administrator.
(ii) The institution's chief administrator or a high level
institutional official the chief administrator designates. (3)(i) An
institution may request the Secretary to waive the training requirement
for any individual described in paragraph (a)(2) of this section.
(ii) When the Secretary receives a waiver request under paragraph
(a)(3)(i) of this section, the Secretary may grant or deny the waiver,
require another institutional official to take the training, or require
alternative training.
* * * * *
13. Section 668.19 is revised to read as follows:
Sec. 668.19 Financial aid history.
(a) Before an institution may disburse title IV, HEA program funds
to a student who previously attended another eligible institution, the
institution must use information it obtains from the Secretary, through
the National Student Loan Data System (NSLDS) or its successor system,
to determine--
(1) Whether the student is in default on any title IV, HEA program
loan;
(2) Whether the student owes an overpayment on any title IV, HEA
program grant or Federal Perkins Loan;
(3) For the award year for which a Federal Pell Grant is requested,
the student's scheduled Federal Pell Grant and the amount of Federal
Pell Grant funds disbursed to the student;
(4) The outstanding principal balance of loans made to the student
under each of the title IV, HEA loan programs; and
(5) For the academic year for which title IV, HEA aid is requested,
the amount of, and period of enrollment for, loans made to the student
under each of the title IV, HEA loan programs.
(b)(1) If a student transfers from one institution to another
institution during the same award year, the institution to which the
student transfers must request from the Secretary, through NSLDS,
updated information about that student so it can make the
determinations required under paragraph (a) of this section; and
(2) The institution may not make a disbursement to that student for
seven days following its request unless it receives the information
from NSLDS in response to its request or obtains that information
directly by accessing NSLDS, and the information it receives allows it
to make that disbursement.
(Authority: 20 U.S.C. 1091 and 1094)
14. Section 668.165(a)(3)(ii) is revised to read as follows:
Sec. 668.165 Notices and authorizations.
(a) * * *
(3) * * *
(ii) Either in writing or electronically. If the institution sends
the notice electronically, it must confirm receipt by the student or
parent of the electronic notification and must maintain documentation
of that confirmation.
* * * * *
PART 675--FEDERAL WORK-STUDY PROGRAMS
15. The authority citation for part 675 continues to read as
follows:
Authority: 42 U.S.C. 2751-2756b, unless otherwise noted.
16. Section 675.19 is amended by revising paragraphs (b)(1) and
(b)(2) to read as follows:
Sec. 675.19 Fiscal procedures and records.
* * * * *
(b) * * *
(1) An institution must follow the record retention and examination
provisions in this part and in 34 CFR 668.24.
(2) The institution must also establish and maintain program and
fiscal records that--
(i) Include a certification by the student's supervisor, an
official of the institution or off-campus agency, that each student has
worked and earned the
[[Page 49154]]
amount being paid. The certification must include or be supported by,
for students paid on an hourly basis, a time record showing the hours
each student worked in clock time sequence, or the total hours worked
per day;
(ii) Include a payroll voucher containing sufficient information to
support all payroll disbursements;
(iii) Include a noncash contribution record to document any payment
of the institution's share of the student's earnings in the form of
services and equipment (see Sec. 675.27(a)); and
(iv) Are reconciled at least monthly.
* * * * *
PART 682--FEDERAL FAMILY EDUCATION LOAN PROGRAM
17. The authority citation for part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
18. Section 682.201 is amended by revising paragraph (b)(1)(vii)(F)
to read as follows:
Sec. 682.201 Eligible borrowers.
* * * * *
(b) * * *
(1) * * *
(vii) * * *
(F) The lender must retain a record of its basis for determining
that extenuating circumstances existed. This record may include, but is
not limited to, an updated credit report, a statement from the creditor
that the borrower has made satisfactory arrangements to repay the debt,
or a satisfactory statement from the borrower explaining any
delinquencies with outstanding balances of less than $500.
* * * * *
19. Section 682.207 is amended by:
A. Revising paragraph (b)(1)(i)(B).
B. Revising paragraph (c)(3).
C. Removing ``(1)'' after the paragraph designation ``(f)'';
removing paragraph (f)(2); and redesignating paragraphs (f)(1)(i),
(f)(1)(ii), and (f)(1)(iii) as paragraphs (f)(1), (f)(2), and (f)(3),
respectively.
The revisions read as follows:
Sec. 682.207 Due diligence in disbursing a loan.
* * * * *
(b)(1) * * *
(i) * * *
(B) Must disburse a Stafford or PLUS loan in accordance with the
disbursement schedule provided by the school or any request made by the
school modifying that schedule.
* * * * *
(c) * * *
(3) Disbursement must be made on a payment period basis in
accordance with the disbursement schedule provided by the school or any
request made by the school modifying that schedule.
* * * * *
20. Section 682.604 is amended by:
A. Revising paragraph (b)(2)(i).
B. Revising paragraph (c)(6).
C. Revising paragraph (c)(7).
The revisions read as follows:
Sec. 682.604 Processing the borrower's loan proceeds and counseling
borrowers.
* * * * *
(b) * * *
(2)(i) Except in the case of a late disbursement under paragraph
(e) of this section or as provided in paragraph (b)(2)(iii) or (iv) of
this section, a school may release the proceeds of any disbursement of
a loan only to a student whom the school determines continuously has
maintained eligibility in accordance with the provisions of
Sec. 682.201 for the loan period certified by the school on the
student's loan application.
* * * * *
(c) * * *
(6) Unless the provision of Sec. 682.207(d) or the provisions of
paragraph (c)(7) of this section apply--
(i) If a loan period is more than one payment period, the school
must deliver loan proceeds at least once in each payment period; and
(ii) If a loan period is one payment period, the school must make
at least two deliveries of loan proceeds during that payment period.
The school may not make the second delivery until the calendar midpoint
between the first and last scheduled days of class of the loan period.
(7)(i) If a school measures academic progress in an educational
program in credit hours and either does not use terms or does not use
terms that are substantially equal in length for a loan period, the
school may not deliver a second disbursement until the later of--
(A) The calendar midpoint between the first and last scheduled days
of class of the loan period; or
(B) The date, as determined by the school, that the student has
completed half of the academic coursework in the loan period.
(ii) For purposes of paragraph(c)(7) of this section, terms in a
loan period are substantially equal in length if no term in the loan
period is more than two weeks shorter than any other term in that loan
period.
* * * * *
PART 685--FEDERAL WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
22. The authority citation for part 685 is revised to read as
follows:
Authority: 20 U.S.C. 1087a through 1087j, unless otherwise
noted.
23. Section 685.301 is amended by revising paragraph (b)(5) to read
as follows:
Sec. 685.301 Origination of a loan by a Direct Loan Program school.
* * * * *
(b) * * *
(5)(i) If a school measures academic progress in an educational
program in credit hours and either does not use terms or does not use
terms that are substantially equal in length for a loan period, the
school may not make a second disbursement until the later of--
(A) The calendar midpoint between the first and last scheduled days
of class of the loan period; or
(B) The date, as determined by the school, that the student has
completed half of the academic coursework in the loan period.
(ii) For purposes of this paragraph, terms in a loan period are
substantially equal in length if no term in the loan period is more
than two weeks longer than any other term in that loan period.
* * * * *
PART 690--FEDERAL PELL GRANT PROGRAM
24. The authority citation for part 690 continues to read as
follows:
Authority: 20 U.S.C. 1070a, unless otherwise noted.
Sec. 690.9 [Removed]
25. Section 690.9 is removed.
Sec. 690.75 [Amended]
26. Section 690.75 is amended by removing the words ``financial aid
transcript'' in paragraph (a); and by removing the reference to ``34
CFR 668.7'' in paragraph (a)(1) and adding, in its place, ``34 CFR part
668, subpart C''.
[FR Doc. 00-20207 Filed 8-9-00; 8:45 am]
BILLING CODE 4000-01-U
]
|