Subject: Foreign Institutions--Federal Student Aid Programs; Proposed Rule

FR part

Publication Date: July 20, 2010

Posted Date: July 20, 2010

Subject: Foreign Institutions--Federal Student Aid Programs; Proposed Rule

FR Part: II

FR Type: Notice of Proposed Rulemaking (NPRM)

NPRM Comment Due Date: August 19, 2010

[Federal Register: July 20, 2010 (Volume 75, Number 138)]
[Proposed Rules]
[Page 42189-42236]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jy10-29]

[[Page 42189]]

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Part II

Department of Education

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34 CFR Parts 600, 668, and 682

Foreign Institutions--Federal Student Aid Programs; Proposed Rule

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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, and 682

RIN 1840-AD03
[Docket ID ED-2010-OPE-0009]

Foreign Institutions--Federal Student Aid Programs

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to implement provisions related to the
eligibility of foreign institutions for participation in the Federal
student aid programs that were added to the Higher Education Act of
1965, as amended (HEA), by the Higher Education Opportunity Act of 2008
(HEOA), as well as other provisions related to the eligibility of a
foreign institution by amending the regulations for Institutional
Eligibility Under the Higher Education Act of 1965, the Student
Assistance General Provisions, and the Federal Family Education Loan
(FFEL) Program.

DATES: We must receive your comments on or before August 19, 2010.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal
or via postal mail, commercial delivery, or hand delivery. We will not
accept comments by fax or by e-mail. Please submit your comments only
one time, in order to ensure that we do not receive duplicate copies.
In addition, please include the Docket ID at the top of your comments.
Federal eRulemaking Portal: Go to http://www.regulations.gov to
submit your comments electronically. Information on using Regulations.gov,
including instructions for finding a regulation, submitting a comment, finding a comment,
and signing up for e-mail alerts, is available on the site under "How To Use
Regulations.gov'' in the Help section.
Postal Mail, Commercial Delivery, or Hand Delivery. If you
mail or deliver your comments about these proposed regulations, address
them to Wendy Macias, U.S. Department of Education, 1990 K Street, NW.,
room 8017, Washington, DC 20006-8502.

Privacy Note: The Department's policy for comments received from
members of the public (including those comments submitted by mail,
commercial delivery, or hand delivery) is to make these submissions
available for public viewing in their entirety on the Federal
eRulemaking Portal at http://www.regulations.gov. Therefore,
commenters should be careful to include in their comments only
information that they wish to make publicly available on the
Internet.

FOR FURTHER INFORMATION CONTACT: For general information or
information related to nonprofit status for foreign institutions,
public foreign institutions and financial responsibility, eligibility
of training programs at foreign institutions, and foreign graduate
medical schools, Wendy Macias. Telephone: (202) 502-7526 or via the
Internet at: Wendy.Macias@ed.gov.
For information related to audited financial statements and
compliance audits, Anthony Gargano. Telephone: (202) 502-7519, or via
the Internet at: Anthony.Gargano@ed.gov.
For information related to the definition of a foreign institution,
Gail McLarnon. Telephone: (202) 219-7048, or via the Internet at:
Gail.McLarnon@ed.gov.
For information related to single legal authorization for groups of
foreign institutions, foreign veterinary schools, foreign nursing
schools and certification of foreign institutions, Brian Smith.
Telephone: (202) 502-7551, or via the Internet at Brian.Smith@ed.gov.
If you use a telecommunications device for the deaf, call the
Federal Relay Service, toll free, at 1-800-877-8339.
Individuals with disabilities can obtain this document in an
accessible format (e.g., braille, large print, audiotape, or computer
diskette) on request to one of the contact persons listed under FOR
FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:

Invitation To Comment

As outlined in the section of this notice entitled Negotiated
Rulemaking, significant public participation, through three public
hearings and three negotiated rulemaking sessions, has occurred in
developing this notice of proposed rulemaking (NPRM). In accordance
with the requirements of the Administrative Procedure Act, we invite
you to submit comments regarding these proposed regulations on or
before August 19, 2010. 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, including its overall
requirements to assess both the costs and the benefits of the proposed
regulations and feasible alternatives, and to make a reasoned
determination that the benefits of these proposed regulations justify
their costs. 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 by accessing Regulations.gov.
You may also inspect the comments, in person, in room 8031, 1990 K
Street, NW., 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, please contact one of the
persons listed under FOR FURTHER INFORMATION CONTACT.

Negotiated Rulemaking

Section 492 of the HEA requires the Secretary, before publishing
certain proposed regulations for programs authorized by Title IV of the
HEA, to obtain public involvement in the development of the proposed
regulations. After obtaining advice and recommendations from the
public, including individuals and representatives of groups involved in
the Federal student financial assistance programs, the Secretary in
many cases must subject the proposed regulations to a negotiated
rulemaking process. Proposed regulations that the Department publishes
on which the negotiators reached consensus must conform to final
agreements resulting from that process unless the Secretary reopens the
process or provides a written explanation to the participants stating
why the Secretary has decided to depart from the agreements. Further
information on the negotiated rulemaking process can be found at:
http://www.ed.gov/policy/highered/leg/hea08/index.html.
On May 26, 2009, the Department published a notice in the Federal
Register (74 FR 24728) announcing our intent to establish two
negotiated rulemaking committees to prepare proposed regulations. One
committee would focus on issues related to

[[Page 42191]]

program integrity (Team I--Program Integrity Issues). A second
committee would focus on issues related to the eligibility of foreign
institutions for participation in the Title IV, HEA programs (Team II--
Foreign School Issues). On September 9, 2009, the Department published
a second notice in the Federal Register (74 FR 46399) listing the
topics the committees were likely to address and requested nominations
of individuals for membership on the committees who could represent the
interests of key stakeholder constituencies on each committee.
Team II--Foreign School Issues (Team II) met to develop proposed
regulations during the months of November 2009, January 2010, and
February 2010.
The Department developed a list of proposed regulatory provisions
based on the provisions contained in the HEOA and from advice and
recommendations submitted by individuals and organizations as testimony
to the Department in a series of three public hearings held on--
June 15-16, 2009, at the Community College of Denver in
Denver, Colorado;
June 18-19, 2009, at the University of Arkansas in Little
Rock, Arkansas;
June 22-23, 2009, at the Community College of Philadelphia
in Pennsylvania.
In addition, the Department accepted written comments on possible
regulatory provisions submitted directly to the Department by
interested parties and organizations. A summary of all comments
received orally and in writing is posted as background material in the
docket for this NPRM. Transcripts of the regional meetings can be
accessed at http://www.ed.gov/policy/highered/leg/hea08/index.html.
Staff within the Department also identified issues for discussion
and negotiation.
At its first meeting, Team II reached agreement on its protocols.
The agenda included the issues identified for the Committee's
consideration.
Team II included the following members:
Harrison Wadsworth, representing the International
Education Council.
Yvonne Oberhollenzer and John Hayton (alternate),
Australian Education International North America, representing the
Embassy of Australia, the Embassy of New Zealand, the British Council
and the German Academic Exchange Service.
Judy Stymest, McGill University, and Alexander Leipziger
(alternate), Canadian Embassy, representing the Canadian Association of
Student Financial Aid Administrators.
Warren Ross and Jerry Thornton (alternate), representing
the International University of Nursing and the University of Medicine
and Health Sciences.
Cynthia Holden, American University of the Caribbean, and
James McIntyre (alternate), McIntyre Law Firm, PLLC, representing
American University of the Caribbean.
Nancy Perri, Ross University School of Medicine, and
William Clohan (alternate), DeVry Inc., representing Ross University
School of Medicine.
Steven Rodger, and Patrick Donnellan (alternate)
representing R3 Education Inc.
Ronald Blumenthal and Rebecca Campoverde (alternate)
representing Kaplan, Inc.
Charles Modica, representing St. George's University.
Betsy Mayotte, American Student Assistance, and Jacqueline
Fairbairn (alternate), Great Lakes Higher Education Guaranty
Corporation, representing guaranty agencies.
David Bergeron and Gail McLarnon (alternate), U.S.
Department of Education, representing the Federal Government.
The Committee's protocols provided that the Committee would operate
by consensus, meaning there must be no dissent by any member. Under the
protocols, if the Committee reaches consensus on all issues, the
Department will use the consensus-based language in the proposed
regulations and Committee members and the organizations whom they
represent will refrain from commenting negatively on the package,
except as provided for in the agreed upon protocols.
During the meetings, Team II reviewed and discussed drafts of
proposed regulations. At the final meeting in February 2010, Team II
reached consensus on the proposed regulations in this document.
More information on the work of Team II can be found at http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/negreg-summerfall.html.

Summary of Proposed Changes

These proposed regulations would implement provisions related to
the eligibility of foreign institutions to participate in the Title IV,
HEA programs including--
Establishing submission requirements for compliance audits
and audited financial statements specific to foreign institutions;
Clarifying and revising the definition of a foreign
institution;
Establishing a definition of nonprofit status specific to
foreign institutions;
Establishing a financial responsibility standard for
foreign public institutions that is comparable to the financial
responsibility standard for domestic public institutions;
Permitting a single legal authorization for groups of
foreign institutions under the purview of a single government entity;
Establishing eligibility of training programs at foreign
institutions;
Establishing institutional eligibility criteria specific
to foreign graduate medical schools, foreign veterinary schools, and
foreign nursing schools; and
Revising the maximum certification period for some foreign
institutions.

Significant Proposed Regulations

We group major issues according to subject, with appropriate
sections of the proposed regulations referenced in parentheses. We
discuss other substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory provisions that are technical or otherwise minor in
effect.
Until amended effective July 1, 2010, section 102(a)(1)(C) of the
HEA provided that foreign institutions may participate in the Title IV,
HEA programs ``only for purposes of part B of Title IV.'' Part B of
Title IV contains the statutory requirements for the FFEL Program. With
the enactment of the Health Care and Education Reconciliation Act of
2010 (Pub. L. 111-152) (HCERA) on March 30, 2010, as of July 1, 2010,
there will be no new originations of FFEL Program loans. All new
originations with a first disbursement on or after July 1, 2010, will
be made via the William D. Ford Federal Direct Loan (Direct Loan)
Program, including loans for students attending foreign institutions.
At the time these proposed regulations were negotiated, it was unclear
whether the proposed legislation that would end the FFEL Program would
be enacted. As a result, these proposed regulations reference
participation in the FFEL Program, except as noted. When the Department
publishes final regulations to implement these proposed regulations, it
will correct those references in the regulations resulting from these
proposed regulations to indicate participation in the Direct Loan
Program, rather than the FFEL Program. Any substantive or technical
changes to the Title IV, HEA program regulations

[[Page 42192]]

resulting from the HCERA will be addressed through future rulemaking
efforts. For more information about the transition of foreign
institutions to the Direct Loan Program, contact the Office of Federal
Student Aid's Foreign Schools Team at fsa.foreign.schools@ed.gov or
(202) 377-3168.
Part 600 Institutional Eligibility Under the Higher Education Act
of 1965, as Amended.

Nonprofit Status for Foreign Institutions (Sec. 600.2)

Statute: Section 102(a)(2)(A) of the HEA directs the Secretary to
establish criteria by regulation for the determination that foreign
institutions are comparable to an institution of higher education as
defined in section 101 of the HEA--which specifies that an institution
of higher education must be a public or other nonprofit institution--
except that foreign graduate medical schools, foreign veterinary
schools, and foreign nursing schools may be for-profit. Sections
101(a)(4) and 101(b)(2) of the HEA identify nonprofit institutions as
one type of institution that may be an institution of higher education
and, therefore, may be eligible to apply to participate in the Title
IV, HEA programs.
Current Regulations: Section 600.54 provides that, to participate
in the Title IV, HEA programs, a foreign institution must be a public
or private nonprofit educational institution. Foreign graduate medical
schools, foreign veterinary schools, and foreign nursing schools are
excepted from this requirement by section 102(a)(2)(A) of the HEA.
Section 600.2 defines a nonprofit institution as an institution that--
Is owned and operated by one or more nonprofit
corporations or associations, no part of the net earnings of which
benefits any private shareholder or individual;
Is legally authorized to operate as a nonprofit
organization by each State in which it is physically located; and
Is determined by the U.S. Internal Revenue Service (IRS)
to be an organization to which contributions are tax-deductible in
accordance with section 501(c)(3) of the Internal Revenue Code (26
U.S.C. 501(c)(3)).
Proposed Regulations: Under proposed Sec. 600.2, a new paragraph
(2) of the definition of a nonprofit institution would provide that if
a recognized tax authority of a foreign institution's home country is
recognized by the Secretary for purposes of making determinations of an
institution's nonprofit status for Title IV, HEA purposes, the
Secretary would automatically accept that tax authority's determination
of nonprofit educational status for any institution located in that
country. If a recognized tax authority of the institution's home
country is not recognized by the Secretary for purposes of making
determinations of an institution's nonprofit status for Title IV, HEA
program purposes, a foreign institution would have to demonstrate to
the satisfaction of the Secretary that it is a nonprofit educational
institution. The proposed regulations would also make clear that a
nonprofit foreign institution may not be owned by a for profit entity,
directly or indirectly. A foreign institution that did not meet this
definition of a nonprofit foreign institution would not be eligible to
participate in the Title IV, HEA programs unless it was a medical,
veterinary, or nursing school.
Reasons: As foreign institutions must be nonprofit institutions to
participate in the Title IV, HEA programs, unless they are medical,
veterinary, or nursing schools, the Department believes it is necessary
to delineate in regulations the requirements for demonstrating
nonprofit status for foreign institutions. Some non-Federal negotiators
originally suggested that the Department should always defer to any
determination by a foreign country that an institution is nonprofit.
The Department pointed out that a domestic institution must be
determined by the U.S. IRS to be a nonprofit organization in order to
be eligible as a nonprofit institution for participation in the Title
IV, HEA programs. The Department also noted that certain countries may
not have standards for the determination of nonprofit status that are
comparable to those used in the United States, and may not ensure that
the institution's net earnings do not benefit any private shareholder
or individual. Therefore, to make the proposed regulations as
comparable as possible to those applicable to domestic institutions,
the Department proposed, and the Committee agreed, that a determination
that an institution is nonprofit by an entity in the institution's
foreign country would qualify an institution as nonprofit only if the
determination is made by a recognized tax authority of the country, and
the Secretary has recognized that tax authority as one that can make a
determination using criteria that are similar to those used by the IRS.
In response to non-Federal negotiators pointing out that some countries
may have more than one recognized entity for the purpose of making
determinations of the nonprofit status of its institutions, the
Department made clear during the negotiations that under the language
proposed, the Secretary may recognize more than one tax authority in a
country. Some non-Federal negotiators suggested that the Department
allow a determination of nonprofit status to be made by an entity other
than a recognized tax authority of the country. The Department noted
that, as the proposed language was written, information submitted by
such entities would be taken into account by the Department; however,
this would be done as part of an individual determination of the
eligibility of an institution. The Department believes that the only
entities it should recognize across the board for making determinations
of nonprofit status are those that are responsible for administering
the country's tax laws.

Definition of a Foreign Institution (Sec. Sec. 600.51, 600.52, 600.54,
682.200 and 682.611)

Statute: Section 102(a)(1)(C) of the HEA provides that an
``institution of higher education,'' only for the purposes of part B of
Title IV, includes an institution outside the United States that is
comparable to an institution of higher education as that term is
defined in section 101 of the HEA and is an institution that has been
approved by the Secretary. Section 102(a)(2)(A) of the HEA requires the
Secretary to establish regulatory criteria for the approval of such
institutions and for the determination that they are comparable.
Current Regulations: Subpart E of 34 CFR part 600 (Sec. Sec.
600.51 through 600.57) contains the eligibility requirements that a
foreign institution must meet to participate in the FFEL Program.
Current Sec. 600.51 explains the purpose and scope of subpart E and
provides that a foreign institution is eligible to participate in the
FFEL Program if it is comparable to an eligible institution of higher
education located in the United States and has been approved by the
Secretary. Implementing a statutory provision in section 481(b)(4) of
the HEA, current Sec. 600.51 also provides that a program offered by a
foreign school through any use of a telecommunications or
correspondence course or through a direct assessment program is not an
eligible program.
Current Sec. 600.52 contains the definitions associated with
subpart E and defines foreign institution as an institution that is not
located in a State. State is defined in Sec. 600.2 as a State of the
Union, American Samoa, the Commonwealth of Puerto Rico, the District of
Columbia, Guam, the Virgin Islands, the Commonwealth of the
Northern Mariana Islands, the Republic of the Marshall Islands, the
Federal States of Micronesia, and the Republic of Palau.
Current Sec. 600.54 contains the criteria the Secretary uses to
determine whether a foreign institution is eligible to apply to
participate in the FFEL Program. A public or private nonprofit foreign
institution may apply to participate in the FFEL Program if the
institution--
Admits as regular students only those students with a
secondary school completion credential or its recognized equivalent;
Is legally authorized by an appropriate authority to
provide an eligible program beyond the secondary school level in the
country in which the institution is located; and
Provides eligible programs for which the institution is
legally authorized to award the equivalent of an associate,
baccalaureate, graduate, or professional degree awarded in the United
States; provides an eligible program that is at least a two-academic
year program acceptable for full credit toward the equivalent of a
baccalaureate degree awarded in the United States; or, provides an
eligible program that is equivalent to at least a one-academic year
training program in the United States that leads to a certificate,
degree, or other recognized educational credential and prepares
students for gainful employment in a recognized occupation.
Currently, Sec. Sec. 668.2 and 682.200 do not contain a reference
to the definition of foreign institution in the list of definitions set
forth in 34 CFR part 600.
Lastly, current Sec. 682.611 provides that a foreign school is
required to comply with the provisions of part 682 unless the
regulations or other official Department of Education publications or
documents state otherwise.
Proposed Regulations: The proposed regulations would remove and
reserve Sec. 682.611, remove the definition of foreign school from
Sec. 682.200(b)(1), and add references to Sec. Sec. 668.2(a)(2) and
682.200(a)(2) specifying that the definition of foreign institution is
contained in regulations for Institutional Eligibility under the HEA,
as amended, 34 CFR part 600. These proposed revisions would consolidate
the requirements and definitions related to the eligibility of foreign
institutions to apply for Title IV, HEA program participation in
subpart E of 34 CFR part 600. The proposed regulations would revise
Sec. 600.51(c) to incorporate the provisions of removed Sec. 682.611,
i.e., that a foreign institution must comply with all requirements for
eligible and participating institutions except to the extent those
provisions are inconsistent with the HEA, 34 CFR part 600, or other
regulatory provisions specific to foreign institutions. Proposed Sec.
600.51(c) would also exempt foreign institutions from requirements that
the Secretary identifies through a notice in the Federal Register.
The proposed regulations would amend Sec. 600.52 to include a
detailed definition of foreign institution. Under the definition
proposed, foreign institution would mean, for the purposes of students
who receive Title IV, HEA program aid, an institution that--
Is not located in a State;
Except with respect to clinical training offered at
foreign graduate medical, veterinary, and nursing schools, has no U.S.
locations;
Has no written arrangements, within the meaning of Sec.
668.5, with institutions or organizations located in the U.S. for
students at foreign institutions to take a portion of the program from
institutions located in the U.S.;
Does not permit students to enroll in any course offered
by the foreign institution in the U.S. except for independent research
under very limited circumstances;
Is legally authorized by the education ministry, council,
or equivalent agency of its home country to provide an education
program beyond the secondary level;
Awards degrees, certificates, or other recognized
educational credentials in accordance with Sec. 600.54(d) that are
officially recognized by the institution's home country; and
For any program designed to prepare the student for
employment in a recognized occupation, provides a credential that
satisfies the educational requirements in the institution's home
country for entry into that occupation, including licensure; and
satisfies the educational requirements for entry into that occupation
in the U.S., including licensure.
The proposed definition of foreign institution would also require
that if an educational enterprise enrolls students both within a State
and outside a State, and the number of students who would be eligible
to receive Title IV, HEA program funds attending locations outside a
State is at least twice the number of students enrolled within a State,
the locations outside a State must apply to participate as one or more
foreign institutions and must meet all requirements of the definition
of foreign institution and other requirements of 34 CFR part 600. Under
the proposed regulations, educational enterprise would mean an
enterprise consisting of two or more locations offering all or part of
an educational program that are directly or indirectly under common
control.
The proposed regulations would amend the threshold criteria in
Sec. 600.54 for determining whether a foreign institution is
comparable to a domestic ``institution of higher education'' as that
term is defined in the HEA, and eligible for Title IV, HEA program
participation. Proposed Sec. 600.54(a) states that to be eligible, a
foreign institution that is not a freestanding foreign graduate
medical, veterinary, or nursing school must be a public or private
nonprofit educational institution (i.e., a for-profit foreign
institution may participate only if it is a freestanding foreign
graduate medical, veterinary, or nursing school). Proposed Sec.
600.54(c)(1) would prohibit an eligible foreign institution from
entering into a written arrangement under which an ineligible
institution or organization provides any portion of one or more of the
eligible foreign institution's programs. Written arrangements would not
include affiliation agreements for the provision of clinical training
for foreign graduate medical, veterinary, and nursing schools under
this proposed change. Proposed Sec. 600.54(c)(2) would require that an
additional location of a foreign institution must separately meet the
proposed definition of foreign institution in Sec. 600.52 if it is
located outside of the country in which the main campus is located,
except for clinical locations of foreign graduate medical, veterinary,
and nursing schools, as provided for in Sec. 600.55(h)(1), Sec.
600.56(b), Sec. 600.57(a)(2), Sec. 600.55(h)(3), and except for
locations at which independent research is conducted as part of a
doctoral program as provided for in the definition of foreign
institution in Sec. 600.52. Under proposed Sec. 600.52(c)(2), an
additional location of a foreign institution would also have to meet
separately the definition of foreign institution, even if that location
is within the same country as the main campus, if it is not covered by
the legal authorization of the main campus. Lastly, proposed Sec.
600.54(e) would prohibit any portion of an eligible for-profit foreign
graduate medical or veterinary program from being offered at what would
be an undergraduate level in the U.S. and would deny Title IV, HEA
program eligibility to any joint degree programs offered at for-profit
foreign graduate medical, veterinary, or nursing schools.
Reasons: Proposed Sec. Sec. 600.52 and 600.54, revising and adding
detail to the

[[Page 42194]]

definition of foreign institution, are necessary to ensure that a
foreign institution is comparable to institutions in the United States,
in accordance with section 102(a)(1)(C) of the HEA, before the foreign
institution is allowed to apply for Title IV, HEA program
participation. The Department is concerned that a foreign institution
that is not comparable to a domestic institution, especially in terms
of the quality of its educational programs, may misuse Federal funds to
the detriment of its students who may have to borrow heavily in order
to attend the foreign institution. The proposed regulations also more
fully implement the scheme of the HEA, which distinguishes between
foreign and domestic institutions and includes provisions unique to
each. For example, these regulations would prevent a domestic
institution from claiming to be a foreign institution by virtue of the
fact that it has established an offshore location, thereby avoiding the
requirements applied to domestic institutions such as recognized
accreditation, but that sends its students to the United States for the
majority of the required coursework.
During the first round of negotiated rulemaking, the Federal
negotiator explained the need for a more detailed definition of foreign
institution and sought comments and feedback from the non-Federal
negotiators. Several negotiators urged the Department to define foreign
institution in a way that ensures quality control through high academic
standards and avoids abuse of the Title IV, HEA programs. The non-
Federal negotiators suggested requiring that foreign institutions be
subject to accreditation by accreditors recognized by the Department as
a means of ensuring comparability with domestic institutions. The
Federal negotiator explained that the Department does not recognize
U.S. accreditors for accreditation of institutions outside the United
States. In light of this fact, the non-Federal negotiators suggested a
requirement that foreign institutions be ``legally authorized'' by an
appropriate authority in the country in which the institution is
located, such as a Ministry of Education or other governmental agency.
Other non-Federal negotiators also urged the Department to be flexible
in this area because such authority could reside in different branches
of government depending on the country. Recognizing that there might be
pressure on some foreign governments to set minimal standards because
educational institutions are an important part of their economy,
several non-Federal negotiators suggested that the Department require
foreign countries to recognize the degrees and licenses offered by a
foreign institution.
In the second round of negotiations, the Department responded with
draft language that addressed many of the non-Federal negotiators'
suggestions from the first round of discussion. However, the
Department's inclusion of provisions prohibiting foreign institutions
from entering into written arrangements with institutions located in
the United States and preventing foreign institution students from
engaging in courses, research, work, and other pursuits within the
United States drew objections from the non-Federal negotiators. The
Federal negotiator explained that these provisions addressed abuses
witnessed by the Department whereby an institution sets up an offshore
campus to claim foreign institution status and thus avoids domestic
requirements even though the institution is, for all intents and
purposes, a domestic institution. The non-Federal negotiators felt the
language prohibiting students from engaging in pursuits within the U.S.
was too broad and urged the Department to make exceptions for research
conducted in the United States by PhD students. The non-Federal
negotiators also requested that the Department clarify what it meant by
``written arrangements'' in the provision that would prohibit foreign
institutions from having written arrangements with U.S. institutions or
organizations, noting that many foreign institutions have multiple
types of written arrangements with institutions in the U.S.
Based on comments received from the non-Federal negotiators at the
second round of negotiated rulemaking, the Department returned to the
last round with language that added a cross-reference to Sec. 668.5 in
draft paragraph (1)(iii) of the definition of foreign institution to
clarify the meaning of written arrangements. The proposed language also
added an exception in draft paragraph (1)(iv) of the definition of
foreign institution for independent research done under certain
circumstances during the dissertation phase of a doctoral program from
the general prohibition on enrolling students in courses offered by a
foreign institution in the United States. In draft paragraph (2) of the
definition of foreign institution, the Department sought to further
distinguish between foreign and domestic institutions by prohibiting
foreign locations of an educational enterprise from being considered
additional locations of a domestic location of the educational
enterprise if the enterprise has at least twice as many students
enrolled in foreign locations as those enrolled in domestic locations.
This provision would prevent a predominantly foreign educational
enterprise from establishing a minor presence within the United States
for the purpose of circumventing the statutory provision limiting
foreign institution participation to the Direct Loan program (or,
before July 1, 2010, to the FFEL program), so as to provide other Title
IV grant, loan, and work-study funds to students at what are really
foreign institutions. In addition, in response to requests by non-
Federal negotiators, the Department added clarity to the paragraph by
describing an ``educational enterprise'' as an entity that consists of
two or more locations offering all or part of an educational program
that are directly or indirectly under common ownership. Locations are
considered to be ``indirectly'' under common ownership if, at any
level, the locations are owned and controlled by the same parties, or
related parties, within the meaning of Sec. 600.31. In draft Sec.
600.54(c)(1), the Department clarified that written arrangements do not
include affiliation agreements for the provision of clinical training.
The non-Federal negotiators were comfortable with the majority of
the Department's proposed language but several non-Federal negotiators
continued to raise concerns about the proposed language prohibiting
U.S. locations of foreign institutions and written arrangements with
institutions located in the United States. The Federal negotiator
stated that foreign institutions are free to establish U.S. locations
and have written arrangements with institutions located in the United
States, but that such locations and institutions would need to be
separately certified and meet the requirements applicable to domestic
institutions in order for U.S. students attending them to receive Title
IV, HEA program funds. In this regard, the Department does not want a
foreign institution to send its U.S. students to a U.S. location of a
foreign institution, or to a U.S. institution with which it has an
agreement for their training, because students enrolled in a foreign
institution are only eligible for Direct Loan program (or, before July
1, 2010, FFEL program) loans. Instead the Department wants U.S.
students attending postsecondary institutions in the United States to
be eligible for the full range of Title IV, HEA program funds available
to domestic institutions. The Federal negotiator noted that it would be
acceptable for a U.S. student to transfer officially from a foreign
institution to an

[[Page 42195]]

institution in the U.S. that would be separately certified as a
domestic institution. The non-Federal negotiators asked the Department
to clarify that the proposed definition of foreign institution would
apply only for the purposes of students who receive Title IV, HEA
program funds. For example, a foreign institution would not be
prohibited from having U.S. locations, but the locations would not be
recognized as part of the institution for Title IV purposes, so no
student attending the location, or enrolled in a program designed to be
offered there in whole or in part, would be eligible to receive Title
IV, HEA program funds. Similarly, a foreign institution may also
maintain agreements with a U.S. institution or organization so that
students of the foreign institution may continue to engage in exchange
opportunities offered by U.S. institutions, but the agreement would not
be recognized for Title IV, HEA purposes, so no student attending the
U.S. institution, or enrolled in a program designed to be offered there
in whole or in part, would be eligible to receive Title IV, HEA program
funds. The Department noted that the Title IV, HEA program regulations
are always applicable for Title IV, HEA program purposes only, but
agreed to add the clarification.

Certification of Foreign Institutions (Sec. Sec. 600.52 and 668.13)

Statute: Section 102(a)(5) of the HEA requires the Secretary to
certify an institution's qualifications as an institution of higher
education in accordance with subpart 3, part H of Title IV. Under
section 498(g)(1) of the HEA, the Secretary is authorized to certify an
institution's eligibility for purposes of participating in the Title
IV, HEA programs for a period of up to six years.
Current Regulations: Section 600.52 of the Institutional
Eligibility regulations defines foreign graduate medical school as a
foreign institution that is listed in the most current edition of the
World Directory of Medical Schools. Foreign nursing school and foreign
veterinary school are not currently defined in Sec. 600.52.
Section 668.13(b)(1) of the General Provisions regulations
specifies that an institution's period of participation expires six
years after the date of certification, except that the Secretary may
specify a shorter period.
Proposed Regulations: The proposed regulations would modify the
definition of foreign graduate medical school and add definitions for
the terms foreign nursing school and foreign veterinary school in Sec.
600.52. In addition, the proposed regulations would modify the
regulations governing certification procedures in Sec. 668.13.
The proposed definition of foreign graduate medical school in Sec.
600.52 would be modified by removing the reference to the World
Directory of Medical Schools (see the discussion under Foreign Graduate
Medical Schools below) and replacing it with language specifying that a
foreign graduate medical school is a foreign institution or component
of a foreign institution that has, as its sole mission, providing an
educational program that leads to a degree of medical doctor, doctor of
osteopathy, or its equivalent. The proposed definition would clarify
that references to a foreign graduate medical school as
``freestanding'' pertain solely to a school that qualifies by itself as
a foreign institution, and not to a school that is a component of a
larger university that qualifies as a foreign institution. Similar
language is included in the proposed definitions for the terms foreign
nursing school and foreign veterinary school.
The proposed regulations would amend Sec. 668.13(b)(1) to specify
that the period of participation for a private, for-profit foreign
institution expires three years after the date the institution is
certified by the Secretary, rather than the current six years.
Reasons: The National Committee on Foreign Medical Education and
Accreditation (NCFMEA) recommended that a foreign graduate medical
school that is a component of a larger foreign institution be certified
as a separate institution of higher education from the larger
institution (Recommendation 14(a)). The Department initially proposed
implementing this recommendation and applying it to foreign nursing and
veterinary schools as well. Under that proposal, a graduate medical,
nursing, or veterinary school that is part of a larger institution
would be given its own OPEID number. Cohort default rates for the
graduate medical, nursing, or veterinary school would be calculated
independently of the cohort default rate for the larger foreign
institution.
After discussions with the non-Federal negotiators regarding the
administrative burdens that separate certification of non-freestanding
graduate medical, veterinary, and nursing schools would entail, the
Department decided to withdraw this proposal. Instead, the Department
will track such graduate medical, veterinary, and nursing schools
separately from the larger institution. To facilitate this, the
Department proposed regulations that clarify the distinction between
``freestanding'' graduate medical, veterinary, and nursing schools and
graduate medical, veterinary, and nursing schools that are components
of a larger foreign institution.
The NCFMEA also recommended that all foreign graduate medical
schools be certified for a period of no more than three years
(Recommendation 14(b)). The Department initially proposed reducing the
certification period for all foreign institutions from six years to
three years to provide the Department with more oversight over foreign
institutions. Non-Federal negotiators noted that the Department's
proposal to decrease the certification period would be administratively
burdensome for institutions. Some non-Federal negotiators felt that the
increased administrative burden might lead foreign institutions that
enroll small numbers of Title IV borrowers to reconsider participating
in the Title IV, HEA programs. Non-Federal negotiators also noted that
for-profit foreign institutions might have difficulty raising capital
based on three-year certifications rather than six-year certifications.
Non-Federal negotiators also contended that the reduction in the
certification period would not provide much benefit to the Department.
They felt that the relevant information for an institution would not be
likely to change significantly in three years. The non-Federal
negotiators also pointed out that this change would increase the
workload for the Department staff who review and approve institutional
eligibility applications for foreign institutions.
The Department continues to believe that reducing the certification
period will give the Department better oversight over foreign
institutions, particularly over institutions that enroll large numbers
of Title IV borrowers. However, the Department acknowledges that
decreasing the certification period from six to three years would be
unnecessary for certain types of institutions. Therefore, the
Department revised its proposal by limiting the three-year
certification period to private, for-profit medical, veterinary, and
nursing schools. These institutions, among all participating foreign
institutions, continue to receive by far the largest amounts of Title
IV, HEA program funds. Under the revised proposal, public and nonprofit
institutions would continue to be recertified every six years.

[[Page 42196]]

Single Legal Authorization for Groups of Foreign Institutions (Sec.
600.54)

Statute: Section 101(a)(2) of the HEA requires a domestic
institution of higher education to be legally authorized by the State
in which it is located to provide a program of postsecondary education.
Section 102(a)(2)(A) of the HEA requires the Secretary, through
regulation, to develop eligibility criteria for foreign institutions of
higher education that are comparable to the eligibility criteria for
U.S. institutions of higher education. Section 498(a) and (b) of the
HEA require the Secretary to determine whether an institution is
legally authorized and to prepare and prescribe an application form for
purposes of determining that the requirements of eligibility,
accreditation, financial responsibility, and administrative capability
are met.
Current Regulations: Section 600.54(b) of the current regulations
requires a foreign institution to be legally authorized by an
appropriate authority to provide postsecondary education in the country
where the institution is located.
Proposed Regulations: Proposed Sec. 600.54(f) would provide three
different methods for a foreign institution to prove that it is legally
authorized to provide postsecondary education in the country where the
institution is located. The documentation from a foreign country's
education ministry, council, or equivalent agency may either be--
A single legal authorization that covers all eligible
foreign institutions in the country;
A single legal authorization that covers all eligible
foreign institutions in a jurisdiction within the country; or
Separate legal authorizations for each eligible foreign
institution in the country.
Reasons: To ease administrative burden for foreign institutions,
the Department sought to determine if compliance with any of the
foreign institution eligibility criteria could be demonstrated at a
nationwide level, for all eligible institutions within a country,
rather than at the individual institution level. After discussions with
the non-Federal negotiators and our own internal review of the Title IV
institutional eligibility criteria, the Department determined that the
requirement for proof of legal authorization to provide postsecondary
education could be provided this way.
Non-Federal negotiators were generally supportive of the
Department's proposal. However, they did raise some concerns. Some non-
Federal negotiators felt that institutions should not have to rely on a
national government to develop a nationwide list of institutions
legally authorized to provide postsecondary education in the country.
They contended that some national governments might not have the
resources to develop and maintain such a list. The non-Federal
negotiators argued that for institutions in some countries, it might be
cumbersome and time-consuming to obtain such a list from the national
government. This would have the effect of slowing down the eligibility
certification processes for some foreign institutions. These non-
Federal negotiators recommended that institutions retain the option of
providing the Department with their own individual legal
authorizations, rather than relying on a nationwide list.
Other non-Federal negotiators believed that it was too constricting
to limit the authority for developing the list of institutions to an
agency of the national government. They noted that in some countries,
such as Canada, legal authorization to provide postsecondary education
is provided by the provincial governments, not by the national
government. These non-Federal negotiators requested that the Department
make provision for legal authorizations from government entities at a
provincial level, not at the national level.
The Department agreed with these recommendations. In addition to
allowing proof of legal authorization to be provided on a nationwide
basis, the proposed regulations allow for proof of legal authorization
to be provided for all eligible institutions in a jurisdiction within
the country, and continue to allow proof of legal authorization to be
provided separately for each eligible institution in a country.

Eligibility of Training Programs at Foreign Institutions (Sec. 600.54)

Statute: Section 101(b)(1) of the HEA provides, in part, that one
type of educational program that a Title IV ``institution of higher
education'' may provide to be eligible to apply to participate in the
Title IV, HEA programs is a training program of at least one year that
prepares students for gainful employment in a recognized occupation.
Section 102(a)(2)(A) provides for participation in the Title IV, HEA
programs by entities that are comparable to such institutions under
regulations prescribed by the Secretary.
Current Regulations: Section 600.54 provides that, in order to be
eligible to apply to participate in the Title IV, HEA programs, a
foreign institution must provide an eligible educational program that
leads to a degree that is equivalent to a U.S. degree, or be at least a
two-academic-year program acceptable for full credit toward the
equivalent of a U.S. baccalaureate degree, or be equivalent to at least
a one-academic-year training program that leads to a certificate,
degree, or other recognized educational credential and prepares
students for gainful employment in a recognized occupation.
Section 668.3 defines an academic year as--
For a program offered in credit hours, a minimum of 30
weeks of instructional time and, for an undergraduate program, an
amount of instructional time whereby a full-time student is expected to
complete at least 24 semester or trimester credit hours or 36 quarter
credit hours; or
For a program offered in clock hours, a minimum of 26
weeks of instructional time and, for an undergraduate program, an
amount of instructional time whereby a full-time student is expected to
complete at least 900 clock hours.
Proposed Regulations: Under the proposed regulations, a foreign
institution would have to demonstrate to the satisfaction of the
Secretary (who would make program-by-program determinations of
comparability) that the amount of academic work required by a program
it seeks to qualify as eligible is at least a one-academic-year
training program that is equivalent to--
For a program offered in credit hours, a minimum of 30
weeks of instructional time and, for an undergraduate program, an
amount of instructional time whereby a full-time student is expected to
complete at least 24 semester or trimester credit hours or 36 quarter
credit hours; or
For a program offered in clock hours, a minimum of 26
weeks of instructional time and, for an undergraduate program, an
amount of instructional time whereby a full-time student is expected to
complete at least 900 clock hours.
Reasons: The Department believes the proposed regulations are
necessary because many foreign institutions use educational
measurements other than conventional U.S. semester, trimester, quarter
credits and clock-hours. As the definition of an academic year--the
program length measurement used here--specifically references these
U.S. measurements, it is necessary to make some sort of comparability
determination in order to determine the eligibility of these programs
at foreign institutions, and the eligibility of those foreign
institutions that do not offer any other type of Title IV, HEA eligible
program. The non-Federal negotiators

[[Page 42197]]

provided the Department with information regarding the definition of
non-degree programs by different countries, units of measurement for
programs in other countries, and evaluation and comparability
determinations made by private entities. The information provided
consistently indicates that the assignment of credits or other measures
of academic work by foreign institutions vary greatly. As a result,
under the proposed regulations, the Secretary would make determinations
of comparability on a program-by-program basis, based on information
provided by a foreign institution to demonstrate that the amount of
academic work required by a program it seeks to qualify as eligible is
comparable to at least a one-academic-year training program that is
equivalent to the academic work required for eligibility of these
programs at domestic institutions.
Two of the issues under negotiation by the Team I negotiating
committee (Program Integrity Issues)--the definition of what it means
to ``provide gainful employment in a recognized occupation'' and the
definition of a credit hour for Title IV, HEA program purposes--could
impact the eligibility of all programs, offered at foreign and domestic
institutions, that are eligible because they are at least one academic
year in length and prepare students for gainful employment in a
recognized occupation. These Team I issues are distinct from the issue
negotiated here by Team II--i.e., the translation of credits or other
measures of academic work by foreign institutions for purposes of
determining program length (a measure of both weeks and credit hours).

Foreign Graduate Medical Schools (Sec. Sec. 600.20, 600.21, 600.52,
600.55)

Statute: Section 102(a)(2)(A) of the HEA provides that the
Secretary shall establish criteria by regulation for the approval of
institutions outside the United States and for the determination that
such institutions are comparable to an ``institution of higher
education'' as defined in section 101 of the HEA, except that a foreign
graduate medical, veterinary or nursing school may be for-profit. That
section also provides that, except for foreign graduate medical schools
that had a clinical training program that was approved by a State as of
January 1, 1992, at least 60 percent of students and graduates must not
be persons described in section 484(a)(5) of the HEA in the year
preceding the year for which students are seeking Title IV, HEA program
loans, and that at least 60 percent of students and graduates taking
the United States Medical Licensing Examination (USMLE) administered by
the Educational Commission for Foreign Medical Graduates (ECFMG) must
have received a passing score in that preceding year.
Effective July 1, 2010, the HEOA amended sections 102(a)(2)(A) and
(B) of the HEA to (1) increase the pass rate threshold for the USMLE
from 60 percent to 75 percent; (2) allow a foreign graduate medical
school that was eligible based on having a clinical training program
approved by a State as of July 1, 1992, to continue to be eligible as
long as it has continuously operated a clinical training program in at
least one State that approves the program; and (3) allow for the
promulgation, through regulations, of new eligibility criteria for
foreign graduate medical schools that have a clinical training program
approved by a State prior to January 1, 2008, but that would not meet
the otherwise--applicable requirement that at least 60 percent of their
students and graduates not be persons described in section 484(a)(5) of
the HEA in the year preceding the year for which students are seeking
Title IV, HEA program loans. Section 102(a)(2)(B)(iii)(IV)(aa) of the
HEA provides that such new eligibility criteria must be based on the
recommendations contained in a report to be prepared by August 14,
2009, by the NCFMEA. The NCFMEA is a panel of medical experts that
evaluates the medical school accrediting agency standards used in the
foreign country where medical education is provided to determine
comparability to the standards of accreditation applied to medical
schools in the United States. The statute required the NCFMEA's report
to address: entrance requirements; retention and graduation rates;
successful placement of students in U.S. medical residency programs;
passage rate of students on the USMLE; the assessment of program
quality by State medical boards; the extent to which graduates would be
unable to practice medicine in one or more States, based on the
judgment of a State medical board; any areas recommended by the
Comptroller General (i.e., head of the Government Accountability Office
(GAO)) under section 1101 of the HEOA; and any additional areas the
Secretary may require. The statute provides that the regulations must,
at a minimum, require a USMLE pass rate of at least 75 percent.
The HEOA also provides that the Department may issue an NPRM
addressing the new eligibility criteria for foreign graduate medical
schools no earlier than 180 days after the submission of the report,
and may issue final regulations no earlier than one year after the
issuance of the NPRM.
Current Regulations: Neither Sec. 600.20, which addresses the
application procedures for establishing, reestablishing, maintaining,
or expanding institutional eligibility and certification, nor Sec.
600.21, which addresses when and how an institution must update
application information, currently include any provisions specific to
foreign graduate medical schools. Section 600.52 defines a foreign
graduate medical school as a foreign institution that qualifies to be
listed in, and is listed as a medical school in, the most current
edition of the World Directory of Medical Schools published by the
World Health Organization (WHO). The regulations do not currently
include a definition of clinical training, the NCFMEA, or a post-
baccalaureate/equivalent medical program. Section 600.55(a)(5) contains
the additional criteria for determining whether a foreign graduate
medical school is eligible to apply to participate in the Title IV, HEA
programs. Currently, a foreign graduate medical school generally must,
in addition to satisfying the criteria in Sec. 600.54 for determining
a foreign institution's eligibility (except the criterion that the
institution be public or private nonprofit), satisfy all of the
following criteria:
Provide, and require its students to complete a program of
clinical and classroom medical instruction of not less than 32 months
that is supervised closely by members of the school's faculty and that
is provided either (1) Outside the United States, in facilities
adequately equipped and staffed to afford students comprehensive
clinical and classroom medical instruction; or (2) In the United
States, through a training program for foreign medical students that
has been approved by all medical licensing boards and evaluating bodies
whose views are considered relevant by the Secretary.
Have graduated classes during each of the two twelve-month
periods immediately preceding the date the Secretary receives the
school's request for an eligibility determination.
Employ only those faculty members whose academic
credentials are the equivalent of credentials required of faculty
members teaching the same or similar courses at medical schools in the
United States;
Be approved by an accrediting body (1) that is legally
authorized to evaluate the quality of graduate medical school
educational programs and facilities in the country where the school is
located; and (2) whose standards of accreditation

[[Page 42198]]

of graduate medical schools have been evaluated by the advisory panel
of medical experts established by the Secretary and have been
determined to be comparable to standards of accreditation applied to
medical schools in the United States.
In addition, current regulations provide that foreign graduate
medical schools that do not have a clinical training program that has
been continuously approved by a State since January 1, 1992, must--
During the academic year preceding the year for which any
of the school's students seeks a FFEL program loan, have at least 60
percent of those enrolled as full-time regular students in the school
and at least 60 percent of the school's most recent graduating class be
persons who did not meet the citizenship and residency criteria
contained in section 484(a)(5) of the HEA, 20 U.S.C. 1091(a)(5); and
For a foreign graduate medical school outside of Canada,
have at least 60 percent of the school's students and graduates who
took any step of the USMLE administered by the ECFMG (including the
ECFMG English test) in the year preceding the year for which any of the
school's students seeks a FFEL program loan to have received passing
scores on the exams. In performing the calculation, a foreign graduate
medical school must count as a graduate each person who graduated from
the school during the three years preceding the year for which the
calculation is performed.
Proposed Regulations: Location of a graduate medical education
program, affiliation agreements, and application and notification
procedures for foreign graduate medical schools
Section 600.55(h)(2) of the proposed regulations would provide that
no portion of the medical education program offered to U.S. students by
a foreign graduate medical school, other than the clinical training
portion of the program, would be allowed to be located outside of the
country in which the main campus of the school is located.
For clinical training sites located outside the United States,
proposed Sec. 600.55(h)(1) would require that, with two exceptions,
all portions of the medical education program offered to U.S. students
must be located in a country whose medical school accrediting standards
are comparable to standards used in the United States, as determined by
the NCFMEA. Under proposed Sec. 600.55(h)(3), with the same two
exceptions, if any portion of the clinical training portion of the
educational program is located in an approved comparable foreign
country other than the country in which the main campus is located, the
institution's medical accrediting agency must have conducted an on-site
evaluation and specifically approved the clinical training sites in
order for students attending the site to be eligible to borrow Title
IV, HEA program funds. Furthermore, clinical instruction offered at a
site in a foreign NCFMEA-approved country must be offered in
conjunction with medical educational programs offered to students
enrolled in accredited medical schools located in that approved foreign
country. The two exceptions are that these criteria would not have to
be met if the clinical training location is included in the
accreditation of a medical program accredited by the Liaison Committee
on Medical Education (LCME), or if no individual student takes more
than two electives at the clinical training location and the combined
length of the electives does not exceed eight weeks.
Proposed Sec. 600.55(e)(1) would require a foreign graduate
medical school to have: (1) A formal affiliation agreement with any
hospital or clinic at which all or a portion of the school's core
clinical training or required clinical rotations are provided; and (2)
either a formal affiliation agreement or other written arrangements
with any hospital or clinic at which all or a portion of its clinical
rotations that are not required are provided, except for those
locations that are not used regularly, but instead are chosen by
individual students who take no more than two electives at the location
for no more than a combined total of eight weeks.
The proposed regulations would require these affiliation agreements
or other written arrangements to state how the following will be
addressed at each site: (1) Maintenance of the school's standards; (2)
appointment of faculty to the medical school staff; (3) design of the
curriculum; (4) supervision of students; (5) provision of liability
insurance; and (6) evaluation of student performance.
Proposed Sec. 600.20(a)(3)(iii) and Sec. 600.20(b)(3)(iii) would
require a foreign graduate medical school (i.e., a freestanding foreign
graduate medical school or a foreign institution that includes a
foreign graduate medical school) to provide copies of the affiliation
agreements with hospitals and clinics that it is required to have under
proposed Sec. 600.55(e)(2) as a part of any application for initial
certification or recertification to participate in the Title IV, HEA
programs.
Proposed Sec. 600.20(a)(3)(i)(A) and Sec. 600.20(b)(3)(i)(A)
would provide that, for initial certification or for recertification, a
foreign graduate medical school (i.e., a freestanding foreign graduate
medical school or a foreign institution that includes a foreign
graduate medical school) would be required to list on the application
to participate all educational sites and where they are located, except
for those locations that are not used regularly, but instead are chosen
by individual students who take no more than two electives at the
location for no more than a combined total of eight weeks.
In Sec. 600.52, the proposed regulations would add a definition of
clinical training. Clinical training would be defined as the portion of
a graduate medical education program that counts as a clinical
clerkship for purposes of medical licensure. Proposed Sec. Sec.
600.20(a)(3)(i)(B) and (b)(3)(i)(B) would require freestanding foreign
graduate medical schools, and foreign institutions that include a
foreign graduate medical school, to identify, for each clinical site
reported in the certification or recertification application as
required under Sec. Sec. 600.20(a)(3)(i)(A) and (b)(3)(i)(A), the type
of clinical training (core, required clinical rotation, not required
clinical rotation) offered at that site.
Proposed Sec. 600.20(c)(5) would require a foreign graduate
medical school (i.e., a freestanding foreign graduate medical school or
a foreign institution that includes a foreign graduate medical school)
that adds a location that offers all or a portion of the school's core
clinical training or required clinical rotations to apply to the
Secretary and wait for approval if it wishes to provide Title IV, HEA
program funds to the students at that location, except for those
locations that are included in the accreditation of a medical program
accredited by the LCME. If a foreign graduate medical school (i.e., a
freestanding foreign graduate medical school or a foreign institution
that includes a foreign graduate medical school) adds a location that
offers all or a portion of the school's clinical rotations that are not
required, proposed Sec. 600.21(a)(10) would require the school to
notify the Secretary no later than 10 days after the location is added,
except for those locations that are included in the accreditation of a
medical program accredited by the LCME, or that are not used regularly,
but instead are chosen by individual students who take no more than two
electives at the location for no more than a combined total of eight
weeks.

[[Page 42199]]

In addition, proposed Sec. 600.20(a)(3)(ii) and Sec.
600.20(b)(3)(ii) would require that, for initial certification or for
recertification, a foreign graduate medical school (i.e., a
freestanding foreign graduate medical school or a foreign institution
that includes a foreign graduate medical school) indicate whether it
offers (1) only post-baccalaureate/equivalent medical programs; (2)
other types of programs that lead to employment as a doctor of
osteopathic medicine or doctor of medicine; or (3) both. Proposed Sec.
600.52 would define a post-baccalaureate/equivalent medical program as
a program that consists solely of courses and training leading to
employment as a doctor of medicine or doctor of osteopathic medicine,
and is offered by a foreign graduate medical school that requires, as a
condition of admission, that its students have already completed their
non-medical undergraduate studies.

General

Proposed Sec. 600.52 would replace the definition of a foreign
graduate medical school and clarify that a foreign graduate medical
school can be free-standing or a component of an eligible foreign
institution.
Proposed Sec. 600.55(a)(1) would continue to provide that, in
addition to satisfying the general criteria for determining a foreign
institution's eligibility (except the criterion that the institution be
public or private nonprofit), a foreign graduate medical school would
have to satisfy all applicable criteria in this section, except that
the proposed regulations would clarify that the general criteria that
must be satisfied are all applicable criteria in part 600, rather than
just Sec. 600.55.
Proposed Sec. 600.55(a)(2) would require a foreign graduate
medical school to provide, and require its students to complete, a
program of clinical training and classroom medical instruction of not
less than 32 months, that is supervised closely by members of the
school's faculty, and that is both (1) provided in facilities
adequately equipped and staffed to afford students comprehensive
clinical and classroom medical instruction; and (2) approved by all
medical licensing boards and evaluating bodies whose views are
considered relevant by the Secretary, regardless of whether it is
located outside or inside the United States.
In addition, the proposed regulations would make clear that a
foreign graduate medical school may offer, as part of its clinical
training, no more than two electives consisting of a combined total of
no more than eight weeks per student at a site located in a foreign
country other than the country in which the main campus is located or
in the United States, unless that location is included in the
accreditation of a medical program that is accredited by the LCME.
Proposed Sec. 600.55(a)(3) would require that a foreign graduate
medical school appoint, rather than employ, only those faculty members
whose academic credentials are the equivalent of credentials required
of faculty members teaching the same or similar courses at medical
schools in the United States.
Finally, proposed Sec. 600.55(a)(4) would continue to require that
a foreign graduate medical school have graduated classes during each of
the two twelve-month periods immediately preceding the date the
Secretary receives the school's request for an eligibility
determination.

Accreditation

The proposed regulations would make no substantive changes to the
accreditation requirements for foreign graduate medical schools.

Admission Criteria and Collection and Submission of Data

Section 668.55(c) would require a foreign graduate medical school
with a post-baccalaureate/equivalent medical program to require
students accepted for admission who are U.S. citizens, nationals, or
permanent residents to have taken the Medical College Admission Test
(MCAT) and to have reported their scores to the school. In addition,
Sec. 600.55(c) would require a foreign graduate medical school to
determine the consent requirements for and require the necessary
consents of all students accepted for admission who are U.S. citizens,
nationals, or eligible permanent residents to enable the school to
comply with the collection and submission requirements in proposed
Sec. 600.55(d) for MCAT scores, residency placement, and USMLE scores.
Proposed Sec. 600.55(d) would require a foreign graduate medical
school to obtain, at its own expense, and by September 30 of each year
submit to its accrediting authority: (1) MCAT scores for all students
who are U.S. citizens, nationals, or eligible permanent residents
admitted during the preceding award year and the number of times each
student took the exam; and (2) the percentage of students who are U.S.
citizens, nationals, or eligible permanent residents graduating during
the preceding award year who are placed in an accredited U.S. medical
residency. A school would have to submit the data on MCAT scores and
placement in a U.S. residency program to the Secretary only upon
request. In addition, proposed Sec. 600.55(d) would require a foreign
graduate medical school to obtain, at its own expense and by September
30 of each year submit to the Secretary, unless the Secretary notifies
schools that it will receive the information directly from the ECFMG,
or other responsible third parties, USMLE scores earned during the
preceding award year by at least each student who is a U.S. citizen,
national, or eligible permanent resident, and each graduate who is a
U.S. citizen, national, or eligible permanent resident who graduated
during the three preceding years, and the date each student took each
test, including any failed tests. The USMLE scores submitted would have
to be disaggregated by step/test for Step 1, which assesses knowledge
and application of basic science concepts; Step 2-Clinical Skills (Step
2-CS), which assesses knowledge of clinical science principles; and
Step 2-Clinical Knowledge (Step 2-CK), which tests a student's ability
to examine and interact with patients and colleagues, and by attempt. A
school would not be required to submit data on the USMLE Step 3, which
provides a final assessment of a physician's ability to assume
independent delivery of general medical care. All foreign graduate
medical schools would be required to submit these data, even those that
are not required to meet the 60 percent/75 percent USMLE pass rate
requirement.

Notification to Accrediting Body

Proposed Sec. 600.55(e)(2) would require a foreign graduate
medical school to notify its accrediting body within one year of any
material changes in (1) the educational programs, including changes in
clinical training programs; and (2) the overseeing bodies in the formal
affiliation agreements with hospitals and clinics.

Citizenship and USMLE Pass Rate Percentages

Proposed Sec. 600.55(f)(1)(i)(B) would allow a foreign graduate
medical school to be exempt from the existing citizenship requirement
(in proposed Sec. 600.55(f)(1)(i)(A)) that at least 60 percent of the
school's students and recent graduates not be U.S. citizens, nationals,
or eligible permanent residents if it had a clinical training program
approved by a State as of January 1, 2008, and continues to operate a
clinical training program in at least one State that approves the
program. In addition, proposed Sec. 600.55(f)(2)(ii) would allow a
foreign

[[Page 42200]]

graduate medical school that was eligible to participate in the Title
IV, HEA programs and exempt from the USMLE pass rate requirement based
on having a clinical training program approved by a State as of January
1, 1992, to continue to be eligible and exempt from the USMLE pass rate
requirement as long as it continues to operate a clinical training
program in at least one State that approves the program. Proposed Sec.
600.55(f)(1)(ii) would make the following changes to the USMLE pass
rate requirement:
Increase the USMLE pass rate threshold from 60 percent to
75 percent (Sec. 600.55(f)(1)(ii)).
Limit the pass rate requirement to Step 1, Step 2-CS, and
Step 2-CK, excluding Step 3.
Require a foreign graduate medical school to have at least
a 75 percent pass rate on each step/test of the USMLE (limited to Step
1, Step 2-CS, and Step 2-CK), rather than a combined pass rate for all
steps/tests.
Require foreign graduate medical schools to include in the
calculation only U.S. citizens, nationals, or eligible permanent
residents, rather than all students taking the USMLE.
Require foreign graduate medical schools to include only
first time test takers in the calculation.
For example, the award year 2011-2012 pass rate for the USMLE-Step
1 would be calculated as follows:
Those from the denominator who passed Step 1.
All U.S. citizens, nationals, and eligible permanent residents who
are students during award year 2010-2011, or who graduated in award
year 2008-2009, 2009-2010, or 2010-2011, and took Step 1 of the exam
for the first time in award year 2010-2011.
Under proposed Sec. 600.55(f)(4), if the result of any step/test
pass rate would be based on fewer than eight students, a single pass
rate would be determined for the school based on the performance of
U.S. citizens, nationals, and eligible permanent residents on Step 1,
Step 2-CS and Step 2-CK combined. If that combined pass rate would be
based on fewer than eight step/test results, the school would be deemed
to have no pass rate for that year, and the results for the year would
be combined with each subsequent year until a pass rate based on at
least eight step/test results could be derived.

Other Criteria

Proposed Sec. 600.55(g)(1) would require a foreign graduate
medical school to apply existing Sec. 668.16(e)(2)(ii)(B), (C), and
(D) for establishing a quantitative satisfactory academic progress
policy and require that a student complete his or her educational
program within 150 percent of the published length of the educational
program. In addition, proposed Sec. 600.55(g)(2) would require a
foreign graduate medical school to document the educational remediation
it provides to assist students in making satisfactory academic
progress. Finally, proposed Sec. 600.55(g)(3) would require a foreign
graduate medical school to publish all the languages in which
instruction is offered.
Reasons: As required by statute, the recommendations of the 2009
Report to the U.S. Congress by the National Committee on Foreign
Medical Education and Accreditation Recommending Institutional
Eligibility Criteria for Participation by Certain Foreign Medical
Schools in the Federal Family Education Loan Program (NCFMEA report)
that could be implemented through regulations were taken into
consideration in the development of these proposed regulations. The
report is available at http://www2.ed.gov/about/bdscomm/list/ncfmea-
dir/reporttocongress2009.pdf. The Department determined that the
following recommendations made by the NCFMEA could be addressed through
regulatory change: 1(a), 1(b), 3, 4(a), 4(b), 4(c), 9(a), 9(b), 10,
12(a), 12(b), 14(a) and 14(b). The Committee's consideration of these
recommendations is discussed below in relation to the areas of the
proposed regulations to which they pertain, except for Recommendations
14(a) and 14(b), which are discussed under Certification of Foreign
Institutions (Sec. Sec. 600.52, and 668.13) above.
Although the HEOA specified that the NCFMEA was to take into
account in the development of their recommendations the results of the
GAO report related to foreign graduate medical schools, the HEOA
specified a later deadline for the issuance of the GAO report than for
the NCFMEA recommendations. As a result, the GAO report was not
completed in time for the NCFMEA to take it into account. The GAO
report was published June 2010. The Department will take the GAO report
into consideration as the rulemaking process continues. Although the
statute directed the NCFMEA to make recommendations for a specific
group of schools, the NCFMEA stated on page seven of its report, ``It
also suggests the recommendations contained within the report be
applied to all foreign graduate medical schools participating in the
FFEL program. The NCFMEA does not believe that two sets of criteria
should be applied, given the millions of dollars in Federal student
loans disbursed annually to foreign graduate medical schools that are
already participating in the FFEL program. If performance levels are
set to ensure quality, they should apply to all.'' The Department in
general agrees with this recommendation; thus, these proposed
regulations for foreign graduate medical schools would apply to all
foreign graduate medical schools, except where noted. Some non-Federal
negotiators believed the NCFMEA report contains a contradictory
statement indicating the NCFMEA's desire to limit its recommendations
for change to a specific group of schools (``The foreign medical
schools that are subject to the recommendations contained within this
report are identified as * * * having American citizens/permanent
residents constitute more than 40 percent of its fulltime enrollment
and/or graduates from the preceding year.'' page five). These non-
Federal negotiators were concerned about the large overall
administrative burden that the proposed regulations as a whole would
have on foreign graduate medical schools with small numbers of U.S.
students with Title IV, HEA program loans. The Department made clear
during the negotiations that it believes the statement identified by
the non-Federal negotiators is merely a restating of the statute.
Regardless, the Department believes that these proposed regulations are
important to the integrity of the Title IV, HEA programs and should
apply to all foreign graduate medical schools, except where noted.

Location of a Graduate Medical Education Program, Affiliation
Agreements, and Application and Notification Procedures for Foreign
Graduate Medical Schools

Under section 102(a)(2)(B) of the HEA, a foreign graduate medical
school must be accredited or preaccredited by an accrediting agency
recognized by the Secretary, or approved under foreign accrediting
standards found comparable by the NCFMEA to standards applied in the
United States. In order for this provision to have effect, and as the
Department's implementing regulations have always provided, an
accrediting body approved by NCFMEA must be legally authorized to
evaluate the quality of the medical school educational programs and
facilities in the country in which those schools are located. The
Department generally construes this requirement for comparable
accreditation to mean that (except for clinical training locations in
the U.S. that are provided for in the statute) the graduate medical
program

[[Page 42201]]

must be located in the country in which the main campus of the school
is located. Although a medical accrediting body may accredit locations
of institutions in other countries, the Department believes this is the
best interpretation of the statute because, with limited exceptions, an
accrediting body's actual authority does not extend beyond the country
in which it is established. The Department currently does not approve
for participation in the Title IV, HEA programs any educational program
in which a portion of what is commonly referred to as the basic science
part of the program is located outside of the country in which the main
campus is located. However, the Department has allowed for the clinical
training part of the program to be located in an approved comparable
foreign country other than the country in which the main campus is
located, if the site is located in an NCFMEA approved country, the
institution's medical accrediting agency has conducted an on-site
evaluation and specifically approved the site, and the clinical
instruction is offered in conjunction with medical educational programs
offered to students enrolled in accredited medical schools located in
that foreign country. The Department's initial proposal reflected this
policy, which is also the approach recommended by NCFMEA Recommendation
12(a).
Several non-Federal negotiators felt this initial proposal was too
limiting. The Committee discussed at length the different parts of a
graduate medical program and the characteristics of each part that
might justify different treatment. In addition to distinguishing
between the basic science and the clinical training parts of the
program, the Committee discussions distinguished between the different
parts of clinical training referred to in these proposed regulations as
the core rotations, the required clinical rotations (the electives that
students are required to take), and the not required clinical rotations
(the electives that students can choose).
In general, some non-Federal negotiators felt that matriculating in
different countries as part of a graduate medical program would benefit
students by exposing them to medical education and practice in
different environments and cultures. One non-Federal negotiator argued
that allowing a portion of the basic science part of the program to be
located in the United States would assist in providing a smooth
transition to clinical training in the United States. The negotiator
also proposed a way of achieving what some non-Federal negotiators felt
was sufficient oversight to permit a portion of the basic science part
of the program to be located in a non-NCFMEA approved foreign country
other than the country in which the main campus is located: Limiting a
school to the establishment of one such site, limiting the amount of
the program that could be offered there, requiring a visit and approval
by the school's accrediting body, setting cohort default rate and USMLE
pass rate thresholds, requiring specific evaluations by the school's
accrediting body, requiring a formal agreement/recognition of the
accrediting body's authority by the country in which the site was
located, and requiring an NCFMEA determination that the accrediting
body has demonstrated its capacity to conduct off-site and on-site
reviews of the site that are comparable to the reviews conducted of the
main campus and additional locations within the country in which the
main campus is located. Others suggested that a portion of the basic
science part of the program be allowed to be located in a country other
than the country in which the main campus is located if the location is
accredited by a comparable accrediting agency.
Non-Federal negotiators also argued for more leniency regarding the
offering of the clinical training part of the program in countries
other than the country in which the main campus is located. While some
felt that all clinical training should be permitted to be located in
another country without as much oversight as the Department proposed,
others felt that leniency was appropriate only for the clinical
rotation part because exposure to different medical environments and
cultures was most important during the hospital-based part of the
clinical training where the students are in direct contact with
patients and medical residents. Other non-Federal negotiators felt that
leniency was appropriate only for the not-required-clinical-rotation
part, because that is when a student will most benefit from the
exposure without the program losing coherence. The Committee discussed
how the not-required-clinical-rotation part of the program may be very
individualized, with numerous sites, sometimes suggested by students,
at which students study for short periods of time. They pointed out
that, as a result, some sites are only used for a short period of time.
They noted that an accrediting body would not have the time or
resources to visit and approve these short-term sites. Non-Federal
negotiators suggested various ways of achieving what they felt was
sufficient oversight of these locations: e.g., limiting the amount of
the program that could be offered there, limiting the amount of the
program an individual student could take at the location, and limiting
the number of students who could attend the location. The non-Federal
negotiators pointed to language in the September 2009 NCFMEA Guidelines
for Requesting a Comparability Determination (page 17) that omits any
mention of non-core portions of a clinical training program in its
discussion of the site visits that the school's accrediting body is
required to make (the document is available at http://www2.ed.gov/
about/bdscomm/list/ncfmea-dir/ncfmea-guidelines.pdf).
In addition, some non-Federal negotiators felt that locations that
are included in the accreditation of a medical program accredited by
the LCME, such as locations of some Canadian schools, should be exempt
because the LCME accrediting standards are those that are applied to
medical schools in the United States. The Department agreed.
Because of the lack of direct authority of accrediting bodies from
different countries, the Department held firm on limiting the location
of the basic science portion of the program to the institution's home
country. The Department reiterated its belief that the basic sciences
part of a graduate medical program should be located in the same
country as the main campus so that the majority of the classroom
instruction part of the program will be under the direct authority of
the school's accrediting body. In one draft of the proposed
regulations, the Department referred to this part of the program as the
``didactic components.'' A non-Federal negotiator pointed out that this
term could be construed to include lectures and other instruction that
take place during the clinical training portion of the program. The
non-Federal negotiator argued that blurring the line between the
``basic science'' and the ``clinical training'' portions of the
programs could lead to an interpretation of the regulations whereby a
foreign graduate medical school would offer parts of what is really the
basic science portion of the program in the United States. As a result,
the Committee agreed to add a definition of clinical training to the
proposed regulations to make clear that only parts of the program that
meet that definition may be located in the United States. The
definition was also added to clarify the terminology that the proposed
regulations are using for the

[[Page 42202]]

components of clinical training, as provisions both here and elsewhere
in the proposed regulations differentiate among these components.
The Department agreed that it was acceptable to balance less
oversight of a short-term location at which individual students were
taking a small portion of the not-required-clinical-rotation part of
the program, with the benefits of exposure to other medical
environments and cultures. The Department believes this is warranted
because of the individualized nature of the not-required-clinical-
rotation part of the program, when individual sites are often used for
short periods of time. The Department also agreed that locations in
countries other than the country in which the main campus is located
that are included in the accreditation of a medical program accredited
by the LCME should also be exempt from meeting the three criteria
(i.e., required to be located in an approved comparable country,
required on-site evaluation and specific approval of the site by the
institution's medical accrediting agency, and the requirement that
instruction must be offered in conjunction with medical educational
programs offered to students enrolled in accredited medical schools
located in that approved foreign country) because the LCME accrediting
standards are those that are applied to medical schools in the United
States. Therefore, the Department's final proposal, which was agreed to
by the Committee, provided that clinical training may be offered
outside the United States and the country in which the main campus is
located without the site meeting the three criteria, if the location is
included in the accreditation of a medical program accredited by the
LCME, or if no individual student takes more than two electives at the
location and the combined length of the electives does not exceed eight
weeks.
Because of the importance and more standardized nature of core and
required clinical rotations, proposed Sec. 600.55(e)(1) would require
a foreign graduate medical school to have a formal affiliation
agreement with any hospital or clinic at which all or a portion of the
school's core clinical training or required clinical rotations are
provided. However, for any hospital or clinic at which only clinical
rotations that are not required are provided, a school would be
permitted to have other written arrangements instead of a formal
affiliation agreement, and the proposed regulations would not require a
school to have any written arrangements for those locations that are
not used regularly, but instead are chosen by individual students who
take no more than two electives at the location for no more than a
combined total of eight weeks. Also, in accordance with NCFMEA
Recommendation 12(b), proposed Sec. 600.20(a)(3)(iii) and Sec.
600.20(b)(3)(iii) would require a foreign graduate medical school to
provide as a part of any application for initial certification or
recertification to participate in the Title IV, HEA programs, copies of
the affiliation agreements that it is required to have for locations
that offer the core and required-clinical-rotation parts of the
clinical training, but not copies of written arrangements for locations
offering the not-required-clinical-rotation part of the program. The
Department was persuaded by the non-Federal negotiators who noted that
it would be quite burdensome for institutions to execute formal
affiliation agreements with the sites of rotations that are not
required, because there are often so many of them and use is often for
the short-term. They assured the Department that other written
arrangements, such as letters of good standing, insurance arrangements,
and other documents specific to a particular student, are made with
these locations that cover the elements of formal affiliation
agreements. Because of the multitude of documentation comprising the
written arrangements with these often short-term sites, the Department
did not believe it was necessary to require a regular submission to the
Department. In accordance with NCFMEA Recommendation 12(b), to ensure
continuity of the eligible program from the main campus to remote
locations, the proposed regulations would require that all required
affiliation agreements or other written arrangements address
maintenance of the school's standards, appointment of faculty, design
of the curriculum, provision of liability insurance, and supervision
and evaluation of student performance.
Although an institution would not be required to have formal
affiliation agreements with locations that offer the not-required-
clinical-rotation part of the clinical training, proposed Sec.
600.20(a)(3)(i) and Sec. 600.20(b)(3)(i) would provide that, for
initial certification or for recertification, a foreign graduate
medical school would be required to list these locations and where they
are located on the application to participate, along with the sites at
which the non-clinical, core clinical, and required-clinical-rotation
parts of the program are offered, except that those not-required-
clinical-rotation locations that are not used regularly, but instead
are chosen by individual students who take no more than two electives
at the location for no more than a combined total of eight weeks, do
not have to be listed. The Department believes it is essential for the
Department to be aware of all locations of an institution to which
Title IV, HEA program funds are provided, and agreed to make an
exception only for sites that are not used regularly and, therefore,
would be difficult and burdensome to track. Some non-Federal
negotiators indicated that most institutions can and do track the
locations the proposed regulations would require them to report to the
Department, so providing this information to the Department would not
be unduly burdensome.
Consistent with these proposed regulations, proposed Sec.
600.20(c)(5) would require a foreign graduate medical school that adds
a location that offers all or a portion of the school's core clinical
training or required clinical rotations to apply to the Secretary and
wait for the Secretary's approval before providing Title IV, HEA
program funds to the students at the location. In proposed
600.21(a)(10), they would allow a foreign graduate medical school that
adds a location that offers all or a portion of the school's clinical
rotations that are not required to provide Title IV, HEA program funds
to the students at the location without waiting for approval from the
Secretary, provided the school notifies the Secretary no later than 10
days after the location is added. As with the proposed exceptions to
the requirements for offering a portion of the clinical training
portion of the program outside of the country in which the main campus
of the school is located, and the proposed regulations specifying when
affiliation agreements would be required, an exception from the prior
approval requirement for adding locations offering core/required
rotations would be allowed for those locations that are included in the
accreditation of a medical program accredited by the LCME. No
notification to the Department would be required for adding LCME
locations, or locations offering only non-core, non-required rotations
that are not used regularly, but instead are chosen by individual
students who take no more than two electives at the location for no
more than a combined total of eight weeks.
So that the Department may track and enforce provisions specific to
post-baccalaureate/equivalent medical programs, proposed Sec. Sec.
600.20(a)(3)(ii) and 600.20(b)(3)(ii) would require that, for initial
certification or for recertification, a foreign graduate medical school
(i.e., a freestanding

[[Page 42203]]

foreign graduate medical school or a foreign institution that includes
a foreign graduate medical school) indicate whether it offers only
post-baccalaureate/equivalent medical programs, other types of programs
that lead to employment as a doctor of osteopathic medicine or doctor
of medicine, or both.
Finally, a proposed definition of NCFMEA was added to make clear
that the NCFMEA is the operational committee of medical experts
established by the Secretary to determine whether the medical school
accrediting standards used in other countries are comparable to those
applied to medical schools in the U.S., for purposes of evaluating the
eligibility of accredited foreign graduate medical schools to
participate in the Title IV, HEA programs.

General

Proposed Sec. 600.52 would remove from the definition of a foreign
graduate medical school the requirement that a foreign graduate medical
school be a foreign institution that qualifies to be listed in, and is
listed as a medical school in, the most current edition of the World
Directory of Medical Schools published by the World Health Organization
(WHO) as the Department believes it is no longer a needed measure of
comparability in light of the proposed new criteria for foreign
graduate medical schools as well as the proposed changes to the
definition of a foreign institution.
Proposed Sec. 600.55(a)(1) would clarify that the general criteria
that must be satisfied is all applicable criteria in part 600, rather
than just Sec. 600.54, to make clear that, unless otherwise specified,
all the provisions of part 600 apply to foreign institutions, including
foreign graduate medical schools. Current regulations require only
instruction that is offered outside of the United States to be provided
in facilities adequately equipped and staffed to afford students
comprehensive clinical and classroom medical instruction, and require
only the training located in the United States to be approved by all
medical licensing boards and evaluating bodies whose views are
considered relevant by the Secretary. Proposed Sec. 600.55(a)(2) would
apply these provisions to all portions of the medical program,
regardless of whether the program is located outside or inside the
United States, as the Department believes they are good requirements
regardless of location. To provide consistency with the proposed
provisions addressing the location of clinical training (see the
discussion of Location of a graduate medical education program,
affiliation agreements, and application and notification procedures for
foreign graduate medical schools above), the proposed regulations would
make clear that a foreign graduate medical school may offer, as part of
its clinical training, no more than two electives consisting of a
combined total of no more than eight weeks per student at a site
located in a foreign country other than the country in which the main
campus is located or in the United States, unless that location is
included in the accreditation of a medical program that is accredited
by the LCME. Non-Federal negotiators noted that foreign graduate
medical schools do not necessarily directly employ faculty for the
clinical training portion of the program, but rather appoint them and
the individuals are usually employed by the hospital or clinic at which
the clinical training takes place. The Committee agreed the regulations
should be changed to reflect actual practice.

Admission Criteria and Collection and Submission of Data

The Department initially proposed that, consistent with NCFMEA
Recommendations 1(a) and 1(b), a foreign graduate medical school would
have to require students who it admits to have a specific educational
background (e.g., for a post-baccalaureate equivalent medical program,
students must have a baccalaureate degree, or at least 90 semester
credit hours or the equivalent, in general education that includes, but
is not limited to, coursework in the social sciences, history, and
languages). Several of the non-Federal negotiators felt that such
provisions were unduly limiting. The Committee, including the
Department, ultimately agreed it would be more appropriate for the
NCFMEA to establish these provisions as guidelines for accrediting
bodies. The Department had also included as a part of its initial
proposal, that a school having an integrated program for a first
professional program leading to a Doctor of Medicine (M.D.) degree, or
its equivalent, must require students who are U.S. citizens, nationals,
or permanent residents to take the MCAT no later than three years after
admission to the program. Although this provision was consistent with
NCFMEA Recommendation 1(b), the Department was ultimately persuaded to
remove the provision by non-Federal negotiators who pointed out that
requiring students to take the MCAT early in the program would distract
them from the education that was preparing them to take the USMLE.
Ultimately, the Department agreed to retain from Recommendations
1(a) and 1(b) only the provision that would require U.S. students who
are admitted to a school having a post-baccalaureate equivalent medical
program to have taken the MCAT and to report the score. This provision
would not require a foreign graduate medical school to give weight to a
U.S. student's score on the MCAT as part of its admission requirements.
Although some non-Federal negotiators expressed concern that the MCAT
would not be readily available to U.S. students who are residing
outside of the United States prior to enrolling in a foreign graduate
medical school, it was determined that the MCAT is administered several
times during the year in countries around the world.
The inclusion of the requirement that a foreign graduate medical
school determine the consent requirements for, and require the
necessary consents of, all students accepted for admission who are U.S.
citizens, nationals, or eligible permanent residents to enable the
school to comply with the collection and submission requirements for
MCAT scores, residency placement, and USMLE scores reflects NCFMEA
Recommendations 9(a), 3, and 4(a), but limits the requirement to U.S.
citizens, nationals, or eligible permanent residents. These proposed
regulations would not establish eligibility thresholds for MCAT scores
or residency placement. As indicated in the discussion of these
recommendations in the NCFMEA report, the NCFMEA believes, and the
Department agrees, that successful performance by an institution in
these three areas may be valuable for the evaluation of the quality of
education being provided to students attending foreign graduate medical
schools. The data will facilitate the NCFMEA's further study of the
issues, strengthen the accreditation process, and allow for the
potential development of additional recommendations for regulatory
change, and/or the NCFMEA standards for evaluating accrediting bodies
of foreign graduate medical schools. Non-Federal negotiators argued,
and the Department agreed, that the Department's main concern is how
well students from the United States, who represent potential borrowers
of Title IV, HEA funds, are doing at these schools. The non-Federal
negotiators felt that it was inappropriate to include non-U.S. students
who may not have as much at stake when they take the United States'
MCAT or USMLE, or attempt to be placed in a

[[Page 42204]]

U.S. residency, and, thus, may skew the data.
Some non-Federal negotiators expressed concern that requiring
foreign institutions to obtain student consent for the release of
information may be in violation of certain countries' privacy laws. In
response to the Department's request for specific information, the
Department was provided with an analysis of the privacy laws and
requirements of one country that had been identified as one that could
have problems in this area. After analyzing the information, the
Department concluded that there would be several ways that institutions
in that country could legally obtain the required information from
students, and committed to working with those schools and schools in
any country that have concerns to facilitate compliance. The Department
noted, however, that the Department cannot waive statutory or
regulatory requirements used to determine institutional eligibility and
that if a foreign country's privacy laws did preclude obtaining the
information and materials necessary for establishing compliance the
institutions located in those countries would not be able to qualify
for participation in the Title IV, HEA programs.
The proposed regulations state that collection and submission of
data must be done at the institution's own expense to emphasize that
the institution is ultimately responsible for providing this
information. In the future, the Department may be able to obtain the
necessary USMLE pass rates directly from the ECFMG. However, unless and
until the Secretary notifies institutions that this is the case, an
institution would be required to take whatever steps are necessary to
obtain and provide the data to its accrediting agency and the
Secretary. Currently, an institution can obtain a student's consent for
USMLE pass rate data on Steps 1 and 2 by requiring students to sign
ECFMG's Institutional Request for an Official USMLE Transcript Form
173. The form and information on its use are available at the ECFMG's
Web site at http://www.ecfmg.org/usmle/transcripts/index.html. We also
note that the ECFMG has established an online procedure by which
schools can obtain data on Steps 1 and 2 directly from the ECFMG (see
the ECFMG's Web site at http://www.ecfmg.org/emswp.html). As this
procedure is still new, the Committee was not able to ascertain whether
the data provided to schools in this manner would be sufficient for
schools to meet the requirements of these proposed regulations. As
information becomes available, the Department will evaluate the
appropriateness of these data for meeting the proposed requirement.
Although the Department originally proposed requiring schools to
submit data on all steps of the USMLE, non-Federal negotiators pointed
out that it would be extremely difficult for schools to obtain data on
Step 3. The non-Federal negotiators noted that this difficulty stems
from the fact that Step 3, which is administered by the Federation of
State Medical Boards (FSMB), is taken by students after they have
graduated from the institution and a student cannot sign a consent to
provide information on Step 3 to third parties until he or she is
actually taking the test. Although the Department is continuing to
explore the collection of data from the FSMB for evaluating its use in
the future, the Department agrees that it would be unreasonable to
require institutions to be responsible for its collection and
submission at this time.
As one of the purposes of the data submission provision is to
provide data for the evaluation of whether additional performance
measures should be required of foreign graduate medical schools, all
foreign graduate medical schools, even those that are exempt from
meeting the 60 percent/75 percent USMLE pass rate requirement, would
have to submit the data under proposed Sec. 600.55(d).
The Department believes that the proposed periods for which data
must be collected and the proposed annual September 30 submission
deadline will provide for consistent submission of data by all schools,
taking into consideration the timing of the events for which data must
be obtained. As these data, other than the USMLE data, are to be
collected for the use of the accrediting bodies and, indirectly, by the
NCFMEA, schools would be required to make submissions of the data to
their accrediting bodies but, except for data on the USMLE, would be
required to submit such data to the Secretary only upon request. The
Secretary would collect the USMLE data on a regular basis in support of
the requirement in Sec. 600.55(f)(1)(ii) that an institution have at
least a 75 percent pass rate on the USMLE.

Notification to Accrediting Body

Proposed Sec. 600.55(e)(2), which would require a foreign graduate
medical school to notify its accrediting body within one year of any
material changes in educational programs and the overseeing bodies in
the formal affiliation agreements with hospitals and clinics, would
reflect NCFMEA Recommendations 12(a) and 12(b) and would allow a
school's accrediting body to assess any substantive impact the change
would have on the school's operations.

Citizenship and USMLE Pass Rate Percentages

The proposed change in Sec. 600.55(f)(1)(i)(B) would allow a
foreign graduate medical school to be exempt from the existing
citizenship rate requirement if it had a clinical training program
approved by a State as of January 1, 2008, and continues to operate a
clinical training program in at least one State that approves the
program reflects the statutory change made by the HEOA. As a result,
both foreign graduate medical schools that had a clinical training
program approved by a State as of January 1, 1992, and those that had a
clinical training program approved by a State as of January 1, 2008,
are exempt from the citizenship rate provision, provided the school
continues to operate a clinical training program in at least one State
that approves the program. The increase in the USMLE pass rate
threshold from 60 percent to 75 percent also reflects a change made by
the HEOA, as does proposed Sec. 600.55(f)(2)(ii), which would allow a
foreign graduate medical school that was eligible and exempt from the
USMLE pass rate requirement based on having a clinical training program
approved by a State as of January 1, 1992, to continue to be eligible
and exempt from the USMLE pass rate requirement as long as it continues
to operate a clinical training program in at least one State that
approves the program.
Although the Department originally proposed requiring pass rate
information for all steps of the USMLE, as stated previously in the
discussion of the submission of USMLE pass data under Admission
criteria and collection and submission of data above, the Department
believes that it would be unreasonable to require institutions to
obtain data on Step 3 of the USMLE for inclusion in the pass rate at
this time.
As suggested by NCFMEA Recommendations 4(b) and 4(c), the proposed
regulations would require a foreign graduate medical school to have at
least a 75 percent pass rate on each step/test of the USMLE (limited to
Step 1, Step 2-CS, and Step 2-CK), rather than a combined pass rate for
all steps/tests. This approach would provide an assessment of the
sequential performance of students on the USMLE, which the NCFMEA and
the Department believe provides a better measure of a medical program's
effectiveness by evaluating how well it prepares students

[[Page 42205]]

for each step/test of the USMLE and, in particular, will allow for the
judgment of the performance of each institution in preparing students
for future clinical performance.
The Committee decided to limit the USMLE pass rate calculation to
U.S. citizens, nationals, and eligible permanent residents for the
reasons discussed for limiting the collection and submission of data
related to MCAT scores, placement in a U.S. medical residency program,
and the USMLE in the same manner (see Admission criteria and collection
and submission of data above). That is, the Committee desired to focus
the pass rate on the students the Department is most concerned about,
students from the United States, who represent potential borrowers of
Title IV, HEA funds, and to prevent a school's rate from being lowered
by non-U.S. students who may not be as invested in passing the USMLE as
U.S. students.
As for the actual calculation used to determine the pass rate for
each step/test of the USMLE, the Department had suggested a rate that
would have required an institution to count an individual student in
the denominator for each time the student took Step 1, Step 2-CS and
Step 2-CK. The Department believed this approach was consistent with
NCFMEA Recommendation 4(b) and was a better measure of how well
prepared students were by the medical education program because it
would reflect failures on repeated attempts. Some non-Federal
negotiators felt that this approach was too burdensome and not an
appropriate means of achieving the Department's goal. They argued that
the pass rates of students in subsequent attempts is typically quite
low; thus, such a measure would be redundant and not more indicative of
the quality of the institution's instruction. Eventually, the non-
Federal negotiators suggested that the calculation be limited to first
time test takers only. The non-Federal negotiators noted that reports
issued in other contexts about pass rates for domestic schools have
included only first time test takers. Ultimately, the Department was
persuaded that a proposed regulation that would require foreign
graduate medical schools to include only first time test takers in the
calculation provided a better evaluation of an institution's
performance than that required under current regulations, and had the
benefit of being comparable to rates published for domestic schools.
The non-Federal negotiators raised strong concerns about the pass
rate's applicability to schools with small numbers of U.S. students.
They pointed out that such a school's eligibility for participation
could be put at risk by the failure of just a small number of students,
or even one student, for those with fewer than four students who would
be included in the cohort for the calculation. The non-Federal
negotiators felt that schools with small numbers of students should be
exempt from this requirement or, at the very least, the regulations
should provide an alternative way for these institutions to comply. The
Department noted that the statute does not provide for exempting
institutions from this requirement. However, in response to these
concerns, the Department proposed an alternative way to comply in Sec.
600.55(f)(4) to allow for the use of a rate that would combine the
performance of U.S. students on Step 1, Step 2-CS and Step 2-CK, if the
result of any step/test pass rate would be based on fewer than eight
students. If that combined pass rate would be based on fewer than eight
step/test results, the school would be deemed to have no pass rate for
that year, and the results for the year would be combined with each
subsequent year until a pass rate based on at least eight step/test
results could be derived. The Department believes that this approach
applies the pass rate provision to all institutions, while
appropriately mitigating the unduly harsh effect a small number of
failures could have on the pass rate calculation for schools with small
numbers of U.S. students.

Other Criteria

The proposed requirements in Sec. 600.55(g)(1) and (g)(2) that
would require a foreign graduate medical school to include in its
satisfactory academic progress standards a requirement that a student
complete his or her educational program within 150 percent of the
published length of the educational program and document the
educational remediation it provides to assist students in making
satisfactory academic progress adopts NCFMEA Recommendation 9(b), but
requires schools to document, rather than submit to the Department as
the NCFMEA recommended, any educational remediation provided.
For consistency with current regulations, in adopting NCFMEA
Recommendation 9(b), suggesting that a student's enrollment prior to
graduation must not exceed 150 percent of the normal length of the
program, the proposed regulations refer to existing Sec. Sec.
668.16(e)(2)(ii)(B), (C), and (D). These regulations, currently
applicable to undergraduate programs, provide additional requirements
as to the quantitative aspect of a foreign graduate medical school's
institutional satisfactory academic progress standards.
Although the Committee agreed with the NCFMEA that there is merit
to requiring institutions to document the remediation it provides to
assist students in making satisfactory academic progress so that, as
needed, the Department, the NCFMEA, or the accrediting body may collect
and examine the data to see if this is an area of concern that may need
to be addressed, they did not believe it was necessary or cost
effective to require the regular submission of these data to the
Department.
Finally, proposed Sec. 600.55(g)(3), which would require a foreign
graduate medical school to publish all the languages in which
instruction is offered, would provide information to students that
could be essential to a student's success in the program. Although
NCFMEA Recommendation 10 suggested requiring schools to publish the
primary language of instruction, and if not English, identify any
alternate language of instruction, the Committee agreed that requiring
schools to publish all languages in which instruction is offered would
be more beneficial and no more burdensome.

Foreign Veterinary Schools (Sec. 600.56)

Statute: Section 102(a)(2)(A)(ii) of the HEA stipulates that Title
IV borrowers attending a foreign for-profit veterinary school must
complete clinical training at an approved veterinary school located in
the United States. The HEA does not establish additional eligibility
criteria specific to foreign veterinary schools. Section 102(a)(2)(A)
of the HEA requires the Secretary, through regulations, to develop
eligibility criteria for foreign institutions that are comparable to
the eligibility criteria for domestic ``institutions of higher
education.''
Current Regulations: Section 600.56 of the Institutional
Eligibility regulations includes additional eligibility criteria for
foreign veterinary schools. Under Sec. 600.56(a)(1)(i), foreign
veterinary school facilities outside the United States must be
adequately equipped and staffed to provide students comprehensive
clinical and classroom veterinary instruction. Under Sec.
600.56(a)(1)(ii), foreign veterinary school programs provided inside
the United States must be approved by all veterinary licensing boards
and evaluating bodies that the Secretary considers to be relevant.
Under Sec. 600.56(a)(3), the credentials of faculty members employed
by the foreign veterinary school must be equivalent to the credentials
of faculty members

[[Page 42206]]

teaching the same or similar courses in the United States.
Proposed Regulations: The proposed regulations would combine the
requirements in Sec. 600.56(a)(1)(i) and Sec. 600.56(a)(1)(ii) into
one paragraph, eliminating the distinction in those sections between
portions of veterinary programs provided inside and outside of the
United States. Proposed Sec. 600.56(a)(4) would require a foreign
veterinary school to be accredited or provisionally accredited by an
organization acceptable to the Secretary. Proposed Sec. 600.56(a)(4)
would also specify that the requirement for accreditation or
provisional accreditation does not take effect until July 1, 2015.
Finally, proposed Sec. 600.56(b)(2)(i) would require that, for a for-
profit veterinary school, the school's students must complete their
clinical training at an approved veterinary school located in the
United States. Under proposed Sec. 600.56(b)(2)(ii), for a veterinary
school that is public or private nonprofit, the school's students may
complete their clinical training at an approved veterinary school
located in the United States or in the home country, and may also take
clinical training at a location outside of the United States or the
home country if no individual student takes more than two electives at
the location and the combined length of the elective(s) does not exceed
eight weeks.
Reasons: The Department proposed revising the regulations governing
eligibility criteria for foreign veterinary schools to improve the
Department's process for making determinations of eligibility of
foreign veterinary schools to participate in the Title IV, HEA
programs. The Department's expertise with regard to making independent
evaluations of the academic quality of veterinary programs is limited,
and currently the Department relies heavily on information provided to
us by the foreign veterinary school to make eligibility determinations.
If the school has been accredited or reviewed by the American
Veterinary Medical Association (AVMA), the Department considers reports
provided by the AVMA to the school to assist in making eligibility
determinations.
The Department initially proposed to build on the Department's
current practice by requiring AVMA accreditation for foreign veterinary
schools applying to participate in the Title IV, HEA programs. We
believed that requiring AVMA accreditation would provide the Department
with an assurance of the academic quality of the veterinary program.
AVMA standards for accrediting veterinary schools are detailed and
specific, and the AVMA has the expertise and resources to evaluate
veterinary schools that the Department lacks. In addition, the AVMA has
a history of accrediting foreign veterinary school academics. For
example, veterinary schools in Canada, Australia, and the Netherlands
are currently accredited by the AVMA.
Non-Federal negotiators generally acknowledged the high quality of
the AVMA's accreditation standards and procedures. One non-Federal
negotiator agreed that it was logical to require AVMA accreditation of
foreign veterinary schools, as most U.S. students studying at those
schools ultimately practice as veterinarians in the United States.
However, several non-Federal negotiators had concerns about requiring
AVMA accreditation as a condition for participation in the Title IV,
HEA programs.
Some non-Federal negotiators pointed out that the process for
receiving AVMA accreditation is lengthy and expensive. Non-Federal
negotiators asserted that the standards of foreign accrediting agencies
such as the Veterinary Schools Accreditation Advisory Committee
(VSAAC), which accredits veterinary schools in Australia and New
Zealand, and the Royal College of Veterinary Surgeons (RCVS), which
accredits veterinary schools in the United Kingdom, are comparable to
the AVMA's standards. These non-Federal negotiators contended that it
would be unnecessarily burdensome to require a veterinary school that
has already been accredited by an agency such as VSAAC to also obtain
AVMA accreditation to participate in the Title IV, HEA programs. The
non-Federal negotiators cautioned the Department that foreign
veterinary schools that enroll small numbers of Title IV borrowers may
determine that obtaining AVMA accreditation is not cost effective, and
may choose to end their participation in the Title IV, HEA programs.
This would have the effect of limiting the options of U.S. students
considering attending foreign veterinary schools.
Other non-Federal negotiators contended that it is extremely
difficult for for-profit veterinary schools to obtain AVMA
accreditation. Although they felt that for-profit veterinary schools
can meet AVMA's standards around facilities, curriculum, and faculty,
the AVMA standards also require veterinary schools to have a strong
research component. These negotiators stated that for-profit veterinary
schools tend not to have the resources to pursue research to the extent
required by AVMA. These negotiators pointed out that public veterinary
schools often have State sources of funding for research programs,
while for-profit veterinary schools do not. The expense of establishing
a research program acceptable to AVMA could be prohibitive for most
for-profit veterinary schools. These non-Federal negotiators contended
that, for purposes of preparing students for employment as competent
veterinarians in most non-research venues, it is not necessary to
include a research component of the kind required by AVMA.
In addition, non-Federal negotiators expressed concerns that
foreign veterinary schools without AVMA accreditation that currently
participate in the Title IV, HEA programs might be forced out of the
Title IV, HEA programs if the Department went forward with its
proposal. The effective date for most of the regulations in this NPRM
is expected to be July 1, 2011. As the accreditation process can take
several years, even a school that ultimately receives AVMA
accreditation might not be able to obtain AVMA accreditation before the
regulations become effective. Although AVMA offers provisional
accreditation for schools in the U.S. or Canada that are on track to
become accredited, it currently does not offer provisional
accreditation to other schools.
As an alternative, non-Federal negotiators recommended using other
measures, such as pass rates on licensing exams, licensure rates, or
default rates, to determine eligibility of a foreign veterinary school.
In addition, non-Federal negotiators recommended that the Department
delay the effective date for the accreditation provision of the
proposed regulations for up to ten years, if the Department goes
forward with the AVMA requirement.
The Department noted that using measures such as pass rates on
licensing examinations can be operationally complicated, raising
concerns over privacy rights, obtaining exam results, and calculating
pass rates in ways that are not disadvantageous to schools with low
numbers of Title IV students. In addition, pass rates would not
necessarily be a reliable indicator of the academic credentials of the
faculty at a foreign veterinary school, and would provide no indication
that the facilities at the veterinary school are adequate and safe for
the students or for the animals housed in the facilities.
Instead, the Department accepted the recommendation of some of the
non-Federal negotiators to replace the proposed requirement that a
foreign veterinary school be accredited or provisionally accredited by
the AVMA,

[[Page 42207]]

with a requirement that the school be accredited or provisionally
accredited by an agency acceptable to the Secretary. Although the
Department continues to believe that AVMA accreditation is the most
desirable standard for foreign schools that train students for
veterinary practice in the United States, we recognize that other
accrediting agencies may also be satisfactory for this purpose. Under
the revised regulations, foreign veterinary schools must still be
accredited or provisionally accredited by an agency with expertise in
accrediting veterinary education programs, but the agency does not have
to be the AVMA. This gives the Department some flexibility in
evaluating schools' compliance with the accreditation requirement, and
gives schools some flexibility with regard to obtaining accreditation.
In addition, the Department delayed the effective date of the
accreditation requirement until July 1, 2015, giving foreign veterinary
schools that are currently in the Title IV, HEA programs approximately
five years after final regulations are published to obtain
accreditation from an acceptable accrediting agency. The Department
believes that five years should be sufficient time for a school to
obtain accreditation or provisional accreditation from an acceptable
accrediting agency. In addition, Title IV borrowers who are currently
enrolled in a foreign veterinary school should be able to complete
their education programs before the five years elapses. Newly enrolled
Title IV borrowers coming into those schools after this NPRM is
published should be advised by the school's financial aid officers that
there is a possibility that the school could lose Title IV, HEA program
eligibility after July 1, 2015, so those borrowers can plan
accordingly.
The Department proposed combining the requirements in Sec.
600.56(a)(1)(i) and in Sec. 600.56(a)(1)(ii) into one paragraph to
simplify the regulations, and to eliminate the distinction between
veterinary school activities in the United States and outside the
United States for purposes of these particular requirements. The
Department did not believe that this distinction in the current
regulations served any useful purpose. The non-Federal negotiators did
not express concerns about this modification to the existing
regulations.
Regarding the provisions addressing the location of a foreign
veterinary school in proposed Sec. 600.57(b), the Committee agreed to
be consistent with provisions that would permit some clinical training
locations of foreign graduate medical schools to be outside of the
United States and of the country in which the main campus of the school
is located. Proposed Sec. 600.57(b) would permit students who attend a
public or private nonprofit foreign veterinary school to take no more
than two electives at the clinical training location per student, as
long as the elective(s) have a combined length of not more than eight
weeks. This provision could not be extended to for-profit veterinary
schools because the statute requires students who attend these schools
to complete their clinical training in the United States.

Foreign Nursing Schools (Sec. 600.57)

Statute: The HEOA amended section 102(a)(2)(A) of the HEA to
provide specific standards for foreign nursing schools. The amendments
are effective beginning July 1, 2010, except that, for nursing schools
that were eligible for Title IV, HEA program participation on August
13, 2008 (the day before enactment of the HEOA), they are effective
July 1, 2012.
The HEA, as amended by the HEOA and HCERA, provides that a foreign
nursing school, including a for-profit nursing school, may not
participate in the Title IV, HEA programs unless the school--
Has an agreement with a hospital or accredited school of
nursing (as those terms are defined in section 801 of the Public Health
Service Act (42 United States Code 296)) located in the United States
that requires the students of the nursing school to complete the
students' clinical training at the hospital or accredited school of
nursing;
Has an agreement with an accredited school of nursing
located in the United States providing that the students graduating
from the foreign nursing school also receive a degree from the
accredited U.S. school of nursing;
Certifies only Federal Direct Stafford loans under section
455(a)(2)(A) of the HEA, Federal Direct Unsubsidized loans under
section 455(a)(2)(D) of the HEA, or Federal Direct PLUS loans under
section 455(a)(2)(B) of the HEA for students attending the school; and
Reimburses the Secretary for the cost of any loan defaults
for current and former students included in the calculation of the
school's cohort default rate during the previous fiscal year.
In addition, the HEOA amendments to the HEA require that at least
75 percent of the individuals who were students or graduates of a
foreign nursing school, and who took the National Council Licensure
Examination for Registered Nurses (NCLEX-RN) in the year preceding the
year for which the school is certifying a Title IV, HEA program loan,
received a passing score on the NCLEX-RN.
Current Regulations: Current regulations do not define foreign
nursing school, or specify Title IV eligibility criteria unique to
foreign nursing schools.
Proposed Regulations: The proposed regulations would add several
new definitions relating to foreign nursing schools to Sec. 600.52,
would redesignate current Sec. 600.57 as Sec. 600.58, and would add a
new Sec. 600.57 specifying additional Title IV eligibility criteria
for foreign nursing schools. The proposed regulations would add
definitions to Sec. 600.52 for associate degree school of nursing,
collegiate school of nursing, and diploma school of nursing. The
proposed new definitions are derived from definitions relating to
nursing schools in section 801 of the Public Health Service Act, as
amended (42 U.S.C. 201 et seq.), as required by the HEA as amended by
the HEOA.
Under the proposed definitions, the primary distinction between the
three types of nursing schools is the type of degree offered by the
school. For an associate degree school of nursing, the nursing program
must lead to a degree equivalent to an associate degree in the U.S. For
a collegiate school of nursing, the nursing program must lead to a
degree equivalent to a bachelor of arts, a bachelor of science, or a
bachelor of nursing in the U.S, or to a degree equivalent to a graduate
degree in nursing in the U.S. For a diploma school of nursing, the
nursing program must lead to the equivalent of a diploma in the U.S. or
to other indicators equivalent to a diploma that demonstrate that the
student has satisfactorily completed the program.
Proposed new Sec. 600.57 would require a foreign nursing school to
meet the applicable eligibility criteria elsewhere in part 600. In
addition, a foreign nursing school must--
Meet the definition of associate degree school of nursing,
collegiate school of nursing, or diploma school of nursing;
Have an agreement with a hospital located in the United
States or an accredited school of nursing located in the United States
that requires students of the nursing school to complete the student's
clinical training at the hospital or accredited school of nursing;
Have an agreement with an accredited school of nursing
located in the United States providing that students graduating from
the nursing school located outside of the United

[[Page 42208]]

States also receive a degree from the accredited school of nursing
located in the United States;
Only certify Federal Stafford Loan program loans or
Federal PLUS program loans for students attending the nursing school;
Reimburse the Secretary for the cost of any loan defaults
for current and former students included in the calculation of the
institution's cohort default rate during the previous fiscal year;
Determine the consent requirements for, and require the
necessary consents of, all students accepted for admission who are U.S.
citizens, nationals, or eligible permanent residents, to enable the
school to comply with the requirements for collection and submission of
NCLEX-RN results or pass rates;
Annually, at its own expense, obtain all results on the
NCLEX-RN achieved by students and graduates who are U.S. citizens,
nationals, or eligible permanent residents, together with the dates the
student has taken the examination (including any failed examinations)
and provide the results to the Secretary;
As an alternative to obtaining the NCLEX results
individually, the school may obtain a report or reports from the
National Council of State Boards of Nursing (NCSB), or an NCSB
affiliate or NCSB contractor, reflecting the percentage of the school's
students and graduates taking the NCLEX-RN in the preceding year who
passed the examination, or the data from which the percentage could be
derived, and provide the report to the Secretary;
Demonstrate at least a 75 percent pass rate on the NCLEX-
RN for all of the U.S. citizens, nationals, or eligible permanent
residents who were students or graduates of the school and who took the
NCLEX-RN in the year preceding the year for which the institution is
certifying Federal Stafford or Federal Plus loans;
Provide a program of clinical and classroom nursing
instruction, which students are normally required to complete, that is
supervised closely by members of the school's faculty. The program,
which includes programs provided through agreements with nursing
schools in the United States, must be provided in facilities adequately
equipped and staffed to afford students comprehensive clinical and
classroom nursing instruction, through a training program for foreign
nursing students that has been approved by all nurse licensing boards
and evaluating bodies whose views are considered relevant by the
Secretary;
Have graduated classes during each of the two twelve-month
periods immediately preceding the date the Secretary receives the
school's request for an eligibility determination; and
Employ only those faculty members whose academic
credentials are the equivalent of credentials required of faculty
members teaching the same or similar courses at nursing schools in the
United States.
In addition, the proposed regulations would specify that for
purposes of reimbursing the Secretary for defaulted loans, the cost of
a loan default is the sum of the defaulted loan's--
Outstanding principal;
Accrued interest;
Unpaid late fees and collection costs;
Special allowance payments;
Reinsurance payments; and
Any related or similar payments the Secretary is obligated
to make on the loan.
The proposed regulations also would specify that after a school
reimburses the Secretary for the cost of a loan default, the loan is
assigned to the school. The borrower remains liable to the school for
the outstanding balance of the loan, under the terms and conditions
specified in the promissory note.
Finally, proposed Sec. 600.57(d) would provide that no portion of
the foreign nursing program offered to U.S. students may be located
outside of the country in which the main campus of the foreign nursing
school is located, except for clinical sites located in the United
States.
Reasons: The Department modeled the proposed language in new Sec.
600.57 on the provisions in the HEOA regarding foreign nursing schools,
as well as on language in existing Sec. Sec. 600.55 and 600.56, which
provide additional eligibility criteria for foreign graduate medical
schools and foreign veterinary schools. In addition, in an effort to
alleviate some of the burden entailed in demonstrating compliance with
the NCLEX-RN pass rate requirement, the Department provided leeway for
the school to obtain and submit, if available, reports on NCLEX-RN
results from the NCSB, or one of its affiliates or contractors, showing
the percentage of students from the school who passed the NCLEX-RN.
In most cases, the non-Federal negotiators did not have concerns or
questions regarding the proposed language in Sec. 600.57 that was
modeled on language in sections Sec. Sec. 600.55 and 600.56. However,
non-Federal negotiators did have concerns relating to several of the
provisions unique to foreign nursing schools.
The non-Federal negotiators believed that the new requirements in
Sec. Sec. 600.57(a)(2) and 600.57(a)(3), requiring agreements between
foreign nursing schools and U.S nursing schools and hospitals, would
force many foreign nursing schools that currently participate in the
Title IV, HEA programs out of the Title IV, HEA programs. The non-
Federal negotiators stated that most foreign nursing schools do not
currently have such agreements and could not revamp their nursing
programs to provide clinical training in the U.S. for their Title IV
students. This issue was of special concern with regard to foreign
nursing schools that enroll relatively small numbers of Title IV
borrowers. The Title IV loan amounts such schools receive might not be
sufficient enough to justify the expense of revamping their nursing
programs.
The Department noted that the proposed regulations reflect the
statute, and that any regulations developed by the Department must be
consistent with statutory requirements.
Non-Federal negotiators also had concerns about the statutory
provision, reflected in proposed Sec. 600.57(a)(5), requiring a
foreign nursing school to reimburse the Secretary for the cost of loan
defaults for loans included in the calculation of a school's cohort
default rate. Discussion of the reimbursement requirement centered
around two major topics: the cost of a loan default and the status of
the loan after the school reimburses the Secretary. Proposed Sec. Sec.
600.57(b) and 600.57(c) address these two issues.
At the time that these proposed regulations were being negotiated,
it was unclear whether foreign institutions would continue to
participate in the FFEL program or be required to switch over to the
Direct Loan Program. Given this uncertainty, the Department drafted
proposed Sec. Sec. 600.57(b) and 600.57(c) in such a way that the
regulations could apply to either a FFEL loan or a Direct Loan.
The cost of a loan default, as specified in proposed Sec.
600.57(b), includes some items that only apply to FFEL loans, such as
special allowance payments, reinsurance payments, and payments of other
fees. For a Direct Loan, the calculation of cost of a loan default
would not include such costs. The cost of loan default for a Direct
Loan would include such items as outstanding principal, accrued
interest, and unpaid late fees or collection costs.
Proposed Sec. 600.57(c) would specify that after a school
reimburses the Secretary for the cost of a loan default,

[[Page 42209]]

the loan would be assigned to the school. The borrower would be
required to repay the loan to the school, under the terms and
conditions of the promissory note. The reimbursement by the school
would not change the school's official cohort default rate or exempt
the school from the consequences of its cohort default rate.
In the initial discussions with the non-Federal negotiators, the
non-Federal negotiators emphasized the importance of borrowers
remaining liable for repayment of the loan after the school has
reimbursed the Department for the loan default. The non-Federal
negotiators stressed that if the reimbursement is deemed to have paid
off the loan, the borrower's obligation to repay the loan would
effectively be discharged. This would provide a perverse incentive for
borrowers to default deliberately on their Title IV loans.
The Department agreed with the non-Federal negotiators. Initially
we proposed that after the Secretary is reimbursed, the loan would
remain with the loan holder, who would continue to collect on the loan.
However, the Department determined that after it received the
reimbursement payment, it would have no financial interest in the loan,
and would have no statutory basis for collecting on the loan.
Accordingly, the Department modified the proposed regulatory language
to require that the loan to be assigned to the school.
Although non-Federal negotiators supported borrowers remaining
liable for the loan, some non-Federal negotiators had concerns about
how assigning the loan to the school would affect the borrower. One
non-Federal negotiator asked how NSLDS reporting, loan rehabilitation,
and total and permanent disability discharges would be handled for
these loans.
The Department did not address in detail operational matters with
regard to defaulted loans assigned to a school. Instead, the Department
pointed out that currently a FFEL loan can fall out of the FFEL
program, usually due to a due diligence failure. The terms and
conditions on the promissory note remain in effect on these loans, and
loan holders continue to collect on them. Procedures currently in place
for FFEL loans that have lost their eligibility would apply to
defaulted Title IV loans that are assigned to a foreign nursing school.
Non-Federal negotiators questioned how foreign schools could comply
with proposed Sec. 600.57(a)(8), which would require that the clinical
training provided at a U.S. school or hospital be ``supervised
closely'' by members of the foreign school's faculty, in light of the
fact that that training would already be supervised by faculty of the
U.S. school. The Department noted that faculty at the U.S. clinical
training facility could be appointed as faculty of the foreign school
as well, and that, in any event, the foreign graduate medical school
needs to have its own faculty supervise its entire program. The
Department emphasized that Title IV eligibility is based on a school
offering an eligible program, not a portion of an eligible program. The
foreign school would have to develop agreements with U.S. schools that
ensure continuity between the training offered at the foreign school
and at the U.S. school.
Non-Federal negotiators also questioned the provision in Sec.
600.57(a)(8) requiring a training program to be approved ``by all
licensing boards and evaluating bodies whose views are considered
relevant by the Secretary.'' Non-Federal negotiators asked how a
nursing program could be expected to obtain approval from state
licensing boards in all 50 states. The Department responded that the
Department would focus on the licensing boards and evaluating bodies
applicable to the state where the training program is located, not
licensing boards and evaluating bodies for all of the states, in
determining compliance with this eligibility requirement, although
approval or disapproval decisions from other states would be considered
if available.
Proposed Sec. 600.57(d) would provide that no portion of the
foreign nursing program offered to U.S. students may be located outside
of the country in which the main campus of the foreign nursing school
is located, except for clinical sites located in the United States, to
protect the coherence of the educational program and ensure continuity
of oversight by the foreign government. The statute requires these
nursing programs to provide their clinical training in the United
States.
As negotiated, proposed Sec. 600.57(d) does not reflect the
inapplicability, through June 30, 2012, to foreign nursing schools that
were participating in a Title IV, HEA program as of August 13, 2008, of
the HEOA's new eligibility requirements for foreign nursing schools. In
the final regulations, the Department will specify that this section
becomes effective on July 1, 2012, with respect to foreign nursing
schools that were participating in a Title IV, HEA program as of August
13, 2008.

Part 668 Student Assistance General Provisions Audited Financial
Statements (Sec. 668.23)

Statute: Section 487(c)(1)(A)(i) of the HEA was amended by the HEOA
to give the Secretary the authority to modify the financial and
compliance audit requirements for foreign institutions, and the
authority to waive the audit requirements for foreign institutions that
receive less than $500,000 in Title IV, HEA program funds in the
preceding year.
Current Regulations: Currently, under Sec. 668.23(a)(2), an annual
submission of both a compliance audit and audited financial statements
is required of all institutions participating in the Title IV, HEA
programs. Section 668.23(d)(1) requires that an institution's audited
financial statements must be prepared on an accrual basis in accordance
with U.S. generally accepted accounting principles (U.S. GAAP), and
audited by an independent auditor in accordance with U.S. generally
accepted government auditing standards (U.S. GAGAS) and other guidance
contained in the Office of Management and Budget Circular A-133 and A-
128 regarding audits of States, Local Government and Non-Profit
Organizations, or in audit guides developed by, and available from, the
Department of Education's Office of Inspector General, whichever is
applicable. Section 668.15(h) permits a foreign institution whose
enrolled students received less than $500,000 in U.S. FFEL Program
funds per fiscal year to have its required audited financial statements
prepared according to the generally accepted accounting principles and
auditing standards of the institution's home country. Current
regulations notwithstanding, on May 15, 2009, the Department of
Education published a Dear Colleague Letter (GEN-09-06) that announced
that the Secretary was waiving the annual audited financial statements
requirement for foreign institutions whose enrolled students received
less than $500,000 in U.S. FFEL Program funds during the award year
preceding the audit period. The waiver applies to any audited financial
statements for such a foreign institution due on or after August 14,
2008, the effective date of the HEOA amendment described previously,
and renders unnecessary Sec. 668.15(h), providing for submission of
audits prepared under home country standards.
Proposed Regulations: Proposed Sec. 668.23 would establish new
financial audit submission requirements for foreign institutions as
follows:

[[Page 42210]]

For a public or nonprofit foreign institution that
received less than $500,000 in U.S. Title IV, HEA program funds during
the institution's most recently completed fiscal year, the audited
financial statements submission would be waived, unless the institution
is in its initial provisional period of participation and received
Title IV, HEA program funds during that year, in which case the
institution must submit, in English, audited financial statements
prepared in accordance with the generally accepted accounting
principles of the institution's home country.
For a public or nonprofit foreign institution that
received at least $500,000 but less than $3,000,000 in U.S. Title IV,
HEA program funds during its most recently completed fiscal year, the
institution would be allowed to submit for that year, in English,
audited financial statements prepared in accordance with the generally
accepted accounting principles of the institution's home country in
lieu of financial statements prepared in accordance with U.S. GAAP.
For a public or nonprofit foreign institution that
received at least $3,000,000 but less than $5,000,000 in U.S. Title IV,
HEA program funds during its most recently completed fiscal year, the
institution would be required to submit once every three years audited
financial statements prepared in accordance with the generally accepted
accounting principles of both the institution's home country and U.S.
GAAP, but for the two years in between would be allowed to submit, in
English, audited financial statements prepared in accordance with the
generally accepted accounting principles of the institution's home
country in lieu of financial statements prepared in accordance with
U.S. GAAP.
For a public or nonprofit foreign institution that
received $5,000,000 or more in U.S. Title IV, HEA program funds during
its most recently completed fiscal year, and for any for-profit foreign
institution, the institution would be required to submit for that year
audited financial statements prepared in accordance with the generally
accepted accounting principles of both the institution's home country
and U.S. GAAP.
Proposed Sec. 668.23(h)(3)(i) would allow the Secretary to issue a
letter to a foreign institution that has been identified as having
problems with its financial condition or financial reporting that would
require the foreign institution to submit its audited financial
statements in the manner specified by the Secretary.
In addition, the proposed regulations would: (1) Remove the
superseded language in Sec. 668.15 addressing submission of financial
audits for foreign institutions; (2) make technical corrections to
reflect the Office of Management and Budget's (OMB's) 2003 rescission
of Circular A-128 and expansion of Circular A-133 to include State and
local governments and (3) add ``issued by the Comptroller General of
the United States'' to Sec. 668.23(d)(1) to make clear that United
States generally accepted government auditing standards must be used
for all submitted financial statements, including those from foreign
institutions. The removal of the superseded language in Sec. 668.15(h)
would not impact the Secretary's ability to make a determination of
financial responsibility for any foreign institution. The Secretary
would make such a determination on the basis of financial statements
submitted under proposed Sec. 668.23(h).
These proposed regulations would supersede the May 15, 2009, Dear
Colleague Letter (GEN-09-06). The proposed regulations would apply the
waiver of the annual audited financial statements requirement to public
or nonprofit foreign institution that received less than $500,000 in
U.S. Title IV, HEA program funds during the institution's most recently
completed fiscal year, instead of applying it to foreign institutions
that received less than $500,000 in U.S. Title IV, HEA Program funds
during the award year preceding the audit period, as the Dear Colleague
Letter does. This would match the Title IV, HEA program funds being
administered by a foreign institution with the period of time covered
in the audited financial statements of the institution. If this
proposed provision becomes final, the Department will provide
implementation guidance to institutions addressing the change in the
period used to determine the amount of Title IV, HEA program funds
received by a foreign institution.
Reasons: The negotiators reached agreement on the proposed
regulatory language only after extensive negotiations and significant
compromises.
The Department initially proposed to require audited financial
statements prepared in accordance with U.S. GAAP, which is the
requirement for domestic institutions, for public foreign institutions
that received $1,000,000 or more in U.S. Title IV, HEA program funds,
or private foreign institutions that received $500,000 or more in U.S.
Title IV, HEA program funds, as well as for any institution in its
initial provisional period of participation. For public foreign
institutions, if an institution received at least $500,000 in U.S.
Title IV, HEA program funds, but less than $1,000,000 in U.S. Title IV,
HEA program funds during the institution's fiscal year preceding the
audit period, the institution would have been allowed to submit audited
financial statements prepared in accordance with the generally accepted
accounting principles of the institution's home country in lieu of
financial statements prepared in accordance with U.S. GAAP. If there
was an unpaid liability due to the Secretary by any public institution
controlled by the same government entity, all public institutions
controlled by that government entity would be required to submit
audited financial statements prepared in accordance with U.S. GAAP.
Upon hearing the Department's initial proposal, some non-Federal
negotiators argued that nonprofit foreign institutions should be
treated the same as public foreign institutions. Others opined that
requiring the audited financial statements to be prepared in accordance
with U.S. GAAP was cost prohibitive, and suggested that a non-U.S. GAAP
financial statement such as the International Financial Reporting
Standards (IFRS) would be comparable and provide the Department with
the information it needs. Another non-Federal negotiator suggested that
the cost of preparing audited financial statements would be paid by
students in the form of higher tuition and fees. It was also suggested
that a rating from a financial rating agency such as Moody's or
Standard and Poor's could be used as an indicator of financial
solvency. Several non-Federal negotiators suggested that the Department
should accept audited financial statements prepared under the
institution's home country accounting standards from nonprofit or
public foreign institutions where the Department determined those home
country standards were comparable to U.S. GAAP, regardless of the
amount of U.S Title IV, HEA program funds that an institution may have
received in the fiscal year preceding the audit. Non-Federal
negotiators pointed out that no evidence had been presented during the
negotiating sessions that international accounting principles are
inferior to U.S. GAAP, and noted that an institution's compliance audit
would continue to be used to demonstrate that

[[Page 42211]]

Title IV, HEA program funds are being handled appropriately.
Other suggestions made by the non-Federal negotiators included that
the Department tie its requirement of U.S. GAAP financial statements to
a foreign institution's cohort default rate, given that such rates are
generally lower than those for domestic institutions, and that public
foreign institutions be relieved from submitting U.S. GAAP financial
statements if the total number of U.S. students enrolled at that entity
was less than fifty, regardless of the amount of U.S. Title IV, HEA
program funds received during the institution's fiscal year.
The Department responded that it believes there is a risk threshold
of Title IV, HEA program dollars administered by foreign institutions
where the audited financial statements for those institutions should be
provided in the same format and at the level of testing required from
domestic institutions. These submissions would be reviewed on an equal
footing with domestic institutions, and allow the Department to
evaluate efficiently and effectively the financial condition of those
institutions. The Department explained that financial statements
prepared under U.S. GAAP provide Department staff with detailed
information about the financial condition and operation of an
institution. The additional information comes from the analysis of the
audited financial statements, the accompanying audit opinion letters
and related disclosures, and items in the footnote disclosures.
Although the Department explored the use of IFRS as an alternative to
U.S. GAAP, the Department believes it is premature to consider doing so
now because the adoption of IFRS by the U.S. and other countries is
proceeding slowly and inconsistently within the different countries.
After consideration of the feedback from the non-Federal
negotiators, the Department agreed to treat nonprofit and public
foreign institutions alike, and removed the requirement that an unpaid
liability due to the Secretary by related public institutions would
require the submission of audited financial statements prepared in
accordance with U.S. GAAP. In order to reach a compromise with the non-
Federal negotiators, the Department agreed to raise the threshold for
nonprofit and public foreign institutions that would be allowed to
submit audited financial statements prepared in accordance with the
generally accepted accounting principles of the institution's home
country from $1,000,000 to $3,000,000 in U.S. Title IV, HEA program
funds.
The Department also clarified that a foreign institution required
to submit audited financial statements prepared in accordance with U.S.
GAAP would be required also to submit a copy of the institution's
audited financial statements that were prepared under the institution's
home country accounting standards for the same period. By doing so, the
Department would be able to perform a comparative analysis between both
sets of financial statements to determine if the requirement to provide
U.S. GAAP financial statements could be changed in the future.
Upon hearing the revised regulatory proposals, several non-Federal
negotiators suggested that, in lieu of a required annual submission of
any audited financial statements, the Department could simply rely on
applying the exception provided to the Secretary under Sec.
668.23(h)(3)(i) and require an institution to submit audited financial
statements on only an ``as needed'' basis. Some non-Federal negotiators
suggested raising the threshold to as much as $10,000,000 in U.S. Title
IV, HEA program funds. Others suggested that a threshold should be
based on a percentage of U.S. Title IV, HEA program funds received
against the total student generated revenues by an institution.
The Department responded to these concerns with a final
modification for public and nonprofit institutions that receive at
least $3,000,000 but less than $5,000,000 in U.S. Title IV, HEA program
funds annually. The Department was unwilling to accept only audited
financial statements prepared in the home country standards on an
ongoing basis for these institutions due to the unknown comparability
of these submissions to audited financial statements prepared under
U.S. GAAP. However, the Department proposed having these institutions
submit U.S. GAAP financial statements once every three years, rather
than every year, which would allow the Department to achieve the
appropriate level of monitoring while providing some burden relief to
these institutions. This proposal was discussed in detail, and
consensus was reached on this issue.

Compliance Audits (Sec. 668.23)

Statute: Section 487(c)(1)(A)(i) of the HEA was amended by the HEOA
to give the Secretary the authority to modify the financial and
compliance audit requirements for foreign institutions, and the
authority to waive the audit requirements for foreign institutions that
receive less than $500,000 in Title IV, HEA program funds in the
preceding year.
Current Regulations: Section 668.23(a)(2) of the current
regulations requires an annual submission of both a compliance audit
and audited financial statements from all institutions participating in
the Title IV, HEA programs.
Sections 668.23(b)(1) and (2) require that an institution's
compliance audit must cover, on a fiscal year basis, all Title IV, HEA
program transactions, and must cover all of those transactions that
have occurred since the period covered by the institution's last
compliance audit. They also require that the compliance audit under
this section be conducted in accordance with the general standards for
compliance audits contained in the U.S. GAO Government Auditing
Standards and procedures for audits contained in audit guides developed
by the Department of Education's Office of Inspector General.
The Inspector General's current Foreign School Audit Guide, as
amended, includes an Alternative Compliance Engagement that may be used
for foreign institutions whose enrolled students received less than the
$500,000 threshold in U.S. Title IV, HEA program funds.
Proposed Regulations: The proposed regulations would separate
foreign institutions into two groups, establishing new compliance audit
requirements for foreign institutions based upon whether the
institution received less than $500,000 or $500,000 or more in U.S.
Title IV, HEA program funds during the institution's most recently
completed fiscal year.
Under proposed Sec. 668.23(h)(2)(ii) and (iii), foreign
institutions that receive less than $500,000 per year in U.S. Title IV,
HEA program funds would be required to submit compliance audits under
an alternative compliance audit performed in accordance with the audit
guide from the Department's Office of Inspector General. The proposed
regulations would require an annual submission of the compliance audit,
except that, under certain conditions as described in the following
paragraphs, an institution would submit a compliance audit annually for
two consecutive years, then, once notified by the Secretary, would be
permitted to submit a cumulative compliance audit every three years
thereafter.
In order to submit a cumulative compliance audit once every three
years instead of annually, a foreign institution would be required to
have received less than $500,000 U.S. in U.S. Title IV, HEA program
funds for its most recently

[[Page 42212]]

completed fiscal year, be fully certified, have timely submitted and
had accepted compliance audits for two consecutive fiscal years, and
have no history of late submissions since then.
Under an alternative compliance audit, the auditor performs
prescribed procedures and reports the findings, but, unlike a standard
compliance audit, is not required to express an opinion of the
reliability of the institution's assertions concerning the
institution's compliance with the requirements. The alternative
compliance audit is performed as an agreed-upon procedures attestation
engagement, and the standard compliance audit is performed as an
examination-level attestation engagement. An alternative compliance
audit is an agreed-upon procedures attestation engagement, which
consists of specific procedures performed on a subject matter and is
substantially narrower in scope than a standard compliance audit, which
is an examination-level attestation engagement.
Under proposed Sec. 668.23(h)(2)(i), foreign institutions that
receive $500,000 or more per year in U.S. Title IV, HEA program funds,
as in the current regulations, would be required to submit annual
compliance audits using the standard audit procedures for foreign
institutions set out in the audit guide issued by the Office of
Inspector General.
When an institution submits a standard compliance audit because it
received more than $500,000 in U.S. Title IV, HEA program funds in its
previous year, the institution must also submit any alternative
compliance audit or audits for preceding years that were prepared in
accordance with proposed Sec. 668.23(h)(2)(ii) for any preceding
fiscal year or years in which the foreign institution received less
than $500,000 in U.S. Title IV, HEA program funds.
Section 668.23(h)(3)(ii) of the proposed regulations would provide
the Secretary with the authority to require that a foreign
institution's compliance audit must be performed at a higher level of
engagement, and/or require that a compliance audit must be submitted to
the Secretary annually, if the institution has been notified by the
Secretary about problems with its administrative capability or
compliance reporting.
Section 668.23(h)(2) of the proposed regulations would make clear
that, as under current regulations, a foreign institution's compliance
audit must be done on a fiscal year basis, and all Title IV, HEA
program transactions that have occurred since the period covered by the
institution's last compliance audit must be covered. For institutions
that are permitted to submit one compliance audit every three years,
this requirement ensures that the compliance audit is cumulative. Also,
when an institution is required to submit a compliance audit, the
compliance audit must be submitted no later than six months after the
last day of the institution's preceding fiscal year.
Reasons: The Department believes that by allowing foreign
institutions that receive $500,000 or less in U.S. Title IV, HEA
program funds per year to make less frequent audit submissions, the
proposed regulations would provide a basis to establish a streamlined
set of compliance audit requirements that would provide flexibility and
cost benefits to a large number of relatively small foreign
institutions and would reduce the reporting burden for the majority of
foreign institutions that currently participate in the Title IV, HEA
programs.
The proposed regulations would also allow the Department to
concentrate its resources on reviewing compliance audits from larger
volume institutions and institutions that have demonstrated Title IV,
HEA program problems, which represent the Department's greatest
financial risk. It would also be more efficient to review the
cumulative audit submissions from lower-volume foreign institutions.
Approximately 75% of the foreign institutions that participate in the
Title IV, HEA programs are in this lower-volume group, and these
institutions account for less than 7.5% of total Title IV, HEA program
funds received by foreign institutions. Where problems are identified
with a foreign institution, Sec. 668.23(h)(3)(ii) of the proposed
regulations provides that the Secretary may require the compliance
audit to be performed at a higher level of engagement and may require
the compliance audit to be submitted annually.

Public Foreign Institutions and Financial Responsibility (Sec.
668.171)

Statute: Section 487(c)(1)(B) of the HEA provides that the
Secretary shall prescribe regulations, as necessary, to provide for the
establishment of reasonable standards of financial responsibility for
institutions that participate in the Title IV, HEA programs. Section
102(a)(2)(A) of the HEA provides that the Secretary shall prescribe
regulations for determining the comparability of foreign institutions
to Title IV ``institutions of higher education.''
Current Regulations: Section 668.171(c) provides that an
institution is financially responsible if the institution--
Notifies the Secretary that it is designated as a public
institution by the State, local, or municipal government entity, tribal
authority, or other government entity that has the legal authority to
make that designation; and
Provides a letter from an official of that State or other
government entity confirming that the institution is a public
institution. In addition, the institution may not be in violation of
any past performance requirement.
Proposed Regulations: The proposed regulations would permit a
foreign public institution to meet the financial responsibility
requirements in a manner similar to domestic public institutions. That
is, the Secretary would consider a public foreign institution to be
financially responsible if the institution: (1) Notifies the Secretary
that it is designated as a public institution by the country or other
government entity that has the legal authority to make that
designation; and (2) provides documentation from an official of that
country or other government entity confirming that the institution is a
public institution and is backed by the full faith and credit of the
country or other government entity. As with domestic public
institutions, a foreign public institution would not meet this standard
of financial responsibility if it was in violation of any past
performance requirement.
If a foreign public institution did not meet the new requirements,
its financial responsibility would be determined under the general
requirements of financial responsibility, including the application of
the equity, primary reserve, and net income ratios. Although the full
faith and credit provision would provide an alternate way of meeting
the financial responsibility standards for public foreign institutions,
it would not excuse the institution from required submissions of
audited financial statements (see the discussion under Audited
Financial Statements above). If a government entity provided full faith
and credit backing, the entity would be held liable for any Title IV,
HEA program liabilities that were not paid by the institution.
Reasons: Current Sec. 668.171(c) is not addressed to foreign
institutions. Therefore, the proposed regulations would establish a
financial responsibility standard for public foreign institutions that
is comparable to public domestic institutions that participate in the
Title IV, HEA programs. Although the Department has not identified
specific countries that would be willing to provide the

[[Page 42213]]

proposed full faith and credit backing, and one non-Federal negotiator
reported that a particular country with several public institutions
that participate in the Title IV, HEA programs did not think that it
would be willing to provide such backing, the Committee agreed that it
was a good idea to make this alternative available.

Executive Order 12866

Regulatory Impact Analysis

Under Executive Order 12866, the Secretary must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the OMB.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action likely to result in a rule that may
(1) have an annual effect on the economy of $100 million or more, or
adversely affect a sector of the economy, productivity, competition,
jobs, the environment, public health or safety, or State, local, or
tribal governments or communities in a material way (also referred to
as an ``economically significant'' rule); (2) create serious
inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) materially alter the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive order.
Pursuant to the terms of the Executive Order, it has been
determined this proposed regulatory action would not have an annual
effect on the economy of more than $100 million. Therefore, this action
is not ``economically significant'' and subject to OMB review under
section 3(f)(1) of Executive Order 12866. Notwithstanding this
determination, the Secretary has assessed the potential costs and
benefits of this regulatory action and has determined that the benefits
justify the costs.

Need for Federal Regulatory Action

These proposed regulations are needed to implement provisions of
the HEA, as amended by the HEOA, particularly related to audit
requirements for foreign institutions, the USMLE pass rate for foreign
graduate medical schools, clinical training programs of foreign
graduate medical schools, eligibility criteria for foreign graduate
medical schools that have a clinical training program approved by a
State prior to January 1, 2008, clinical training programs for foreign
veterinary schools, provisions for participation by for-profit foreign
nursing schools, and eligibility restrictions applicable to for-profit
(and, later, all) foreign nursing schools. A brief description of the
proposed rules, the reasons for adopting them, and an analysis of their
effects is presented in the following sections of this NPRM:
Definition of a Foreign Institution (Sec. Sec. 600.51, 600.52,
600.54, 682.200, 682.611): Section 102(a)(2)(A) of the HEA requires the
Secretary to establish regulatory criteria for the approval of foreign
institutions and for the determination that they are comparable to an
institution of higher education within the United States. Proposed
Sec. Sec. 600.52 and 600.54 would include a more detailed definition
of foreign institution to ensure that a foreign institution is
comparable to institutions in the United States, in accordance with HEA
section 102(a)(1)(C), before allowing a foreign institution to
participate in the Title IV, HEA programs. The Department is concerned
that a foreign institution that is not comparable to a domestic
institution, especially in terms of the quality of its educational
programs, may misuse Federal funds to the detriment of its students who
may have to borrow heavily in order to attend the foreign institution.
The proposed regulations also more fully implement the scheme of the
HEA, which distinguishes between foreign and domestic institutions and
includes provisions unique to each. For example, these regulations
would prevent a domestic institution from claiming to be a foreign
institution by virtue of the fact that it has established an offshore
location, thereby avoiding the requirements applied to domestic
institutions such as recognized accreditation, but that sends its
students to the United States for the majority of the required
coursework.
As described in the preamble section related to this provision,
under current regulations a foreign institution is eligible to
participate if it is comparable to an institution of higher education
located in the United States; has been approved by the Secretary; does
not offer its programs through any use of telecommunications,
correspondence course, or direct assessment program; is not located in
a State as defined in Sec. 600.2; admits as regular students only
those with a secondary school credential or recognized equivalent; and
is legally authorized by an appropriate authority to provide an
eligible program beyond the secondary level in the country in which it
is located. The foreign institution must also provide eligible programs
for which the institution is authorized to award the equivalent of an
associate, baccalaureate, graduate, or professional degree in the
United States; or a two-year program acceptable for full credit towards
the equivalent of a baccalaureate degree awarded in the United States;
or a program equivalent to a one-academic year training program that
leads to a certificate, degree, or other credential and prepares a
student for gainful employment in a recognized occupation.
The proposed regulations would consolidate the definitions and
requirements related to the eligibility of foreign institutions to
apply for Title IV, HEA program eligibility in subpart E of 34 CFR 600.
As is the current practice, foreign institutions would be required to
comply with all other requirements for eligible and participating
institutions except to the extent the provisions are inconsistent with
the HEA, 34 part CFR 600, or other regulatory provisions specific to
foreign institutions. Proposed Sec. 600.51(c) would also exempt
foreign institutions from requirements that the Secretary identifies
through a notice in the Federal Register. The proposed regulations
would amend Sec. 600.52 to include a detailed definition of foreign
institution. Under the definition proposed, foreign institution would
mean, for the purposes of students who receive Title IV, HEA program
aid, an institution that is not located in a State; has no U.S.
locations except with respect to clinical training for foreign graduate
medical, veterinary, and nursing schools; has no written agreements
with institutions or organizations located in the United States for
students to take a portion of the program in the United States; does
not permit students to enroll in any course offered by the foreign
institution in the United States except for independent research under
very limited circumstances; is legally authorized by an agency of its
home country to provide an education program beyond its secondary
level; awards degrees that are officially recognized by the
institution's home country; and, for a program designed to prepare a
student for gainful employment in a recognized occupation, provides a
credential that satisfies the education requirements in the
institution's home country for entry into that occupation and satisfies
the educational requirements for entry into that occupation in the
United States, including licensure. Proposed Sec. 600.54(a) clarifies
that, with the exception of freestanding foreign

[[Page 42214]]

graduate medical, veterinary, or nursing schools that may be for-
profit, foreign institutions must be public or private nonprofit
education institutions to be eligible.
Nonprofit Status for Foreign Institutions (Sec. 600.2): As foreign
institutions must be public or private nonprofit institutions to
participate in the Title IV, HEA programs, unless they are medical,
veterinary, or nursing schools, the Department believes it is necessary
to delineate in regulations the requirements for demonstrating
nonprofit status for foreign institutions. Current section 600.2
defines a nonprofit institution as an institution that--
Is owned and operated by one or more nonprofit
corporations or associations, no parts of the net earnings of which
benefits any private shareholder or individual;
Is legally authorized to operate as a nonprofit
organization by each State in which it is physically located; and
Is determined by the U.S. Internal Revenue Service (IRS)
to be an organization to which contributions are tax-deductible in
accordance with section 501(c)(3) of the Internal Revenue Code (26
U.S.C. 501(c)(3)).
Under proposed Sec. 600.2, a new paragraph (2) of the definition
of a nonprofit institution would provide that if a recognized tax
authority of a foreign institution's home country is recognized by the
Secretary for purposes of making determinations of an institution's
nonprofit status for Title IV, HEA purposes, the Secretary would
automatically accept that tax authority's determination of nonprofit
educational status for any institution located in that country. If a
recognized tax authority of the institution's home country is not
recognized by the Secretary for purposes of making determinations of an
institution's nonprofit status for Title IV, HEA program purposes, a
foreign institution would have to demonstrate to the satisfaction of
the Secretary that it is a nonprofit educational institution. The
proposed regulations would also make clear that a nonprofit foreign
institution may not be owned by a for profit entity, directly or
indirectly. A foreign institution that did not meet this definition of
a nonprofit foreign institution would not be eligible to participate in
the Title IV, HEA programs unless it was a medical, veterinary, or
nursing school.
The proposed regulations should increase comparability in the
determination of nonprofit status between domestic and foreign
institutions. A domestic institution must be determined by the IRS to
be a nonprofit organization in order to be eligible as a nonprofit
institution for participation in the Title IV, HEA programs.
Additionally, certain countries may not have standards for the
determination of nonprofit status that are comparable to those used in
the United States, and may not ensure that the institution's net
earnings do not benefit any private shareholder or individual.
Therefore, to make the proposed regulations as comparable as possible
to those applicable to domestic institutions, the Department proposed,
and the Committee agreed, that a determination that an institution is
nonprofit by an entity in the institution's foreign country would
qualify an institution as nonprofit only if the determination is made
by a recognized tax authority of the country, and the Secretary has
recognized that tax authority as one that can make a determination
using criteria that are similar to those used by the U.S. IRS. The
Secretary may recognize more than one tax authority in a country.
Information submitted by entities other than recognized tax authorities
would be taken into account by the Department; however, this would be
done as part of an individual determination of the eligibility of an
institution.
Foreign Graduate Medical Schools (Sec. Sec. 600.20, 600.21,
600.52, 600.55): As discussed in the section of the preamble related to
this provision, the proposed regulations reflect amendments made to the
sections 102(a)(2)(A) and (B) of the HEA by the HEOA and the
requirement in 102(a)(2)(B)(iii)(IV)(aa) of the HEA that the
regulations be based on the recommendations of the 2009 NCFMEA report.
The NCFMEA is a panel of medical experts that evaluates the medical
school accrediting agency standards used in the country where medical
education is provided to determine comparability to the standards of
accreditation applied to medical schools in the United States.
Current section 600.52 defines a foreign graduate medical school as
a foreign institution that qualifies to be listed in, and is listed as
a medical school in, the most current edition of the World Directory of
Medical Schools published by the World Health Organization. The
regulations do not define clinical training, the NCFMEA, or a post-
baccalaureate/equivalent medical degree. Neither section 600.20, which
addresses the application procedures for establishing, reestablishing,
maintaining, or expanding institutional eligibility and certification,
nor Sec. 600.21, which addresses when and how an institution must
update application information, currently include any provisions
specific to foreign graduate medical schools. Foreign graduate medical
schools generally must meet the criteria in Sec. 600.54 for
determining a foreign institution's eligibility (except the criterion
that the institution be public or private nonprofit), as well as the
additional criteria in Sec. 600.55(a)(5). The additional criteria
include the following: (1) Providing and requiring students to complete
a program of clinical and classroom medical instruction of not less
than thirty-two months that is supervised closely by faculty and that
is provided (a) outside the United States in facilities adequately
equipped and staffed to afford students comprehensive clinical and
classroom medical instruction, or (b) in the United States, through a
training program for foreign medical students that has been approved by
all medical licensing boards and evaluating bodies whose views are
considered relevant by the Secretary; (2) having graduated classes
during each of the two twelve-month periods immediately preceding the
date the Secretary receives the school's request for an eligibility
determination; (3) employing only those faculty members whose academic
credentials are the equivalent of credentials required of faculty
members teaching the same or similar courses at medical schools in the
United States; and (4) being approved by an accrediting body that is
legally authorized to evaluate graduate medical schools in the country
where the school is located and whose standards of accreditation have
been evaluated by the advisory panel of medical experts established by
the Secretary and have been determined to be comparable to standards of
accreditation applied to medical schools in the United States. In
addition, current regulations provide that foreign graduate medical
schools that do not have a clinical training program that has been
continuously approved by a State since January 1, 1992, must: (1)
During the academic year preceding the year for which any of the
school's students seeks a FFEL program loan, have at least 60 percent
of those enrolled as full-time regular students in the school and at
least 60 percent of the school's most recent graduating class be
persons who did not meet the citizenship and residency criteria
contained in section 484(a)(5) of the HEA, 20 U.S.C. 1091(a)(5); and
(2) for a foreign graduate medical school outside of Canada, have at
least 60 percent of the school's students and graduates who took any
step of the USMLE administered by the

[[Page 42215]]

ECFMG (including the ECFMG English test) in the year preceding the year
for which any of the school's students seeks a FFEL program loan to
have received passing scores on the exams.
The proposed regulations would deal with location requirements for
foreign medical education programs, affiliation agreements, application
and notification procedures, accreditation, admission criteria,
collection and submission of data, citizenship and USMLE pass rate
percentages, maximum timeframes for program completion, required
documentation related to educational remediation a school provides as
part of a satisfactory academic progress policy, and publication of the
languages in which instruction is offered.
Proposed Sec. 600.55(h) contains regulations concerning the
locations where a foreign graduate medical school can establish its
program. No portion of the medical education program offered to United
States students by a foreign graduate medical school, other than the
clinical training portion of the program, would be allowed to be
offered outside the country where the main campus of the school is
located. In addition to distinguishing between the basic science and
the clinical training parts of the program, the Committee discussions
distinguished between the different parts of clinical training;
referred to in these proposed regulations as the core, the required
clinical rotation (the electives that students are required to take),
and the not required clinical rotation (the electives that students can
choose). The proposed regulations set three criteria for clinical
training sites outside the United States--the requirement to be located
in an approved comparable country; required on-site evaluation and
specific approval of the site by the institution's medical accrediting
agency if a location is in a comparable foreign country outside the
country of the program's main campus; and the requirement that
instruction be offered in conjunction with medical educational programs
offered to students enrolled in accredited medical schools located in
that approved foreign country--but allow two exceptions. The two
exceptions would permit a foreign graduate medical school to have a
clinical training program in a foreign country other than the country
in which the main campus is located or in the United States without
meeting these three criteria if the clinical training location is
included in the accreditation of a medical program accredited by the
LCME, or if no individual student takes more than two electives at the
clinical training location and the combined length of the electives
does not exceed eight weeks.
Proposed Sec. 600.55(e)(1) would require a foreign graduate
medical school to have: (1) A formal affiliation agreement with any
hospital or clinic at which all or a portion of the school's core
clinical training or required clinical rotations are provided; and (2)
either a formal affiliation agreement or other written arrangements
with any hospital or clinic at which all or a portion of its clinical
rotations that are not required are provided, except for those
locations that are not used regularly, but instead are chosen by
individual students who take no more than two electives at the location
for no more than a combined total of eight weeks. The proposed
regulations would require these affiliation agreements or other written
arrangements to state how the following will be addressed at each site:
(1) Maintenance of the school's standards; (2) appointment of faculty
to the medical school staff; (3) design of the curriculum; (4)
supervision of students; (5) provision of liability insurance; and (6)
evaluation of student performance. In addition, the proposed
regulations would require a foreign graduate medical school to do the
following in its application for participation in Title IV, HEA
programs: (1) To provide copies of the affiliation agreements with
hospitals and clinics that it is required to have under proposed Sec.
600.55(e)(2); (2) to list all educational sites associated with its
program on its application for participation, except those not used
regularly that are chosen by individual students who take no more than
two electives there for no more than a combined total of eight weeks;
(3) to apply for certification and wait for approval before dispensing
Title IV, HEA program funds at any additional location that offers core
clinical training, except for those locations included in the
accreditation of a medical program accredited by the LCME; and (4) to
indicate whether it offers only post-baccalaureate/equivalent medical
programs, other types of programs that lead to employment as a doctor
of osteopathic medicine or doctor of medicine, or both. The Department
believes that distinguishing between the parts of the medical education
program allows a balance between effective oversight and exposure to
other medical environments and cultures for short-term elective
training.
Other proposed regulations address general definitions and
requirements related to foreign graduate medical programs. The proposed
regulations would change the definition of a foreign graduate medical
school, removing the requirement that a school qualify for listing in
the World Directory of Medical Schools and clarifying that schools
would have to meet all applicable criteria for foreign institution's
Title IV, HEA program eligibility in part 600, not just the criteria in
Sec. 600.55. In its place, the definition proposed would clarify that
a foreign graduate medical school can be free-standing or a component
of an eligible foreign institution. Current regulations require only
clinical training and classroom instruction that is offered outside of
the United States to be provided in facilities adequately equipped and
staffed to afford students comprehensive clinical and classroom medical
instruction, and require only the clinical training and classroom
instruction located in the United States to be approved by all medical
licensing boards and evaluating bodies whose views are considered
relevant by the Secretary. Proposed Sec. 600.55(a)(2) would apply
these provisions to the entire medical program, regardless of whether a
particular portion is located outside or inside the United States, as
the Department believes both are good requirements for medical
education regardless of location. In Sec. 600.52, the proposed
regulations would add a definition of clinical training. Clinical
training would be defined as the portion of a graduate medical
education program that counts as a clinical clerkship for purposes of
medical licensure. Proposed Sec. Sec. 600.20(a)(3)(i)(B) and
(b)(3)(i)(B) would require freestanding foreign graduate medical
schools, and foreign institutions that include a foreign graduate
medical school, to identify, for each clinical site reported in the
certification or recertification application as required under
Sec. Sec. 600.20(a)(3)(i)(A) and (b)(3)(i)(A), the type of clinical
training (core, required clinical rotation, not required clinical
rotation) offered at that site. Proposed Sec. 600.55(a)(3) would
require foreign graduate medical schools to appoint, rather than
employ, faculty members with comparable academic credentials to those
teaching similar courses at U.S. medical schools. The proposed
regulations make no substantive changes to existing accreditation
requirements for foreign graduate medical schools.
The proposed regulations also address admission criteria and
collection and submission of data in order to provide data for the
evaluation of whether additional performance measures should be
required of foreign graduate medical schools. Proposed Sec. 668.55(c)

[[Page 42216]]

would require foreign graduate medical school with a post-
baccalaureate/equivalent medical program to require U.S. citizens,
nationals, or permanent residents accepted as students to have taken
the MCAT and have reported the scores to the school. To provide
information valuable for the future evaluation of the quality of
education being provided to students attending foreign graduate medical
schools, foreign graduate medical schools must determine consent
requirements, obtain necessary consents from U.S. citizens, nationals,
or eligible permanent residents, and comply with the collection and
submission requirements in proposed Sec. 600.55(d) for MCAT scores,
residency placement, and USMLE examination scores. Proposed Sec.
600.55(d) requires that schools obtain the required information at
their own expense, submit MCAT scores and medical residency data to
their accrediting agency by September 30 of each year, and submit the
USMLE scores for Step 1, Step 2--Clinical Skills, and Step 2--Clinical
Knowledge to the Department annually by September 30 unless the
Department informs the school that it will get the USMLE scores from
ECFMG. The provision in proposed Sec. 600.55(e)(2) would require a
foreign graduate medical school to notify its accrediting body within
one year of any material changes in educational programs, and the
overseeing bodies and in the formal affiliation agreements with
hospitals and clinics would reflect NCFMEA Recommendations 12(a) and
12(b) and would allow a school's accrediting body to assess any
substantive impact the change would have on the school's operations.
The proposed change in Sec. 600.55(f)(1)(i)(B) to allow a foreign
graduate medical school to be exempt from the existing citizenship
requirement if it had a clinical training program approved by a State
as of January 1, 2008, and continues to operate a clinical training
program in at least one State that approves the program, reflects a
change made by the HEOA. As a result, both foreign graduate medical
schools that had a clinical training program approved by a State as of
January 1, 1992, and those that had a clinical training program
approved by a State as of January 1, 2008, are exempt from the
citizenship rate provision, provided the school continues to operate a
clinical training program in at least one State that approves the
program.
The increase in the USMLE pass rate threshold from 60 percent to 75
percent also reflects a change made by the HEOA, as does proposed Sec.
600.55(f)(2)(ii), which would allow a foreign graduate medical school
that was eligible to participate in the Title IV, HEA programs and
exempt from the USMLE pass rate requirement based on having a clinical
training program approved by a State as of January 1, 1992, to continue
to be eligible and exempt from the USMLE pass rate requirement as long
as it continues to operate a clinical training program in at least one
State that approves the program. Proposed Sec. 600.55(f)(1)(ii) would
make the following changes to the USMLE pass rate requirement: (1)
Increase the USMLE pass rate threshold from 60 percent to 75 percent
(Sec. 600.55(f)(1)(ii)); (2) limit the pass rate requirement to Step
1, Step 2--CS, and Step 2--CK, excluding Step 3; (3) require a foreign
graduate medical school to have at least a 75 percent pass rate on each
step/test of the USMLE (limited to Step 1, Step 2--CS, and Step 2--CK),
rather than a combined pass rate for all steps/tests; (4) require
foreign graduate medical schools to include in the calculation only
U.S. citizens, nationals, or eligible permanent residents, rather than
all students taking the USMLE; and (5) require foreign graduate medical
schools to include only first time test takers in the calculation. As
described in the preamble section related to this provision, under
proposed Sec. 600.55(f)(4), pass rates must be based on at least eight
step/test results.
Proposed Sec. 600.55(g)(1) would require a foreign graduate
medical school to follow existing regulations currently applicable to
undergraduate programs for establishing a maximum timeframe in which a
student must complete his or her program of medical education and
require that a student complete his or her program within 150 percent
of the published length of the program. This adopts NCFMEA
Recommendation 9(b). In addition, proposed Sec. 600.55(g)(2) would
require a foreign graduate medical school to document the educational
remediation it provides to assist students in making satisfactory
academic progress. In the future, the Department or the NCFMEA may
collect and examine the data to see if this is an area of concern that
may need to be addressed, but they did not believe it was currently
necessary or cost effective to require the regular submission of these
data to the Department. Finally, proposed Sec. 600.55(g)(3) would
require a foreign graduate medical school to publish all the languages
in which instruction is offered. Although NCFMEA Recommendation 10
suggested requiring schools to publish the primary language of
instruction, and if not English, identify any alternate language of
instruction, the Committee agreed that requiring schools to publish all
languages in which instruction is offered would be more beneficial and
no more burdensome.
Foreign Veterinary Schools (Sec. 600.56): Section 102(a)(2)(A)(ii)
of the HEA stipulates that Title IV borrowers attending a foreign for-
profit veterinary school must complete clinical training at an approved
veterinary school located in the United States. The HEA does not
establish additional eligibility criteria specific to foreign
veterinary schools, and requires the Secretary to develop, through
regulation, eligibility criteria for foreign institutions that are
comparable to the eligibility criteria for domestic institutions of
higher education. Under current regulations, foreign veterinary school
facilities outside the United States must be adequately equipped and
staffed to provide students comprehensive clinical and classroom
veterinary instruction, foreign veterinary school programs provided
inside the United States must be approved by all veterinary licensing
boards and evaluating bodies that the Secretary considers to be
relevant, and the credentials of faculty members employed by the
foreign veterinary school must be equivalent to the credentials of
faculty members teaching the same or similar courses in the United
States.
The Department proposed revising the regulations governing
eligibility criteria for foreign veterinary schools to improve the
Department's process for making determinations of eligibility of
foreign veterinary schools to participate in the Title IV, HEA
programs. The proposed regulations would apply the current regulatory
standards regarding facilities, approvals and faculty credentials
without distinguishing between portions of veterinary programs provided
inside and outside of the United States, and, as of July 1, 2015, would
require a foreign veterinary school to be accredited or provisionally
accredited by an organization acceptable to the Secretary. As required
by the HEA, the proposed regulations also distinguish between for-
profit foreign veterinary schools and those that are public or private
nonprofit. Students from a for-profit foreign veterinary school must
complete their clinical training at an approved veterinary school
located in the United States. Students from public or private nonprofit
foreign veterinary schools may complete their clinical training at an
approved veterinary school located

[[Page 42217]]

in the United States or in the home country, and may also take clinical
training outside the United States or the home country if no individual
student takes more than two electives at the location and the combined
length of the elective does not exceed eight weeks. The Department
agreed to be consistent with medical school provisions that would
permit some clinical training locations of foreign graduate medical
schools to be outside of the United States and the country in which the
main campus of the school is located. This provision could not be
extended to for-profit veterinary schools because the statute requires
students who attend these schools to complete their clinical training
in the United States.
Foreign Nursing Schools (Sec. 600.57): The HEOA amended section
102(a)(2)(A) of the HEA to provide specific standards for foreign
nursing schools. The amendments are effective beginning July 1, 2010,
except that, for nursing schools that were eligible for Title IV, HEA
program participation on August 13, 2008 (the day before enactment of
the HEOA), they are effective July 1, 2012. The HEA, as amended by the
HEOA and HCERA, provides that a foreign nursing school, including a
for-profit nursing school, may not participate in the Title IV, HEA
programs unless the school: (1) Has an clinical training agreement with
a hospital or accredited school of nursing located in the United
States; (2) has an agreement with an accredited school of nursing
located in the United States providing that the students graduating
from the foreign nursing school also receive a degree from the
accredited U.S. school of nursing; (3) certifies only Federal Direct
Stafford Loans under section 455(a)(2)(A) of the HEA, Federal Direct
Unsubsidized Stafford Loans under section 455(a)(2)(D) of the HEA, or
Federal Direct PLUS loans under section 455(a)(2)(B) of the HEA for
students attending the school; and (4) reimburses the Secretary for the
cost of any loan defaults for current and former students included in
the calculation of the school's cohort default rate during the previous
fiscal year. In addition, the HEOA amendments to the HEA require that
at least 75 percent of the individuals who were students or graduates
of a foreign nursing school, and who took the National Council
Licensure Examination for Registered Nurses (NCLEX-RN) in the year
preceding the year for which the school is certifying a Title IV, HEA
program loan, received a passing score on the NCLEX-RN. Current
regulations do not define the term ``foreign nursing school'', or
specify Title IV, HEA program eligibility criteria unique to foreign
nursing schools.
The proposed regulations would add several new definitions relating
to foreign nursing schools to Sec. 600.52, and would add a new Sec.
600.57 specifying additional Title IV eligibility criteria for foreign
nursing schools. The proposed regulations would add definitions to
Sec. 600.52 for the terms associate degree school of nursing,
collegiate school of nursing, and diploma school of nursing, with the
primary distinction between the three types of nursing schools being
the type of degree offered by the school. For an associate degree
school of nursing, the nursing program must lead to a degree equivalent
to an associate degree in the U.S. For a collegiate school of nursing,
the nursing program must lead to a degree equivalent to a bachelor of
arts, a bachelor of science, or a bachelor of nursing in the U.S., or
to a degree equivalent to a graduate degree in nursing in the U.S. For
a diploma school of nursing, the nursing program must lead to the
equivalent of a diploma in the U.S. or to other indicia equivalent to a
diploma that demonstrates that the student has satisfactorily completed
the program. These definitions are drawn from the Public Health Service
Act, as required by the foreign nursing school provisions of the HEOA
amendments to the HEA.
Proposed new Sec. 600.57 would require a foreign nursing school to
meet the applicable eligibility criteria elsewhere in part 600. In
addition, a foreign nursing school must meet the statutory requirements
described above as well as the following eligibility criteria: (1) Meet
the definition of associate degree school of nursing, collegiate school
of nursing, or diploma school of nursing; (2) reimburse the Department
for the cost of any loan defaults for current and former students
included in the calculation of the institution's cohort default rate
during the previous fiscal year; (3) determine the consent requirements
for, and require the necessary consents of, all students accepted for
admission who are U.S. citizens, nationals, or eligible permanent
residents, to enable the school to comply with the requirements for
collection and submission of NCLEX-RN results or pass rates; (4)
annually, at its own expense, obtain all results on the NCLEX-RN
achieved by students and graduates who are U.S. citizens, nationals, or
eligible permanent residents, together with the dates the student has
taken the examination (including any failed examinations) and provide
the results to the Secretary; (5) as an alternative to obtaining the
NCLEX results individually, the school may obtain a report or reports
from the National Council of State Boards of Nursing (NCSB), or an NCSB
affiliate or NCSB contractor, reflecting the percentage of the school's
students and graduates taking the NCLEX-RN in the preceding year who
passed the examination, or the data from which the percentage could be
derived, and provide the report to the Secretary; (6) provide, a
program of clinical and classroom nursing instruction, which students
are normally required to complete, that is supervised closely by
members of the school's faculty. The program, which includes programs
provided through agreements with nursing schools in the United States,
must be provided in facilities adequately equipped and staffed to
afford students comprehensive clinical and classroom nursing
instruction, through a training program for foreign nursing students
that has been approved by all nurse licensing boards and evaluating
bodies whose views are considered relevant by the Secretary; (7) have
graduated classes during each of the two twelve-month periods
immediately preceding the date the Secretary receives the school's
request for an eligibility determination; and (8) employ only those
faculty members whose academic credentials are the equivalent of
credentials required of faculty members teaching the same or similar
courses at nursing schools in the United States.
The proposed regulations also would specify that after a school
reimburses the Secretary for the cost of a loan default, the loan is
assigned to the school. The borrower remains liable to the school for
the outstanding balance of the loan, under the terms and conditions
specified in the promissory note.
Proposed Sec. 600.56(b) would provide that no portion of the
foreign nursing program offered to U.S. students may be located outside
of the country in which the main campus of the foreign nursing school
is located, except for clinical sites, which by statute must be located
in the United States.

Single Legal Authorization for Groups of Foreign Institutions (Sec.
600.54)

To ease administrative burden for foreign institutions, the
Department sought to determine if compliance with any of the foreign
institution institutional eligibility criteria could be demonstrated at
a nationwide level, for all eligible institutions within a country,
rather than at the individual institution level. After discussions with
the non-Federal negotiators and our own

[[Page 42218]]

internal review of the Title IV institutional eligibility criteria, the
Department determined that the requirement for proof of legal
authorization to provide postsecondary education could be provided this
way. Section 600.54(b) of the current regulations requires a foreign
institution to be legally authorized by an appropriate authority to
provide postsecondary education in the country where the institution is
located. Proposed Sec. 600.54(f) would provide three different methods
for a foreign institution to prove that it is legally authorized to
provide postsecondary education in the country where the institution is
located. The documentation from a foreign country's education ministry,
council, or equivalent agency may either be: (1) A single legal
authorization that covers all eligible foreign institutions in the
country; (2) a single legal authorization that covers all eligible
foreign institutions in a jurisdiction within the country; or (3)
separate legal authorizations for each eligible foreign institution in
the country.
The proposed regulations reflect recommendations made in response
to concerns raised by non-Federal negotiators about reliance on
national governments to produce lists of institutions legally
authorized to provide postsecondary education because of efficiency and
provincial level regulation of educational providers in some countries.
In addition to allowing proof of legal authorization to be provided on
a nationwide basis, the proposed regulations allow for proof of legal
authorization to be provided for all eligible institutions in a
jurisdiction within the country, and continue to allow proof of legal
authorization to be provided separately for each eligible institution
in a country.
Eligibility of Training Programs at Foreign Institutions (Sec.
600.54): Section 101(b)(1) of the HEA provides, in part, that one type
of educational program that a Title IV ``institution of higher
education'' may provide to be eligible to apply to participate in the
Title IV, HEA programs, is a training program of at least one year that
prepares students for gainful employment in a recognized occupation.
Section 102(a)(2)(A) provides for participation in the Title IV, HEA
programs by entities that are comparable to such institutions under
regulations prescribed by the Secretary. Current regulations provide
that, in order to be eligible to apply to participate in the Title IV,
HEA programs, a foreign institution must provide an eligible
educational program that leads to a degree that is equivalent to a U.S.
degree, or be at least a two-academic year program acceptable for full
credit toward the equivalent of a U.S. baccalaureate degree, or be
equivalent to at least a one-academic-year training program that leads
to a certificate, degree, or other recognized educational credential
and prepares students for gainful employment in a recognized
occupation.
Under the proposed regulations, a foreign institution would have to
demonstrate to the satisfaction of the Secretary (who would make
program-by-program determinations of comparability) that the amount of
academic work required by a program it seeks to qualify as eligible as
at least a one-academic-year training program is equivalent to--
For a program offered in credit hours, a minimum of 30
weeks of instructional time and, for an undergraduate program, an
amount of instructional time whereby a full-time student is expected to
complete at least 24 semester or trimester credit hours or 36 quarter
credit hours; or
For a program offered in clock hours, a minimum of 26
weeks of instructional time and, for an undergraduate program, an
amount of instructional time whereby a full-time student is expected to
complete at least 900 clock hours.
The Department believes the proposed regulations are necessary
because many foreign institutions use educational measurements other
than conventional U.S. semester, trimester, quarter credits and clock-
hours. The non-Federal negotiators provided the Department with
information regarding the definition of non-degree programs by
different countries, units of measurement for programs in other
countries, and evaluation and comparability determinations made by
private entities. The information provided consistently indicates that
the assignment of credits or other measures of academic work by foreign
institutions vary greatly. As the definition of an academic year--the
program length measurement used here--specifically references these
U.S. measurements, it is necessary to make some sort of comparability
determination in order to determine the eligibility of these programs
at foreign institutions, and in some cases to determine the eligibility
of the foreign institution itself. Under the proposed regulations, the
Secretary would make determinations of comparability on a program-by-
program basis, based on information provided by a foreign institution
to demonstrate that the amount of academic work required by a program
it seeks to qualify as eligible as comparable to at least a one-
academic-year training program is equivalent to the academic work
required for eligibility of these programs at domestic institutions.
Audited Financial Statements (Sec. 668.23): Section
487(c)(1)(A)(i) of the HEA was amended by the HEOA to give the
Secretary the authority to modify the financial and compliance audit
requirements for foreign institutions and the authority to waive the
audit requirements for foreign institutions that receive less than
$500,000 in Title IV, HEA program funds in the preceding year.
Currently, under Sec. 668.23(a)(2), an annual submission of both a
compliance audit and audited financial statements is required of all
institutions participating in the Title IV, HEA programs. Section
668.23(d)(1) requires that an institution's financial statements must
be prepared on an accrual basis in accordance with U.S. GAAP, and
audited by an independent auditor in accordance with U.S. GAGAS, or in
compliance with guidance in Office of Management and Budget Circular A-
133 and A-128 or in audit guides developed by, and available from, the
Department of Education's Office of Inspector General.
The proposed regulations categorize foreign institutions by control
and amount of Title IV, HEA program funds received during the
institution's most recently completed fiscal year and establish new
financial audit submission requirements. For a public or nonprofit
foreign institution that received less than $500,000 in U.S. Title IV,
HEA program funds during the institution's most recently completed
fiscal year, the audited financial statements submission normally would
be waived. However, if the institution is in its initial provisional
period of participation, and received Title IV, HEA program funds
during that year, the institution must submit, in English, audited
financial statements prepared in accordance with generally accepted
accounting principles of the institution's home country. For a public
or nonprofit foreign institution that received at least $500,000 but
less than $3,000,000 in U.S. Title IV, HEA program funds during its
most recently completed fiscal year, the institution would be allowed
to submit for that year, in English, audited financial statements
prepared in accordance with the generally accepted accounting
principles of the institution's home country in lieu of financial
statements prepared in accordance with U.S. GAAP. For a public or
nonprofit foreign institution that received at least $3,000,000 but
less than $5,000,000 in

[[Page 42219]]

U.S. Title IV, HEA program funds during its most recently completed
fiscal year, the institution would be required to submit once every
three years audited financial statements prepared in accordance with
the generally accepted accounting principles of both the institution's
home country and U.S. GAAP, but, for the two years in between, would be
allowed to submit in English, audited financial statements prepared in
accordance with the generally accepted accounting principles of the
institution's home country in lieu of financial statements prepared in
accordance with U.S. GAAP. Foreign institutions that receive more than
$5,000,000 or more annually would remain subject to current
requirements for audited financial statements prepared in accordance
with U.S. GAAP.
The proposed regulations also allow the Secretary to issue a letter
to a foreign institution that has been identified as having problems
with its financial condition or financial reporting that requires the
foreign institution to submit its audited financial statements in the
manner specified by the Secretary.
Compliance Audits (Sec. 668.23): Current regulations require an
annual submission of both a compliance audit and audited financial
statements from all institutions participating in the Title IV, HEA
programs. An institution's compliance audit must cover on a fiscal year
basis, all Title IV, HEA program transactions, and must cover all of
those transactions that have occurred since the period covered by the
institution's last compliance audit and be conducted in compliance with
the general standards for compliance audits contained in the U.S. GAO
Government Auditing Standards and procedures for audits contained in
audit guides developed by the Department of Education's Office of
Inspector General. The current Inspector General's Audit Guide
concerning compliance audits for foreign institutions includes an
Alternative Compliance Engagement that may be used for foreign
institutions whose enrolled students received less than the $500,000
threshold in U.S. Title IV, HEA program funds.
The proposed regulations would separate foreign institutions into
two groups, establishing new compliance audit requirements for foreign
institutions based upon whether the institution received less than
$500,000 or $500,000 or more in U.S. Title IV, HEA program funds during
the institution's most recently completed fiscal year. For foreign
institutions that receive less than $500,000 per year in U.S. Title IV,
HEA program funds would be required to submit compliance audits under
an alternative compliance audit performed in accordance with the audit
guide from the Department's Office of Inspector General. Under an
alternative compliance audit, the auditor performs prescribed
procedures and reports the findings, but, unlike a standard compliance
audit, is not required to express an opinion of the reliability of the
institution's assertions concerning the institution's compliance with
the requirements. The alternative compliance audit is performed as an
agreed-upon procedures attestation engagement, and the standard
compliance audit is performed as an examination-level attestation
engagement. The proposed regulations would require an annual submission
of the compliance audit, except that, in specified circumstances, an
institution would submit a compliance audit annually for two
consecutive years, then, once notified by the Department, would be
permitted to submit a compliance audit every three years thereafter. To
qualify for these less frequent submission requirements, a foreign
institution would be required to have received less than $500,000 in
the most recently completed fiscal year, be fully certified, have
timely submitted and had accepted compliance audits for two consecutive
fiscal years, and have no history of late submissions since then.
Foreign institutions that receive $500,000 or more in U.S. Title
IV, HEA program funds would be required to submit an annual compliance
audit using the standard audit procedures for foreign institutions in
the audit guide issued by the Office of Inspector General. The
compliance audit would be submitted along with any alternative
compliance audits for any preceding fiscal years in which the
institutions received less than $500,000 in U.S. Title IV, HEA program
funds.
Section 668.23(h)(3)(ii) of the proposed regulations would provide
the Secretary with the authority to require that a foreign
institution's compliance audit be performed at a higher level of
engagement, and/or require that a compliance audit must be submitted to
the Secretary annually if it has been identified that the institution
has problems with its administrative capability or compliance
reporting. Section 668.23(h)(2) of the proposed regulations would make
clear that, as under the current regulations, a foreign institution's
compliance audit must be done on a fiscal year basis, and all Title IV,
HEA program transactions that have occurred since the period covered by
the institution's last compliance audit must be covered. Also, a
compliance audit must be submitted no later than six months after the
last day of the institution's fiscal year.
The Department believes the proposed regulations provide a basis to
establish a streamlined set of compliance audit requirements that would
provide flexibility and cost benefits to the large number of relatively
small foreign institutions and reduce the reporting burden for the
majority of foreign institutions. Approximately 75% of the foreign
institutions that participate in the Title IV, HEA programs are in this
lower-volume group, and these institutions account for less than 7.5%
of total Title IV, HEA program funds received by foreign institutions.
The proposed regulations should allow the Department to concentrate its
resources on reviewing compliance audits from the larger volume
institutions and institutions that have demonstrated Title IV, HEA
program problems that represent the Department's greatest financial
risk.

Public Foreign Schools and Financial Responsibility (Sec. 668.171)

Section 487(c)(1)(B) of the HEA provides that the Secretary shall
prescribe regulations, as necessary, to provide for the establishment
of reasonable standards of financial responsibility for institutions
that participate in the Title IV, HEA programs. Section 102(a)(2)(A)
provides that the Secretary shall prescribe regulations for determining
the comparability of foreign schools to Title IV ``institutions of
higher education.'' Current section 668.171(c) provides that an
institution is financially responsible if the institution notifies the
Secretary that it is designated as a public institution by the State,
local, or municipal government entity, tribal authority, or other
government entity that has the legal authority to make that
designation, and provides a letter from an official of that State or
other government entity confirming that the institution is a public
institution. In addition, the institution may not be in violation of
any past performance requirement. Current Sec. 668.171(c) is not
addressed to foreign institutions. The proposed regulations would
permit a foreign public institution to meet the financial
responsibility in a manner similar to domestic public institutions as
described above. If a foreign public institution did not meet the new
requirements, its financial responsibility would be determined under
the general requirements of financial responsibility, including the
application of the equity, primary reserve, and net income ratios.

[[Page 42220]]

Although the full faith and credit provision would provide an alternate
way of meeting the financial responsibility standards for public
foreign institutions, it would not excuse the institution from required
submissions of audited financial statements.
The following section addresses the alternatives that the Secretary
considered in implementing these regulations. These alternatives are
also discussed in more detail in the Reasons sections of this preamble
related to the specific regulatory provisions.

Regulatory Alternatives Considered

Definition of a Foreign Institution (Sec. Sec. 600.51, 600.52,
600.54, 682.200, 682.611): As described in the section of the preamble
related to this provision, there were extensive comments and
negotiations related to the definition of a foreign institution. In
response to the Department's position that a more detailed definition
of foreign institution is necessary and request for comments, several
non-Federal negotiators urged the Department to define the term to
ensure quality control through high academic standards and suggested
subjecting foreign institutions to accreditation by accreditors
recognized by the Department. When the Department indicated that it
does not recognize U.S. accreditors for accreditation of institutions
outside the United States, the non-Federal negotiators suggested a
requirement that foreign institutions be ``legally authorized'' by an
appropriate authority in the country in which the institution is
located, with some negotiators urging the Department to be flexible in
this area as such authority could reside in different branches of
government depending on the country. Several non-Federal negotiators
suggested that the Department require foreign countries to recognize
the degrees and licenses offered by a foreign institution.
The Department drafted regulatory language that responded to these
suggestions and also included provisions prohibiting foreign
institutions from entering into written arrangements with institutions
located in the United States and preventing foreign institution
students from engaging in courses, research, work, and other pursuits
within the United States that drew objections from the non-Federal
negotiators. The Department included these provisions to address abuses
whereby an institution sets up an offshore campus to claim foreign
institution status and thus avoids domestic requirements even though
the institution is, for all intents and purposes, a domestic
institution, but the non-Federal negotiators felt the language was too
broad and urged the Department to make exceptions for research
conducted in the United States by PhD students. In responding to these
comments, the Department clarified the meaning of the terms written
agreement and educational enterprise and sought to further distinguish
between foreign and domestic institutions by prohibiting foreign
locations of an educational enterprise from being considered additional
locations of a domestic location of the educational enterprise if the
enterprise has at least twice as many students enrolled in foreign
locations as those enrolled in domestic locations.
The non-Federal negotiators were comfortable with the majority of
the Department's proposed language but several non-Federal negotiators
continued to raise concerns about the proposed language prohibiting
U.S. locations of foreign institutions and written arrangements with
institutions located in the United States. The Department indicated
that foreign institutions can establish locations in the United States,
but that such locations and institutions would need to be separately
certified and meet the requirements applicable to domestic institutions
in order for U.S. students attending them to receive Title IV, HEA
funds. The Department does not want a foreign institution to send its
U.S. students to a U.S. location of a foreign institution or to a U.S.
institution with which it has an agreement for their training because
students enrolled in a foreign institution are only eligible for Direct
Loan program (or, before July 1, 2010, FFEL program) loans. Instead,
the Department wants U.S. students attending postsecondary institutions
in the United States to be eligible for the full range of Title IV, HEA
program funds available to domestic institutions.
Foreign Graduate Medical Schools (Sec. Sec. 600.20, 600.21,
600.52, 600.55): The Department's initial proposal related to the
location of foreign graduate medical schools reflected the approach
recommended by NCFMEA Recommendation 12(a) and the Department's current
policy of allowing clinical training sites outside of the program's
main country if the site is located in an NCFMEA approved country, the
institution's medical accrediting agency has conducted an on-site
evaluation and specifically approved the site, and the clinical
instruction is offered in conjunction with medical educational programs
offered to students enrolled in accredited medical schools located in
that foreign country. Several non-Federal negotiators felt this initial
proposal was too limiting and that matriculating in different countries
as part of a graduate medical program would benefit students by
exposing them to medical education and practice in different
environments and cultures. After negotiations involving possible
locations for the basic science portion of the program as well as
accreditation requirements for clinical training sites, the proposed
framework that distinguishes the basic science, required clinical
training, and elective clinical training was established. The
Department reiterated its belief that the basic sciences part of a
graduate medical program should be located in the same country as the
main campus so that the classroom instruction part of the program will
be under the direct authority of the school's accrediting body. In
addition, the Department agreed to the position of some non-Federal
negotiators who felt that clinical locations that are included in the
accreditation of a medical program accredited by the LCME, such as
locations of some Canadian schools, should be eligible regardless of
locale because the LCME accrediting standards are those that are
applied to medical schools in the United States.
The Department initially proposed that, consistent with NCFMEA
Recommendations 1(a) and 1(b), a foreign graduate medical school would
have to require students who it admits to have a specific educational
background (e.g., for a post-baccalaureate/equivalent medical program,
students must have a baccalaureate degree, or at least 90 semester
credit hours or the equivalent, in general education that includes, but
is not limited to, coursework in the social sciences, history, and
languages). Several of the non-Federal negotiators felt that such
provisions were unduly limiting, and ultimately the negotiators agreed
it would be more appropriate for the NCFMEA to establish these
provisions as guidelines for accrediting bodies. The Department had
also included as a part of its initial proposal, that a school having
an integrated program for a first professional program leading to a
Doctor of Medicine (M.D.) degree, or its equivalent must require
students who are U.S. citizens, nationals, or permanent residents to
take the MCAT no later than three years after admission to the program.
The Department was ultimately persuaded to remove the provision by non-
Federal negotiators who pointed out that requiring students to take the
MCAT early in the program would distract

[[Page 42221]]

them from the education that was preparing them to take the USMLE.
Ultimately, the Department agreed to retain from Recommendations 1(a)
and 1(b) only the provision that would require U.S. students who are
admitted to a school having a post-baccalaureate/equivalent medical
program to have taken the MCAT and to report the score. This provision
would not require a foreign graduate medical school to give weight to a
U.S. student's score on the MCAT as part of its admission requirements.
The Department originally proposed requiring schools to submit data
on all steps of the USMLE, but non-Federal negotiators pointed out that
it would be extremely difficult for schools to obtain data on Step-3 as
it is taken by students after they have graduated from the institution
and a student cannot sign a consent to provide information on Step 3 to
third parties until he or she is actually taking the test. Although the
Department is continuing to explore the collection of data from the
FSMB for evaluating its use in the future, the Department agrees that
it would be unreasonable to require institutions to be responsible for
its collection and submission at this time. To focus the USMLE pass
rate on the students the Department is most concerned about and allow
comparability to domestic schools, the USMLE pass rate calculation was
limited to U.S. citizens, nationals, and eligible permanent residents
taking the tests for the first time.
Some non-Federal negotiators expressed concern that requiring
foreign institutions to obtain student consent for the release of
information may be in violation of certain countries' privacy laws.
After reviewing an analysis of the privacy laws and requirements of one
country that had been identified as one that could have problems in
this area, the Department concluded that there would be several ways
that institutions in that country could legally obtain the required
information from students, and committed to working with those schools
and schools in any country that have concerns to facilitate compliance.
The Department noted, however, that the Department cannot waive
statutory or regulatory requirements used to determine institutional
eligibility and that if a foreign country's privacy laws did preclude
obtaining the information and materials necessary for establishing
compliance, the institutions located in those countries unfortunately
would not be able to qualify for participation in the Title IV, HEA
programs.
Foreign Veterinary Schools (Sec. 600.56): The Department's initial
proposal built on current practice by requiring AVMA accreditation for
foreign veterinary schools applying to participate in Title IV, HEA
programs. The AVMA's standards are detailed and specific, it has the
expertise to evaluate foreign veterinary programs that the Department
lacks, and it has a history of accrediting foreign veterinary programs
as veterinary schools in Australia, Canada, the Netherlands and other
foreign countries are currently accredited by the AVMA. Non-Federal
negotiators acknowledged the quality of the AVMA's accreditation
standards and the logic of requiring it for foreign veterinary schools
as most U.S. students at those schools eventually practice in the
United States. However, several non-Federal negotiators had concerns
about requiring AVMA accreditation as it is a lengthy and expensive
process, many foreign accrediting agencies have comparable standards,
some schools with a small number of U.S. students would opt out of
receiving Title IV, HEA program funds thus limiting the options for
U.S. students, and it is difficult for for-profit veterinary schools to
obtain AVMA accreditation because of the research component. The non-
Federal negotiators suggested using other measures such as pass rates
on licensing exams, licensure rates, or default rates to determine
eligibility of foreign veterinary schools. The Department noted that
using measures such as pass rates on licensing examinations can be
operationally complicated, raising concerns over privacy rights,
obtaining exam results, and calculating pass rates in ways that are not
disadvantageous to schools with low numbers of Title IV, HEA program
students. In addition, pass rates would not necessarily be a reliable
indicator of the academic credentials of the faculty at a foreign
veterinary school, and would provide no indication that the facilities
at the veterinary school are adequate and safe for the students or for
the animals housed in the facilities. Instead, the Department accepted
the recommendation of some of the non-Federal negotiators to replace
the proposed requirement that a foreign veterinary school be accredited
or provisionally accredited by the AVMA, with a requirement that the
school be accredited or provisionally accredited by an agency
acceptable to the Secretary. This gives the Department some flexibility
in evaluating school's compliance with the accreditation requirement,
and gives schools some flexibility with regard to obtaining
accreditation. In addition, the Department delayed the effective date
of the accreditation requirement until July 1, 2015, giving foreign
veterinary schools that are currently in the Title IV, HEA programs
approximately five years after final regulations are published to
obtain accreditation from an acceptable accrediting agency.
Foreign Nursing Schools (Sec. 600.57): As described in the
preamble section related to this provision, the Department modeled the
proposed language on portions of the HEOA related to foreign nursing
schools and on existing regulatory language related to foreign medical
and veterinary schools. For the most part, the non-Federal negotiators
accepted this approach, but had some concerns about the provisions
specific to foreign nursing programs. In particular, the requirement
for clinical training to be provided in the United States, the
requirement that a foreign nursing school reimburse the Department for
the cost of loan defaults for loans included in the calculation of a
school's cohort default rate, and the status of loans post-default were
subject to extensive discussion.
Audited Financial Statements (Sec. 668.23): The negotiators
reached agreement on the proposed regulatory language on financial
audits only after extensive negotiations and significant compromise. As
detailed in the section of the preamble related to this provision, the
Department initially proposed to require audited financial statements
prepared in accordance with the same requirements for domestic
institutions (U.S. GAAP) for public institutions that received
$1,000,000 or more in U.S. Title IV, HEA program funds, or private
foreign institutions that received $500,000 or more in U.S. Title IV,
HEA program funds, as well as for any institution in its initial
provisional period of participation. For public foreign institutions,
if an institution received at least $500,000 in U.S. Title IV, program
funds, but less than $1,000,000 in U.S. Title IV, HEA program funds
during the institution's fiscal year preceding the audit period, the
institution would have been allowed to submit audited financial
statements prepared in accordance with the generally accepted
accounting principles of the institution's home country in lieu of
financial statements prepared in accordance with U.S. GAAP. If there
was an unpaid liability due to the Secretary by any public institution
controlled by the same government entity, all public institutions
controlled by that government entity would be required to submit
audited financial statements prepared in accordance with U.S. GAAP.
Non-Federal negotiators argued

[[Page 42222]]

that foreign nonprofit institutions should be treated the same as
foreign public institutions, the requirement to submit audited
financial statements prepared in accordance with U.S. GAAP was cost
prohibitive, a non-U.S. GAAP financial statement such as one prepared
in accordance with International Financial Reporting Standards (IFRS)
would be comparable and provide any information the Department with the
information it needs, or that the audited financial statement
requirement should be tied to cohort default rates.
After consideration of the feedback from the non-Federal
negotiators, the Department revised its initial proposal to treat
nonprofit and public foreign institutions alike, and eliminated the
provision that would have required all public institutions controlled
by the same government entity to submit audited financial statements
prepared in accordance with the same requirements for domestic
institutions if there is an unpaid liability due to the Secretary by
any public institution controlled by the same government entity. In
addition, the Department raised the threshold for nonprofit and public
foreign institutions that would be allowed to submit audited financial
statements prepared in accordance with the generally accepted
accounting principles of the institution's home country from $1,000,000
to $3,000,000 in U.S. Title IV, program funds. The Department also
clarified that it would require that foreign institutions that would be
required to submit audited financial statements prepared in accordance
with U.S. GAAP would also be required to submit a copy of an
institution's audited financial statements for the same period that
were prepared under the institution's home country standards, allowing
a comparative analysis to determine if the requirement to provide U.S.
GAAP financial statements could be changed in the future.
Non-Federal negotiators responded to this revised proposal with
additional comments on the thresholds for audit requirements and a
suggestion to eliminate the $3,000,000 cap and rely entirely upon
``exceptions'' that would permit the Secretary to require U.S. GAAP
financial statements on a case-by-case basis. The Department reiterated
its view that did not view the matter in terms of rigor of accounting
standards of other countries, but a level of risk that justified
requiring submission of U.S. GAAP financial statements. The Department
offered a final revised proposal that modified the audit submission
requirements for public and nonprofit institutions that receive at
least $3,000,000 but less than $5,000,000 in U.S. Title IV, HEA program
funds annually. Pursuant to the revised proposal, institutions in this
group would submit financial statements prepared in accordance with
home country accounting standards and U.S. GAAP for one year, and then,
if no problems were identified, submit financial statements prepared in
accordance with the home country standards for the next two years and
once every three years, rather every year, U.S. GAAP financial
statements.

Benefits

Benefits provided in these regulations include submission
requirements for compliance audits and audited financial statements
specific to foreign institutions; a revised definition of a foreign
institution and a definition of nonprofit status specific to foreign
institutions; the creation of a financial responsibility standard for
foreign public institutions that is comparable to the financial
responsibility standard for domestic public institutions; permission
for a single legal authorization for groups of foreign institutions
under the purview of a single government entity; the establishment of
program eligibility requirements specific to training programs at
foreign institutions; institutional eligibility criteria specific to
foreign graduate medical schools, foreign veterinary schools, and
foreign nursing schools; and revised maximum certification periods for
some foreign institutions. The revised requirements for audited
financial statements improve comparability between foreign and domestic
institutions and enhance the security of Title IV, HEA program funds
while taking into account the burden on foreign institutions of
different sizes. The specific eligibility criteria for foreign graduate
medical schools allow students to benefit from exposure to other
medical environments and cultures while ensuring a comparable education
to that available in domestic institutions. It is difficult to quantify
benefits related to the new institutional and other third-party
requirements, as there is little specific data available on the effect
of the provisions on borrowers, institutions, or the Federal taxpayer.
The Department is interested in receiving comments or data that would
support a more rigorous analysis of the impact of these provisions.
As discussed in greater detail under Net Budget Impacts below,
these proposed provisions result in net costs to the government of $0.0
million over 2011-2015.

Costs

Several of the provisions implemented though this NPRM would
require regulated entities to update existing policies and procedures
related to financial and compliance audits. Other proposed regulations
generally would require discrete changes in specific parameters
associated with existing requirements--such as changes to clinical
training programs, application procedures, USMLE pass rates, and
notification requirements--rather than wholly new requirements.
Accordingly, entities wishing to continue to participate in the student
aid programs have already absorbed many of the administrative costs
related to implementing these proposed regulations. Marginal costs over
this baseline are primarily due to new procedures that, while possibly
significant in some cases, are an unavoidable cost of continued program
participation. As discussed above, foreign nursing schools would be
required to reimburse the Department for the costs of defaults for
loans included in the calculation of the school's cohort default rate
for the previous year. This is estimated to cost the participating
schools approximately $3.1 to $3.9 million a year in gross default
costs. As the subsequent holders of the loans, the schools would be
able to pursue recovery of those funds, reducing the anticipated net
costs to approximately $1.7 to $2.2 million. Some foreign institutions
could choose to withdraw from participation in the Title IV, HEA
programs as a result of these provisions. However, the Department
believes the flexibility and targeting of the negotiated provisions
should allow institutions to remain in the programs while enhancing the
security of Title IV, HEA program funds and ensuring compliance with
statutory requirements.
In assessing the potential impact of these proposed regulations,
the Department recognizes that certain provisions are likely to
increase workload for some program participants, as described below.
(This additional workload is discussed in more detail under the
Paperwork Reduction Act of 1995 section of this preamble.) Additional
workload would normally be expected to result in estimated costs
associated with either the hiring of additional employees or
independent auditors or opportunity costs related to the reassignment
of existing staff from other activities. In total, these changes are
estimated to increase burden on entities participating in the Federal
Student Assistance

[[Page 42223]]

programs by 18,684 hours. Of this increased burden, 18,364 hours are
associated with foreign institutions and 320 hours are associated with
borrowers, generally reflecting the time required to read new
disclosures or submit required information. Approximately 95 percent of
this burden is associated with the financial and compliance audit
requirements in proposed Sec. 668.23. As described in the Paperwork
Reduction Act section of this NPRM, if the regulatory changes had not
been proposed, the burden associated with the financial statement and
compliance audit requirements would be significantly higher. The
monetized cost of this additional burden, using loaded wage data
developed by the Bureau of Labor Statistics and used for domestic
institutions, is $466,569 of which $461,321 is associated with foreign
institutions and $5,248 with individuals. The wage data for foreign
institutions was assumed to be comparable to domestic institutions as
many are located in developed economies with wages similar to those in
the United States, institutions located in countries with lower wage
scales have to compete for employees familiar with the lending
programs, and substituting U.S. wage rates for those in lower wage
countries results in a conservative estimate. For institutions, an
hourly rate of $24.88 was used to monetize the burden of these
provisions. This was a blended rate based on wages of $15.51 for office
and administrative staff and $36.33 for managers and financial
professionals, assuming that office staff would perform 55 percent of
the work affected by these regulations. Given the limited data
available, the Department is particularly interested in comments and
supporting information related to possible burden stemming from the
proposed regulations. Estimates included in this notice will be
reevaluated based on any information received during the public comment
period.

Net Budget Impacts

The provisions implemented by these proposed regulations are
estimated to have a net budget impact of -$2.6 million over FY 2011-
2015, from savings associated with the assignment of defaulted loans
from foreign nursing schools. Consistent with the requirements of the
Credit Reform Act of 1990, budget cost estimates for the student loan
programs reflect the estimated net present value of all future non-
administrative Federal costs associated with a cohort of loans. (A
cohort reflects all loans originated in a given fiscal year.)
These estimates were developed using the Office of Management and
Budget's Credit Subsidy Calculator. This calculator will also be used
for re-estimates of prior-year costs, which will be performed each year
beginning in FY 2009. The OMB calculator takes projected future cash
flows from the Department's student loan cost estimation model and
produces discounted subsidy rates reflecting the net present value of
all future Federal costs associated with awards made in a given fiscal
year. Values are calculated using a ``basket of zeros'' methodology
under which each cash flow is discounted using the interest rate of a
zero-coupon Treasury bond with the same maturity as that cash flow. To
ensure comparability across programs, this methodology is incorporated
into the calculator and used government-wide to develop estimates of
the Federal cost of credit programs. Accordingly, the Department
believes it is the appropriate methodology to use in developing
estimates for these proposed regulations. That said, however, in
developing the following Accounting Statement, the Department consulted
with OMB on how to integrate our discounting methodology with the
discounting methodology traditionally used in developing regulatory
impact analyses.
Absent evidence on the impact of these proposed regulations on
student behavior, budget cost estimates were based on behavior as
reflected in various Department data sets and longitudinal surveys
listed under Assumptions, Limitations, and Data Sources. Program cost
estimates were generated by running projected cash flows related to
each provision through the Department's student loan cost estimation
model. Student loan cost estimates are developed across five risk
categories: two-year proprietary institutions, two-year public and
private institutions, not-for-profit; freshman and sophomore at four-
year institutions, junior and senior at four-year institutions, and
graduate students. Risk categories have separate assumptions based on
the historical pattern of behavior--for example, the likelihood of
default or the likelihood to use statutory deferment or discharge
benefits--of borrowers in each category.
Estimates indicate that three foreign graduate medical schools may
become eligible under these provisions in the next few years but that
this would potentially shift volume among schools but not significantly
increase the total volume of loans. The Department estimates no
budgetary impact for most of the proposed regulations included in this
NPRM as there is no data indicating that the provisions will have any
impact on the volume or composition of Federal student aid programs.
The provision requiring foreign nursing schools to reimburse the
Secretary for defaulted loans is expected to generate approximately
$2.6 million in savings for the Department between 2011 and 2015.

Assumptions, Limitations, and Data Sources

Impact estimates provided in the preceding section reflect a pre-
statutory baseline in which the HEOA changes implemented in these
proposed regulations do not exist. Costs have been quantified for five
years. In general, these estimates should be considered preliminary;
they will be reevaluated in light of any comments or information
received by the Department prior to the publication of the final
regulations. The final regulations will incorporate this information in
a revised analysis.
In developing these estimates, a wide range of data sources were
used, including data from the National Student Loan Data System;
operational and financial data from Department of Education systems,
including especially the Fiscal Operations Report and Application to
Participate (FISAP); and data from a range of surveys conducted by the
National Center for Education Statistics such as the 2008 National
Postsecondary Student Aid Survey, the 1994 National Education
Longitudinal Study, and the 1996 Beginning Postsecondary Student
Survey. Data from other sources, such as the U.S. Census Bureau, were
also used. Data on administrative burden at participating institutions
are extremely limited; accordingly, as noted earlier in this
discussion, the Department is particularly interested in receiving
comments in this area.
Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and
explain burdens specifically associated with information collection
requirements. See the heading Paperwork Reduction Act of 1995.

Accounting Statement

As required by OMB Circular A-4 (available at http://
www.Whitehouse.gov/omb/Circulars/a004/a-4.pdf), in Table 2, we have
prepared an accounting statement showing the classification of the
expenditures associated with the provisions of these proposed
regulations. This table provides our best estimate of the changes in
Federal student aid payments as a result of these proposed regulations.
Expenditures are

[[Page 42224]]

classified as transfers from the Federal government to student loan
borrowers.

Table 2--Accounting Statement: Classification of Estimated Expenditures
[In millions]
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Costs................ $3.9.
Cost of defaults for foreign
nursing schools and cost of
compliance with paperwork
requirements.
Annualized Monetized Transfers............ $0.
From Whom To Whom? Federal Government To
Student Loan Borrowers.
------------------------------------------------------------------------

Clarity of the Regulations

Executive Order 12866 and the Presidential memorandum on ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
Are the requirements in the proposed regulations clearly
stated?
Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 601.30.)
Could the description of the proposed regulations in the
``Supplementary Information'' section of this preamble be more helpful
in making the proposed regulations easier to understand? If so, how?
What else could we do to make the proposed regulations
easier to understand?
To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section of this 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. These proposed regulations would affect foreign institutions
that participate in Title IV, HEA programs and loan borrowers. The
definition of ``small entity'' in the Regulatory Flexibility Act
encompasses ``small businesses,'' ``small organizations,'' and ``small
governmental jurisdictions.'' The definition of ``small business''
comes from the definition of ``small business concern'' under section 3
of the Small Business Act as well as regulations issued by the U.S.
Small Business Administration. The SBA defines a ``small business
concern'' as one that is ``organized for profit; has a place of
business in the U.S.; operates primarily within the U.S. or makes a
significant contribution to the U.S. economy through payment of taxes
or use of American products, materials or labor * * *'' ``Small
organizations,'' are further defined as any ``not-for-profit enterprise
that is independently owned and operated and not dominant in its
field.'' For the purposes of the Regulatory Flexibility Act analysis,
the foreign institutions would not fall within the definition of small
businesses or small organizations based upon this definition of ``small
business concern.''
The definition of ``small entity'' also includes ``small
governmental jurisdictions,'' which includes ``school districts with a
population less than 50,000.'' The definition of ``small governmental
jurisdictions'' is not applicable to this rule. The Secretary invites
comments from small institutions and other affected entities as to
whether they believe the proposed changes would have a significant
economic impact on them and, if so, requests evidence to support that
belief.

Paperwork Reduction Act

Sections 600.20, 600.21, 600.54, 600.55, 600.56, 600.57, 668.13,
668.23, and 668.171 contain information collection requirements. Under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department
has submitted a copy of these sections to OMB for its review.

Section 600.20--Application Procedures for Establishing,
Reestablishing, Maintaining, or Expanding Institutional Eligibility and
Certification

Proposed Sec. 600.20(a)(3) and Sec. 600.20(b)(3) would provide
that, for initial certification or for recertification, a foreign
graduate medical school (i.e., a freestanding foreign graduate medical
school or a foreign institution that includes a foreign graduate
medical school) be required to--
List on the application to participate all educational
sites and where they are located, except for those locations that are
not used regularly, but instead are chosen by individual students who
take no more than two electives at the location for no more than a
total of eight weeks;
Identify, for each clinical site reported in the
certification or recertification application, the type of clinical
training (core, required clinical rotation, not required clinical
rotation) offered at that site;
Indicate whether it offers only post-baccalaureate/
equivalent medical programs, other types of programs that lead to
employment as a doctor of osteopathic medicine, doctor or medicine, or
both;
Provide copies of the affiliation agreements with
hospitals and clinics that it is required to have as a part of any
application for initial certification or recertification to participate
in the Title IV, HEA programs.
Proposed Sec. 600.20(c)(5) would require a foreign graduate
medical school that adds a location that offers all or a portion of the
school's core clinical training or required clinical rotations, to
apply to the Secretary and wait for approval if it wishes to provide
Title IV, HEA program funds to the students at that location, except
for those locations that are included in the accreditation of a medical
program accredited by the LCME.
While we recognize that there would be burden assessed under
Sec. Sec. 600.20(a)(3) and 600.20(c)(5), we do not anticipate either
an initial eligibility application or an application to expand
eligibility at this time.
We estimate that 58 public institutions would take .58 hours (35
minutes) per institution to submit a reapplication, which would
increase burden by 34 hours. We estimate that 10 private nonprofit
institutions would take .58 hours (35 minutes) per institution to
submit a reapplication, which would increase burden by 6 hours. We
estimate that 3 for-profit institutions would take .58 hours (35
minutes) per institution to submit a reapplication, which would
increase burden by 2 hours. There would be a total 42 hours of burden
associated with Sec. 600.20(b)(3) in OMB Control Number 1845-0012.

Section 600.21--Updating Application Information

Proposed Sec. 600.21(a)(10) would require, if a foreign graduate
medical school adds a location that offers all or a portion of the
school's clinical rotations that are not required, that the

[[Page 42225]]

school notify the Department no later than 10 days after the location
is added, except for those locations that are included in the
accreditation of a medical program accredited by the LCME, or those
that are not used regularly, but instead are chosen by individual
students who take no more than two electives at the location for no
more than a combined total of eight weeks. This requirement mirrors the
requirement of proposed Sec. 600.20(c)(5).
We estimate that 6 public institutions would take .17 hours (10
minutes) per institution to fulfill the reporting requirement, which
would increase burden by 1 hour. We estimate that 1 private nonprofit
institution would take .17 hours (10 minutes) to fulfill the reporting
requirement, which would increase burden by 10 minutes. We estimate 1
for-profit institution would take .17 hours (10 minutes) to fulfill the
reporting requirement, which would increase burden by 10 minutes.
Therefore, the proposed total increase in burden would be 1 hour and 20
minutes associated with Sec. 600.21(a)(10) in OMB Control Number 1845-
0012.

Section 600.54--Criteria for Determining Whether a Foreign Institution
Is Eligible To Apply To Participate in the FFEL Programs

Under proposed Sec. 600.54(d)(3)(ii), a foreign institution would
have to demonstrate to the satisfaction of the Secretary (who would
make program-by-program determinations of comparability) that the
amount of academic work required by a program it seeks to qualify as
eligible as at least a one-academic-year training program is equivalent
to an academic year as defined in Sec. 668.3.
We estimate that 93 public institutions would take .17 (10 minutes)
to demonstrate the comparability of the academic work and would
increase burden by 16 hours. We estimate that 33 private institutions
would take .17 (10 minutes) to demonstrate the comparability of the
academic work and would increase burden by 6 hours. Therefore, the
proposed total increase in burden would be 22 hours associated with
Sec. 600.54(d)(3)(ii) in OMB 1845-NEWA.

Section 600.55--Additional Criteria for Determining Whether a Foreign
Graduate Medical School Is Eligible To Apply To Participate in the
Title IV, HEA Programs

Proposed Sec. 668.55(c)(2) would require a foreign graduate
medical school to determine the consent requirements for, and require
the necessary consents of, all students accepted for admission who are
U.S. citizens, nationals, or eligible permanent residents to enable the
school to comply with the collection and submission requirements in
proposed Sec. 600.55(d) for Medical College Admission Test (MCAT)
scores, residency placement, and U.S. Medical Licensing Examination
(USMLE) scores.
We estimate that 58 public institutions would take .50 hours (30
minutes) to develop this consent form and would increase burden by 29
hours. We estimate that 5 private nonprofit institutions would take .50
hours (30 minutes) to develop this consent form and would increase
burden by 5 hours. We estimate that 3 for-profit institutions would
take .50 hours (30 minutes) to develop this consent form and would
increase burden by 2 hours. We estimate that 2,800 individuals would
take .08 hours (5 minutes) to complete this consent form and would
increase burden by 224 hours. Therefore, the total proposed burden
increase would be 260 hours associated with Sec. 600.55(c)(2) in OMB
1845-NEWA.
Proposed Sec. 600.55(d) would require a foreign graduate medical
school to obtain, at its own expense, and by September 30 of each year
submit to its accrediting authority for all students who are U.S.
citizens, nationals, or eligible permanent residents: (1) MCAT scores
for students admitted during the preceding award year and the number of
times each student took the exam; and (2) the percentage of students
graduating during the preceding award year who are placed in an
accredited U.S. medical residency. A school would have to submit the
data on MCAT scores and placement in a U.S. residency program to the
Department only upon request. In addition, proposed Sec. 600.55(d)
would require a foreign graduate medical school to obtain, at its own
expense and by September 30 of each year submit to the Department,
unless the Department notifies schools that it will receive the
information directly from the ECFMG, or other responsible third
parties, USMLE scores earned during the preceding award year on the
first attempt by at least each student, and each student who graduated
during the three preceding years, and the date each student/graduate
took each test, including any failed tests. The USMLE scores submitted
would have to be disaggregated by step/test for Step 1, Step 2-Clinical
Skills (Step 2-CS), and Step 2-Clinical Knowledge (Step 2-CK), and by
attempt. A school would not be required to submit data on the USMLE
Step 3.
We estimate that 58 public institutions would require 1.25 hours (1
hour 15 minutes) to create this annual report and would increase burden
by 73 hours. We estimate that 10 private nonprofit institutions would
require 1.25 hours (1 hour 15 minutes) to create this annual report and
would increase burden 13 hours. We estimate that 3 for-profit
institutions would require 1.25 hours (1 hour 15 minutes) to create
this annual report and would increase burden by 4 hours. Therefore, the
total proposed burden increase would be 90 hours associated with Sec.
600.55(d) in OMB 1845-NEWA.
Proposed Sec. 600.55(e)(2) would require a foreign graduate
medical school to notify its accrediting body within one year of any
material changes in (1) the educational programs, including changes in
clinical training programs; and (2) the overseeing bodies and (3) the
formal affiliation agreements with hospitals and clinics.
We estimate that 15 public institutions would require .82 hours (50
minutes) to complete the accrediting agency clinical training
notifications and would increase burden by 12 hours. We estimate that 3
private nonprofit institutions would require .82 hours (50 minutes) to
complete the accrediting agency clinical training notifications and
would increase burden by 3 hours. We estimate that 1 for-profit
institution would require .82 hours (50 minutes) to complete the
accrediting agency clinical training notifications and would increase
burden by 1 hour. Therefore, the total proposed burden increase would
be 16 hours associated with Sec. 600.55(e) in OMB 1845-NEWA.
Proposed Sec. 600.55(g)(1) would require a foreign graduate
medical school to apply the existing satisfactory academic progress
regulations in Sec. 668.16(e) for establishing a maximum timeframe in
which a student must complete their educational program and require
that a student complete their educational program within 150 percent of
the published length of the educational program. In addition, proposed
Sec. 600.55(g)(2) would require a foreign graduate medical school to
document the educational remediation it provides to assist students in
making satisfactory academic progress.
We estimate that 58 public institutions would require 2.5 hours (2
hours 30 minutes) to update the satisfactory academic policy and
document remediation provided to student and would increase burden by
145 hours. We estimate that 10 for private nonprofit institutions would
require 2.5 hours (2 hours 30 minutes) to update the satisfactory
academic policy and document remediation provided to student and would
increase burden by 25 hours. We estimate that 3

[[Page 42226]]

for-profit institutions would require 2.5 hours (2 hours 30 minutes) to
update the satisfactory academic policy and document remediation
provided to student and would increase burden by 7 hours and 30
minutes. The total proposed burden for increase would be 177 hours and
30 minutes associated with Sec. 600.55(g)(1) and (2) in OMB 1845-NEW2.
Finally, proposed Sec. 600.55(g)(3) would require a foreign
graduate medical school to publish all the languages in which
instruction is offered.
We estimate that 58 public institutions would require .33 hours (20
minutes) to publish the languages in which instruction is provided
increasing burden by 19 hours. We estimate that 10 private nonprofit
institutions would require .33 hours (20 minutes) to publish the
languages in which instruction is provided increasing burden by 3
hours. We estimate that 3 for-profit institutions would require .33
hours (20 minutes) to publish the languages in which instruction is
provided increasing burden by 1 hour. Therefore, the total proposed
burden increase would be 23 hours associated with Sec. 600.55(g)(3) in
OMB 1845-NEWA.
In total, we estimate that proposed Sec. 600.55 would increase by
389 hours in OMB 1845-NEWA, and 177 hours and 30 minutes in OMB 1845-
NEW2.

Section 600.56--Additional Criteria for Determining Whether a Foreign
Veterinary School Is Eligible To Apply To Participate in the FFEL
Programs

Proposed Sec. 600.56(a)(4) would require a foreign veterinary
school to be accredited or provisionally accredited by an organization
acceptable to the Secretary. Proposed Sec. 600.56(a)(4) would also
specify that the requirement for accreditation or provisional
accreditation does not take effect until July 1, 2015.
The Department has delayed the effective date of the accreditation
requirement until July 1, 2015. This allows foreign veterinary schools
that are currently in the Title IV, HEA programs approximately five
years after final regulations are published to obtain accreditation
from an acceptable accrediting agency. Therefore, no burden assessment
has been made at this time, but the issue will be reviewed closer to
the effective date of this section of the regulations thereby enabling
the Department to use a more accurate number of participating
veterinary schools in its assessment.

Section 600.57--Additional Criteria for Determining Whether a Foreign
Nursing School Is Eligible To Apply To Participate in the FFEL Program

The proposed regulations would add a new Sec. 600.57 specifying
additional Title IV, HEA program eligibility criteria for foreign
nursing schools. These criteria include Sec. 600.57(a)(6)(i), where
the school must determine the consent requirements for, and require the
necessary consents of, all students accepted for admission who are U.S.
citizens, nationals, or eligible permanent residents, to enable the
school to comply with the requirements for collection and submission of
National Council Licensure Examination for registered Nurses (NCLEX-RN)
results or pass rates.
We estimate that 3 new nursing institutions would require .50 hours
(30 minutes) to develop the consent form increasing burden by 1 hour
and 30 minutes. We estimate that 1,200 individuals would require .08
hours (10 minutes) to respond to this consent form and increasing
burden by 96 hours in OMB Control Number 1845-NEWA.
The foreign nursing school eligibility also includes Sec.
600.57(a)(6)(ii) where an institution must annually, at its own
expense, obtain all results on the NCLEX-RN achieved by students and
graduates who are U.S. citizens, nationals, or eligible permanent
residents, together with the dates the student has taken the
examination (including any failed examinations) and provide the results
to the Department. As an alternative to obtaining the NCLEX results
individually, the school may obtain a report or reports from the
National Council of State Boards of Nursing (NCSB), or an NCSB
affiliate or NCSB contractor, reflecting the percentage of the school's
students and graduates taking the NCLEX-RN in the preceding year who
passed the examination, or the data from which the percentage could be
derived, and provide the report to the Department.
We estimate that 3 new nursing institutions would require 1.5 hours
(1 hour 30 minutes) to compile this annual report submission increasing
burden by 4 hours 30 minutes in OMB Control Number 1845-NEWA. In total,
we estimate there would be 102 hours of burden associated with Sec.
600.57(a)(6) in OMB Control Number 1845-NEWA.
In addition, proposed Sec. 600.57(c) would specify that after a
school reimburses the Department for the cost of a loan default, the
loan would be assigned to the school. The borrower would remain liable
to the school for the outstanding balance of the loan, under the terms
and conditions specified in the promissory note.
While burden would normally be associated with notification and
collection activity, because there is no history of Federal borrowing
for attendance at these schools and due to the extended period of time
prior to a student borrower defaulting on a Title IV, HEA loan at a
newly approved foreign nursing school during the first year after the
implementation of the final regulations, we believe that it would be
inappropriate to project burden to schools and individuals at this
time.

Section 668.13--Certification Procedures

The proposed regulations would amend Sec. 668.13(b)(1) to specify
that the period of participation for a private, for-profit foreign
institution expires three years after the date the institution is
certified by the Department, rather than the current six years.
While the duration of the approval process is reduced from six
years to three years and, therefore, the time associated with the
submission for recertification will be filed more often, this proposed
change in the regulations does not represent a substantive impact on
the amount of annual burden generated by these regulations. We do not
estimate a change in the burden as a result of the proposed regulations
to OMB 1845-0022.

Section 668.23--Compliance Audits and Audited Financial Statements

The proposed regulation in Sec. 668.23(h)(1) would revise
financial statement submission requirements for foreign institutions
receiving Title IV, HEA program funds in the most recently completed
fiscal year.
In Sec. 668.23(h)(1)(i)--For a public or nonprofit
foreign institution that received less than $500,000 in U.S. Title IV,
HEA program funds during the institution's most recently completed
fiscal year, the audited financial statements submission would be
waived, unless the institution is in its initial provisional period of
participation and received Title IV, HEA program funds during that
year, in which case the institution must submit, in English, audited
financial statements prepared in accordance with the generally accepted
accounting principles of the institution's home country.
In Sec. 668.23(h)(1)(iii)(A)--For a public or nonprofit
foreign institution that received $500,000 or more in U.S. Title IV,
HEA program funds, but less than $3,000,000 in U.S. Title IV, HEA

[[Page 42227]]

program funds during its most recently completed fiscal year, the
institution would be allowed to submit for that year, in English,
audited financial statements prepared in accordance with the generally
accepted accounting principles of the institution's home country in
lieu of financial statements prepared in accordance with U.S. GAAP.
In Sec. 668.23(h)(1)(iii)(B)--For a public or nonprofit
foreign institution that received at least $3,000,000 but less than
$5,000,000 in U.S. Title IV, HEA program funds during its most recently
completed fiscal year, the institution would be required to submit once
every three years audited financial statements prepared in accordance
with the generally accepted accounting principles of both the
institution's home country and U.S. GAAP, but for the two years in
between would be allowed to submit, in English, audited financial
statements prepared in accordance with the generally accepted
accounting principles of the institution's home country in lieu of
financial statements prepared in accordance with U.S. GAAP.
In Sec. 668.23(h)(1)(ii)--For a public or nonprofit
foreign institution that received $5,000,000 or more in U.S. Title IV,
HEA program funds during its most recently completed fiscal year, and
for any for-profit foreign institution, the institution would be
required to submit for that year audited financial statements prepared
in accordance with the generally accepted accounting principles of both
the institution's home country and U.S. GAAP.
We estimate that 15 public institutions would require 35 hours for
the translation of financial statements to English increasing burden by
525 hours. We estimate that 15 private institutions would require 35
hours for the translation of financial statements to English increasing
burden by 525 hours for a total of 1,050 hours.
We estimate 20 public institutions would require 100 hours for the
preparation of the U.S. GAAP financial statement increasing burden by
2,000 hours. We estimate that 8 private nonprofit institutions would
require 100 hours for the preparation of the U.S. GAAP financial
statement increasing burden by 800 hours. We estimate that four for-
profit institutions require 100 hours for the preparation of the U.S.
GAAP financial statement increasing burden by 400 hours for a total of
3,200 hours. Collectively, we estimate that there would be 4,250 hours
of burden associated with proposed Sec. 668.23(h)(1) in OMB Control
Number 1845-0038.
Proposed Sec. 668.23(h)(2) would separate foreign institutions
into two groups, establishing new compliance audit requirements for
foreign institutions based upon whether the institution received less
than $500,000 or $500,000 or more in U.S. Title IV, HEA program funds
during the institution's most recently completed fiscal year.
For foreign institutions that receive less than $500,000 per year
in U.S. Title IV, HEA program funds, under proposed Sec.
668.23(h)(2)(ii) and (iii) they would be required to submit compliance
audits under an alternative compliance audit performed in accordance
with the audit guide from the Department's Office of Inspector General.
The alternative compliance audit is performed as an agreed-upon
procedures attestation engagement, and the standard compliance audit is
performed as an examination-level attestation engagement. An
alternative compliance audit is an agreed-upon procedures attestation
engagement, which consists of specific procedures performed on a
subject matter and is substantially narrower in scope than a standard
compliance audit, which is an examination level attestation.
The proposed regulations would require an annual submission of the
compliance audit, except that, under certain conditions as described in
the following paragraphs, an institution would submit a compliance
audit annually for two consecutive years, then, if notified by the
Department, would be permitted to submit a cumulative compliance audit
every three years thereafter as long as the institution continued to
receive less than $500,000 in U.S. Title IV funds each fiscal year
being audited.
We anticipate 269 public institutions would require 25 hours to
provide the alternate compliance audit increasing burden by 6,725
hours. We anticipate 81 private institutions would require 25 hours to
provide the alternate compliance audit increasing burden by 2,025
hours. Collectively we anticipate a total of 8,750 hours of increased
burden for Sec. 668.23(h)(2)(ii) and (iii) in OMB Control Number 1845-
0038.
For foreign institutions that receive $500,000 or more per year in
U.S. Title IV, HEA program funds, as in the current regulations, under
proposed Sec. 668.23(h)(2)(i) they would be required to submit annual
compliance audits using the standard audit procedures for foreign
institutions set out in the audit guide issued by the Office of
Inspector General. This compliance audit would be submitted together
with an alternative compliance audit or audits prepared in accordance
with proposed Sec. 668.23(h)(2)(ii) for any preceding fiscal year or
years in which the foreign institution received less than $500,000 in
U.S. Title IV, HEA program funds.
We estimate 90 public institutions would require 40 hours to submit
a full compliance audit increasing burden by 3,600 hours. We estimate
29 private nonprofit institutions would require 40 hours to submit a
full compliance audit increasing burden by 1,160 hours. We estimate 4
for-profit institutions would require 40 hours to submit a full
compliance audit increasing burden by 160 hours for a total of 4,920
hours. Collectively, we estimate that there would be 13,670 hours of
increased burden associated with Sec. 668.23(h)(2)(i) in OMB Control
1845-0038.
In total, we estimate that the burden related to proposed Sec.
668.23(h) would increase by 17,920 hours in OMB Control Number 1845-
0038.
Although audited financial statements and compliance audits have
long been required of foreign schools, no separate calculation of the
burden of those requirements had been done until now. As a result, by
and large the burdens estimated are not new. What is new is the
reduction in already-existing burdens that would result from the
proposed regulations if finalized.
In relation to the proposed requirement to submit audited financial
statements, if the proposed regulations (allowing for alternate
submissions for institutions with funding over $500,000 in U.S. Title
IV, HEA program funds) had not been offered, there would have been 123
foreign institutions required to submit annually audited financial
statements prepared in accordance with U.S. GAAP at a burden of 12,300
hours (123 institutions x 100 hours = 12,300 hours). The proposed
regulations reduce that burden by 9,100 hours (proposed burden of 3,200
hours subtracted from estimated burden of 12,300 hours required under
current regulations).
In relation to the proposed requirement to submit a compliance
audit, if the proposed regulations had not been offered, there would
have been an annual standard compliance audit submission requirement
burden of 17,500 hours over two years (350 institutions x 25 hours
annual burden x 2 years) that foreign institutions disbursing less than
$500,000 in U.S. Title IV, HEA program funds would have had to
complete. The proposed regulations decrease burden by allowing for
submission of alternative compliance audits once every three years upon
notification from the Department.

[[Page 42228]]

Section 668.171--General (Subpart L--Financial Responsibility)

Proposed Sec. 668.171 would consider a public foreign institution
to be financially responsible if the institution: (1) Notifies the
Secretary that it is designated as a public institution by the country
or other government entity that has the legal authority to make that
designation; and (2) provides documentation from an official of that
country or other government entity confirming that the institution is a
public institution and is backed by the full faith and credit of the
country or other government entity. A foreign public institution would
not meet this standard of financial responsibility if it was in
violation of any past performance requirements in Sec. 668.174.
If a foreign public institution did not meet the new requirements,
its financial responsibility would be determined under the general
requirements of financial responsibility, including the application of
the equity, primary reserve, and net income ratios. Although the full
faith and credit provision would provide an alternate way of meeting
the financial responsibility standards for public foreign institutions,
it would not excuse the institution from required submissions of
audited financial statements. In addition, if a government entity
provided full faith and credit backing, the entity would be held liable
for any Title IV, HEA program liabilities that were not paid by the
institution.
We estimate 13 public institutions would require 16 hours to obtain
documentation from the applicable government entity at an increase in
burden of 208 hours in OMB Control Number 1845-0022.

**NOTE: Chart omitted - Collection of Information can be found in the PDF file.

**NOTE: Chart omitted - 600.21--Updating application can be found in the PDF file.




 If you want to comment on the proposed information collection 
requirements, please send your comments to the Office of Information 
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S. 
Department of Education. Send these comments by e-mail to OIRA_
DOCKET@omb.eop.gov or by fax to (202) 395-6974. You may also send a 
copy of these comments to the Department contact named in the ADDRESSES 
section of this preamble.
    We consider your comments on these proposed collections of 
information in--
     Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     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.

Intergovernmental Review

    These programs are not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these proposed regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Electronic Access to This Document: You can view this document, as 
well as all other Department of Education documents published in the 
Federal Register, in text or Adobe Portable Document Format (PDF) on 
the Internet at the following site: http://www.ed.gov/news/fedregister. 
To use PDF you must have Adobe Acrobat Reader, which is available free 
at this site. If you have questions about using PDF, call the U.S. 
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    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
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Regulations is available on GPO Access at: http://www.gpoaccess.gov/nara/index.html.

 Catalog of Federal Domestic Assistance Numbers: 84.063 Federal 
Pell Grant Program; 84.033 Federal Work-Study Program; 84.379 TEACH 
Grant Program; 84.069 LEAP).

List of Subjects

34 CFR Part 600

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

34 CFR Part 668

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

34 CFR Part 682

    Administrative practice and procedure, Colleges and universities, 
Education, Loan programs--education, Reporting and recordkeeping 
requirements, Student aid.

    Dated: July 12, 2010.
Arne Duncan,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary proposes 
to amend parts 600, 668, and 682 of title 34 of the Code of Federal 
Regulations 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.

    2. Section 600.2 is amended by revising paragraphs (1) and (2) of 
the definition of Nonprofit institution.
    The revision reads as follows:

Sec.  600.2  Definitions.

* * * * *
    Nonprofit institution: An institution that--

[[Page 42230]]

    (1)(i) Is owned and operated by one or more nonprofit corporations 
or associations, no part of the net earnings of which benefits any 
private shareholder or individual;
    (ii) Is legally authorized to operate as a nonprofit organization 
by each State in which it is physically located; and
    (iii) Is determined by the U.S. Internal Revenue Service to be an 
organization to which contributions are tax-deductible in accordance 
with section 501(c)(3) of the Internal Revenue Code (26 U.S.C. 
501(c)(3)); or
    (2) For a foreign institution--
    (i) An institution that is owned and operated only by one or more 
nonprofit corporations or associations; and
    (ii)(A) If a recognized tax authority of the institution's home 
country is recognized by the Secretary for purposes of making 
determinations of an institution's nonprofit status for title IV 
purposes, is determined by that tax authority to be a nonprofit 
educational institution; or
    (B) If no recognized tax authority of the institution's home 
country is recognized by the Secretary for purposes of making 
determinations of an institution's nonprofit status for title IV 
purposes, the foreign institution demonstrates to the satisfaction of 
the Secretary that it is a nonprofit educational institution.
* * * * *
    3. Section 600.20 is amended by:
    A. Revising paragraph (a).
    B. Adding a new paragraph (b)(3).
    C. In paragraph (c)(4), removing the word ``or''.
    D. Redesignating paragraph (c)(5) as paragraph (c)(6).
    E. Adding a new paragraph (c)(5).
    The revision and additions read as follows:

Sec.  600.20  Application procedures for establishing, reestablishing, 
maintaining, or expanding institutional eligibility and certification.

    (a) Initial eligibility application. (1) 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.
    (2) 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 documentation 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.
    (3) A freestanding foreign graduate medical school, or a foreign 
institution that includes a foreign graduate medical school, must 
include in its application to participate--
    (i)(A) A list of all educational sites and where they are located, 
including all sites at which its students receive clinical training, 
except those clinical training sites that are not used regularly, but 
instead are chosen by individual students who take no more than two 
electives at the location for no more than a total of eight weeks; and
    (B) The type of clinical training (core, required clinical 
rotation, not required clinical rotation) offered at each site listed 
on the application in accordance with paragraph (a)(3)(i)(A) of this 
section; and
    (ii) Whether the school offers--
    (A) Only post-baccalaureate/equivalent medical programs, as defined 
in Sec.  600.52;
    (B) Other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or
    (C) Both; and
    (iii) Copies of the formal affiliation agreements with hospitals or 
clinics providing all or a portion of a clinical training program 
required under Sec.  600.55(e)(1).
    (b) * * *
    (3) A freestanding foreign graduate medical school, or a foreign 
institution that includes a foreign graduate medical school, must 
include in its reapplication to participate--
    (i)(A) A list of all educational sites and where they are located, 
including all sites at which its students receive clinical training, 
except those clinical training sites that are not used regularly, but 
instead are chosen by individual students who take no more than two 
electives at the location for no more than a total of eight weeks; and
    (B) The type of clinical training (core, required clinical 
rotation, not required clinical rotation) offered at each site listed 
on the application in accordance with paragraph (b)(3)(i)(A) of this 
section; and
    (ii) Whether the school offers--
    (A) Only post-baccalaureate/equivalent medical programs, as defined 
in Sec.  600.52;
    (B) Other types of programs that lead to employment as a doctor of 
osteopathic medicine or doctor of medicine; or
    (C) Both; and
    (iii) Copies of the formal affiliation agreements with hospitals or 
clinics providing all or a portion of a clinical training program 
required under Sec.  600.55(e)(1).
* * * * *
    (c) * * *
    (5) For a freestanding foreign graduate medical school, or a 
foreign institution that includes a foreign graduate medical school, 
add a location that offers all or a portion of the school's core 
clinical training or required clinical rotations, except for those 
locations that are included in the accreditation of a medical program 
accredited by the Liaison Committee on Medical Education (LCME); or
* * * * *
    4. Section 600.21 is amended by adding paragraph (a)(10) to read as 
follows:

Sec.  600.21  Updating application information.

    (a) * * *
    (10) For a freestanding foreign graduate medical school, or a 
foreign institution that includes a foreign graduate medical school, 
the school adds a location that offers all or a portion of the school's 
clinical rotations that are not required, except for those that are 
included in the accreditation of a medical program accredited by the 
Liaison Committee on Medical Education (LCME), or that are not used 
regularly, but instead are chosen by individual students who take no 
more than two electives at the location for no more than a total of 
eight weeks.
* * * * *
    5. Section 600.51 is amended by revising paragraph (c) to read as 
follows:


Sec.  600.51  Purpose and scope.

* * * * *
    (c) A foreign institution must comply with all requirements for 
eligible and participating institutions except--
    (1) To the extent those provisions are inconsistent with this 
subpart or other provisions of these regulations or the HEA specific to 
foreign institutions; or
    (2) When the Secretary, through a notice in the Federal Register, 
identifies specific provisions as inapplicable to foreign institutions.
* * * * *
    6. Section 600.52 is amended by:
    A. Adding, in alphabetical order, a definition of Associate degree 
school of nursing.
    B. Adding, in alphabetical order, a definition of Clinical 
training.
    C. Adding, in alphabetical order, a definition of Collegiate school 
of nursing.
    D. Adding, in alphabetical order, a definition of Diploma school of 
nursing.
    E. Revising the definition of Foreign graduate medical school.
    F. Revising the definition of Foreign institution.
    G. Adding, in alphabetical order, a definition of Foreign nursing 
school.

[[Page 42231]]

    H. Adding, in alphabetical order, a definition of Foreign 
veterinary school.
    I. Adding, in alphabetical order, a definition of National 
Committee on Foreign Medical Education and Accreditation (NCFMEA).
    J. Revising the definition of Passing score.
    K. Adding, in alphabetical order, a definition of Post-
baccalaureate/equivalent medical program.
    The additions and revisions read as follows:

Sec.  600.52  Definitions.

    Associate degree school of nursing: A school that provides 
primarily or exclusively a two-year program of postsecondary education 
in professional nursing leading to a degree equivalent to an associate 
degree in the United States.
    Clinical training: The portion of a graduate medical education 
program that counts as a clinical clerkship for purposes of medical 
licensure comprising core, required clinical rotation, and not required 
clinical rotation.
    Collegiate school of nursing: A school that provides primarily or 
exclusively a minimum of a two-year program of postsecondary education 
in professional nursing leading to a degree equivalent to a bachelor of 
arts, bachelor of science, or bachelor of nursing in the United States, 
or to a degree equivalent to a graduate degree in nursing in the United 
States, and including advanced training related to the program of 
education provided by the school.
    Diploma school of nursing: A school affiliated with a hospital or 
university, or an independent school, which provides primarily or 
exclusively a two-year program of postsecondary education in 
professional nursing leading to the equivalent of a diploma in the 
United States or to equivalent indicia that the program has been 
satisfactorily completed.
    Foreign graduate medical school: A foreign institution (or, for a 
foreign institution that is a university, a component of that foreign 
institution) having as its sole mission providing an educational 
program that leads to a degree of medical doctor, doctor of osteopathic 
medicine, or the equivalent. A reference in these regulations to a 
foreign graduate medical school as ``freestanding'' pertains solely to 
those schools that qualify by themselves as foreign institutions and 
not to schools that are components of universities that qualify as 
foreign institutions.
    Foreign institution:
    (1) For the purposes of students who receive title IV aid, an 
institution that--
    (i) Is not located in a State;
    (ii) Except as provided with respect to clinical training offered 
under Sec.  600.55(h)(1), Sec.  600.56(b), or Sec.  600.57(a)(2)--
    (A) Has no U.S. location;
    (B) Has no written arrangements, within the meaning of Sec.  668.5, 
with institutions or organizations located in the United States for 
students enrolling at the foreign institution to take courses from 
institutions located in the United States;
    (C) Does not permit students to enroll in any course offered by the 
foreign institution in the United States, including research, work, 
internship, externship, or special studies within the United States, 
except that independent research done by an individual student in the 
United States for not more than one academic year is permitted, if it 
is conducted during the dissertation phase of a doctoral program under 
the guidance of faculty, and the research can only be performed in a 
facility in the United States;
    (iii) Is legally authorized by the education ministry, council, or 
equivalent agency of the country in which the institution is located to 
provide an educational program beyond the secondary education level;
    (iv) Awards degrees, certificates, or other recognized educational 
credentials in accordance with Sec.  600.54(d) that are officially 
recognized by the country in which the institution is located; and
    (v) For any program designed to prepare the student for employment 
in a recognized occupation, with or without licensure, provides a 
credential, including a degree, that--
    (A) Satisfies the educational requirements in the country in which 
the institution is located for entry into that occupation, including 
educational requirements for licensure; and
    (B) Satisfies the educational requirements, including requirements 
for licensure, for entry into that occupation in the United States; or
    (2) If the educational enterprise enrolls students both within a 
State and outside a State, and the number of students who would be 
eligible to receive title IV, HEA program funds attending locations 
outside a State is at least twice the number of students enrolled 
within a State, the locations outside a State must apply to participate 
as one or more foreign institutions and must meet all requirements of 
paragraph (1) of this definition, and the other requirements of this 
part. For the purposes of this paragraph, an educational enterprise 
consists of two or more locations offering all or part of an 
educational program that are directly or indirectly under common 
ownership.
    Foreign nursing school: A foreign institution (or, for a foreign 
institution that is a university, a component of that foreign 
institution) that is an associate degree school of nursing, a 
collegiate school of nursing, or a diploma school of nursing. A 
reference in these regulations to a foreign nursing school as 
``freestanding'' pertains solely to those schools that qualify by 
themselves as foreign institutions and not to schools that are 
components of universities that qualify as foreign institutions.
    Foreign veterinary school: A foreign institution (or, for a foreign 
institution that is a university, a component of that foreign 
institution) having as its sole mission providing an educational 
program that leads to the degree of doctor of veterinary medicine, or 
the equivalent. A reference in these regulations to a foreign 
veterinary school as ``freestanding'' pertains solely to those schools 
that qualify by themselves as foreign institutions and not to schools 
that are components of universities that qualify as foreign 
institutions.
    National Committee on Foreign Medical Education and Accreditation 
(NCFMEA): The operational committee of medical experts established by 
the Secretary to determine whether the medical school accrediting 
standards used in other countries are comparable to those applied to 
medical schools in the U.S., for purposes of evaluating the eligibility 
of accredited foreign graduate medical schools to participate in the 
title IV, HEA programs.
    Passing score: The minimum passing score as defined by the 
Educational Commission for Foreign Medical Graduates (ECFMG), or on the 
National Council Licensure Examination for Registered Nurses (NCLEX-
RN), as applicable.
    Post-baccalaureate/equivalent medical program: A program offered by 
a foreign graduate medical school that requires, as a condition of 
admission, that its students have already completed their non-medical 
undergraduate studies and that consists solely of courses and training 
leading to employment as a doctor of medicine or doctor of osteopathic 
medicine.
* * * * *
    7. Section 600.54 is revised to read as follows:


Sec.  600.54  Criteria for determining whether a foreign institution is 
eligible to apply to participate in the FFEL programs.

    The Secretary considers a foreign institution to be comparable to 
an eligible institution of higher education in the United States and 
eligible to apply to participate in the FFEL

[[Page 42232]]

programs if the foreign institution meets the following requirements:
    (a) Except for a freestanding foreign graduate medical school, 
foreign veterinary school, or foreign nursing school, the foreign 
institution is a public or private nonprofit educational institution.
    (b) The foreign institution admits as regular students only persons 
who--
    (1) Have a secondary school completion credential; or
    (2) Have the recognized equivalent of a secondary school completion 
credential.
    (c)(1) Notwithstanding Sec.  668.5, an eligible foreign institution 
may not enter into a written arrangement under which an ineligible 
institution or organization provides any portion of one or more of the 
eligible foreign institution's programs. For the purposes of this 
paragraph, written arrangements do not include affiliation agreements 
for the provision of clinical training for foreign medical, veterinary, 
and nursing schools.
    (2) An additional location of a foreign institution must separately 
meet the definition of a foreign institution in Sec.  600.52 if it is--
    (i) Located outside of the country in which the main campus is 
located, except as provided in Sec.  600.55(h)(1), Sec.  600.56(b), 
Sec.  600.57(a)(2), Sec.  600.55(h)(3), and the definition of foreign 
institution found in Sec.  600.52; or
    (ii) Located within the same country as the main campus, but is not 
covered by the legal authorization of the main campus.
    (d) The foreign institution provides an eligible education 
program--
    (1) For which the institution is legally authorized to award a 
degree that is equivalent to an associate, baccalaureate, graduate, or 
professional degree awarded in the United States;
    (2) That is at least a two-academic-year program acceptable for 
full credit toward the equivalent of a baccalaureate degree awarded in 
the United States; or
    (3)(i) That is equivalent to at least a one-academic-year training 
program in the United States that leads to a certificate, degree, or 
other recognized educational credential and prepares students for 
gainful employment in a recognized occupation.
    (ii) An institution must demonstrate to the satisfaction of the 
Secretary that the amount of academic work required by a program in 
paragraph (d)(3)(i) of this section is equivalent to at least the 
definition of an academic year in Sec.  668.3.
    (e) For a for-profit foreign medical, veterinary, or nursing 
school--
    (1) No portion of an eligible medical or veterinary program offered 
may be at what would be an undergraduate level in the United States; 
and
    (2) The title IV, HEA program eligibility does not extend to any 
joint degree program.
    (f) Proof that a foreign institution meets the requirements of 
paragraph (1)(iii) of the definition of a foreign institution in Sec.  
600.52 may be provided to the Secretary by a legal authorization from 
the appropriate education ministry, council, or equivalent agency--
    (i) For all eligible foreign institutions in the country;
    (ii) For all eligible foreign institutions in a jurisdiction within 
the country; or
    (iii) For each separate eligible foreign institution in the 
country.

(Authority: 20 U.S.C. 1082, 1088)

    8. Section 600.55 is revised to read as follows:


Sec.  600.55  Additional criteria for determining whether a foreign 
graduate medical school is eligible to apply to participate in the 
title IV, HEA programs.

    (a) General. (1) The Secretary considers a foreign graduate medical 
school to be eligible to apply to participate in the title IV, HEA 
programs if, in addition to satisfying the criteria of this part 
(except the criterion in Sec.  600.54 that the institution be public or 
private nonprofit), the school satisfies the criteria of this section.
    (2) A foreign graduate medical school must provide, and in the 
normal course require its students to complete, a program of clinical 
training and classroom medical instruction of not less than 32 months 
in length, that is supervised closely by members of the school's 
faculty and that--
    (i) Is provided in facilities adequately equipped and staffed to 
afford students comprehensive clinical training and classroom medical 
instruction;
    (ii) Is approved by all medical licensing boards and evaluating 
bodies whose views are considered relevant by the Secretary; and
    (iii) As part of its clinical training, does not offer more than 
two electives consisting of no more than eight weeks per student at a 
site located in a foreign country other than the country in which the 
main campus is located or in the United States, unless that location is 
included in the accreditation of a medical program accredited by the 
Liaison Committee on Medical Education (LCME).
    (3) A foreign graduate medical school must appoint for the program 
described in paragraph (a)(2) of this section only those faculty 
members whose academic credentials are the equivalent of credentials 
required of faculty members teaching the same or similar courses at 
medical schools in the United States.
    (4) A foreign graduate medical school must have graduated classes 
during each of the two twelve-month periods immediately preceding the 
date the Secretary receives the school's request for an eligibility 
determination.
    (b) Accreditation. A foreign graduate medical school must--
    (1) Be approved by an accrediting body--
    (i) That is legally authorized to evaluate the quality of graduate 
medical school educational programs and facilities in the country where 
the school is located; and
    (ii) Whose standards of accreditation of graduate medical schools 
have been evaluated by the NCFMEA or its successor committee of medical 
experts and have been determined to be comparable to standards of 
accreditation applied to medical schools in the United States; or
    (2) Be a public or private nonprofit educational institution that 
satisfies the requirements in Sec.  600.4(a)(5)(i).
    (c) Admission criteria. (1) A foreign graduate medical school 
having a post-baccalaureate/equivalent medical program must require 
students accepted for admission who are U.S. citizens, nationals, or 
permanent residents to have taken the Medical College Admission Test 
(MCAT) and to have reported their scores to the foreign medical school; 
and
    (2) A foreign graduate medical school must determine the consent 
requirements for and require the necessary consents of all students 
accepted for admission who are U.S. citizens, nationals, or eligible 
permanent residents to enable the school to comply with the collection 
and submission requirements of paragraph (d) of this section.
    (d) Collection and submission of data. A foreign graduate medical 
school must obtain, at its own expense, and by September 30 of each 
year, submit--
    (1) To its accrediting authority and, on request, to the Secretary, 
the scores on the MCAT or successor examination, of all students 
admitted during the preceding award year who are U.S. citizens, 
nationals, or eligible permanent residents, together with a statement 
of the number of times each student took the examination;
    (2) To its accrediting authority and, on request, to the Secretary, 
the percentage of students graduating during the preceding award year 
(including at least all graduates who are

[[Page 42233]]

U.S. citizens, nationals, or eligible permanent residents) who obtain 
placement in an accredited U.S. medical residency program;
    (3) To the Secretary, except upon written notice from the Secretary 
that the necessary information has been obtained by the Secretary for 
the year directly from the Educational Commission for Foreign Medical 
Graduates (ECFMG) or other responsible third parties, all scores, 
disaggregated by step/test--i.e., Step 1, Step 2--Clinical Skills (Step 
2--CS), and Step 2--Clinical Knowledge (Step 2--CK), or the successor 
examinations--and attempt, earned during the preceding award year by at 
least each student and graduate who is a U.S. citizen, national, or 
eligible permanent resident, on Step 1, Step 2--CS, and Step 2--CK, or 
the successor examinations, of the U.S. Medical Licensing Examination 
(USMLE), together with the dates the student has taken each test, 
including any failed tests;
    (e) Requirements for clinical training. (1)(i) A foreign graduate 
medical school must have--
    (A) A formal affiliation agreement with any hospital or clinic at 
which all or a portion of the school's core clinical training or 
required clinical rotations are provided; and
    (B) Either a formal affiliation agreement or other written 
arrangements with any hospital or clinic at which all or a portion of 
its clinical rotations that are not required are provided, except for 
those locations that are not used regularly, but instead are chosen by 
individual students who take no more than two electives at the location 
for no more than a total of eight weeks.
    (ii) The agreements described in paragraph (e)(1)(i) of this 
section must state how the following will be addressed at each site--
    (A) Maintenance of the school's standards;
    (B) Appointment of faculty to the medical school staff;
    (C) Design of the curriculum;
    (D) Supervision of students;
    (E) Provision of liability insurance; and
    (F) Evaluation of student performance.
    (2) A foreign graduate medical school must notify its accrediting 
body within one year of any material changes in--
    (i) The educational programs, including changes in clinical 
training programs; and
    (ii) The overseeing bodies and in the formal affiliation agreements 
with hospitals and clinics described in paragraph (e)(1)(i) of this 
section.
    (f) Citizenship and USMLE pass rate percentages. (1)(i)(A) During 
the academic year preceding the year for which any of the school's 
students seeks an title IV, HEA program loan, at least 60 percent of 
those enrolled as full-time regular students in the school and at least 
60 percent of the school's most recent graduating class must have been 
persons who did not meet the citizenship and residency criteria 
contained in section 484(a)(5) of the HEA, 20 U.S.C. 1091(a)(5); or
    (B) The school must have had a clinical training program approved 
by a State prior to January 1, 2008, and must continue to operate a 
clinical training program in at least one State that approves the 
program; and
    (ii) Except as provided in paragraph (f)(4) of this section, for a 
foreign graduate medical school outside of Canada, for Step 1, Step 2--
CS, and Step 2--CK, or the successor examinations, of the USMLE 
administered by the ECFMG, at least 75 percent of the school's U.S. 
citizen, national, or eligible permanent resident students and 
graduates who took that step/test of the examination in the year 
preceding the year for which any of the school's students seeks a title 
IV, HEA program loan must have received a passing score on that step/
test and are taking the step/test for the first time; or
    (2)(i) The school must have had a clinical training program 
approved by a State as of January 1, 1992; and
    (ii) The school must continue to operate a clinical training 
program in at least one State that approves the program.
    (3) In performing the calculation required in paragraph (f)(1)(ii) 
of this section, a foreign graduate medical school shall--
    (i) Count as a graduate each U.S. citizen, national, or eligible 
permanent resident who graduated from the school during the three years 
preceding the year for which the calculation is performed; and
    (ii) Count each U.S. citizen, national, or eligible permanent 
resident who takes more than one step/test of the USMLE examination in 
a year in the denominator for each of those steps/tests;
    (4)(i) If the calculation described in paragraph (f)(1)(ii) of this 
section would result in any step/test pass rate based on fewer than 
eight students, a single pass rate for the school is determined instead 
based on the performance of the school's U.S. citizen, national, and 
eligible permanent resident students and graduates on Step 1, Step 2--
CS, and Step 2--CK combined;
    (ii) If combining the results on all three step/tests as permitted 
in paragraph (f)(4)(i) of this section would result in a pass rate 
based on fewer than eight step/test results, the school is deemed to 
have no pass rate for that year and the results for the year are 
combined with each subsequent year until a pass rate based on at least 
eight step/test results is derived.
    (g) Other criteria. (1) As part of establishing, publishing, and 
applying reasonable satisfactory academic progress standards, a foreign 
graduate medical school must include as a quantitative component a 
maximum timeframe in which a student must complete his or her 
educational program that must--
    (i) Be no longer than 150 percent of the published length of the 
educational program measured in academic years, terms, credit hours 
attempted, clock hours completed, etc., as appropriate; and
    (ii) Meet the requirements of Sec.  668.16(e)(2)(ii)(B), (C) and 
(D).
    (2) A foreign graduate medical school must document the educational 
remediation it provides to assist students in making satisfactory 
academic progress.
    (3) A foreign graduate medical school must publish all the 
languages in which instruction is offered.
    (h) Location of a program. (1) Except as provided in paragraph 
(h)(3)(ii) of this section, all portions of a graduate medical 
education program offered to U.S. students must be located in a country 
whose medical school accrediting standards are comparable to standards 
used in the United States, as determined by the NCFMEA, except for 
clinical training sites located in the United States.
    (2) No portion of the graduate medical educational program offered 
to U.S. students, other than the clinical training portion of the 
program, may be located outside of the country in which the main campus 
of the foreign medical school is located.
    (3)(i) Except as provided in paragraph (h)(3)(ii) of this section, 
for any part of the clinical training portion of the educational 
program located in a foreign country other than the country in which 
the main campus is located or in the United States, in order for 
students attending the site to be eligible to borrow title IV, HEA 
program funds--
    (A) The site must be located in an NCFMEA approved comparable 
foreign country;
    (B) The institution's medical accrediting agency must have 
conducted an on-site evaluation and specifically approved the clinical 
training site; and

[[Page 42234]]

    (C) Clinical instruction must be offered in conjunction with 
medical educational programs offered to students enrolled in accredited 
medical schools located in that approved foreign country.
    (ii) A clinical training site located in a foreign country other 
than the country in which the main campus is located or in the United 
States is not required to meet the requirements of paragraph (h)(3)(i) 
of this section in order for students attending that site to be 
eligible to borrow title IV, HEA program funds if--
    (A) The location is included in the accreditation of a medical 
program accredited by the Liaison Committee on Medical Education 
(LCME); or
    (B) No individual student takes more than two electives at the 
location and the combined length of the electives does not exceed eight 
weeks.
    9. Section 600.56 is revised as follows:

Sec.  600.56  Additional criteria for determining whether a foreign 
veterinary school is eligible to apply to participate in the FFEL 
programs.

    (a) The Secretary considers a foreign veterinary school to be 
eligible to apply to participate in the FFEL programs if, in addition 
to satisfying the criteria in this part (except the criterion in Sec.  
600.54 that the institution be public or private nonprofit), the school 
satisfies all of the following criteria:
    (1) The school provides, and in the normal course requires its 
students to complete, a program of clinical and classroom veterinary 
instruction that is supervised closely by members of the school's 
faculty, and that is provided in facilities adequately equipped and 
staffed to afford students comprehensive clinical and classroom 
veterinary instruction through a training program for foreign 
veterinary students that has been approved by all veterinary licensing 
boards and evaluating bodies whose views are considered relevant by the 
Secretary.
    (2) The school has graduated classes during each of the two twelve-
month periods immediately preceding the date the Secretary receives the 
school's request for an eligibility determination.
    (3) The school employs for the program described in paragraph 
(a)(1) of this section only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at veterinary schools in 
the United States.
    (4) Effective July 1, 2015, the school is accredited or 
provisionally accredited by an organization acceptable to the Secretary 
for the purpose of evaluating veterinary programs.
    (b)(1) No portion of the foreign veterinary educational program 
offered to U.S. students, other than the clinical training portion of 
the program as provided for in paragraph (b)(2) of this section, may be 
located outside of the country in which the main campus of the foreign 
veterinary school is located;
    (2)(i) For a veterinary school that is neither public nor private 
nonprofit, the school's students must complete their clinical training 
at an approved veterinary school located in the United States;
    (ii) For a veterinary school that is public or private nonprofit, 
the school's students may complete their clinical training at an 
approved veterinary school located--
    (A) In the United States;
    (B) In the home country; or
    (C) Outside of the United States or the home country, if no 
individual student takes more than two electives at the location and 
the combined length of the elective does not exceed eight weeks.

    Authority: 20 U.S.C. 1002 and 1092.

    10. Section 600.57 is redesignated as Sec.  600.58 and a new Sec.  
600.57 is added to read as follows:


Sec.  600.57  Additional criteria for determining whether a foreign 
nursing school is eligible to apply to participate in the FFEL program.

    (a) The Secretary considers a foreign nursing school to be eligible 
to apply to participate in the FFEL programs if, in addition to 
satisfying the criteria in this part (except the criterion in Sec.  
600.54 that the institution be public or private nonprofit), the 
nursing school satisfies all of the following criteria:
    (1) The nursing school is an associate degree school of nursing, a 
collegiate school of nursing, or a diploma school of nursing.
    (2) The nursing school has an agreement with a hospital located in 
the United States or an accredited school of nursing located in the 
United States that requires students of the nursing school to complete 
the student's clinical training at the hospital or accredited school of 
nursing.
    (3) The nursing school has an agreement with an accredited school 
of nursing located in the United States providing that students 
graduating from the nursing school located outside of the United States 
also receive a degree from the accredited school of nursing located in 
the United States.
    (4) The nursing school certifies only Federal Stafford Loan program 
loans or Federal PLUS program loans, as those terms are defined in 
Sec.  668.2, for students attending the nursing school.
    (5) The nursing school reimburses the Secretary for the cost of any 
loan defaults for current and former students included in the 
calculation of the institution's cohort default rate during the 
previous fiscal year.
    (6)(i) The nursing school determines the consent requirements for 
and requires the necessary consents of all students accepted for 
admission who are U.S. citizens, nationals, or eligible permanent 
residents to enable the school to comply with the collection and 
submission requirements of paragraph (a)(6)(ii) of this section.
    (ii) The nursing school annually either--
    (A) Obtains, at its own expense, all results achieved by students 
and graduates who are U.S. citizens, nationals, or eligible permanent 
residents on the National Council Licensure Examination for Registered 
Nurses (NCLEX-RN), together with the dates the student has taken the 
examination, including any failed examinations, and provides such 
results to the Secretary; or
    (B) Obtains a report or reports from the National Council of State 
Boards of Nursing (NCSB), or an NCSB affiliate or NCSB contractor, 
reflecting the percentage of the school's students and graduates taking 
the NCLEX-RN in the preceding year who passed the examination, or the 
data from which the percentage could be derived, and provides the 
report to the Secretary.
    (7) Not less than 75 percent of the school's students and graduates 
who are U.S. citizens, nationals, or eligible permanent residents who 
took the NCLEX-RN in the year preceding the year for which the 
institution is certifying a Federal Stafford Loan or a Federal Plus 
Loan, passed the examination.
    (8) The school provides, including under the agreements described 
in paragraphs (a)(2) and (a)(3) of this section, and in the normal 
course requires its students to complete, a program of clinical and 
classroom nursing instruction that is supervised closely by members of 
the school's faculty that is provided in facilities adequately equipped 
and staffed to afford students comprehensive clinical and classroom 
nursing instruction, through a training program for foreign nursing 
students that has been approved by all nurse licensing boards and 
evaluating bodies whose views are considered relevant by the Secretary.
    (9) The school has graduated classes during each of the two twelve-
month periods immediately preceding the date the Secretary receives the 
school's request for an eligibility determination.

[[Page 42235]]

    (10) The school employs only those faculty members whose academic 
credentials are the equivalent of credentials required of faculty 
members teaching the same or similar courses at nursing schools in the 
United States.
    (b) For purposes of paragraph (a)(5) of this section, the cost of a 
loan default is the sum of the defaulted loan's--
    (1) Outstanding principal;
    (2) Accrued interest;
    (3) Unpaid late fees and collection costs;
    (4) Special allowance payments;
    (5) Reinsurance payments; and
    (6) Any related or similar payments the Secretary is obligated to 
make on the loan.
    (c) After a school reimburses the Secretary for the amount 
specified in paragraph (b) of this section, the loan is assigned to the 
school, and the borrower remains liable to the school for the 
outstanding balance of the loan, under the terms and conditions 
specified in the promissory note.
    (d) No portion of the foreign nursing program offered to U.S. 
students may be located outside of the country in which the main campus 
of the foreign nursing school is located, except for clinical sites 
located in the United States.

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

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

    Authority: 20 U.S.C. 1001, 1002, 1003, 1070g, 1085, 1088, 1091, 
1092, 1094, 1099c, and 1099c-1, unless otherwise noted.

    12. Section 668.2 is amended by adding the words ``Foreign 
institution'' immediately after ``Federal Family Education Loan (FFEL) 
programs'' in the list of definitions in paragraph (a).
    13. Section 668.13(b) is revised to read as follows:

Sec.  668.13  Certification procedures.

* * * * *
    (b) Period of participation. (1) If the Secretary certifies that an 
institution meets the standards of this subpart, the Secretary also 
specifies the period for which the institution may participate in a 
title IV, HEA program. An institution's period of participation expires 
six years after the date that the Secretary certifies that the 
institution meets the standards of this subpart, except that--
    (i) The period of participation for a private, for profit foreign 
institution expires three years after the date of the Secretary's 
certification; and
    (ii) The Secretary may specify a shorter period.
    (2) Provided that an institution has submitted an application for a 
renewal of certification that is materially complete at least 90 days 
prior to the expiration of its current period of participation, the 
institution's existing certification will be extended on a month to 
month basis following the expiration of the institution's period of 
participation until the end of the month in which the Secretary issues 
a decision on the application for recertification.

Sec.  668.15  [Amended]

    14. Section 668.15 is amended by removing paragraph (h).
    15. Section 668.23 is amended by:
    A. In paragraph (a)(5), removing the words `` ``Audits of 
Institutions of Higher Education and Other Non-profit Organizations''; 
Office of Management and Budget Circular A-128, ``Audits of State and 
Local Governments'' '' and adding, in their place, the words ``Audits 
of States, Local Governments, and Non-Profit Organizations'' ''.
    B. In paragraph (d)(1)--
    Adding the words ``issued by the Comptroller General of the United 
States'' after ``with generally accepted government auditing 
standards'' and removing the words `` ``Audits of Institutions of 
Higher Education and Other Non-profit Organizations''; Office of 
Management and Budget Circular A-128, ``Audits of State and Local 
Governments'' ''; and adding, in their place, ``Audits of States, Local 
Governments, and Non-Profit Organizations''.
    C. Removing paragraph (d)(3).
    D. Redesignating paragraph (d)(4) as paragraph (d)(3).
    E. Redesignating paragraph (d)(5) as paragraph (d)(4).
    F. Adding paragraph (h).
    The addition reads as follows:

Sec.  668.23  Compliance audits and audited financial statements.

* * * * *
    (h) Audit submission requirements for foreign institutions. (1) 
Audited financial statements. (i) The Secretary waives for that fiscal 
year the submission of audited financial statements if the institution 
is a foreign public or nonprofit institution that received less than 
$500,000 in U.S. title IV program funds during its most recently 
completed fiscal year, unless that foreign public or nonprofit 
institution is in its initial provisional period of participation, and 
received title IV program funds during that year, in which case the 
institution must submit, in English, audited financial statements 
prepared in accordance with generally accepted accounting principles of 
the institution's home country.
    (ii) Except as provided in paragraph (h)(1)(iii) of this section, a 
foreign institution that received $500,000 or more in U.S. title IV 
program funds during its most recently completed fiscal year must 
submit, in English, for each most recently completed fiscal year in 
which it received title IV program funds, audited financial statements 
prepared in accordance with generally accepted accounting principles of 
the institution's home country along with corresponding audited 
financial statements that meet the requirements of paragraph (d) of 
this section.
    (iii) In lieu of making the submission required by paragraph 
(h)(1)(ii) of this section, a public or private nonprofit institution 
that received--
    (A) $500,000 or more in U.S. title IV program funds, but less than 
$3,000,000 in U.S. title IV program funds during its most recently 
completed fiscal year, may submit for that year, in English, audited 
financial statements prepared in accordance with the generally accepted 
accounting principles of the institution's home country, and is not 
required to submit the corresponding audited financial statements that 
meet the requirements of paragraph (d) of this section;
    (B) At least $3,000,000, but less than $5,000,000 in U.S. title IV, 
program funds during its most recently completed fiscal year, must 
submit in English, for each most recently completed fiscal year, 
audited financial statements prepared in accordance with the generally 
accepted accounting principles of the institution's home country along 
with corresponding audited financial statements that meet the 
requirements of paragraph (d) of this section, except that an 
institution that continues to receive at least $3,000,000 but less than 
$5,000,000, in U.S. title IV funds during its most recently completed 
fiscal year may omit the audited financial statements that meet the 
requirements of paragraph (d) of this section for up to two consecutive 
years following the submission of audited financial statements that 
meet the requirements of paragraph (d) of this section.
    (2) Compliance audits. A foreign institution's compliance audit 
must cover, on a fiscal year basis, all title IV, HEA program 
transactions, and must cover all of those transactions that have 
occurred since the period covered by the institution's last compliance 
audit. A compliance audit that is due under this paragraph must be 
submitted no later than six months after the last day of the 
institution's fiscal year, and must meet the following requirements:

[[Page 42236]]

    (i) If the foreign institution received $500,000 or more in U.S. 
dollars in title IV, HEA program funds during its most recently 
completed fiscal year, it must submit a standard compliance audit for 
that year that is performed in accordance with audit guides developed 
by, and available from, the Department of Education's Office of 
Inspector General, together with an alternative compliance audit or 
audits prepared in accordance with paragraph (h)(2)(ii) of this section 
for any preceding fiscal year or years in which the foreign institution 
received less than $500,000 in U.S. dollars in title IV, HEA program 
funds;
    (ii) If the foreign institution received less than $500,000 U.S. in 
title IV, HEA program funds for its most recently completed fiscal 
year, it must submit an alternative compliance audit for that prior 
fiscal year that is performed in accordance with audit guides developed 
by, and available from, the Department of Education's Office of 
Inspector General, except as noted in paragraph (h)(2)(iii) of this 
section.
    (iii) If so notified by the Secretary, a foreign institution may 
submit an alternative compliance audit performed in accordance with 
audit guides developed by, and available from, the Department of 
Education's Office of Inspector General, that covers a period not to 
exceed three of the institution's consecutive fiscal years if such 
audit is submitted either no later than six months after the last day 
of the most recent fiscal year, or contemporaneously with a standard 
compliance audit timely submitted under paragraph (h)(2)(i) or 
(h)(3)(ii) of this section for the most recently completed fiscal year, 
and if the following conditions are met:
    (A) The institution received less than $500,000 in title IV, HEA 
program funds for its most recently completed fiscal year.
    (B) The institution has timely submitted acceptable compliance 
audits for two consecutive fiscal years, and following such submission, 
has no history of late submission since then.
    (C) The institution is fully certified.
    (3)(i) Exceptions. Notwithstanding the provisions of paragraphs 
(h)(1)(i) and (h)(1)(iii) of this section, the Secretary may issue a 
letter to a foreign institution that identifies problems with its 
financial condition or financial reporting and requires the submission 
of audited financial statements in the manner specified by the 
Secretary.
    (ii) Notwithstanding the provisions of paragraphs (h)(2)(ii) and 
(h)(2)(iii) of this section, the Secretary may issue a letter to a 
foreign institution that identifies problems with its administrative 
capability or compliance reporting that may require the compliance 
audit to be performed at a higher level of engagement, and may require 
the compliance audit to be submitted annually.
    16. Section 668.171 is amended by revising paragraph (c) to read as 
follows:

Sec.  668.171  General.

* * * * *
    (c) Public institutions. (1) The Secretary considers a domestic 
public institution to be financially responsible if the institution--
    (i)(A) Notifies the Secretary that it is designated as a public 
institution by the State, local, or municipal government entity, tribal 
authority, or other government entity that has the legal authority to 
make that designation; and
    (B) Provides a letter from an official of that State or other 
government entity confirming that the institution is a public 
institution; and
    (ii) Is not in violation of any past performance requirement under 
Sec.  668.174.
    (2) The Secretary considers a foreign public institution to be 
financially responsible if the institution--
    (i)(A) Notifies the Secretary that it is designated as a public 
institution by the country or other government entity that has the 
legal authority to make that designation; and
    (B) Provides documentation from an official of that country or 
other government entity confirming that the institution is a public 
institution and is backed by the full faith and credit of the country 
or other government entity; and
    (ii) Is not in violation of any past performance requirement under 
Sec.  668.174.
* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

    17. The authority citation for part 682 continues to read as 
follows:

    Authority: 20 U.S.C. 1071-1087-2, unless otherwise noted.

    18. Section 682.200 is amended by:
    A. Adding the words ``Foreign institution'' immediately after 
``Federal Family Education Loan Program (formerly known as the 
Guaranteed Student Loan (GSL) Program'' in the list of definitions in 
paragraph (a)(2).
    B. Removing the definition of Foreign school in paragraph (b).


Sec.  682.611  [Removed]

    19. Section 682.611 is removed and reserved.

[FR Doc. 2010-17313 Filed 7-19-10; 8:45 am]
BILLING CODE 4000-01-P

Maintained for Historical Purposes

Subject: Foreign Institutions--Federal Student Aid Programs; Proposed Rule