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Institutional Eligibility and Administrative Requirements - Institutional and Program Eligibility

AwardYear: 1997-1998
EnterChapterNo: 3
EnterChapterTitle: Institutional Eligibility and Administrative Requirements
SectionNumber: 1
SectionTitle: Institutional and Program Eligibility
PageNumbers: 5-26


Before a school is eligible to participate in the SFA Programs, the
school must meet the definition of an eligible institution. This section
will discuss the three types of institutions that are eligible to
participate in the SFA Programs and the effect of program eligibility
requirements on institutional eligibility. Not every program at an
eligible institution is an eligible program, nor must all eligible
programs at the school have the same minimum program length or
admissions standards. Generally, the requirements for an eligible
institution are found in 34 CFR Part 600. Program eligibility
requirements are found in 34 CFR Part 668.

A school must apply to the Department and receive approval from
the Department of its eligibility to participate in the SFA Programs.
A school applying for approval to participate for the first time should
refer to Section 9 of this chapter. Section 9 also discusses changes in
participation, loss of eligibility, and ownership changes.

THE THREE DEFINITIONS OF ELIGIBLE INSTITUTIONS

The Institutional Eligibility regulations (34 CFR Part 600) define
three types of eligible institutions. Under the three definitions, a
school is eligible to participate in all the SFA Programs, provided the
school offers the appropriate type of eligible program. (Refer to the
chart on page 3-6.) This section covers the key elements of the three
definitions, giving special attention to those requirements that affect
the definition of an eligible program.

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

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

CONTROL AND LEGAL AUTHORIZATION

[[Public/private, nonprofit/for-profit]]
The "control" of an institution distinguishes whether the school is
public or private, nonprofit or for-profit. Under the institutional
definitions, an "institution of higher education" or a "postsecondary
vocational institution" can be either public or private, but is always
nonprofit. A "proprietary institution of higher education" is always a
private, for-profit institution.

A nonprofit institution

- is owned and operated by one or more nonprofit corporations or
associations whose net earnings do not benefit 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 Internal Revenue Service to be eligible for
tax-deductible contributions.

[[Definition of a "state"]]
[[School's main campus must be located "in a state"]]
With the exception of foreign schools (see page 3-23), an eligible
institution under any of the three definitions must be located in a
state. The definition of a "state" includes not only the 50 States of the
Union, but also American Samoa, Puerto Rico, the District of
Columbia, Guam, the Virgin Islands, and the Northern Mariana
Islands. For the purposes of the Federal Pell Grant (Pell Grant),
Federal Supplemental Educational Opportunity Grant (FSEOG), and
Federal Work-Study (FWS) programs, a "state" also includes the
Federated States of Micronesia, the Marshall Islands, and the
Republic of Palau. GENERALLY, THE DETERMINING FACTOR
IS THE PHYSICAL LOCATION OF THE MAIN CAMPUS OR
PLACE OF INSTRUCTION. For instance, if a school's main campus
is in a state, as defined above, the school can still have an additional
location in a foreign country. However, a correspondence school is
considered to be located in the state where its administrative office is
located.

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

ACCREDITATION

Generally, an institution must be accredited by a nationally
recognized accrediting agency to be eligible. The U.S. Department of
Education (the Department) has published regulations governing the
procedures and criteria for recognizing accrediting agencies. For
more information, see the Accreditation regulations (34 CFR Part
602). The Department periodically publishes a list of recognized
accrediting bodies in the Federal Register, based on criteria given in
CFR Part 602. Copies of this list are also available from the

U.S. Department of Education
Accrediting and Eligibility Determination Division
600 Independence Ave. SW Room 3012 (ROB-3)
Washington, DC 20202-5244

The law provides two statutory alternatives to accreditation. First, an
institution may be preaccredited by an agency or association that has
been approved by the Department to grant such preaccreditation.
Secondly, unaccredited postsecondary vocational institutions may be
eligible for SFA funds if approved by a state agency that the
Department determines to be a reliable authority.

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

PREACCREDITED: A status granted by a nationally recognized
accrediting agency or association to a public or private nonprofit
institution that is progressing towards accreditation within a
reasonable period of time.

[[Changes in accreditation may affect eligibility]]
[[Dual accreditation]]
If a school loses its accreditation, it is ineligible to participate in the
SFA Programs and must notify the Department within 30 days.*1*
However, if a school's accrediting agency loses its recognition from
the Department, the school has up to 18 months in which to obtain
accreditation from another recognized agency. Other changes in
accreditation may also jeopardize institutional participation. If a
school changes accrediting agencies, it may be subject to termination
unless the school submits to the Department all materials relating to
the prior accreditation, including materials demonstrating reasonable
cause for changing accrediting agencies. If a school is accredited by
two agencies at the same time, the school must designate which
agency's accreditation will be used in determining institutional
eligibility for SFA funds and must inform the Department of the
designation. Further, the school must provide to the Department (and
to both agencies involved) all materials documenting sufficient
reason and cause for dual accreditation. See Section 9 of this chapter
for more on changes in accreditation and loss of eligibility.

ADMISSIONS STANDARDS

[[Admissions standards]]
An eligible institution may admit as regular students only persons
who have a high school diploma or its recognized equivalent, or
persons who are beyond the age of compulsory school attendance.

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

Students who are beyond the age of compulsory attendance but who
do not have a high school diploma or its recognized equivalent must
meet ability-to-benefit criteria to be eligible for aid from the SFA
Programs. (For more information on this student eligibility
requirement, see Chapter 2 under "Ability to Benefit.")

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

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

A school that admits students who do not have a high school diploma
or recognized equivalent has some additional considerations. A
school does NOT qualify as an eligible institution if, for its latest
complete award year, 50% or more of its regular enrolled students
had neither a high school diploma or equivalent, unless the school
provides a four-year bachelor's degree program or two-year associate
degree program.

[[Waiver]]
A nonprofit institution may apply for a waiver of this requirement.
The institution must demonstrate to the Department's satisfaction that
it met or exceeded the 50% threshold because the school serves,
through contracts with federal, state or local government agencies,
significant numbers of students who do not have a high school
diploma or its recognized equivalent. A school will not be granted
this waiver if more than 40% of the school's enrolled regular students
do not have a high school diploma or equivalent and are not served
through contracts with federal, state, or local government agencies.
The purpose of the contracts must be to provide job training to low-
income individuals who are in need of the training.

[[School must make GED program available]]
Also, a school that participates in the SFA Programs and admits
students without a high school diploma or its equivalent must make a
GED preparatory program available to its students. (For more
information see the discussion of the Program Participation
Agreement in Section 2.)

"TWO-YEAR" RULE

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

A branch campus*2* seeking status as a main campus or free-
standing institution is subject to the two-year rule, but its time as a
branch campus counts toward the two years.

PROGRAM ELIGIBILITY REQUIREMENTS

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

[[Determination of program eligibility]]
Generally, a student must be enrolled in an eligible program to
receive SFA funds. Because a school's eligibility does not necessarily
extend to all its programs, the school must ensure that a program is
eligible BEFORE awarding SFA funds to students in that program.
The school is ultimately responsible for determining that a program
is eligible. In addition to determining that the program meets the
eligible program definition, the school should make certain that the
program is included under the notice of accreditation from a
nationally recognized accrediting agency (unless the agency does not
require that particular programs be accredited). The school should
also make certain that it is authorized by the appropriate state agency
to offer the program (if the state licenses individual programs at
postsecondary institutions).

A school's eligibility extends to all eligible programs and locations
that were identified on the school's application for participation,
unless the Department determines that certain school programs or
locations did not meet the eligibility requirements. In general, the
school's eligible non-degree programs and locations are specifically
named on the approval notice. Additional locations and programs
may be added later (see Section 9).

[[Programs that meet more than one definition]]
It is not uncommon for a school to offer programs that meet different
eligible program definitions. For example, a school that offers a
bachelor's degree program (qualifying the school as an institution of
higher education) may also offer a nondegree training program that
is eligible under a definition that qualifies the school as a
postsecondary vocational institution.

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

A school may also qualify as an institution of higher education if it
offers a program of at least two academic years in duration that is
acceptable for full credit toward a bachelor's degree, or if it offers a
program of at least one academic year in duration that leads to a
certificate, degree, or other recognized credential and prepares
students for gainful employment in a recognized occupation.*3*

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

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

[[Shorter programs]]
The SECOND TYPE of eligible program is one that must provide at
least 300 clock hours, 8 semester hours, or 12 quarter hours of
instruction offered during a minimum of 10 weeks of instruction.
The program must be a graduate or professional program OR must
admit as regular students ONLY persons who have completed the
equivalent of an associate degree.

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

[[Qualitative factors for short-term programs]]
- have verified completion and placement rates of at least 70%,

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

- have been in existence for at least one year.

For the purpose of demonstrating compliance with these qualitative
factors, a school must calculate the completion and placement rates
FOR THE AWARD YEAR, as explained later. The CPA who
prepares the school's compliance audit report must attest to the
accuracy of the school's calculation of completion and placement
rates.

COMPLETION RATE CALCULATION

Number of regular students who received credential for
successfully completing the program within 150 % of the
length of the program
-----------------------------------------------------------
Number of regular students enrolled for the year
- number of regular students who withdrew with
a 100% refund*
- number of regular students enrolled at the
end of the year

*less any permitted administrative fee

PLACEMENT RATE CALCULATION

Number of students who obtained employment* within 180
days of receiving credential, and who are employed (or have
been employed) for at least 13 weeks following receipt of
credential
-----------------------------------------------------------
Number of students who received credential for successfully
completing the program

*in the recognized occupation for which they were trained
or in a related comparable occupation

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

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

[[Exceptions to eligible program definition]]
Note that there are two cases (certain types of preparatory
coursework and teacher-certification programs) where students may
receive FFEL or Direct Loan funds for enrollment in a program that
does not meet the eligible program definition. (For more information,
see Chapter 2.)

WEEKS OF INSTRUCTION AND THE 12-HOUR RULE

The three types of eligible programs discussed above, which qualify
an otherwise eligible school as a proprietary institution or as a
postsecondary vocational institution, are required to have a specified
number of weeks of instruction. Definitions for a "week of
instruction" and for a "week of instructional time" for the academic
year definition are similar. (See the discussion of academic year in
Section 2.)

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

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

For educational programs measured in credit hours without standard
terms, a week of instruction must include at least 12 HOURS of
instruction, examinations, or preparation for examination within a
consecutive seven-day period.

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

A school that wants to set its program to be only 15 calendar weeks
long would therefore have to meet an average of 12 hours per week
for the 15 calendar week period in order for the program to be
eligible. A school with a program that meets less frequently than 12
hours a week would have to meet for enough weeks to provide 180
hours of instruction, examinations, or preparation for examinations.
For example, a program meeting 6 hours per week would have to be
30 calendar weeks long in order to be eligible under this provision.

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

ADDITIONAL ELIGIBLE PROGRAM REQUIREMENTS

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

[[ESL programs]]
A program that consists solely of English as a Second Language
(ESL) instruction is eligible ONLY for Pell Grant participation. It
must meet the general requirements for an eligible program (for
example, it must lead to a degree or other credential) and may admit
only students who need instruction in English to be able to use the
knowledge, training, or skills they already have. The school must
document its determination that the ESL instruction is necessary for
each student enrolled. A school may request an eligibility
determination from the Department for an ESL Program.

A student also may receive SFA funds for ESL coursework that is
part of a larger eligible program. In this case, the ESL coursework is
treated as remedial coursework. For more information, see Chapter 2.

[[Study abroad programs]]
Study abroad courses are eligible for SFA funds, regardless of
whether they are REQUIRED for the student's program of study, as
long as they are ACCEPTED FOR CREDIT in the student's program
(provided that the requirements meet the consortium and contractual
requirements discussed in Section 5). The law also requires schools
to notify study-abroad students of the availability of such assistance
and to certify on the new Program Participation Agreement that they
will not deny SFA funds to such students.

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


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

*2* A branch campus is a location of a school that is geographically
apart and independent of the main campus of the school. A location
is independent of the main campus if the location: (1) is permanent
in nature; (2) offers courses in educational programs leading to a
degree, certificate, or other recognized educational credential; (3) has
its own faculty and administrative or supervisory organization; and
(4) has its own budgetary and hiring authority.

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

Section 1: Institutional and Program Eligibility
pages 3-15 to 3-26


CLOCK HOUR/CREDIT HOUR CONVERSIONS

The clock hour/credit hour requirements affect both program
eligibility, and the determination of the amount of SFA Program
funds a student who is enrolled in the program may receive.

Schools must determine whether an undergraduate program
measured in credit hours qualifies as an eligible program in credit
hours after using the required conversion formula unless

[[Exceptions]]
- the program is at least two academic years in length and provides
an associate, bachelor's, or professional degree (or a degree that
the Department has determined to be equivalent to one of these
degrees), or

- each course within the program is acceptable for full credit toward
one of these degrees at the school, and the degree requires at least
two academic years of study.

Note that the exemption for programs that lead to a degree that is
EQUIVALENT to an associate, bachelor's, or professional degree
program of at least two years does not permit a school to ask for a
determination that a NONDEGREE program is equivalent to a
degree program.

Also, public or private nonprofit hospital-based diploma schools of
nursing are exempt from using the clock-to-credit hour conversion
formula to calculate awards for the SFA Programs.

To determine the number of credit hours in a program for SFA
purposes, schools must use the appropriate formula.

[[Formulas]]
For a semester or trimester hour program

Number of clock hours in the credit-hour program
---------------------------------------------------
30

For a quarter hour program

Number of clock hours in the credit-hour program
---------------------------------------------------
20

The school must use the resulting number of credit hours to
determine if a program is eligible under the eligible program
requirements explained on pages 3-11 to 3-13. For a program to
qualify as eligible by providing at least 16 semester or trimester
credit hours or 24 quarter credit hours, the program must include at
least 480 CLOCK HOURS OF INSTRUCTION. For a program to
qualify as eligible by providing at least 8 semester or trimester credit
hours or 12 quarter credit hours, the program must include at least
240 CLOCK HOURS OF INSTRUCTION.

[[CLARIFICATION]]
Because the results of these formulas determine the eligibility of a
program, the resulting number of credit hours may not be rounded
upward.

[[Program eligibility]]
If a school applies the appropriate formula and finds that a program
is eligible, the converted credit hours are used to determine the
amount of SFA funds that a student who is enrolled in the program is
eligible to receive under the Pell Grant, FFEL, and Direct Loan
programs. If, after applying the formula, the number of credit hours
in the program has decreased, a student's enrollment status could
change resulting in a decrease in SFA eligibility under these
programs.

Example

Sternberg University (SU) states that a two-year nondegree
program measured in semester credit hours is 16 credit hours per
semester. Courses within the program are not creditable toward a
degree at SU. SU determines that there are 330 clock hours in the
first and second semesters, and 390 in the third and fourth
semesters. By applying the conversion formula, the school
determines that the number of credit hours for SFA purposes is 11
for the first two semesters, and 13 for the last two semesters.

330 clock hours = 11 credit hours for SFA purposes
----------------
30

390 clock hours = 13 credit hours for SFA purposes
----------------
30

Total clock hours in the program is 1440. Because the program is
longer than 15 weeks and contains more than 480 clock hours of
instruction, the program remains an eligible program, provided it
is otherwise eligible (see page 3-11). However, for the first two
semesters of the program, students are eligible for payment for
only 11 credit hours of instruction. Because this is less than the
full-time student minimum of 12 credit hours, students who attend
the first two semesters are eligible to be paid for only three-quarter
time attendance.

[[Units of measurement--clock hours vs. credit hours]]
A student's period of attendance is measured according to several
commonly accepted academic standards. A clock hour is based on an
actual hour of attendance, though each hour may include a 10-minute
break. Credit hours are typically based on two hours of homework
for each hour of class attendance.

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

OTHER ELIGIBILITY FACTORS

A school is not an eligible institution if the school violates the 85/15
Rule (applicable to proprietary schools only), the Correspondence
Course Limitation, the Correspondence Student Limitation, the
Incarcerated Student Limitation, or the Ability-To-Benefit Student
Limitation.

[[School calculations must be attested to by CPA]]
All of these requirements involve certain percentage calculations,
which are performed by the school either to demonstrate compliance
with a requirement or to demonstrate eligibility for a limitation
waiver. In the case of the Correspondence Course Limitation, the
Correspondence Student Limitation, the Incarcerated Student
Limitation, and the Ability-To-Benefit Student Limitation, a
calculation performed by the school must be attested to by the
certified public accountant (CPA) who prepares the school's audited
financial statement or its SFA compliance audit. The CPA's report
must be part of the audit record and must include a recalculation if a
school's initial calculation was in error. The CPA's attestation report
must indicate whether the school's determinations (including any
relevant waiver or exception) are accurate. Requirements for
demonstrating compliance with the 85/15 Rule are discussed below.

[[School required to notify the Department]]
For each of the requirements and limitations discussed below, the
school must notify the Department of the school's failure to meet a
requirement, its falling within a prohibited limitation, or its
ineligibility for a continued waiver. Except for the specific
notification requirements under the 85/15 Rule, the school's
notification must occur by July 31 following the end of an award
year. If a school fails to meet any of these requirements, the school
loses its eligibility to participate in any SFA Program on the last day
of the most recent award year. The school must immediately stop
awarding SFA Program funds and must comply with the
requirements in 34 CFR 668.26 for a school that has lost its SFA
participation (for more information on requirements when a school's
SFA participation ends, see Section 9).

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

THE 85/15 RULE

To be eligible for SFA participation, a proprietary institution may
derive no more than 85% of its revenues from the SFA Programs. As
specified in 34 CFR 600.5(d), a school must determine its revenue
percentages using the following formula:

[[Fraction for 85/15 Rule calculation]]
SFA Program funds (except SSIG or FWS) used for tuition,
fees, and other institutional charges to students
-----------------------------------------------------------------
The sum of revenues generated by the school from: (1) tuition,
fees, and other institutional charges for students enrolled in
eligible programs; plus (2) school activities* necessary for the
education or training of students enrolled in those eligible
programs

*to the extent not included in tuition, fees, and other institutional
charges

[[Refunds not counted in fraction]]
In determining whether a school satisfies the 85/15 Rule, the totals
used in the fraction do NOT include refunds paid to or on behalf of
students who have withdrawn, dropped out, been expelled, or
otherwise failed to complete the period of enrollment. Charges for
books, supplies, and equipment are not included in the fraction
unless the amount is part of the tuition, fees, or other institutional
charges.

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

- grant funds provided by non-federal public agencies,

- grant funds provided by independent private sources, or

- funds from qualified government agency job training contracts.

[[Revenues from school activities]]
In figuring revenues generated by school activities, a school may
include only revenue from activities that are conducted on campus or
at a facility under the control of the school, that are performed under
the supervision of a faculty member, and that are necessary for the
training of its students who are enrolled in an eligible program. The
school's "85/15 Rule" calculation must be attested to by a CPA, as
discussed previously.

The 85/15 Rule was published in final regulations on April 29, 1994.
However, Public Law 103-333 precluded the Department from
implementing the 85 Percent Rule regulations until July 1, 1995. As
of July 1, 1995, the 85 Percent Rule applies to all institutional
eligibility determinations for proprietary institutions.

[[Most recently completed fiscal year]]
A proprietary institution must determine whether it satisfied the
85/15 Rule during its most recently completed fiscal year. For
example, for schools using a calendar year as their fiscal year, their
most recently completed fiscal year is the one that ended on
December 31, 1996. For those schools using the award year as their
fiscal year, their most recently completed fiscal year will be the one
that ends on June 30, 1997.

[[Failure to meet the 85/15 Rule]]
Schools that fail to satisfy the 85/15 Rule lose their eligibility on the
last day of that fiscal year. As mentioned earlier, the school must
immediately stop awarding SFA Program funds and comply with the
provisions of 34 CFR 668.26. Schools have 90 days after their most
recently completed fiscal year has ended to report to the Secretary if
they did not satisfy the 85/15 Rule for that period.

[[NEW]]
Previously, schools that determined that they satisfied the 85/15
Rule during their most recently completed fiscal year had to have
the CPA who prepared their audited financial statement report on
the accuracy of that determination based upon performing an
attestation engagement. Final regulations published November 29,
1996 changed this requirement. Instead, a proprietary school is
required to disclose the percentage of its revenues derived from the
SFA Programs (that the school received during the fiscal year
covered by the audit) as a footnote to its audited financial statement
(see Section 6).

[[Notification to the Department]]
A school must notify the Department of its failure to satisfy the
85/15 Rule at one of the following addresses:

By regular mail

U.S. Department of Education
Institutional Participation and Oversight Service
P.O. Box 44805
L'Enfant Plaza Station
Washington, DC 20026-4805

By overnight mail or courier delivery

U.S. Department of Education
Institutional Participation and Oversight Service
7th and D Streets, SW
GSA Building, Room 3522
Washington, DC 20407

By Internet

IPOS@ed.gov

Correspondence Course Limitation

An otherwise eligible institution is not eligible for SFA Program
participation if, during the school's latest complete award year, more
than 50% of its COURSES are taught through correspondence.*4*

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

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

[[Exceptions for certain institutions]]
This requirement does not apply to an institution that mainly
provides vocational adult education or job training (as defined under
the Carl D. Perkins Vocational and Applied Technology Education
Act).

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

Correspondence Student Limitation

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

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

Incarcerated Student Limitation

[[Waiver possible]]
An otherwise eligible institution is NOT eligible for SFA Program
participation if, for its latest complete award year, 25% or more of its
regular students are incarcerated.*5* If requested by the school, the
Department may waive this limitation for a nonprofit school offering
a two-year associate degree or a four-year baccalaureate degree
program. For the purposes of this waiver, "nonprofit" includes public
institutions. (For information on the eligibility of incarcerated
students for SFA assistance, see Chapter 2.)

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

Ability-to-benefit Limitation

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

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

FOREIGN SCHOOLS ELIGIBLE FOR FFEL PROGRAMS

Subpart E of the Institutional Eligibility regulations establishes the
eligibility criteria for foreign schools. In general, by law, a foreign
school can participate in the FFEL Programs if the foreign school is
comparable to an institution of higher education as defined earlier in
this section and have been approved by the Department.
Additionally, the regulations added specific requirements for foreign
medical schools.

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

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

- provide, and require its students to complete, a medical program
of clinical and classroom instruction not less than 32 months long
that is supervised closely by members of the school's faculty and
that is provided either

- Outside the U. S., in facilities adequately equipped and staffed
to afford students comprehensive clinical and classroom
medical instruction, or

- In the U. S., 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 Department;

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

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

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

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

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

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

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

REPORTING INFORMATION ON FOREIGN SOURCES

The law requires certain postsecondary schools (whether or not the
school is eligible to participate in the SFA Programs) to report
ownership or control by foreign sources. The law also requires these
postsecondary schools to report contracts with, or gifts from the
same foreign source that, alone or combined, have a value of
$250,000 or more for a calendar year. These reports must be filed
with the Department by the January 31 or July 31, whichever is
sooner, after the date of receipt of the gifts, date of the contract, or
date of ownership or control. The January 31 report should cover the
period July 1-December 31 of the previous year, and the July 31
report should cover January 1-June 30 of the same year.

[[Definitions of gift & contract]]
GIFT: Any gift of money or property.

CONTRACT: Any agreement for the acquisition by purchase,
lease, or barter of property or services for the direct benefit or use
of either of the parties.

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

- is legally authorized to provide a program beyond the secondary
level within a state,

- provides a program for which it awards a bachelor's degree or a
more advanced degree, or provides at least a two-year program
acceptable for full credit toward a bachelor's degree,

- is accredited by a nationally recognized accrediting agency, and

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

[[Contents of disclosure report]]
Each disclosure report to the Department must contain

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

- in the case of a school that is owned or controlled by a foreign
source, the identity of the foreign source, the date on which the
foreign source assumed ownership or control, and any changes in
program or structure resulting from the change in ownership or
control;

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

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

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

Restricted or conditional gift or contract

Any endowment, gift, grant, contract, award, present, or
property of any kind which includes provisions regarding

- the employment, assignment, or termination of faculty;

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

- the selection or admission of students; or

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

In lieu of the reporting requirements listed above:

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

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

[[Where to send reports]]
Reports should be sent to the Department's Institutional Participation
and Oversight Service at one of the addresses on page 3-20.
Submissions should be marked "Foreign Gift Report."

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

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


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

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

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

Last Modified: 08/18/1998