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Rule2022-23078

Pell Grants for Prison Education Programs; Determining the Amount of Federal Education Assistance Funds Received by Institutions of Higher Education (90/10); Change in Ownership and Change in Control

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Published

October 28, 2022

Effective

July 1, 2023

Issuing agencies

Education Department

Abstract

The Secretary amends regulations for the Federal Pell Grant program (Pell Grants or Pell), institutional eligibility, and student assistance general provisions. First, we amend the regulations for Federal Pell Grants for prison education programs (PEPs), to implement new statutory requirements to establish Pell Grant eligibility for a confined or incarcerated individual enrolled in a PEP to implement the statutory change in the Consolidated Appropriations Act, 2021. Second, we amend the Title IV Revenue and Non-Federal Education Assistance Funds regulations (referred to as "90/10" or the "90/10 Rule") to implement the statutory change in the American Rescue Plan Act of 2021 (ARP). We further amend which non-Federal funds can be counted when determining compliance with the 90/10 rule to align allowable non- Federal revenue more closely with statutory intent. Finally, we amend regulations to clarify the process for consideration of changes in ownership and control (CIO), to promote compliance with the Higher Education Act of 1965, as amended (HEA), and related regulations and reduce risk for students and taxpayers, as well as institutions contemplating or undergoing such a change.

Full Text

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[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Rules and Regulations]
[Pages 65426-65498]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-23078]

[[Page 65425]]

Vol. 87

Friday,

No. 208

October 28, 2022

Part III

Department of Education

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34 CFR Parts 600, 668, and 690

Pell Grants for Prison Education Programs; Determining the Amount of
Federal Education Assistance Funds Received by Institutions of Higher
Education (90/10); Change in Ownership and Change in Control; Final
Rule

Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 /
Rules and Regulations

[[Page 65426]]

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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, and 690

[Docket ID ED-2022-OPE-0062]
RIN 1840-AD54, 1840-AD55, 1840-AD66, 1840-AD69

Pell Grants for Prison Education Programs; Determining the Amount
of Federal Education Assistance Funds Received by Institutions of
Higher Education (90/10); Change in Ownership and Change in Control

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends regulations for the Federal Pell Grant
program (Pell Grants or Pell), institutional eligibility, and student
assistance general provisions. First, we amend the regulations for
Federal Pell Grants for prison education programs (PEPs), to implement
new statutory requirements to establish Pell Grant eligibility for a
confined or incarcerated individual enrolled in a PEP to implement the
statutory change in the Consolidated Appropriations Act, 2021. Second,
we amend the Title IV Revenue and Non-Federal Education Assistance
Funds regulations (referred to as ``90/10'' or the ``90/10 Rule'') to
implement the statutory change in the American Rescue Plan Act of 2021
(ARP). We further amend which non-Federal funds can be counted when
determining compliance with the 90/10 rule to align allowable non-
Federal revenue more closely with statutory intent. Finally, we amend
regulations to clarify the process for consideration of changes in
ownership and control (CIO), to promote compliance with the Higher
Education Act of 1965, as amended (HEA), and related regulations and
reduce risk for students and taxpayers, as well as institutions
contemplating or undergoing such a change.

DATES:
Effective date: The regulations are effective July 1, 2023.
Applicability date: The 90/10 regulations will apply to
institutional fiscal years beginning on or after January 1, 2023,
consistent with the effective date of the statutory changes to the 90/
10 calculation.

FOR FURTHER INFORMATION CONTACT: For PEPs: Aaron Washington. Telephone:
(202) 987-0911. Email: <a href="/cdn-cgi/l/email-protection#1859796a7776364f796b7071767f6c7776587d7c367f776e">[email&#160;protected]</a>. For 90/10: Ashley
Clark. Telephone: (202) 453-7977. Email: <a href="/cdn-cgi/l/email-protection#9edfedf6f2fbe7b0ddf2ffecf5defbfab0f9f1e8">[email&#160;protected]</a>. For
Change in Ownership: Brian Schelling. Telephone: (202) 453-5966. Email:
<a href="/cdn-cgi/l/email-protection#2466564d454a0a77474c4148484d4a436441400a434b52">[email&#160;protected]</a>. You may also email your questions to
<a href="/cdn-cgi/l/email-protection#3b68544b53525a1576585a495f575e7b5e5f155c544d">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of this Regulatory Action

These final regulations address three areas: Pell Grants for PEPs,
the 90/10 rule, and institutional changes in ownership. The PEP final
regulations, on which the Affordability and Student Loans Committee
reached consensus, implement statutory changes that extend Pell Grant
eligibility to confined or incarcerated individuals who enroll in
qualifying PEPs. The 90/10 final regulations, on which the
Institutional and Programmatic Eligibility Committee (Committee)
reached consensus, implement statutory changes that require proprietary
institutions to obtain at least 10 percent of their revenue from
sources other than Federal education assistance funds and more closely
align allowable non-Federal revenue with statutory intent. Finally, the
changes to the current CIO regulations provide a clearer and more
defined process for institutions undergoing changes in ownership and
control.

Prison Education Programs

The PEP regulations provide to the Department and stakeholders,
including students, correctional agencies and institutions,
postsecondary institutions, accrediting agencies, and related
organizations, a detailed and clear framework for how to implement the
new section 484(t) of the HEA, which takes effect on July 1, 2023. The
Department amended the regulations in Sec. Sec. 600.2, 600.7, 600.10,
600.21, 668.8, 668.32, 668.43, and 690.62, and added part 668, subpart
P. Section 484(t) of the HEA sets forth PEP requirements that include:
(1) a prohibition on PEPs offered by proprietary institutions; (2)
definitions of a ``confined or incarcerated individual'' and a ``prison
education program;'' (3) the program approval process by the Bureau of
Prisons, State department of corrections, or other entity that is
responsible for overseeing the correctional facility (which we refer to
throughout these final regulations as the oversight entity); (4) a
credit transfer requirement for PEPs; (5) a prohibition against program
offerings by institutions that are subject to adverse actions by the
Department, their accrediting agency, or the relevant State authorizing
agency; (6) requirements that PEPs offer educational programming that
satisfies professional licensure or certification, as applicable; (7)
student enrollment restrictions for programs where ultimate licensure
or employment would be prohibited; (8) the requirement that confined or
incarcerated individuals be enrolled in an eligible PEP in order to
access a Pell Grant; and (9) various Department reporting requirements
for postsecondary institutions offering PEPs.
The final regulations clarify and implement these statutory
requirements by setting clear standards for postsecondary institutions
offering PEPs and outlining the requirements to develop and implement
such programs to gain and maintain access to Pell Grant funds. The
final regulations also ensure that institutions report necessary data
to the Department to assist in assessing program outcomes, also
consistent with statutory requirements under section 484(t)(5) of the
HEA for an annual report by the Secretary regarding the impact of the
new requirements. The final rule establishes important guardrails for
confined or incarcerated individuals and taxpayers, to protect students
from enrolling in programs that will not permit them to benefit by
finding employment in the field after graduation and release, and to
prevent taxpayer funds from financing such programs. It also outlines
title IV program requirements for PEPs related to State authorizing
agencies and accrediting agencies.
Section 484(t)(1)(B)(iii) of the HEA requires an oversight entity,
defined in the final regulations as a State department of corrections
or other entity responsible for overseeing correctional facilities or
the Federal Bureau of Prisons, to determine that any PEP it approved is
``operating in the best interest'' of the confined or incarcerated
individuals it supervises. Congress outlined indicators of ``best
interest''--both inputs and outcomes--which are explained below.
Because oversight entities may not have previously assessed some of the
``best interest'' indicators outlined in statute, such as student
earnings and job placement post-release, the final regulations clarify
how to implement this requirement. To facilitate a thorough and well-
informed program assessment, these final regulations require oversight
entities to seek input from relevant stakeholders in making the ``best
interest'' determination.

90/10 Rule

The final 90/10 regulations amend Sec. 668.28 to change how
proprietary institutions calculate and report to the Department the
percentage of their revenue that comes from Federal sources, in
accordance with section

[[Page 65427]]

487(a) of the HEA. Section 487(a) establishes the requirement that
proprietary institutions derive not less than 10 percent of their
revenue from non-Federal sources. Section 487(d) of the HEA: (1)
defines how proprietary institutions calculate the percentage of their
revenue that is derived from non-Federal sources; (2) outlines
sanctions for proprietary institutions that fail to meet the
requirement in section 487(a); (3) requires the Secretary to publicly
disclose on the College Navigator website proprietary institutions that
fail to meet the requirement; and (4) requires that the Secretary
submit a report to Congress that contains the Federal and non-Federal
revenue amounts and percentages for each proprietary institution.
The ARP amended these sections to require proprietary institutions
to include other sources of Federal revenue, in addition to title IV
revenue from the Department, in the calculation that proprietary
institutions make to determine if they comply with the 90/10 rule.
These final regulations codify this statutory change and inform
proprietary institutions how to determine which Federal funds they must
include in their calculations.
Additionally, the final regulations amend how proprietary
institutions calculate 90/10 to address practices that some proprietary
institutions have used to alter their revenue calculation or inflate
their non-Federal revenue percentage. The final regulations also create
a new requirement for when proprietary institutions must request and
disburse title IV student aid funds to prevent them from delaying
disbursements to the next fiscal year. The final regulations will also
more closely align allowable non-Federal revenue with statutory intent
by clarifying: (1) allowable non-Federal revenue generated from
programs and activities that can count for the purposes of 90/10; (2)
how schools must apply Federal funds to student accounts and determine
the funds' inclusion in the Federal revenue percentage of 90/10; (3)
which revenue generated from institutional aid can count as non-Federal
revenue for purposes of 90/10; and (4) funds that institutions must
exclude from the 90/10 calculation.
The final regulations also modify the steps that proprietary
institutions must take if they fail to derive at least 10 percent of
their revenue from allowable non-Federal sources by requiring them to
notify students of the failure and of the students' potential loss of
title IV aid at that proprietary institution. Additionally, the final
regulations establish the process that proprietary institutions must
follow if they initially determine that they met the 90/10 requirement
for the preceding fiscal year but subsequently determine that they did
not. Lastly, the final regulations provide that a proprietary
institution will be liable for repaying all title IV funds disbursed
for the fiscal year after it becomes ineligible to participate in the
title IV program due to failing 90/10.

Changes in Ownership

To address the risks that some changes in ownership of
postsecondary institutions present to students and taxpayers and to
address the growing complexity of those transactions, the Department,
under the authority of section 498(i) of the HEA, amends regulations
covering changes in ownership in Sec. Sec. 600.2, 600.4, 600.20,
600.21, and 600.31. These changes modify the definitions of
``additional location,'' ``branch campus,'' ``main campus,'' and
``nonprofit institution,'' as well as the terms ``closely-held
corporation,'' ``ownership or ownership interest,'' ``parent,''
``person,'' and ``other entities'' in the context of changes in
ownership that result in a change in control, where the individual or
entity with control has the power to direct the management or policies
of the institution.
Under the final regulations, we require institutions to provide a
minimum 90-day notice to the Department when they are to undergo a
change in control. The Department may apply conditions to the new
Temporary Provisional Program Participation Agreement (TPPPA) after the
change and until we issue a decision on the pending application for
approval of the change. The final regulations also increase
transparency for changes in ownership that do not constitute a change
of control by increasing the reporting requirements to the Department
on such transactions at lower percentages of ownership.

Summary of the Major Provisions of This Regulatory Action

The final regulations make the following changes.
<bullet> Update appropriate cross-references.
Prison Education Programs (PEPs) (Sec. Sec. 600.2, 600.7, 600.10,
600.21, 668.8, 668.32, 668.43, 668.234 through 668.242, and 690.62).
<bullet> Extend access to Pell Grants for confined or incarcerated
individuals in qualifying postsecondary education programs and define
an eligible PEP based on the statutory requirements.
<bullet> Clarify that only public or private nonprofit institutions
as defined in Sec. 600.4, or vocational institutions as defined in
Sec. 600.6, may offer eligible PEPs and require that PEPs offered at a
correctional institution be reported to the Department as an
``additional location.''
<bullet> Amend requirements for postsecondary institutions to
obtain and maintain a waiver from the Secretary to allow students who
are confined or incarcerated to exceed 25 percent of the institution's
regular student enrollment.
<bullet> For a PEP designed to meet educational requirements for a
specific professional license or certification, require disclosures to
students of typical State or Federal prohibitions on the licensure or
employment of formerly incarcerated individuals.
<bullet> Prohibit institutions from enrolling a confined or
incarcerated individual in a PEP that is designed to lead to licensure
or employment in a specific job or occupation where State or Federal
law would prohibit that individual from licensure or employment based
on the type of the criminal conviction for which the student has been
confined or incarcerated.
<bullet> Define the process and the factors that the oversight
entity will use to determine if a PEP is operating in the best interest
of the confined or incarcerated individuals they supervise, including
consulting with interested third parties and conducting periodic re-
evaluations.
<bullet> Define the requirements for approval from the Secretary
and the Institutions of Higher Education's (``IHE's'') accrediting
agency for the first PEP at the institution's first two additional
locations at prison facilities.
<bullet> Require a postsecondary institution to obtain and report
to the Department the release or transfer date of all confined or
incarcerated individuals who participated in its PEP.
<bullet> Outline the process for winding down eligible programs for
confined or incarcerated individuals that are not operating at a
Federal or State correctional facility and are not approved as eligible
PEPs, prior to July 1, 2023.
<bullet> Outline the process a postsecondary institution must
follow to reduce a Pell Grant award that exceeds the confined or
incarcerated individual's cost of attendance. Title IV Revenue and Non-
Federal Education Assistance Funds (90/10 Rule) (Sec. 668.28)
<bullet> Amend the revenue calculation methodology in the 90/10
rule by changing references to ``title IV revenue'' to ``Federal
revenue'' where appropriate to align with the statutory amendment that
changes the 90/10

[[Page 65428]]

revenue requirement to include all Federal revenue.
<bullet> Outline how the Department will publish, and update as
necessary, which Federal funds it requires proprietary institutions to
include in their 90/10 calculation.
<bullet> Create a new requirement for when proprietary institutions
must request and disburse title IV, HEA program funds to prevent them
from delaying disbursements to reduce their Federal revenue percentage
for a fiscal year in order to meet the 90/10 revenue requirement.
<bullet> Clarify the allowable revenue generated from programs and
activities that can be counted as non-Federal revenue for purposes of
the 90/10 revenue requirement to provide additional consumer
protections.
<bullet> Revise how proprietary institutions apply funds to student
accounts and determine the funds' inclusion in the 90/10 revenue
requirement calculation to incorporate statutory changes, clarify how
grants from non-Federal public agencies that include Federal funds must
be treated, and add additional consumer protection measures.
<bullet> Revise the provisions governing which revenue generated
from institutional aid can be included in the 90/10 revenue calculation
to remove paragraphs that are no longer applicable, codify existing
practices in regulation, promote consumer protection measures, and
close potential loopholes related to Income Share Agreements (ISAs) or
other alternative financing agreements issued by the institution or a
related party.
<bullet> Revise the provisions governing which funds must be
excluded from a proprietary institution's calculation of its revenue
percentage to remove regulations that no longer apply and to limit
certain types of revenues that some proprietary institutions have
employed to alter their revenue calculation.
<bullet> Revise the steps that a proprietary institution must take
to better protect students and taxpayers if it does not generate 10
percent or more of its revenue from allowable non-Federal sources in a
fiscal year. The regulations provide reporting procedures for
proprietary institutions that become aware, based on information
received after the initial 45-day reporting period, that they failed
the revenue requirement for the previous fiscal year.

Changes in Ownership (CIO) (Sec. Sec. 600.2, 600.4, 600.20, 600.21,
and 600.31)

<bullet> Clarify the definitions of ``additional location,''
``branch campus,'' ``main campus,'' and ``nonprofit institution;'' and
for nonprofit institution, we describe institutional characteristics
that do not generally meet the definition of a ``nonprofit
institution.''
<bullet> Require that institutions provide the Department with 90
days' notice of an impending change in ownership, ensure that
accreditation and State licensure are in effect as of the day before
the proposed change, and codify practices on submission of financial
statements and provision of financial protection.
<bullet> Explain the terms by which a TPPPA may be extended to
institutions seeking a change in ownership.
<bullet> Clarify what constitutes a change in ownership and, more
narrowly, a change in control, distinguishing between natural persons
and entities in Sec. 600.21 and the conditions under which they
constitute a change of control.
<bullet> Add ``trust'' to the definition of ``person'' and refine
the definitions of the terms ``ownership or ownership interest,''
``parent,'' and ``other entities,'' as applied to changes in
ownership.''
<bullet> Add to the list of covered transactions the acquisition of
another institution and clarify the application of the regulations in
cases of resignation or death of an owner.
Costs and Benefits: As further detailed in the Regulatory Impact
Analysis, the final regulations have significant impacts on students,
borrowers, educational institutions, taxpayers, and the Department.
The PEP regulations benefit incarcerated individuals, taxpayers,
and communities by creating higher employment and earnings, and lower
recidivism rates, for those who enroll in higher education programs in
prison, as described in the Regulatory Impact Analysis. Institutions
that offer programs in correctional facilities and do not currently
receive Pell Grants may bear some or all costs of that programming.
Institutions that do not currently receive Pell funds for these
programs benefit from these changes. Pell Grant transfers to
institutions and students are estimated to increase by $1.1 billion
from these programs. These transfers are overwhelmingly the result of
the statutory changes made by Congress to make incarcerated students
eligible for Pell Grants again. There are increased costs for the
Department due to various requirements in the final regulations
including, but not limited to: data collection and dissemination,
approval of PEPs, and required reporting to Congress and the public.
There are increased costs to the oversight entity due to the required
``best interest determination'' defined in Sec. 668.241. There are no
direct costs to students. Completing the Free Application for Federal
Student Aid (FAFSA[supreg]) is free (though there is some minimal
burden associated with completing the form) and grants under the Pell
Grant program do not need to be repaid. To qualify for a Pell Grant,
the student must be charged tuition and the charges cannot be covered
by another source. Generally, students do not pay anything to
participate in these programs. However, there could be occasions where
a student only qualifies for a partial Pell Grant and owes a balance to
the postsecondary institution.
Under the final 90/10 regulations, military-connected students will
benefit as proprietary institutions' incentive to aggressively recruit
GI Bill and Department of Defense (DOD) Tuition Assistance recipients
is greatly reduced because Federal assistance for those students will
be treated the same as title IV funds in the 90/10 revenue calculation.
The Department is aware that some proprietary institutions have sought
to enroll additional Department of Veterans Affairs (VA) or DOD
recipients because their dollars provide a larger cushion in their 90/
10 calculation to pursue more title IV, HEA funds, sometimes to the
detriment of those veterans and service members. The regulatory changes
remove that incentive by counting all Federal education assistance
funds on the 90 side of the 90/10 calculation. These changes produce
some savings to the taxpayer in the form of reduced expenditures of
title IV, HEA aid to institutions that are not able to adapt and lose
title IV eligibility. As indicated in the Regulatory Impact Analysis,
we estimate transfers are reduced by -$292 million from the changes to
the 90/10 provisions. These reduced transfers are mostly a result of
the statutory changes made by Congress to amend the 90/10 provision. In
as much as only repayment of principal on institutional loans and ISAs
may be counted as revenue, the regulatory changes may further decrease
proprietary institutions' incentive to rely on such potentially costly
student financing options to meet 90/10 requirements. Costs to
institutions include the need to ensure compliance with the
regulations. For example, institutions unable to generate sufficient
non-Federal revenues through their eligible programs may create
programs that are not title IV eligible to generate revenue to meet 90/
10 requirements.
The changes to the CIO regulations benefit institutions and the
Department by clarifying requirements as well as providing timely
feedback for institutions undergoing CIO

[[Page 65429]]

transactions. Students and borrowers benefit from the 90-day CIO notice
requirement that provides students with timely information that impacts
their education and enables them to make future decisions based on that
knowledge. Costs to institutions include compliance and the paperwork
burden associated with the increased reporting and disclosure
requirements.
On July 28, 2022, the Secretary published a notice of proposed
rulemaking (NPRM) for these parts in the Federal Register (87 FR
45432). These final regulations contain changes from the NPRM, which we
explain in the Analysis of Comments and Changes section of this
document.
Public Comment: In response to our invitation in the NPRM, 142
parties submitted comments on the proposed regulations.
We discuss substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
technical or other minor changes or recommendations that are out of the
scope of this regulatory action or that would require statutory
changes.
Analysis of Public Comment and Changes: Analysis of the comments
and of any changes in the regulations since publication of the NPRM
follows.

General Comments Regarding the Negotiated Rulemaking Process

Selection of Negotiators and Negotiated Rulemaking Process
Comments: A few commenters wrote that there should have been other
negotiators to represent other interests or sectors, including ISAs,
proprietary institutions, and veterans. A few commenters stated that
the Committee members were not sufficiently familiar with the issues
involved in 90/10. One commenter questioned why the Department selected
a Committee member whose employer was under investigation by the
Department of Veterans Affairs (VA) Office of Inspector General. One
commenter claimed that the Department did not provide adequate time for
Committee negotiators to consider the Department's proposed language.
Finally, one commenter stated that because 90/10 negotiations happened
in caucus that the consensus language does not meet the statutory
requirement that negotiations provide for a comprehensive discussion
and exchange of information.
Discussion: Section 492 of the HEA provides that the Secretary
``select individuals with demonstrated expertise or experience in the
relevant subjects under negotiation, reflecting the diversity in the
industry, presenting both large and small participants, as well as
individuals servicing local areas and national markets.'' The
Department identified the relevant subjects to be negotiated and
invited the public to nominate negotiators and advisors. The Department
reviewed the qualifications of nominees and made selections for
Committee members. Further, during the first negotiation session,
negotiators had the opportunity to suggest additional Committee members
by consensus. The Committee added one additional Committee member
representing civil rights organizations through this process. We have
used this process for many years and believe it meets the statutory
requirements for selecting negotiators. Further, none of the commenters
identified nominated individuals who should have been selected but were
not.
On October 4, 2021, the Department published a Federal Register
document announcing public hearings on 90/10 (86 FR 54666). We held
those hearings October 26-27, 2021. The Department also accepted
written public comments from October 4, 2021, through November 2, 2021.
We then held three weeks of virtual negotiated rulemaking sessions on
January 18-21, 2022, February 14-18, 2022, and March 14-18, 2022, that
we livestreamed.
The Committee adopted by consensus a set of protocols that allowed
any Committee member, including the Federal negotiator, to call for a
caucus with other Committee members. The protocols also stated that the
Department would provide its proposed language prior to the start of
the week's negotiation sessions, which the Department did with its
initial proposed 90/10 language. During the last week of negotiations,
the Federal negotiator and the negotiator representing proprietary
institutions called for caucuses to discuss possible 90/10 regulatory
language with a small group of negotiators during the final session.
The Federal negotiator presented this language to the full Committee
for discussion and review before taking the consensus check. This
process met the statutory requirements and provided ample time for
discussion of the regulations.
Changes: None.

Public Comment Period

Comments: A few commenters asked the Department to extend the
public comment period an additional 30 days. These commenters pointed
out that there were several large regulatory packages that impact the
higher education sector out for public comments at once, and the
commenters also observed that Executive Orders 12866 and 13563 cite 60
days as the recommended length for public comment. One commenter asked
the Department why the Department's proposed regulations related to
Title IX received more time for public comment than these regulations.
Discussion: As discussed previously, the Department's negotiated
rulemaking process provides ample time for public comment and
engagement before the public comment period. Additionally, the proposed
regulations for 90/10 were the same as the regulations agreed to by
consensus in March 2021, providing the public with additional time to
review the Department's proposed regulations. Further, the regulations
related to Title IX are not subject to the negotiated rulemaking
process, and therefore the public did not have the same opportunity to
weigh in on the regulations before they were published for public
comment. The Executive orders provide a recommendation for an
appropriate time for public comment, but that timeline is not a
requirement, nor does it take into account the Department's individual
process for regulating under the HEA. The Department declines to extend
the comment period for an additional 30 days.
Changes: None.

Prison Education Program (PEP) (Sec. Sec. 600.2, 600.7, 600.10,
600.21, 668.43, 668.234 through 668.242, and 690.62)

General Support

Comments: Several commenters submitted general letters of support
by noting that the regulations will benefit both taxpayers and
incarcerated individuals and may ultimately lead to lower recidivism
rates, which could lead to a smaller prison population.
Discussion: We thank the commenters for their support.
Changes: None.

General Opposition

Comments: Many commenters stated that the regulations will be
bureaucratic, burdensome, and costly and that the additional proposed
regulatory requirements go beyond the statutory framework.
Discussion: The Department disagrees with these comments and
believes the regulations strike an appropriate balance between imposing
requirements that will increase access to incarcerated individuals,
improving the quality of PEPs, and limit administrative burden to
schools, correctional agencies, and other stakeholders.
We also disagree that the regulations exceed the scope of the
statutory

[[Page 65430]]

authority for PEPs. The Department has the authority to expand on and
clarify statutory text, and we believe that the requirements in the
final regulations are a logical outgrowth of the HEA. For example, the
main concern from commenters was the prescriptive nature of the best
interest determination and the accompanying requirement to assess PEP
outcomes under Sec. 668.241. While the HEA requires the oversight
entity to determine if a PEP is operating in the best interest of the
confined or incarcerated individual, it does not prescribe how often
and when that process should be undertaken. The regulations supply that
necessary clarification.
The statute also requires the oversight entity to approve PEPs, but
we heard from non-Federal negotiators and from commenters that the
oversight entities may not be equipped to make these determinations
because they are not education experts. By identifying what factors to
consider, who to consult, and how often to revisit the determinations,
we created a formal process with clear measurements that will be
consistent across all oversight entities.
We also believe that the oversight entity should continue to
reassess PEPs operating in a correctional facility because a PEP will
not always be operating in the best interest of its population. For
example, changes over time in program offerings, instructors, academic
counseling, transfer of credits, or labor market trends might impact a
PEP, such that it no longer operates in the best interest of the
confined or incarcerated individuals. We believe that mandatory
periodic assessment will ensure that PEPs serve the programmatic and
financial purposes for which they were authorized. We have set
reasonable standards, with extensive public input, to ensure that the
process is not overly burdensome to the oversight entity.
Commenters also raised concerns about the initial two-year approval
period, accreditation requirements, and reporting requirements. We
respond to those comments and other commenter concerns in the
individual sections devoted to those topics below.
Changes: See the discussion under Best Interest Determination
(Sec. 668.241) for changes the Department has made in the final
regulations.

General Comments

Comments: One commenter requested that the Department require
standardization of access to technology for confined or incarcerated
individuals across the United States and within States.
Discussion: The Department does not have the authority to require
postsecondary institutions or correctional facilities to standardize
technology across all spaces. Further, technology requirements will
vary between PEPs, and a one-size-fits-all approach could inhibit the
flexibility of institutions to offer appropriate forms of technology in
their PEPs.
Changes: None.
Comments: One commenter stated that the Department should extend
Pell Grant eligibility to individuals who have been released from a
correctional facility. That commenter also recommended that the
Department increase the amount of the Pell Grant.
Discussion: Under existing law, individuals released from a
correctional facility will qualify for Pell Grant funds if they
otherwise continue to meet all applicable eligibility requirements and
enroll in eligible postsecondary programs.
The Department does not have the authority to adjust the maximum
Pell Grant award because that amount is established annually through
Congressional appropriations.
Changes: None.
Comments: One commenter stated that all Pell Grant funding received
by a confined or incarcerated individual must go directly to support
the individual's education and should not be used to support the
postsecondary institution's main campus or other non-PEP locations.
Discussion: The Department lacks the authority to adopt the
commenter's suggestion. The Department maintains authority over the use
of Pell Grant funds only to the extent that the grants are
appropriately calculated, awarded, and disbursed to students. As long
as the institution follows all applicable laws and Department
regulations, once Pell Grant funds have been correctly disbursed, the
Department does not control institutional budgets or how institutions
use funds that have been correctly applied to institutional charges.
Changes: None.
Comments: One commenter noted that the subcommittee that discussed
these regulations during negotiated rulemaking should have included
greater representation from oversight entities (which are defined in
Sec. 668.235). The commenter requested that in the future any issue
that does not fit well with the regulatory agenda should have its own
negotiated rulemaking instead of discussing the topic in a
subcommittee.
Discussion: We believe the subcommittee had appropriate
representation from oversight entities. The eight-member subcommittee
included representatives from both State departments of corrections and
State correctional education directors, and the representative from
State departments of corrections was added during negotiated rulemaking
specifically to ensure additional representation in that area.
Moreover, the Department has successfully used subcommittees during
several prior rulemakings to gain additional critical feedback from
specialists with experience related to the issues to be discussed. Use
of a subcommittee during the Affordability and Student Loans Committee
Meetings was appropriate and valuable because the eight subcommittee
members provided substantial background on the topic of postsecondary
education in carceral settings to the main committee, offered numerous
recommendations that were adopted by the main committee, and ultimately
expressed their support for the draft regulations to the main committee
at the conclusion of the negotiations, all of which enabled the main
committee to reach consensus on the proposed regulatory language. Three
members of the subcommittee also had a seat on the main committee,
including representatives for independent students, private nonprofit
institutions, and State departments of corrections. An additional
member of the subcommittee presented information to the main committee
and was available during the November and December sessions to answer
questions.
Changes: None.
Comments: Many commenters requested that the Department provide
guidance to ensure smooth implementation of the regulations, including
guidance or additional actions the Department should take on the
following topics:
<bullet> The Second Chance Pell experiment under the Experimental
Sites Initiative.
<bullet> How to apply for PEP, step-by-step.
<bullet> Overcoming barriers to completing the FAFSA[supreg] and
verification of application information.
<bullet> Supporting students with delinquent or defaulted Federal
student loans.
<bullet> Automatically enrolling confined or incarcerated
individuals with Federal loan debt into income-driven repayment plans.
<bullet> Cancelling Federal student loans if the borrower is
incarcerated for a minimum of five years.
<bullet> Supporting individuals post-release in collaboration with
the Office of Career, Technical, and Adult Education.
<bullet> The grievance or complaint process for confined or
incarcerated individuals.

[[Page 65431]]

<bullet> Protecting confined or incarcerated individuals who do not
meet Satisfactory Academic Progress (SAP) standards for confined or
incarcerated individuals.
<bullet> Monitoring issues related to lack of access to technology
and accessing coursework online.
<bullet> Dependency overrides for confined or incarcerated
individuals.
<bullet> Return of Title IV funds (R2T4) calculations for confined
or incarcerated individuals.
<bullet> The conditions for Pell restoration in the event of
closure of an institution.
<bullet> Releasing and making public an annual listing of PEPs by
correctional facility and State.
<bullet> Developing an interagency communications process between
the oversight entity, accrediting or State approval agency, and the
Department.
<bullet> Establishing that correctional facilities that are
additional locations need not be included in Clery Act campus
reporting.
<bullet> The roles and responsibilities of accrediting and State
approval agencies, especially regarding accreditation requirements in
Sec. 668.237.
<bullet> The timelines for reporting requirements under Sec.
668.239.
<bullet> The best interest determination under Sec. 668.241(a),
including data sources or infrastructure that are available to
stakeholders.
<bullet> The role of the advisory committee.
<bullet> The role of community-based organizations.
Discussion: The Department appreciates the recommendations for
additional guidance and actions the Department should take to support
confined or incarcerated individuals and address other implementation
issues that may arise. The Department plans to publish guidance
addressing many of the topics identified by commenters. The Department
is also currently developing a dedicated landing page for PEP resources
about prison education programs, and we have also created a central
mailbox, <a href="/cdn-cgi/l/email-protection#85f5e0f5c5e0e1abe2eaf3">[email&#160;protected]</a>, for ongoing PEP questions from stakeholders.
Changes: None.

Definitions (Sec. 600.2)

General Comments

Comments: One commenter requested definitions and clarification of
several phrases in the preamble to the NPRM, including ``greater
oversight'' and ``high program standards.'' The commenter also asked
what metrics we will use to ascertain whether a PEP is providing
confined or incarcerated individuals with education that meets high
program standards, and how frequently and through what mechanism we
will evaluate and report on such high program standards.
Discussion: The Department elects not to provide definitions of
these terms or to outline these operational processes in regulation.
Instead, the Department will consider providing guidance to
postsecondary institutions, accrediting and State approval agencies,
and oversight entities, as appropriate.
Changes: None.
Additional Location
Comments: Several commenters requested that the Department remove
juvenile justice facilities and jails from the definition of
``additional location'' and exempt programs offered at such facilities
from statutory and regulatory PEP requirements. They argued that the
``scale'' and cost associated with the regulations will harm small
programs.
Discussion: The Department declines to remove juvenile justice
facilities and local jails from the ``additional location'' definition.
The statute does not provide an exemption or waiver for such programs.
To qualify for Pell Grant funds, the statute requires that all confined
or incarcerated individuals be enrolled in an eligible PEP that adheres
to statutory requirements. These regulations reinforce statutory
protections for the benefit of all confined or incarcerated individuals
by ensuring that PEPs also comply with requirements of the Department,
the State authorizing agency, the accrediting agency or the State
approval agency, and oversight entities.
Including juvenile justice facilities and jails as additional
locations also allows the Department to track and monitor PEPs offered
at these facilities and include them in data collection, trending, and
reporting. This will help us better understand if certain PEPs need
more oversight or supports, or both.
Finally, as noted in the NPRM, if an institution ceases all
operations at a correctional facility (the additional location of the
postsecondary institution) the confined or incarcerated individual may
be eligible for Pell Grant restoration. 87 FR 45441. Without the
inclusion of these facilities in the definition of an additional
location, confined or incarcerated individuals may not be eligible for
restoration of their Pell Grant if all PEPs at the correctional
facility close.
Changes: None.
Comments: One commenter noted that some of their institution's
programs operating in a prison setting are extensions of their existing
academic programs and are not distinct programs operating at a
correctional facility. The commenter asked if these types of programs
would need to be reported as additional locations.
Discussion: Even if the program the postsecondary institution plans
to offer at the correctional facility is an extension of a program
offered either at the main campus or at another additional location,
the program still must meet the definition of and be approved as a PEP.
In addition, the correctional facility where that program is offered
must be reported as an additional location.
Changes: None.
Comments: One commenter requested that correctional facilities only
offering correspondence courses be removed from the definition of
``additional location,'' because the postsecondary institution would be
unable to consistently review the facility or gain access to locations
where the confined or incarcerated individuals complete their
coursework.
Discussion: The Department declines to adopt the commenter's
request. We seek to hold all programs accountable to the standards
outlined in these final regulations, regardless of the method of
delivery. With the monitoring and oversight required under these
regulations, the Department will be able to track and monitor PEPs
offered at these facilities and include them in data collection,
trending, and reporting. This will help us to better understand if
certain PEPs need more oversight and supports.
The Department also noted in the NPRM that if an institution ceases
all operations at a correctional facility (the additional location of
the postsecondary institution), enrolled students may be eligible for
Pell Grant restoration. 87 FR 45441. Without the inclusion of
facilities where only correspondence courses are offered, confined or
incarcerated individuals may not be eligible for restoration of their
Pell Grant in the event all PEPs at the correctional facility close.
Changes: None.
Confined or Incarcerated Individual
Comments: The same commenters that requested removal of juvenile
justice facilities and jails from the definition of ``additional
location'' also requested removal of these facilities from the
definition of ``confined or incarcerated individual.'' They argued that
the ``scale'' of the regulations and cost associated with the
regulations would harm small programs.
Discussion: The Department declines to make this change, for the
reasons

[[Page 65432]]

described in the ``additional location'' discussion above.
Changes: None.
Comments: Several commenters suggested additions to the types of
individuals who are not considered to be confined or incarcerated,
including individuals in pretrial detention, individuals under
correctional custody in temporary release programs, or individuals
living in a halfway house.
Discussion: To be eligible for a Pell Grant, those meeting the
definition of a ``confined or incarcerated individual'' must enroll in
a PEP. Section 484(t)(1)(a)(i) of the HEA defines a ``confined or
incarcerated individual'' as ``an individual who is serving a criminal
sentence[.]'' An individual who is not serving a criminal sentence thus
is not considered to be confined or incarcerated for the purposes of
the PEP provision and would not be required to enroll in a PEP to
establish eligibility for Pell Grant funds. The Department also notes
that, under section 484 of the HEA, individuals living in a halfway
house are not considered to be incarcerated and therefore would qualify
for Pell Grant eligibility through enrollment in any eligible program,
whether or not it is a PEP. While the Department did not amend the
definition of ``confined or incarcerated individual,'' we plan to
release guidance as necessary to assist postsecondary institutions with
questions that may arise regarding student eligibility.
Changes: None.

Conditions of Institutional Eligibility (Sec. 600.7)

Comments: One commenter asserted that the waiver of the enrollment
cap for incarcerated individuals under Sec. 600.7(c) is overly narrow
because the commenter believed it would only apply to a subset of PEPs
that had already received an initial waiver. The commenter also
believed that some of the considerations listed in Sec. 600.7 may not
be appropriate when determining whether to grant a waiver.
Discussion: The commenter appears to have misunderstood the
application of Sec. 600.7, which applies to any institution seeking a
waiver to exceed the 25 percent enrollment cap on incarcerated
individuals. As provided in the regulations, an institution that does
not already have a waiver must wait at least two years from the date of
its first approved PEP before applying for a waiver. We thank the
commenter for making the Department aware of implementation
considerations and note that we accepted a proposed revision from a
different commenter below that will make the waiver language clearer.
While we do not anticipate a large number of applications that will
exceed the 25 percent cap on enrollment of confined or incarcerated
individuals, the Department intends to provide guidance for
institutions that wish to exceed the 25 percent cap, as necessary. We
also do not anticipate a large number of applications will exceed the
25 percent cap. The Department plans to provide direct one-on-one
assistance to postsecondary institutions that wish to apply for the
waiver to assist with regulatory compliance.
Changes: None.
Comments: One commenter asked whether non-profit institutions that
exclusively provide educational services to students who are
incarcerated will be required to apply for a waiver.
Discussion: The only automatic exemption in Sec. 600.7(c) is for
public institutions chartered for the explicit purpose of educating
confined or incarcerated individuals. The Department declines to
include private non-profit institutions in this automatic exemption.
Public institutions are likely to be backed by the full faith of a
State government, and there are stronger centralized administrative
processes and support systems in place. We believe that these State
processes will ensure that a postsecondary institution that is
chartered for the purpose of exclusively providing educational services
to confined or incarcerated individuals will receive a thorough review
by an entity within the State government and be found capable of
fulfilling the needs of confined or incarcerated individuals. Private
non-profit institutions would thus have to apply for the waiver.
Changes: None.
Comments: One commenter noted that the draft language in Sec.
600.7(c) refers to two 5-year waiver periods allowing expansion first
to 50 percent and then to 75 percent incarcerated student enrollment,
but that it is unclear what happens after the second five-year period
has elapsed, specifically whether the Department would automatically
extend the waiver if there was no reason to limit or terminate it.
Discussion: The Department will not automatically extend the
waiver. At the end of the five-year period following the Department's
initial approval of the waiver, if the Department has not otherwise
informed the institution that it is revoking the institution's waiver,
up to 75 percent of the institution's regular enrolled students may be
confined or incarcerated individuals. However, at each recertification,
defined under Sec. 668.13, the Department will review whether the
postsecondary institution is eligible to maintain its waiver. We
believe that monitoring an institution's administrative capability and
financial health at recertification is important because the
administrative capability and financial responsibility of an
institution can fluctuate. Failures in either of those areas could call
into question whether the institution is best situated to maintain its
waiver or have it revoked. Additionally, the Department's
recertification evaluation provides an opportunity to evaluate whether
the oversight entity has determined whether the program continues to be
offered in the best interest of students and whether the program
continues to meet all of the Department's requirements for PEPs. We
have the authority to review for compliance as a normal part of
operational considerations and decline to include additional regulatory
language to this effect.
The Department agrees, however, that certain language in proposed
Sec. 600.7(c)(4)(i)(B) is unclear regarding the extent of available
waivers. That provision allows up to 75 percent of an institution's
students to be confined or incarcerated ``for the five years''
following the period described in Sec. 600(c)(4)(i)(A) (which allows
enrollment up to 50 percent). Because the regulations are intended to
cap institutions at 75 percent enrollment of confined or incarcerated
individuals, the cited five-year clause is unnecessary.
Changes: To clarify that enrollment of incarcerated individuals at
postsecondary institutions will be capped at 75 percent enrollment, the
Department amends Sec. 600.7(c)(4)(i)(B) to clarify that, following
the period described in paragraph (c)(4)(i)(A), no more than 75 percent
of the institution's regular enrolled students may be confined or
incarcerated.
Comments: One commenter questioned the rationale for the 75 percent
enrollment cap given that the Department has the authority to limit or
terminate the waiver at any point if it determines the institution does
not meet the waiver requirements.
Discussion: Section 102 of the HEA says that an institution of
higher education is not an eligible institution for the purposes of the
title IV aid if the institution has a student enrollment in which more
than 25 percent of the students are incarcerated, except that the
Secretary may waive the limitation for a public or nonprofit
institution that provides a two- or four-year program of instruction
(or both) for which the institution awards a bachelor's degree, or an
associate's degree or a

[[Page 65433]]

postsecondary diploma, respectively. Because it is optional for the
Secretary to waive the limitation, the Department has authority to set
reasonable upward limits through regulation. A subcommittee member
recommended the 75 percent limit on enrollment of confined or
incarcerated individuals, and the Department formally adopted the
recommendation, which was agreed to by the committee. The Department
believes that the upper limit strikes an appropriate balance between
increasing options to serve this population and the heightened demands
and responsibilities of operating successful PEPs. Public postsecondary
institutions that are specifically chartered for educating confined or
incarcerated individuals are exempt from the 75 percent cap on
enrollment.
Some postsecondary institutions currently have a waiver to exceed
25 percent enrollment of confined or incarcerated individuals.
Institutions that received a waiver prior to the implementation date of
these regulations are currently permitted to enroll up to 100 percent
of confined or incarcerated individuals and are automatically granted a
waiver. However, we will limit the growth of incarcerated enrollment at
those institutions to ensure consistent program quality and adequate
oversight. Beginning on the implementation date of July 1, 2023,
enrollment of incarcerated individuals in any such institution will be
limited to 50 percent in the first five years after the regulations
take effect, and the cap will be raised to 75 percent if the
institution is granted an additional waiver after the initial five-year
period.
Changes: None.
Comments: One commenter asked whether the entire postsecondary
institution becomes ineligible for the title IV, HEA programs, or if
only the PEP would lose eligibility if the Secretary limits or
terminates an institution's waiver of the limitation on the percentage
of regular students who may be confined or incarcerated.
Discussion: Under Sec. 600.7(c)(6), the entire postsecondary
institution becomes ineligible at the end of the award period that
begins after the Secretary's action, unless the institution comes back
into compliance or reduces its enrollment of confined or incarcerated
individuals to no more than 25 percent of its regular enrolled
students.
Changes: None.
Comments: One commenter asked the Department to restructure Sec.
600.7(c) to separate the waiver from the waiver denial.
Discussion: The Department agrees with the recommended edit and
believes the change will improve the clarity of the regulations.
Changes: Paragraph (c)(1) will now be split into paragraphs
separately addressing waiver grant and waiver denial.
Commenter: One commenter asked the Department to define
``demonstrated program success'' and explain what is meant by ``expand
the number of incarcerated students.''
Discussion: The Department intends to provide details of the waiver
application process, such as information about program success and
expanding the number of an institution's confined or incarcerated
students, in subregulatory guidance.
Changes: None.
Comments: One commenter asked how the Secretary will utilize the
required reviews, assessments and reporting by the accrediting agencies
and the oversight entity to approve, deny, or delay the waiver request
and increase.
Discussion: The accrediting agency and oversight entity must
provide approval at various points the throughout the process. We note
here and under the preamble discussion for Sec. 668.237 that the PEP
is not eligible if either the oversight entity or the accrediting or
State approval agency denies approval. The PEP must meet all regulatory
requirements to be an eligible PEP. The Department plans to release
more subregulatory guidance to postsecondary institutions wishing to
apply for a waiver and to institutions that already have the waiver.
Changes: None.
Comments: One commenter asked for clarification concerning the
Secretary's revocation and reduction of the waiver under paragraph
(c)(6)(i).
Discussion: If the institution demonstrates to the Secretary that
it met all the requirements under paragraph (c)(1) prior to the end of
the award year that begins after the Secretary's action to limit or
terminate the waiver, then the institution may keep the waiver and need
not reapply or reduce its confined or incarcerated student enrollment.
Changes: None.

Date, Extent, Duration, and Consequence of Eligibility (Sec. 600.10)

Comments: One commenter noted that there should be an ``and'' at
the end of Sec. 600.10(c)(1)(iii).
Discussion: The commenter is correct.
Changes: We have added an ``and'' to the end of Sec.
600.10(c)(1)(iii).
Comments: One commenter stated that the Department should remove
Sec. 600.10(c)(1)(iv), which requires Department approval for the
first eligible PEP offered at an institution's first two additional
locations, because it is too burdensome given other requirements.
Discussion: The Department disagrees that the requirements under
Sec. 600.10(c)(1)(iv) are excessively burdensome to institution. We
also believe that the requirements outlined in the final rule,
including securing all necessary program approvals, will benefit
confined or incarcerated individuals, by ensuring that PEPs serve their
best interests and avoiding needless exhaustion of their Pell Grant
eligibility. The requirements will benefit postsecondary institutions
and oversight entities by providing a clear regulatory framework.
Finally, the rules will benefit the taxpayer by ensuring that Pell
Grant funds are directed to postsecondary institutions that are
compliant.
Changes: None.

Student Eligibility General (Sec. 668.32)

Comment: Multiple commenters stated that the Department must
consider in these regulations ways to prevent postsecondary
institutions and oversight entities from applying additional
eligibility restrictions that are unrelated to academic qualifications.
Commenters suggested the regulations should stipulate that PEPs cannot
bar people based on nature or length of their sentence, for example.
Alternatively, the commenters suggested that, at a minimum, the
Department must require postsecondary institutions and oversight
entities to disclose to accreditors, the Department, and confined or
incarcerated individuals any additional eligibility restrictions they
intend to put in place, including but not limited to restrictions based
on sentence, release date, convictions, and facility-based disciplinary
infractions.
Discussion: The Department declines to add additional disclosures
as requested for a few reasons. First, we do not have the authority to
regulate an institution's admissions requirements. Additionally, the
Department also does not have the authority to mandate how the
oversight entity manages its internal operations, including
restrictions on enrollment in postsecondary programs. If a confined or
incarcerated individual is eligible for Pell Grant, meaning the
individual has met all student eligibility requirements under the HEA
and the regulations, and the individual has been accepted into a PEP,
that individual cannot be denied the Pell Grant for which they are
eligible. Furthermore, there is no statutory or regulatory

[[Page 65434]]

provision that would prohibit a postsecondary institution from
enrolling or admitting a confined or incarcerated individual into a PEP
due to nature or length or the individual's sentence. For example, an
institution could choose to admit a student that is likely to be
released within a year even if the student's program is two years in
length.
Changes: None.
Comments: One commenter asked the Department to clarify that
confined or incarcerated individuals enrolled in PEPs through
correspondence are eligible for a Pell Grant.
Discussion: A confined or incarcerated individual who is enrolled
in a correspondence course as defined in Sec. 600.2 is eligible for a
Pell Grant, as long as the standards for student, program, and
institutional eligibility are met. It is important to note, however,
that if an institution offers correspondence courses to a student that
is confined or incarcerated at a correctional facility and the student
can complete at least 50 percent of the program through such
correspondence courses, the institution must add that facility as an
additional location.
Changes: None.

Institutional Information (Sec. 668.43)

Comments: One commenter disagreed that postsecondary institutions
should be responsible for providing information regarding whether an
occupation typically involves State or Federal prohibitions on the
licensure or employment of formerly confined or incarcerated
individuals. The commenter asserted that responsibility for making and
reporting this determination lies with the State correctional agency.
The commenter stated that providing such information would be costly
and time consuming because of the diversity of convictions and changes
in State law.
Discussion: The Department disagrees with the commenter. The
postsecondary institution is the entity offering the educational
programming and, as such, needs to be aware of licensing and employment
conditions in the field. Therefore, it is best situated to ascertain
State or Federal prohibitions on licensure or employment. Moreover, if
a postsecondary institution chooses to offer a PEP in a State, it
already must comply with Sec. 668.236(a)(7) and (8), which require the
program to satisfy certain educational requirements for professional
licensure or certification, and thus the additional requirements in
Sec. 668.43 are not significant.
The Department notes that postsecondary institutions are not
required to be aware of State or Federal prohibitions on licensure or
employment in States where they do not offer a PEP, unless the
postsecondary institution offers it in a Federal correctional facility.
For a Federal correctional facility, the institution is only required
to be aware of any prohibitions in the State where most confined or
incarcerated individuals will reside post release. See discussion of
Sec. 668.236.
Changes: None.
Comments: A few commenters requested that the Department require
postsecondary institutions to disclose the use of any third-party
vendors involved in the development, management, maintenance, and
provision of programs, as well as involvement in marketing,
recruitment, and enrollment management of programs, regardless of the
way in which the vendor classifies or identifies its services to
clients or the public.
Discussion: Postsecondary institutions are subject to all
applicable requirements under Sec. 668.25, which pertain to contracts
between an institution and a third-party servicer. Also, the Department
plans to establish procedures for eligible PEP applications. Therefore,
we decline to add specific regulations for PEPs. If the Department
needs more information about third-party vendors, we have authority
under Sec. 668.239(a) to require the submission of reports.
Changes: None.
Comments: One commenter requested clarification on the word
``other'' in Sec. 668.43(a)(5)(vi). The commenter stated that neither
paragraph (a)(5)(vi) nor the preceding paragraph (a)(5)(v) refers to a
specific State or group of States that would be distinguished from the
``other'' States referred to in paragraph (a)(5)(vi).
Discussion: The ``other'' States referenced toward the end of Sec.
668.43(a)(5)(vi) are those not already identified earlier in the
sentence through Sec. 668.236(a)(7) and (8). Section 668.236(a)(7) and
(8), respectively, require a PEP to meet any applicable educational
requirements for professional licensure or certification, and not offer
education that is designed to lead to licensure or employment for a
specific occupation if there are prohibitions on licensure or
employment, ``in the State where the correctional facility is located,
or, in the case of a Federal correctional facility, in the State where
most of the individuals confined or incarcerated in such a facility
will reside upon release[.]'' The ``other'' State reference in Sec.
668.43(a)(5)(vi) refers to any other State that falls outside those
states identified in Sec. 668.236(a)(7) and (8).
Changes: None.
Comments: A few commenters stated that the Department should
provide institutions with a central location where they can access
information about licensure restrictions in a particular State or
disclose information about licensure restrictions and update that
information annually.
Discussion: State licensure restrictions will likely continue to
change and there is no language in the HEA or regulations that requires
institutions or other organizations to report licensure restrictions to
the Department. Therefore, at this time we decline to create a central
location to access such information. The Department endeavors to
provide up-to-date resources and technical assistance to postsecondary
institutions, but it is incumbent upon postsecondary institutions,
prior to and while offering a PEP, to remain current with State and
Federal licensure restrictions and ensure they are correctly
implementing the requirements in Sec. 668.236(a)(7) and (8).
Additionally, institutions can avail themselves of resources
provided by other organizations. For example, the National Reentry
Resource Center maintains a National Inventory of Collateral
Consequences of Conviction at <a href="https://niccc.nationalreentryresourcecenter.org">https://niccc.nationalreentryresourcecenter.org</a> that may be useful to
institutions and students.
Changes: None.
Comments: One commenter indicated that the Department should expand
its requirement that postsecondary institutions provide information
about PEPs that typically involve State or Federal prohibitions on the
licensure or employment of formerly incarcerated individuals, to
require similar information from all educational programs designed or
advertised as leading to a required license for employment in a State.
The commenter acknowledged that the request may not be a logical
outgrowth of the PEP regulations.
Discussion: The Department agrees that this requirement would not
be a logical outgrowth of regulations focused on PEPs and, therefore,
declines to make the requested change.
Changes: None.

Definitions (Sec. 668.235)

Comments: One commenter requested that the Department eliminate the
definitions of ``feedback process'' and the ``advisory committee'' due
to the complexity and cost.

[[Page 65435]]

Discussion: Because the definitions of ``feedback process'' and
``advisory committee'' are tied to many concepts throughout subpart P,
including the best interest determination in Sec. 668.241, we decline
to remove these definitions.
Changes: None.
Comments: A few commenters suggested that the Department define PEP
and proposed this definition: ``an education or training program that
meets the definitions in Sec. 668.236. The [PEP] is created
exclusively for incarcerated individuals as defined in Sec. 600.2 who
are eligible for and will be awarded a Federal Pell Grant to pay for
the program's cost of attendance, as defined in 20 U.S. Code Sec.
1087.''
Discussion: We decline to make this change because Sec. 668.236
defines a PEP and believe that adding an additional definition would be
redundant. We agree with the commenter, however, that a PEP is distinct
from an institution's other eligible programs, and that the definition
of ``confined or incarcerated individual'' under Sec. 600.2 only
allows a PEP to be offered at locations that are classified as Federal,
State, or local penitentiaries, prisons, jails, reformatories, work
farms, juvenile justice facilities, or other similar correctional
institutions.
Changes: None.

Relevant Stakeholder

Comments: Several commenters requested that the Department add
various stakeholders to the definition, including community colleges,
boards, commissions, associations, and departments at the State level
that oversee, coordinate, or otherwise represent community colleges,
employers, workforce development boards, industry associations and
community-based organizations; community-based organizations that
provide reentry services; employers who have demonstrated a commitment
to hiring justice-involved individuals; and current and former confined
or incarcerated individuals.
Discussion: We do not believe it is necessary to add additional
members to the relevant stakeholder definition. We are not convinced
that an oversight entity could feasibly gather information from all of
the new groups that commenters proposed in a reasonable timeframe. This
could create administrative burden that could limit the implementation
of PEPs. We note that the Department's definition permits the oversight
entity to include additional stakeholders as appropriate.
Changes: None.

Oversight Entity

Comments: Several commenters suggested removing the Bureau of
Prisons and State departments of corrections from the definition of
``oversight entity'' or expanding the definition to include other
members.
Discussion: Section 484(t)(1)(B)(ii) of the HEA confers authority
on ``the appropriate State department of corrections or other entity
that is responsible for overseeing correctional facilities, or by the
Bureau of Prisons'' to approve PEPs at any correctional facility it
oversees. The Department proposed using the term ``oversight entity''
as a short-hand reference for that statutory list. The Department does
not have the authority to amend the list. While the statute allows for
some flexibility by including ``or other entity that is responsible''
for oversight, it will be within the purview of the Bureau of Prisons,
State departments of corrections, and the correctional facilities
themselves to determine if a different entity also has the requisite
level of control.
Changes: None.

Feedback Process

Comments: One commenter stated that the advisory committee
mentioned in the definition of feedback process should be mandatory.
Discussion: The Department believes that relevant stakeholder input
through the feedback process is sufficient. Requiring an advisory
committee could also be too burdensome for some oversight entity
systems. Additionally, the Federal Bureau of Prisons would likely need
to follow the Federal Advisory Committee Act if it convened an advisory
committee, which would significantly limit the development of PEPs.
Changes: None.
Comments: One commenter asked the Department to include examples of
input that the relevant stakeholders can provide to the oversight
entity to assist with PEP operation, including information on reentry
services, services offered by a community-based organization that are
available to confined or incarcerated individuals, and information on
in-demand industries or occupations with career opportunities available
to formerly incarcerated individuals.
Discussion: The Department believes that these are all excellent
examples of input that the relevant stakeholders can provide to the
oversight entity. We decline to prescribe these in regulation, however.
Changes: None.

Eligible Prison Education Program (Sec. 668.236)

Comments: One commenter suggested that the Department require all
PEPs to partner with a community-based organization offering reentry
services and counseling.
Discussion: As a part of the application process for the first PEP
at the first two additional locations, the Department requests
information about reentry services, see Sec. 668.238(b)(5), and the
Department strongly encourages institutions to offer reentry services
to students enrolled in PEPs. However, the Department declines to
require reentry services as a part of every PEP. Because the statute
does not require reentry services and we are prohibited from regulating
on educational program offerings, we believe that requiring each
program to maintain such services is beyond our authority.
We also note that oversight entities are required to consider
whether a PEP's academic services, including in advance of reentry, are
comparable to similar services that the institution offers to its on-
campus students. We believe that this consideration will provide
institutions with an incentive to create strong reentry services for
students enrolled in their PEPs.
Changes: None.
Comments: One commenter was opposed to excluding proprietary
institutions from offering PEPs under Sec. 668.236(a)(1).
Discussion: The HEA specifically excludes proprietary institutions
from offering PEPs. See HEA, section 484(t)(1)(B)(i) (limiting PEP
offerings to institutions of higher education as defined in sections
101 or 102(a)(1)(B) of the HEA, which do not include proprietary
institutions).
Changes: None.
Comments: Several commenters questioned whether every PEP would get
a two-year initial approval, who gives the two-year initial approval,
what the accrediting or State approval agencies must do for the initial
approval process, on what basis the oversight entity should make the
two-year initial approval, and finally, how the term ``initial'' is
defined in different contexts in the regulations.
Discussion: Every PEP must be approved by the oversight entity,
which will permit initial operation of the program for up to two years.
Every PEP is eligible to be considered for initial approval by the
oversight entity for two years. The oversight entity has sole authority
to provide the two-year initial approval. Initial approval may be
granted without making a best interest

[[Page 65436]]

determination. Specifically, to allow flexibility and time to build the
PEP, there are no specific requirements for the initial approval, and
the oversight entity can use whatever information it has available.
After two years, the oversight entity must assess all PEPs using the
requirements in Sec. 668.241(a). The accrediting or State approval
agency must follow the requirements under Sec. 668.237. The Department
intends to provide guidance to further explain the regulatory text, as
necessary.
Changes: None.
Comments: One commenter asked what happens if a PEP is not approved
after the initial two-year period.
Discussion: If a PEP is not determined to be operating in the best
interest of confined or incarcerated individuals, the PEP would lose
eligibility. The Department will provide additional information on the
process for the loss of eligibility in future guidance, as necessary.
Changes: None.
Comments: One commenter suggested that the Department reduce the
two-year initial approval period to one year because, in the
commenter's opinion, two years is too long to remove a failing program.
Discussion: The Department declines to make this change, because we
believe that one year is not sufficient time to make reasonable
determinations about whether a program is operating in the best
interests of students. If an oversight entity has concerns about the
quality of a program in the initial two-year period, it has the
authority at any time to revoke approval of a PEP to operate in a
facility that it oversees, even after the oversight entity has approved
the program. Additionally, the Department has the authority under part
668, subpart G, to terminate the eligibility of a program that it has
determined does not meet our PEP regulatory requirements.
Changes: None.
Comments: Multiple commenters offered that the initial two-year
approval period under Sec. 668.236(a)(3) is too short. The commenters
claimed that such a short period will disincentivize institutions from
offering slow-growing or small programs and that the initial two-year
period is not based in evidence or research.
Discussion: The Department noted in the proposed rule that the two-
year timeframe would ensure confined or incarcerated individuals
receive the protections of the best interest framework in a timely
manner, while recognizing the need for some time to gather the
necessary information to meet the statutory requirement for a data-
informed decision by the oversight entity. Two years is sufficiently
long enough to assess outcomes for shorter programs and will ensure
accountability for poorly performing programs.
During negotiations, in response to similar concerns, the
Department amended its proposed language in Sec. 668.241 to make the
assessment of certain ``best interest'' indicators--namely program
outcomes--permissive instead of mandatory. This change will relieve
institutions of conducting outcome assessments at the two-year point
where no data may yet be available, while retaining an assessment of
program inputs to ensure the foundation for the program remains strong.
Finally, we note that a two-year assessment timeframe is used
elsewhere in the title IV, HEA regulations to establish continuity of
operations and experience at new institutions. In Sec. 600.6(a)(5),
for example, to establish institutional eligibility, a postsecondary
vocational institution must be in existence for at least two years.
Changes: None.
Comments: Multiple commenters requested that the Department add
language to Sec. 668.236(a)(4) either requiring or encouraging
transferability of credits to more than one institution in the State in
which the correctional facility is located.
Discussion: The Department declines to make this change, because
section 484(t)(1)(B)(iv) of the HEA states that credits from a PEP must
transfer to ``at least 1 institution of higher education[.]'' A
postsecondary institution, the oversight entity, or the accrediting or
State approval agency could set higher standards. The Department
strongly encourages institutions to ensure that credits earned by
students in PEPs are transferable to more than one other eligible
institution, thus providing students enrolled in such programs with as
many options as possible for continuing their education following
release from incarceration.
Changes: None.
Comments: One commenter stated that Pell Grant eligibility through
a PEP should be expanded to include enrollment in liberal arts
subjects.
Discussion: Neither the HEA nor the applicable PEP regulations
prohibit enrollment in liberal arts subjects offered through a PEP.
Changes: None.
Comments: In regard to Sec. 668.236(a)(6) and (b), one commenter
wrote that the text itself specifies that an institution already
offering one or more PEPs that are subject to an initiated adverse
action may maintain eligibility for those existing PEPs, provided that
they submit a teach-out plan. However, when read together, these
provisions state that ``An eligible PEP means an education or training
program that . . . [i]s offered by an institution that is not subject
to a current initiated adverse action,'' which, according to the
commenter, would seem to create a blanket policy of ineligibility for
programs offered by institutions subject to an adverse action.
Discussion: We believe the paragraph is clear both in the general
description of the program and in defining the limited situation in
which a program loses approval to enroll new students while teaching
out those who are currently enrolled.
Changes: The Department made non-substantive technical edits to
restructure the paragraphs to improve the flow and clarity of the text.
Comments: One commenter suggested that the Department further
regulate on the teach-out plan required under Sec. 668.236(b)(2), to
require that the plan include options for confined or incarcerated
individuals beyond transferring to a postsecondary institution once
they are no longer incarcerated.
Discussion: The definition of ``teach-out plan'' is in Sec. 600.2
and the requirements related to teach-out plans and agreements for
accrediting agencies are in Sec. 602.24(c). The Department declines to
establish additional requirements for teach-out plans. The Department
has not generally regulated on the contents of a teach-out plan because
they are not one size fits all. The postsecondary institution's
accrediting or State approval agency could also set standards for the
teach-out plan.
Changes: None.
Comments: One commenter asked what would happen when a fully
informed student is aware of licensure restrictions in advance but,
nevertheless, desires to earn that credential and attempt to overturn
an unjust licensure restriction. The commenter also recommended
providing resources to approved PEPs, State Higher Education Executive
Offices (SHEEOs), community-based partners, and prospective employers
to help them advocate for the removal of unjust licensure restrictions
that prevent people with felony convictions from attaining their
educational and career goals.
Discussion: There is no exception in the regulations to waive the
requirements under Sec. 668.236(a)(8). While the Department
acknowledges the commenter's concern, Sec. 668.236(a)(8) was adopted
to protect confined or

[[Page 65437]]

incarcerated individuals from unnecessary exhaustion of their Pell
Grant benefits, and to ensure PEP enrollees receive the full benefit of
their education. These goals are undermined if time and money are spent
pursuing training in an employment field barred to the student. If a
State or Federal law prohibits licensure or employment of the formerly
incarcerated individual in the State the correctional facility is
located, or, for a Federal correctional facility, the State the most
individuals will reside upon release, then that individual cannot
enroll in the PEP. In general, the Department cannot lobby, recommend
lobbying, or provide resources to aid in lobbying a State legislature
for the purpose of removal or modification of laws.
Changes: None.
Comments: One commenter asked the Department to require oversight
entities and postsecondary institutions to annually review collateral
consequences relevant to education and workforce training pathways and
add new pathways that align with confined or incarcerated individual's
interests and labor market demands in the State and region under Sec.
668.236(a)(8).
Discussion: The Department does not have the authority to mandate
that a postsecondary institution offer a PEP or add new pathways that
better align with students' interests and labor market demands in the
State or region. It is the postsecondary institution's choice whether
to offer a PEP.
For institutions that choose to offer a PEP, while we can prohibit
them from enrolling students in programs for fields where they know
their students will be barred, we cannot dictate how they otherwise
structure the academic component of the PEP. The Department's authority
in postsecondary education matters is limited to issues relating to
Federal student aid, the use of Federal funds, and the specific
programs administered by the Department. The Department is prohibited
from exercising any direction, supervision, or control over curriculum
or a certain type of PEP.
Changes: None.
Comments: One commenter suggested that we consider advising
postsecondary institutions that, where they offer a vocational program
affiliated with employment bans for a confined or incarcerated
individual with certain convictions, the provider should offer another
non-degree or degree program that does not lead to such licensure or
employment prohibitions.
Discussion: The Department does not have the authority to require
that postsecondary institutions offer a confined or incarcerated
individual specific prison education programming. We also do not have
any regulations prohibiting a postsecondary institution from providing
non-degree programs.
Changes: None.
Comments: One commenter stated that the requirement to meet ``any
applicable education requirements'' in Sec. 668.236(a)(7) and (c)(1)
and (2) is too broad in scope and would not allow for the materiality
of education requirements to be considered. The commenter stated that
postsecondary institutions may not have the resources to make these
decisions annually.
Discussion: The requirements in Sec. 668.236(a)(7) and (8) (and
corresponding requirements in Sec. 668.236(c)(1) and (2)) are based in
statute and further clarified through the regulation. The Department
has the authority to set reasonable parameters in regulation. PEPs may
not be widely accessible within a correctional facility and confined or
incarcerated individuals may have to rely on the postsecondary
institution's determinations regarding educational requirements for and
prohibitions on licensure or employment to a greater extent than would
individuals who are not incarcerated. A postsecondary institution is
not required to offer a PEP in a State where it is unsure about
educational or licensure requirements or where it does not wish to
remain up to date regarding these requirements. The Department believes
many postsecondary institutions will recognize the benefits of the
regulatory framework for confined or incarcerated individuals.
Changes: None.

Accreditation Requirements (Sec. 668.237)

Comments: One commenter asked whether the regulations define the
actions an accrediting agency should take to determine the academic
quality of a program for an established PEP through the Second Chance
Pell program, or whether an accrediting agency would be allowed to
fully use their process and professional assessment standards in
determining the academic quality of a program.
Discussion: The accrediting agency must evaluate the first PEP at
the first two additional locations. Additionally, the accrediting
agency must conduct a site visit at those locations to evaluate the
first additional PEP offered by a new method of delivery. They must
also approve the methodology for how the institution made the best
interest determination under Sec. 668.241. We fully specify the
accreditation requirements for PEPs in these final regulations.
Changes: None.
Comments: One commenter called for the elimination of Sec. 668.237
because accrediting and State approval agencies already have standards
by which they evaluate educational programs, regardless of location.
The commenter stated that prescribing additional program evaluations is
unnecessary and burdensome and will discourage participation in PEPs.
Discussion: The Department disagrees with the commenter. First, we
wish to make clear that the policies and standards of accrediting and
State approval agencies differ, and the Department's regulations for
agency recognition do not require the evaluation of every new program
or location. Furthermore, PEPs are unique in that participants may only
have one educational option at their correctional facility. The
Department has chosen to mandate additional safeguards so that the PEP
is beneficial to the confined or incarcerated individual. We also
believe that requiring that the accrediting or State approval agency
take a more proactive role in ensuring quality in PEPs is a logical
outgrowth of the statutory requirements. Section 484(t)(1)(B)(v) of the
HEA specifically provides, for example, that an institution offering a
PEP cannot be subject to an adverse action in the last five years ``by
the institution's accrediting agency or association.''
Finally, the Department has similar rules for other programs, such
as direct assessment programs under Sec. 668.10(a)(5), that require
evaluation by the accrediting or State approval agency to establish
eligibility for title IV purposes.
Comments: One commenter believed that programs offered via
correspondence courses should be exempt from the Department's
requirements for accreditation review because postsecondary
institutions are already required to be approved for that method of
delivery by their accrediting or State approval agency. The commenter
stated that the accreditation requirements would add unnecessary burden
to correctional facilities and postsecondary institutions.
Discussion: The Department disagrees with the commenter, as we seek
to hold all programs regardless of the method of delivery to the
standards outlined in these final regulations. The Department believes
that offering educational programming through any method of delivery in
a correctional facility for the first time may present various
challenges that require creative thinking and collaboration amongst
several stakeholders. A new method of delivery

[[Page 65438]]

in a correctional facility may also involve unique obstacles that
institutions are unaccustomed to, which in turn could result in risks
to confined or incarcerated individuals that may not have been
addressed when the accrediting agency or State approval agency last
approved the institution's use of distance education or correspondence
courses. The accrediting and State approval agencies are uniquely
authorized to confirm educational quality and we believe they must do
so for all methods of delivery.
Changes: None.
Comments: One commenter asked the Department to require that any
postsecondary institution offering a PEP at an additional location for
a program that also exists on the postsecondary institution's main
campus be included in any programmatic accreditation that may be held
by the institution for that same program.
Discussion: The Department declines this recommendation because it
can only require a postsecondary institution to hold accreditation by a
nationally recognized accrediting agency for title IV purposes. We do
not have the authority to require an institution to obtain programmatic
accreditation for its PEPs.
Changes: None.
Comments: One commenter requested that, under Sec. 668.237(b)(1),
we require the accrediting or State approval agency, in addition to the
oversight entity, to review and approve all PEPs.
Discussion: The Department disagrees with this commenter and
believes that such a requirement would be overly burdensome to
postsecondary institutions and accrediting and State approval agencies.
If the PEP is a ``significant departure from existing offerings or
educational programs, or method of delivery,'' Sec. 602.22(a)(1)(i)
and (a)(1)(ii)(C) already require review and approval by an accrediting
agency prior to implementation.
Further, by requiring the Secretary's approval of the first PEP at
the first two additional locations the regulations mirror the
requirements of the accrediting and State approval agencies. We believe
that a postsecondary institution that can sufficiently demonstrate
satisfactory standards need not seek direct approval from the
accrediting or State approval agency for every PEP. The regulations do
not preclude an accrediting or State approval agency itself from
requiring every PEP to be approved, however.
Changes: None.
Comments: Several commenters stated that the Department should
approve the PEP prior to the accrediting or State approval agency
approval required under Sec. 668.237(b)(1).
Discussion: The Department disagrees with commenters because we
must have a completed application to decide whether the PEP meets all
regulatory requirements, particularly for the first PEP at the first
two additional locations.
Changes: None.
Comments: One commenter asked for clarification on Sec.
668.237(b)(1), specifically about the process for a postsecondary
institution that has recently completed the accreditation process for
the first or second additional location at a correctional facility and
is in compliance.
Discussion: Rather than regulating on operational process, the
Department intends to provide this information through guidance.
Changes: None.
Comments: Several commenters suggested that the Department remove
the requirement under Sec. 668.237(b)(3) for site visits, because
postsecondary institutions have no control over correctional
facilities. Instead, the commenters suggested that the Department
require program evaluation, review of contact, and Learning Management
System delivery.
Discussion: The Department disagrees with the commenters'
suggestion. While the postsecondary institution does not have control
over the correctional facility, it is important for the accrediting or
State approval agency to ensure educational quality is still being
achieved in unfamiliar or atypical settings. We believe that it is very
important to have in-person on-site visits so that the accrediting or
State approval agency can review how confined or incarcerated
individuals are learning regardless of the method of delivery of the
instruction.
Changes: None.
Comments: One commenter asked whether they could assume that the
next site visit to a correctional facility would occur during the next
accreditation cycle rather than no later than one year after initiating
the PEPs in the first two additional locations, if an existing Second
Chance Pell school's accrediting agency completed their site visit
within 5 years of the July 1, 2023, regulations and found the
institution to be compliant.
Discussion: Under the regulations, a site visit must occur no later
than one year after initiating the PEP at the first two additional
locations. The Department wants to ensure that the PEP complies with
all applicable accreditation requirements in these final regulations.
We also want to ensure that sites are visited shortly after a PEP
begins, to confirm that there are adequate faculty, facilities, student
support systems, and other resources. The next accreditation cycle for
an institution could potentially be years into the future and would be
too long for an accrediting or State approval agency to wait to confirm
that the PEP met their standards. It would also be too long for a PEP
that was not providing quality education and could mean significant
numbers of students exhaust sizable portions of their Pell eligibility
in furtherance of a worthless credential from a low-quality program.
Changes: None.
Comments: Several commenters asked for clarification about how the
accreditation requirements in Sec. 668.237(b)(4) relate to the best
interest determination in Sec. 668.241(a)(1) and whether that
requirement is an additional evaluation. The commenters also asked
whether the accrediting agency has the authority to invalidate the
oversight entity's best interest determination if the agency does not
find the oversight entity's methodology sufficiently rigorous.
Discussion: These are two separate and unique approvals in the
regulations. The Bureau of Prisons or the State department of
corrections (oversight entity) conducts the best interest determination
under Sec. 668.241. The other is the review and approval by the
accrediting or State approval agency of methodology used the oversight
entity in making the determination that the PEP is in the best interest
of the confined or incarcerated individuals under Sec. 668.237(b)(4).
Under Sec. 668.237(b)(4) the accrediting or State approval agency
has reviewed and approved the methodology for how the institution, in
collaboration with the oversight entity, determined that the PEP meets
the same standards as substantially similar programs that are not PEPs
at the institution for the elements listed under Sec. 668.241(a)(1)(i)
through (iv).
Finally, the PEP is not eligible if either the oversight entity or
the accrediting or State approval agency denies approval. The PEP must
meet all regulatory requirements to be an eligible PEP.
Changes: None.

Application Requirements (Sec. 668.238)

Comments: One commenter recommended the removal of Sec. 668.238.
Discussion: The Department believes an application process is
necessary to ensure that the PEP is able to comply with all applicable
standards. We require a similar process for direct assessment programs
under Sec. 600.10(c).

[[Page 65439]]

The Department is not proposing to approve all PEPs, but only the first
PEP at the first two additional locations. We believe this is a
reasonable requirement.
Changes: None.
Comments: One commenter stated there need to be explicit timeframes
for each step of PEP approval.
Discussion: The Department will work expeditiously to review and
approve or deny applications, but we choose not to provide timeframes
for those approvals.
Changes: None.
Comments: One commenter requested that any eligible programs that
participated in the Second Chance Pell experiment under the
Experimental Sites Initiative should be automatically approved to avoid
a bottleneck of applications.
Discussion: The Department will not exempt any postsecondary
institutions or programs from the application process. Approving the
first PEP at the first two additional locations will ensure that the
PEP is able to comply with all applicable regulations. The Department
continues to consider options for institutions currently participating
in the Second Chance Pell experiment to transition to the new statutory
and regulatory requirements and will announce its transition plans for
the experiment at a later date.
Changes: None.
Comments: One commenter noted that the way Sec. 668.238(a) is
written implies that after one postsecondary institution gets approval
to offer a PEP at a particular correctional facility, another
postsecondary institution would not need approval to operate a PEP at
that correctional facility. The commenter suggested the paragraph be
updated to read: ``Following the Secretary's initial approval of an
institution's prison education program, additional prison education
programs offered by the same institution at the same location may be
determined eligible without further approval from the Secretary . . .''
Discussion: The Department agrees that this will clarify the
regulation. Every postsecondary institution, without exception, must
have the first PEP at the first two additional locations where the
postsecondary institution offers that PEP approved by the Department.
Changes: We have revised Sec. 668.238(a) to provide that following
the Secretary's initial approval of an institution's prison education
program, additional prison education programs offered by the same
institution at the same location may be determined eligible without
further approval from the Secretary except as required by Sec. 600.7,
Sec. 600.10, Sec. 600.20(c)(1), or Sec. 600.21(a), as applicable, if
such programs are consistent with the institution's accreditation or
its State approval agency.
Comments: One commenter suggested that the Department require a
memorandum of understanding between the PEP and oversight entity that
requires library services and resources.
Discussion: The Department does not have the authority to regulate
library services or resources.
Changes: None.
Comments: One commenter stated that that people are leaving prison
having earned a significant number of credits but have no pathway to an
actual degree and have exhausted their Pell Grant eligibility. The
commenter stated that postsecondary institutions should be required to
submit to the Department and oversight entity a curricular plan that
details how the program's course offerings will lead to a degree. The
commenter requested that the Department amend Sec. 668.238(b)(1) to
add a clause at the end as follows: ``A description of the educational
program, including the educational credential offered (degree level or
certificate), the field of study, and curricular plan or pathway for
degree completion.''
Discussion: The Department's authority in postsecondary education
matters is limited to issues relating to Federal student aid, the use
of Federal funds, and the specific programs administered by the
Department. We are prohibited for exercising any direction,
supervision, or control over curriculum. We cannot evaluate the PEP
curriculum but would expect a review of curricula by accrediting
agencies and State approval agencies.
Changes: None.
Comments: A few commenters stated that the oversight entity should
be required to prove that it properly gathered input from all the
relevant stakeholders. The commenters said the Department should add a
rule that requires the oversight entity to disclose all the feedback it
received from stakeholders to the postsecondary institution,
accrediting agency or State approval agency, and the Department. The
commenters also said the Department should require postsecondary
institutions to include this documentation in their application to the
Department.
Discussion: The Department declines to make this change, because we
have language in Sec. 668.241(f) that requires a postsecondary
institution to maintain records related to the eligibility of a PEP,
which includes ensuring that the oversight entity responsible for
determining that the PEP is being offered in students' best interest
appropriately conducted outreach to stakeholders as part of its
evaluation of the program.
Changes: None.
Comments: One commenter requested that the Department insert
language into Sec. 668.238(b)(4) encouraging PEPs to align their data
collection methodology and metrics with those required by the
Integrated Postsecondary Education Data System, to ensure comparability
of data across programs and ease the burden of submission.
Discussion: The Department does not want to hinder flexibility and
innovation by requiring the standardization of methods.
Changes: None.
Comments: One commenter stated that requiring the postsecondary
institution to explain the oversight entity's methodology for approving
the PEP in Sec. 668.238(b)(4) is significant, overly broad, and not
well defined.
Discussion: Upon further review, the Department acknowledges that
the oversight entity will not have to make the best interest
determination for the first two years of the prison education program
and therefore the postsecondary institution could not detail the
methodology the oversight entity used in making the best interest
determination under Sec. 668.241(a). The information that the
Department will now request is simply any information from the
postsecondary institution that the oversight entity used to approve the
prison education program. The Department will not prescribe this
information in regulation to allow the oversight entity and
postsecondary institution flexibility to be innovative in the
application.
Changes: The Department will amend Sec. 668.238(b)(4) to provide
that an institution's PEP application must provide information
satisfactory to the Secretary that includes documentation detailing the
methodology including thresholds, benchmarks, standards, metrics, data,
or other information the oversight entity used in approving the PEP and
how all the information was collected.
Comments: One commenter stated that the Department needs to be more
specific about information on reentry services requested in the
application under Sec. 668.238(b)(5). The commenter proposed breaking
the paragraph into academic counseling which refers to the educational
and career support students receive to help guide their enrollment in
the prison education program and beyond; academic reentry counseling
which refers to the support students

[[Page 65440]]

receive to plan and prepare for continuing their education post-release
from incarceration; and reentry counseling which refers to preparing
students for all facets of reentry, including securing housing, parole
preparation, merit release, etc.
Discussion: While we decline to make this change in regulation, any
postsecondary institution seeking approval of a PEP is welcome to
provide this type of information to the Department. Reentry services
are not required in the definition of a PEP in Sec. 668.236, but if
they are offered, the Department would appreciate that information.
Changes: None.
Comments: One commenter requested that the Department make clear
that postsecondary institutions can partner with community-based
organizations that have expertise in the field of prison education to
help provide orientation, tutoring, and academic counseling.
Discussion: In Sec. 668.238(b)(5), the Department notes that it is
aware that postsecondary institutions partner with community-based
organizations to provide certain types of services. This is allowable
as long as the postsecondary institution is following applicable rules
regarding title IV aid, including those relating to written
arrangements under Sec. 668.5.
Changes: None.
Comments: One commenter stated that Sec. 668.238(b)(9), which
allows the Department to request ``[s]uch other information as the
Secretary deems necessary,'' is too open-ended. The commenter stated
that postsecondary institutions may not be able to comply with the
Department's request if the information and supported data are not
collected through current information technology data systems.
Discussion: The Department needs to be able to ask applicants for
more information if any area of an application is lacking. The
Department does not intend to request information from postsecondary
institutions that they cannot obtain, and if the Department does so,
the postsecondary institution will have the opportunity to note that it
cannot obtain the information and why.
Changes: None.
Comments: Several commenters asked that the Department create
specific application requirements relating to correspondence PEPs,
because the regulations would be burdensome, not feasible and cost
prohibitive for those programs.
Discussion: As noted throughout the discussion section, the
Department will hold PEPs offered through all methods of delivery to
the same standards. The Department therefore declines to adopt the
commenter's suggestion.
Changes: None.
Comments: One commenter asked whether a postsecondary institution
may offer PEPs in States other than where its main campus is located.
Discussion: A postsecondary institution may offer PEPs in States
other than where its main campus is located. Note that every
correctional facility where a postsecondary institution offers a PEP
and enrolls a confined or incarcerated individual must be reported as
an additional location of the postsecondary institution, even if the
prison education program is offered through distance education or
correspondence courses.
Changes: None.

Reporting Requirements (Sec. 668.239)

Comments: One commenter asked the Department to mandate additional
PEP reporting requirements including which PEP courses are equivalent
to courses offered on the main campus and are eligible for credit
transfer; the share of confined or incarcerated individuals accessing
Pell grants who complete the course; and the share of confined or
incarcerated individuals accessing Pell grants who fail to complete the
course, indicating the reasons, including transfer or release.
Discussion: The Department will have information on completion and
withdrawal rates in our internal systems or databases. While we decline
to incorporate other information collection into the regulation, we
will consider these suggestions when developing an information
collection under Sec. 668.239(a).
Changes: None.
Comments: A few commenters believe that the Department should not
require postsecondary institutions to report information about transfer
and release through an agreement with the oversight entity under Sec.
668.239(c). One of those commenters suggested that the Department
modify the National Student Loan Data System to allow the oversight
entity to directly provide this information.
Discussion: While we appreciate the commenter's input and emphasis
on the most efficient method to collect this important data, the
Department declines to remove the requirements for institutions to
obtain this information. The HEA requires that the Department provide
annual publicly available reports to Congress about PEPs. Some of that
information is about outcomes, including earnings outcomes or
individuals who continue their education post-release. The Department
needs information about transfer or release dates to fulfill the
statutory mandate, and it is unclear whether the Department can collect
such information from the large number of separate agencies and
facilities that would otherwise be required.
The Department will also provide data through various systems to
the oversight entity and postsecondary institutions to assist in
completing the best interest determination.
We commit to continue to analyze the feasibility of information
collection directly from oversight entities or correctional facilities,
and the regulatory language allows for that option. If the Department
ultimately decides to collect such information from oversight entities
or correctional facilities, we will not require institutions to obtain
the information separately. We also intend to provide guidance
regarding how and where transfer and release date information must be
reported.
Changes: None.
Comments: One commenter expressed concern regarding the potential
reporting under Sec. 668.239(a). This section allows the Department to
publish a notice in the Federal Register requesting data from
participating institutions. The commenter is concerned that the
Department will require postsecondary institutions to report data
beyond the specific data items prescribed in the HEA. The commenter was
concerned that we will request additional data from the oversight
entities and institutions that they may not typically collect. The
commenter noted that postsecondary institutions may not have effective
information technology systems that are capable to collecting some of
the data that the Department may request.
Discussion: Because the Department is required to submit an annual
report to Congress, we must be able to collect applicable data items.
We cannot publish in regulation all of the data elements that we will
need from participating institutions, because we may need to update
data items. The Department must have the flexibility to amend, change,
rescind, or further develop collection items. We have used similar
processes in other contexts. For example, we publish an annual notice
regarding the application verification of FAFSA[supreg] information.
The Department has not always added verification criteria; in fact, in
response to data analysis and feedback received, we removed several
verification items over the years and endeavored to streamline
requirements annually. We hope to do the same with any notice regarding
PEPs.

[[Page 65441]]

Changes: None.

Limitation or Termination of Approval (Sec. 668.240)

Comments: One commenter stated that the scope of the Department's
authority to limit or terminate a PEP for violating any terms of
proposed subpart P is unreasonable, too restrictive, does not consider
the materiality of violation observed, and does not provide a process
to appeal and time to cure the violation. The commenter suggested we
clarify term violation and related materiality and establish a process
for an institution to appeal and a time to cure the violation.
Discussion: The Secretary's action to remove a PEP would be the
same as an action to remove any other eligible program, meaning that
the action would be taken under part 668, subpart G; through a
revocation action under Sec. 668.13(d) for a provisionally certified
institution; or addressed during an institution's application for
recertification.
The decision to terminate, revoke, or end the approval during
recertification of a PEP will be based upon the Department's evaluation
of the violation and in consideration of the institution's ability to
administer the program. While the Department declines to create a
separate process in regulation for removing PEPs, we acknowledge the
commenter's concerns about materiality. We have changed the language to
clarify these decisions will be made on a case-by-case basis. The
Department will work with postsecondary institutions to resolve
reasonable issues or minor violations throughout of the PEP
requirements.
Changes: We have revised Sec. 668.240(a) to state that the
Secretary may limit or terminate or otherwise end the approval of an
institution to provide an eligible prison education program if the
Secretary determines that the institution violated any terms of the
subpart or that the institution submitted materially inaccurate
information to the Secretary, accrediting agency, State agency, or
oversight entity.

Best Interest Determination (Sec. 668.241)

Comments: Many commenters submitted concerns regarding the required
assessment of the PEP by the oversight entity. Commenters generally
stated that the Department was proposing to regulate beyond
congressional intent and the Department's statutory authority. The
commenters noted that postsecondary institutions and oversight entities
may choose not to offer PEPs due to the regulatory burden and cost.
Commenters argued that there was little research to support the
requirement to assess items proposed in regulation.
Many commenters also noted that the oversight entity may not have
the expertise, data, training, or resources in the postsecondary
education to set thresholds and benchmarks for the indicators related
to outcomes, such as earnings and job placement rates of formerly
confined or incarcerated individuals who have been released. Several
commenters stated that the regulations do not consider labor market
biases or post-release employment barriers to formerly incarcerated
students.
The following are recommendations made by commenters to improve the
best interest determination:
[middot] Make all best interest indicator assessments permissive
instead of mandatory, by changing ``must'' to ``may'' assess.
[middot] Remove the exception for exceptional circumstances from
the assessment of transferability of credits to any location of the
institution that offers a comparable program.
[middot] Make all the indicators optional except transferability of
credits and academic and career advising for at least four years due to
lack of data.
[middot] Replace the indicators with faculty contact hours,
meaningful engagement with peers, and ability to engage in research.
[middot] Replace the indicators with civic engagement, family
reunification, and increased self-efficacy.
[middot] Assess other dimensions including physical, mental, and
emotional issues.
[middot] Add as optional metrics information about reentry
services, whether credentials gained align with current labor market
needs for in-demand industry sectors, and credentials that confined or
incarcerated individuals gain through their participation that led to
in-demand careers.
[middot] Add an optional metric of how much regular and meaningful
involvement programs have between students, faculty, and program
administrators at the correctional facility.
[middot] Replace metrics with access to support services and
academic resources, tutoring, library resources and services, and
technology.
[middot] Add additional indicators that include whether the mode of
course instruction for the prison education program is substantially
similar to the primary instructional format at the home institution,
preferably weighting in-person over virtual instruction, whether the
demographics of the confined or incarcerated individual match the wider
prison population, regardless of the main campus population of the home
institution, and whether the prison education program staff and faculty
represent or have experience or background working with or pertaining
to underrepresented populations and groups, including individuals
directly impacted by systemic racism, generational cycles of poverty
and exclusion, or incarceration.
[middot] Remove threshold requirements for the indicators related
to outcomes.
[middot] Modify the indicator related to earnings post release to
include a succeeding sentence to outline if earnings data for
individuals who graduated from the prison education program has been
recorded, that data should carry more weight than a comparison to
graduates of programs offered by the institution writ large.
[middot] Clarify and rearrange indicators related to transfer.
[middot] Specify how the earnings indicator is calculated.
[middot] Revert to the statutory language for the assessment of
earnings.
[middot] Replace the oversight entity with the accrediting or State
approval agency as the entity that determines best interest.
[middot] Remove the oversight entity from the best interest
determination.
[middot] Replace the oversight entity with the relevant
stakeholders for the best interest determination.
Discussion: The Department disagrees with commenters that we are
regulating beyond congressional intent and the Department's statutory
authority. We have the general authority to regulate on the HEA unless
otherwise directly prohibited from doing so in statute. We thank the
community for its feedback on the best interest determination section.
However, we acknowledge the wide-ranging comments and suggestions about
the proposed best interest indicators, in particular those indicators
focused on student outcomes. Based on persuasive commentary, we have
decided to make all outcomes indicators optional but maintain the
requirement that the current input indicators must be assessed by the
oversight entity. We believe the input indicators are foundational
requirements. It is important that the oversight entity assess whether
confined or incarcerated individuals are receiving these necessary
supports as a part of the PEP.
The Department believes that assessment of inputs and outcomes is
paramount in establishing a standardized framework for the oversight
entity. We reiterate that the oversight entity is not required to deny
a PEP if it fails to satisfy one of the

[[Page 65442]]

indicators. The oversight entity can take the totality of circumstances
into account, which we have purposefully left undefined for flexibility
in making decisions that are unique to each correctional facility and
each PEP.
While assessment of outcomes indicators is optional, we encourage
the oversight entity to assess as many of them as possible. As we
stated in the NPRM, we intend to provide the oversight entity with data
to assist in making outcomes assessments, and we will do so even if the
oversight entity chooses not to assess one or more of the outcomes
metrics. The Department also will assess outcomes, because the HEA
requires the Department to provide a publicly available annual report
to Congress that includes numerous outcomes measures.
The Department may:
<bullet> Publicly report on the rates of confined or incarcerated
individuals continuing their education post-release. As the Department
obtains transfer and release dates from postsecondary institutions, we
could calculate rates of reenrollment using our internal data systems.
<bullet> Publicly report of job placement rates. The Department may
be able to calculate and report on job placement rates through
employment information that may be available via the College Scorecard
using Internal Revenue Service (IRS) data or using the employment
information of high school graduates from the U.S. Census Bureau.
<bullet> Publicly report on earnings of formerly confined or
incarcerated individuals through program-level earnings via the College
Scorecard using IRS data.
<bullet> Publicly report on rates of recidivism of PEP graduates
through data obtained through reporting to the Department from States
required by the Workforce Innovation and Opportunity Act. There may be
additional data on recidivism from the Bureau of Justice Statistics and
the U.S. Sentencing Commission that the Department may also be able to
incorporate into a published analysis.
<bullet> Publicly report about rates of program completion of
confined or incarcerated individuals. Postsecondary institutions
currently report graduation rates to the Integrated Postsecondary
Education Data System (IPEDS) and the Department produces completion
rates of title IV recipients through the College Scorecard.
Finally, there may be other items that the Department reports on as
required by statute or if the Department requests information from the
postsecondary institutions through a Federal Register notice as
required in Sec. 668.239(a).
With respect to the indicator related to transfers in Sec.
668.241, the Department accepts the suggestion to remove the exception
for exceptional circumstances surrounding the student's conviction. It
is not our intention to encourage postsecondary institutions to deny
admission to formerly incarcerated students that were once enrolled in
PEPs, and we are persuaded by the commenter that such language could
form the basis for an institution's decision for such a denial.
With respect to the earnings indicator related to earnings, we have
amended the language to no longer suggest a comparison to the earnings
of a typical high school graduate. Although the Department continues to
believe that post-graduation earnings are an important indicator of
quality in postsecondary programs, we are persuaded by commenters that
due to the ongoing barriers to employment for formerly incarcerated
individuals and the resulting discrepancies in earnings between typical
high school graduates and such individuals, it is not appropriate to
compare the earnings of confined or incarcerated students who complete
programs and are released from incarceration and the earnings of high
school graduates.
The Department declines to add additional indicators or to further
edit the remaining indicators to the regulation, but the oversight
entity in collaboration with the relevant stakeholders through the
feedback process has the flexibility to add other pertinent indicators
relevant to PEP success.
The Department also declines to replace the oversight entity with
the accrediting agency or relevant stakeholders. Section 484(t) of the
HEA is clear that the oversight entity has sole authority to approve a
PEP and make the best interest determination.
With these changes, the Department is confident that there are
sufficient existing guardrails in the final regulations to protect
confined or incarcerated individuals from subpar prison education
programs, support postsecondary institutions and oversight entities,
and safeguard the taxpayer investment.
Changes: We have revised Sec. 668.241(a) to make the three outcome
indicators--postsecondary enrollment following release, job placement
rates, and earnings for graduates--optional factors that an oversight
entity may consider in its determination of whether a program is
operating in students' best interest.
Comment: One commenter suggested requiring that PEPs transcript
credits in the same way that they would transcript courses offered to
students who are not confined or incarcerated individuals.
Discussion: The Department does not have the authority to regulate
an institution's transcripts.
Changes: None.
Comments: One commenter suggested that the Department require the
oversight entity to identify how it determines the appropriate
stakeholders, including any applicable conflict of interest standards.
Discussion: Under the statute, the oversight entity has the
authority the approve a PEP and determine that it is in the best
interest of confined or incarcerated individuals. Relevant stakeholders
provide nonbinding feedback to the oversight entity. The list of
relevant stakeholders is reported to the Department under Sec.
668.241(f). We decline to add additional requirements, but we do
believe that these final regulations will create a more informed,
holistic process.
Comments: One commenter suggested that the feedback process under
Sec. 668.242(b)(1) be open to the public.
Discussion: The feedback process allows relevant stakeholders to
provide nonbinding input to the oversight entities. The Department does
not intend to regulate further on the parameters of the feedback
process, to allow the oversight entity flexibility to set up that
process.
Changes: None.
Comments: One commenter suggested that the Department provide
guidance on how many indicators a PEP is permitted to not meet under
Sec. 668.241(b)(2) but still be deemed as operating in the best
interest of confined or incarcerated individuals.
Discussion: The statute allows the oversight entity to not only
approve a PEP's operation in a correctional facility but also to
determine that it is operating in the best interest of the enrolled
confined or incarcerated individuals. Apart from identifying the
factors that the oversight entity may and must consider in making its
determination, the Department will provide flexibility to the oversight
entity and not regulate further in this area.
Changes: None.
Comments: Several commenters suggested that the Department further
articulate an appeal process under Sec. 668.241(c) if the oversight
entity declines to permit a PEP from operating at a correctional
facility. The commenters suggested that the appeal process include an
explanation for the rejection, timeframes for an appeal,

[[Page 65443]]

incorporating a vote from the relevant stakeholders and a mediation
process with the Department.
Discussion: The Department agrees that an appeal process is a best
practice and supports the use of an appeal process by oversight
entities wherever possible. However, the oversight entities include the
Federal Bureau of Prisons and the State departments of corrections, and
the Department does not have the authority to directly regulate the
process of another Federal or State agency.
Changes: None.
Comments: One commenter suggested that the Department note in
regulation that it will review the standards utilized by the oversight
entity at recertification or in program reviews to ensure consistency
and compliance across the oversight entities.
Discussion: The Department will ensure that postsecondary
institutions are complying with the regulations during program reviews
and at recertification. As stated under Sec. 668.241(f), the
postsecondary institution must maintain documentation about the PEP,
which can be used by the Department for program reviews or
recertification reviews.
Changes: None.
Comments: One commenter suggested that the Department include
language that permits an approved PEP to continue in approved status if
the institution provides all required materials to the oversight entity
for approval 240 days in advance of the expiration of the program
participation agreement. Section 668.241(e)(1) requires an institution
to obtain final evaluations of each PEP not less than 120 days before
the expiration of the institution's Program Participation Agreement
(PPA), but there is no provision for delays by the oversight entity.
The commenter requested the addition of regulatory language that
permits approved programs to continue to be approved if the institution
provides all required materials to the oversight entity for approval
240 days in advance of the expiration of the PPA. This, according to
the commenter, would put the onus on the oversight entity to act in a
timely fashion.
Discussion: The Department will consider the totality of
circumstances on a case-by-case basis during the recertification
process. The Department will consider whether the postsecondary
institution is actively working with the oversight entity and the
oversight entity indicates that it is actively reviewing the PEP. The
Department declines to regulate on a formal process for case-by-case
considerations.
Changes: None.
Comments: One commenter stated that the term ``subsequent final
evaluations'' under Sec. 668.241(e)(1) is not clear.
Discussion: ``Subsequent final evaluations'' refers to the
requirement that the oversight entity make a best interest
determination at least 120 days prior to expiration of the
postsecondary institution's program participation agreement, in
perpetuity, as long as the institution seeks to maintain the
eligibility of the PEP.
Changes: We have removed the word ``final'' from Sec.
668.241(e)(1).
Comments: One commenter inquired whether the cross-reference to
paragraph (c) in Sec. 668.241(e)(1) was correct.
Discussion: The cross-reference was incorrect. We updated the
paragraph for clarity.
Changes: The paragraph will now state that after its initial
determination that a program is operating in the best interest of
students under paragraph (a), the institution must obtain subsequent
evaluations of each eligible prison education program from the
responsible oversight entity not less than 120 calendar days prior to
the expiration of each of the institution's Program Participation
Agreements, except that the oversight entity may make a determination
between subsequent evaluations based on the oversight entity's regular
monitoring and evaluation of program outcomes.
Comments: Under Sec. 668.241(e)(2)(i), the regulation requires the
postsecondary institution to submit data on ``all'' students for the
oversight entity to determine continued approval. One commenter
requested that the Department delete the word ``all,'' because in
limited circumstances, data may not be available to the postsecondary
institution.
Discussion: The Department agrees in part with the recommendation.
It is not our intent for an oversight entity to deny a PEP for reasons
beyond an institution's control, because the institution may lack data
that is unavailable, for example, or that was not part of the oversight
entity's determination of whether the program was being operated in
students' best interest. We do not agree, however, with the commenters
who suggested that the regulation should not apply to all students.
Instead, we believe that the regulation should require the institution
to provide all applicable data for students who were enrolled in the
PEP, which would exclude data that the oversight entity did not require
to make its determination and any data that are unavailable and cannot
be obtained by the institution.
Changes: Section 668.241(e)(2)(i) will be updated to reflect
application of ``applicable'' factors, providing that each subsequent
evaluation must include the entire period following the prior
determination and be based on the applicable factors described under
paragraph (a) for all students enrolled in the program since the prior
determination.
Comment: One commenter suggested to remove the word ``for'' before
``public disclosure'' in Sec. 668.241(f)(1).
Discussion: The Department views this as a style preference and
declines to make the change.
Changes: None.
Comments: One commenter suggested that all documentation related to
records mandated under Sec. 668.241(f) be made public.
Discussion: The Department believes that requiring the oversight
entity or postsecondary institution to publish all documentation
related to the decision-making process would discourage participation.
There are also confined or incarcerated individual privacy
considerations that would be particularly problematic given the small
size of many of these programs. The oversight entity or postsecondary
institution would not be able to publish data that would indirectly
identify an individual from the information provided.
The HEA requires the Department to release an annual data report
that is available to the public, and we believe that will provide
valuable information to both institutions and other policymakers
sufficient to evaluate prison education programs.
Changes: None.
Comments: One commenter stated that State departments of
corrections will require financial assistance to offset material and
human resources needed to implement the regulations in Sec. 668.241.
Discussion: The HEA does not provide for an administrative cost
allowance for oversight entities, and the Department does not have the
authority to establish such an allowance.
Changes: None.
Comments: One commenter asked the Department to define several
terms, including ``unique constraints,'' ``career advising,''
``substantially similar,'' and ``overarching requirement.'' In
addition, the commenter asked many technical questions regarding how
the process of the best interest determination will work.

[[Page 65444]]

Discussion: The regulations establish a framework to implement the
statutory provisions. While we believe this framework is sufficiently
clear without providing additional defined terms and decline to provide
technical guidance in this document, the Department intends to provide
guidance to oversight entities and postsecondary institutions regarding
the best interest determination, as required by section 484(t)(2) of
the HEA.
Changes: None.

Transition to a Prison Education Program (Sec. 668.242)

Comment: One commenter requested that the Department specify the
date on which a confined or incarcerated individual needs to be
enrolled in a formerly eligible program in order to qualify for
transitional eligibility. The commenter stated that it is not clear
whether this provision applies to a confined or incarcerated individual
who was enrolled in an eligible program outside a correctional facility
prior to becoming incarcerated. The commenter also stated that it is
unclear whether this provision restricts the ability of title IV-
eligible institutions to offer non-Pell-eligible programs in
correctional facilities.
Discussion: Section 668.242(b) provides that an institution is not
permitted to enroll a confined or incarcerated individual on or after
July 1, 2023, who was not enrolled in an eligible program prior to July
1, 2023, unless the institution first converts the eligible program
into an eligible prison education program as defined in Sec. 668.236.
This provision applies to any individual who is confined or
incarcerated and who is enrolled in any program at a correctional
facility in which the individual is receiving any title IV aid. For
example, if an individual was enrolled in a distance education program
prior to July 1, 2023, and subsequently becomes incarcerated after July
1, 2023, that individual can continue receiving a Pell Grant only until
they have reached the time or eligibility limits under Sec.
668.242(a), unless that distance education program becomes a PEP, which
would include reporting the individual's correctional facility as an
additional location.
Finally, the Department does not have the authority to restrict the
ability of an eligible institution to offer programs that are not
eligible for title IV aid, including Pell Grants, at correctional
facilities.
Changes: None.

Calculation of a Federal Pell Grant (Sec. 690.62)

Comment: One commenter stated that the Department should insert
language requiring PEPs to include the cost of obtaining required
professional credentials for confined or incarcerated individuals in
PEPs in their cost of attendance calculations.
Discussion: The Department will not regulate on cost of attendance
with these final regulations. The Consolidated Appropriations Act of
2021 made changes to allowable costs that may be considered in a
confined or incarcerated individual's cost of attendance, which are
``only tuition, fees, books, course materials, supplies, equipment, and
the cost of obtaining a license, certification, or a first professional
credential[.]'' Therefore, a postsecondary institution may include the
cost of obtaining the first professional credential in the individual's
cost of attendance. The Department will provide additional guidance on
the changes to cost of attendance components established by the
Consolidated Appropriations Act of 2021 in the near future.
Changes: None.

90/10 Rule (Sec. 668.28)

General Support

Comments: Many commenters supported the 90/10 regulations and the
consensus reached on the regulatory changes. Commenters overwhelmingly
supported including financial aid administered by the VA as Federal
revenue in the 90/10 calculation. Additionally, many commenters
supported the changes to allowable non-Federal revenue and encouraged
the Department to enforce the regulations with the full intent of the
law.
Discussion: The Department thanks commenters for their support. We
intend to fully enforce the regulations.
Changes: None.

General Opposition

Comments: Several commenters opposed the proposed regulations on
the basis that the regulations unfairly burden one sector of higher
education and restrict academic choices of students. Several other
commenters opposed the changes to the regulations because they stated
that proprietary institutions will be disincentivized to enroll
veterans because of the regulations and the significant cost of running
a separate and distinct compliance program to remain eligible for VA
funds. These commenters further stated that this will lead to decreased
opportunities for veterans returning to civilian life after their
service. Other commenters opposed the 90/10 rule generally because they
claimed that the rule will cause proprietary institutions to increase
tuition, incentivize proprietary institutions to recruit students who
can pay for tuition without Federal funds, and reduce learning
opportunities for low-income students and American students by
encouraging proprietary institutions to recruit international students.
One commenter suggested that the Department exempt certain
institutions, such as those that offer terminal degree programs, post-
baccalaureate programs, or medical programs from 90/10 because these
institutions are already held to a high standard by other oversight
mechanisms and provide unique value by helping the country fill its
need for medical providers.
Discussion: The ARP modified section 487(a) and (d) of the HEA to
require proprietary institutions to count all Federal funds in the
numerator of their 90/10 calculation. The Department's regulations for
which funds must be counted in the numerator and the formula for how
these institutions must calculate the percentage of their revenue
derived from Federal funds are consistent with statutory requirements.
Further, the statute does not provide a basis to exempt certain
proprietary institutions from this requirement.
Changes: None.
Comments: Several commenters generally opposed the proposed changes
to allowable non-Federal revenue. A few of these commenters requested
additional facts, evidence, data, or other sources the Department
employed as a basis for our assertion that proprietary institutions
have maneuvered to game the system and that there is a need to modify
allowable non-Federal revenue or other components of the 90/10
calculation, including creating a disbursement rule and disallowing the
proceeds from the sale of accounts receivable, in response to these
behaviors.
Discussion: As stated in the NPRM, the Department based its
regulations on observations of 90/10 calculations, audit workpapers,
program reviews, and other oversight activities.\1\ Based on the
Department's observations and its experience enforcing 90/10 (and
previous enforcement of 85/15), the Department believes that the
changes to allowable non-Federal revenue are necessary to uphold the
statutory intent of the 90/10 calculation.\2\
---------------------------------------------------------------------------

\1\ See 87 FR 45454 and 87 FR 45459.
\2\ As an example, Kofoed (2020) demonstrates that proprietary
institutions account for a disproportionate share of GI Bill
spending while graduating relatively few veterans, which he
attributes to the exclusion of GI Benefits from the 90/10
calculation. See Kofoed, Michael (2020). ``Where have all the GI
Bill dollars gone? Veteran usage and expenditure of the Post-9/11 GI
Bill.'' Brookings Institute report available at <a href="https://www.brookings.edu/research/where-have-all-the-gi-bill-dollars-gone/">https://www.brookings.edu/research/where-have-all-the-gi-bill-dollars-gone/</a>.

---------------------------------------------------------------------------

[[Page 65445]]

Changes: None.

Calculating the Revenue Percentage (Sec. 668.28(a)(1))

Statutory Authority and Congressional Intent

Comments: Several commenters stated that the 90/10 regulations
exceed statutory authority and Congressional intent. Some of these
commenters stated that the proposed regulations do not provide a
definition for ``Federal revenue,'' and the lack of a definition gives
the Department an amount of discretion that Congress did not intend. A
few commenters suggested that the Department restart the negotiation
process to define ``Federal funds.''
These commenters further stated that it is clear that Congress
intended for the Department to include VA and DOD education funds used
to attend such proprietary institution as ``Federal education
assistance funds,'' and clarified that they are not disputing that
portion of the regulations. These commenters further stated that
Federal agencies are required to point to clear grants of congressional
authority in order to enact the regulations that are contemplated.
Commenters requested clarification on the congressional authority that
the Department believes allows it to include other types of Federal
education assistance funds as Federal funds beyond DOD and VA funding.
Discussion: The ARP amended the HEA to state that proprietary
institutions should include ``all Federal education assistance funds''
in the numerator of their 90/10 calculation. It is apparent that
Congress intended for institutions to include all other Federal funds,
in addition to title IV funds, used to pay for tuition, fees, and other
institutional charges in the numerator of their 90/10 calculation based
on this language, not just DOD and VA funds. Further, Federal
appropriations for education assistance programs and disbursements to
institutions may change from year to year. We do not want to
inadvertently create an incentive for proprietary institutions to
identify a large source of Federal funds not on the list and then
target students that receive this funding.
The Department defines Federal funds in Sec. 668.28(a)(1)(i) as
title IV, HEA program funds and any other education assistance funds
provided by a Federal agency directly to an institution or student
including the Federal portion of any grant funds provided by or
administered by a non-Federal agency, except for non-title IV Federal
funds provided directly to a student to cover expenses other than
tuition, fees, and other institutional charges. The ARP language is
broad, and a broad regulatory definition aligns with statutory intent.
We do not believe it is necessary to renegotiate the definition of
Federal funds because the current definition implements the statutory
change in the ARP.
Changes: None.
Comments: A few comments stated that in W. Virginia v. EPA, 142 S.
Ct. 2587, 2608 (2022), the Court held that Congress did not grant a
Federal agency the authority necessary to create a regulatory scheme
that the agency had attempted to enact, and under a body of law, known
as the ``major questions doctrine,'' the Court found that, given both
the separation of powers principles and a practical understanding of
legislative intent, an agency must point to ``clear congressional
authorization'' for the authority it claims. These commenters
questioned whether Congress provided clear authorization for the
Department to make any changes to allowable non-Federal revenue in the
proposed 90/10 regulations given that the ARP only modified what funds
must be counted in the numerator. In addition, these commenters stated
the proposed regulations violate the Administrative Procedure Act (APA)
as the regulations are arbitrary and capricious.
Discussion: The ARP modified the statutory provisions in section
487 of the HEA governing which funds institutions must include in the
numerator of their 90/10 calculation. The statute did not prohibit the
Department from amending other portions of the 90/10 regulatory
calculation related to allowable non-Federal funds. Further, it
included a section directing the Department to amend the 90/10
regulations through the negotiated rulemaking process, without any new
limitation on our authority to revise other parts of the 90/10
regulations, as has been done in prior years. The Department has the
statutory authority granted by section 437 of the General Education
Provisions Act to promulgate regulations that are consistent with
statutory requirements and necessary for us to effectively administer
the program using the negotiated rulemaking process required in section
492 of the HEA. Additionally, our rulemaking to determine how to
calculate the 90/10 statutory requirement is not of such political and
economic consequence that involves a major question under W. Virginia
v. EPA. Finally, we have provided our reasoned basis for these
regulations in the proposed and final rules.
Changes: None.
Comments: A few commenters requested clarification on the authority
upon which the Department relied for its proposal that it has the
authority to publish, on a semi-regular basis, ``updates'' as to what
Federal funds should be counted in the 90/10 calculation without any
notice and comment rulemaking or negotiated rulemaking process given
that the ARP requires that its amendments to section 487 of the HEA be
subject to negotiated rulemaking. These commenters stated that we
should provide the public with an opportunity to comment on the
definition of Federal funds.
Several commenters stated the Department has no authority to
enforce the proposed rule prior to the effective date of the
regulations, and that the HEA states that a regulation related to title
IV programs cannot take effect during the current award year. These
commenters further stated the Department lacks the authority under the
HEA to force proprietary institutions to early implement the
regulation, and that the ARP stated that its statutory changes should
follow master calendar. Several commenters questioned the statutory
authority on which we relied to justify enforcing a title IV regulation
prior to the effective date of the final rule. They requested further
clarification on how we will reconcile its application of the proposed
regulations to proprietary institutions with a fiscal year beginning on
January 1, 2023, with the clear statutory authority set forth in 20
U.S.C. 1089(c). These commenters recommended that revenues subject to
the regulation should only be counted after July 1, 2023, regardless of
the institution's fiscal year calendar. In addition, these commenters
stated that the Department cannot retroactively apply these
regulations. Some of these commenters requested that, if the Department
contends that the regulations are not retroactively applied, the
Department provide legal support for the assertion.
Finally, a few commenters requested that we clarify on which HEA
provisions we relied in determining that certain proprietary
institutions, but not all, would be required to comply with the changes
to the 90/10 regulations on January 1, 2023.

[[Page 65446]]

Discussion: Section 668.28(a)(1) defines Federal funds. The updates
published in the Federal Register would simply notify institutions
about which types of specific educational assistance funds are covered
by the regulatory language. This is similar to how the Department
publishes annually in the Federal Register which components of the
FAFSA[supreg] institutions must verify, and this type of guidance does
not require notice and comment.\3\ Therefore, the Department's
rulemaking activity has met the ARP's statutory requirements that the
revisions to section 487 of the HEA be subject to public involvement
and the negotiated rulemaking process.
---------------------------------------------------------------------------

\3\ 34 CFR 668.56.
---------------------------------------------------------------------------

Section 2013 of the ARP has two provisions related to the timing of
this change. First, it requires that these changes be subject to master
calendar requirements. It also states that the amendments to section
487 of the HEA, which describe funds that must be included in the
numerator of the 90/10 calculation, apply to institutional fiscal years
beginning on or after January 1, 2023. This is why the Department chose
to implement the regulations when an institution's fiscal year begins
rather than requiring all institutions to implement the changes on
January 1, 2023. The regulations meet both requirements because the
regulations will apply to institutional fiscal years beginning on or
after January 1, 2023, and institutions will determine their compliance
with the regulations and file their related audited financial
statements after July 1, 2023. The Department would enforce any
consequences of failing 90/10 after July 1, 2023, and the regulations
are, therefore, not retroactive in their application. It is not correct
to characterize this process as ``early implementation'' of the
regulations because the audit submissions and compliance requirements
go into effect July 1, 2023. Proprietary institutions that fail the 90/
10 requirements for the 2023 fiscal year will not be impacted until
early in 2024, and an institution must determine if it fails 90/10
within 45 days after the end of its fiscal year.
Changes: None.

Definition of Federal Funds

Comments: A few commenters supported our definition of Federal
funds as only those used to pay for tuition, fees, and other
institutional charges. These commenters also supported not including in
the definition of Federal funds those that are expressly used for other
purposes, such as housing or books when those are not included in
institutional charges.
Discussion: The Department thanks commenters for their support. Our
definition most accurately reflects statutory intent.
Changes: None.
Comments: Several commenters urged the Department to publish the
list of Federal funds as soon as possible so that proprietary
institutions can begin developing systems and procedures to track these
funds. These commenters emphasized that institutions also need adequate
notice so that they can effectively manage any changes they might need
to make regarding admissions and enrollment. A few commenters asserted
that this lack of clarity on which Federal funds must be included in an
institution's 90/10 calculation at this point of implementation
deprives institutions of fair notice of laws they are supposed to
follow. Many of these commenters urged the Department to delay
implementation of the new 90/10 regulations for a year or publish an
abbreviated list in the first year if we cannot publish the list in a
timely manner.
Discussion: The Department recognizes the need to publish the list
so that proprietary institutions know which funds they must include,
and we plan to publish on a timeline that will provide adequate time to
account for the full list of Federal funds in the first fiscal year
that begins on or after January 1, 2023.
Changes: None.
Comments: One commenter asked if Chapter 31 of the Veteran
Readiness and Employment program would be counted as Federal funds in
the 90/10 calculation. A few commenters recommended the Department
exclude scholarship aid awarded through the Health Professions
Scholarship Program (HPSP), the National Health Service Corps (NHSC)
Scholarship Program, and the Indian Health Service Scholarship (IHSS)
Program from the definition of Federal funds that institutions must
include in the numerator of their 90/10 calculation. These commenters
further recommended that we recognize the unique nature of these
competitively awarded programs and not consider this aid as Federal
funds under these regulations.
Discussion: The Department will publish in the Federal Register the
full list of Federal funds that proprietary institutions must include.
We will publish on a timeline that provides institutions with adequate
time to account for the full list of identified funds. The statute
defines Federal education assistance funds that institutions must count
as Federal funds as funds disbursed or delivered to or on behalf of a
student to be used to attend the institution. Therefore, the list will
include all identified Federal education assistance funds that meet the
definition in statute.
Changes: None.
Comments: Several commenters supported including Federal funds
awarded directly to students as Federal funds in the 90/10 calculation.
A few other commenters opposed including Federal funds paid directly to
students in the numerator of the 90/10 calculation. A few of these
commenters expressed concern with how proprietary institutions should
account for funds disbursed directly to students if the agency does not
provide this information to the institution, and they recommended that
the Department should limit this to only funds that the institution
receives notice of. One commenter recommended that the Department
accept a proprietary institution's use of a certification from an
agency or student that contains the details of Federal funds received
as sufficient basis for the Federal funds it includes in its 90/10
calculation.
Discussion: The Department appreciates commenters' support for
including Federal funds disbursed directly to students in the numerator
of the 90/10 calculation. The ARP amended section 487(a) of the HEA to
require proprietary institutions to include ``Federal funds that are
disbursed or delivered to or on behalf of a student,'' and, thus, it is
a statutory requirement to include all Federal funds disbursed to a
student in the numerator of the 90/10 calculation.
For purposes of 90/10, we understand that proprietary institutions
need a basis to calculate the Federal funds disbursed directly to its
students. The Department considers a certification from an agency
describing the Federal funds that a student received as a sufficient
basis for this calculation. In cases where an agency does not provide
this information to an institution, we will evaluate on a case-by-case
basis whether the institution made a good-faith effort to obtain this
information, including if a student certifies that they received
Federal funds and the amount of funds received.
Changes: None.
Comments: A few commenters requested clarification on whether
proprietary institutions would only need to include revenues from new
Federal sources when those funds paid for institutional costs for the
fiscal year

[[Page 65447]]

starting after the Federal program has been identified on the published
list. These commenters requested further clarification on how
proprietary institutions should manage the termination of students
based on projections that the students' enrollment and reliance on
Federal funds may cause the institution to violate the 90/10 rule.
Additionally, one commenter suggested that the Department allow
proprietary institutions to exclude in their 90/10 calculation newly
identified Federal funds that are added to the Federal Register notice
that a currently enrolled student receives. A few commenters asked that
we publish any updates to the list of Federal funds by November 1 of
the preceding year for an institution to be required to include those
Federal funds in its fiscal year beginning on or after July 1 of the
following year, following the master calendar outlined in section 482
of the HEA. One commenter suggested revising the regulatory language to
state that proprietary institutions will only be required to include
newly added Federal funds that are added to the Federal Register notice
at least six months before the start of an institution's fiscal year.
Discussion: As we stated in the preamble to the NPRM, in instances
where the Department updates the initial Federal Register notice midway
through an institution's fiscal year, the proprietary institution will
be responsible for including those funds paid for institutional costs
the fiscal year starting after the Federal program has been identified
on the published list.\4\ This lead time is also adequate for
institutions to begin accounting for Federal funds from currently
enrolled students, and therefore it is not necessary to allow
institutions to exempt counting newly identified Federal funds that
these students receive. Likewise, it is unnecessary to publish updates
by November 1 or at least six months before the start of an
institution's fiscal year for institutions to include those funds in a
fiscal year beginning on or after July 1 of the following year.
Proprietary institutions are responsible for generating at least 10
percent of their revenue from allowable non-Federal sources. How to
meet this requirement is up to the institutions, provided that they
follow regulatory and statutory requirements. The regulations neither
contemplate, nor require, institutions to terminate the enrollment of
students if they would otherwise fail the 90/10 rule. The Department
hopes that institutions make enrollment decisions that are best for
students and clearly communicate about potential issues in a clear and
timely manner.
---------------------------------------------------------------------------

\4\ See 87 FR 54453.
---------------------------------------------------------------------------

Changes: None.
Comments: A few commenters requested clarification upon what basis,
elements, factors, and evidence will the Department evaluate whether an
institution has made a ``good faith'' effort to identify all Federal
funds. They further requested clarification of what process and
procedures the Department will employ to make this determination and
what appeal process proprietary institutions will be provided. A few
commenters also requested clarification on how the Department will
observe institutional due process protections during the determination
and appeal procedures.
Discussion: We will evaluate the facts of a situation on a case-by-
case basis to determine if an institution made a good faith effort to
identify all Federal funds. This evaluation may include what
information was readily available to an institution and the materiality
of funds from that Federal source to an institution's 90/10 measure.
Institutions have opportunities to resolve disputes with Department
staff regarding the 90/10 measure (for example, providing additional
information and/or documentation), or through an administrative process
if a resolution is not reached.
Changes: None.

Appendix C

Comments: Several commenters recommended the Department clarify and
streamline appendix C in the final rule, including by combining certain
refund and adjustment categories and by combining title IV and Federal
funds into one section. A few of these commenters suggested that the
Department work with external certified public accountants to revise
appendix C. Many of these commenters also requested that we include
additional examples of adjustment and revenue categories in appendix C
to allow institutions to reflect revenues more accurately in their 90/
10 calculation. One commenter stated that it is confusing for appendix
C to include an institutional matching payment as a subtraction from
cash payments as usually it is treated as a non-cash write off. In
addition to asking that we publish the list of Federal funds in the
Federal Register at least six months prior the start of an
institution's fiscal year, a few commenters asked the Department to
publish any updates to appendix C at least six months before the start
of an institution's fiscal year.
Many commenters recommended that as these 90/10 changes are
implemented, we should be vigilant in monitoring the cash flows of
institutions, through the calculations derived from the modified
appendix C, to better understand how the new regulations changes
institutional financial behavior and to ensure the regulations are
strongly enforced to protect students and taxpayers.
Discussion: The Department intends to evaluate the impact of the
new 90/10 regulations on institutional financial behavior, as supported
in the comments. Thus, the Department declines to combine Federal funds
and title IV, HEA funds in appendix C so that the Department can more
easily observe how the inclusion of other Federal funds impacts 90/10
rates. Likewise, we decline to collapse and combine the title IV and
Federal funds category to only require institutions to report a topline
dollar amount for Federal funds received because that would make it
difficult for us to ascertain the impact of our new regulations. The
Department expects institutions to apply title IV funds before applying
other Federal funds to student accounts for 90/10 purposes because
these regulations relate to title IV eligibility, and the Department
intends to evaluate how the inclusion of Federal funds effects
institutions' ability to comply with 90/10 requirements.
We understand that appendix C does not include every type of
adjustment an institution may need to make when calculating 90/10.
Appendix C is intended to generally outline how institutions must
calculate 90/10 by providing an example that cannot reflect every
situation. Institutions may need to add other refund or adjustment
categories that are not included in our example to calculate their own
90/10 compliance. We have shown a variety of common line items in an
institution's 90/10 calculation, and therefore we decline to add
additional line items in appendix C. We also clarify that institutions
should include a general adjustment category that reflects one
adjustment amount for Federal funds rather than calculating and
attributing adjustments to specific sources of Federal funds. However,
to comply with title IV administration requirements, institutions must
track adjustments and refunds by category of title IV funds, and the
Department expects that institutions to include this level of detail in
their 90/10 calculation for title IV funds.
We also clarify why we included an example of an institutional
matching payment as a subtraction from cash

[[Page 65448]]

payments rather than a non-cash write-off. There are instances where
institutional matches to programs are cash payments rather than non-
cash write-offs, such as when institutions use state grant funds for
matching payments. How an institution reflects institutional matches in
its 90/10 calculation is dependent upon the source of the match.
As with publishing new Federal funds, institutions would only be
required to comply with changes to appendix C the fiscal year after the
changes are made to appendix C, which provides sufficient time for
institutions to comply. Additionally, appendix C is an example of how
institutions should calculate their 90/10 compliance, and generally we
only change appendix C if there are statutory or regulatory changes to
the 90/10 calculation, which do not happen often.
Changes: None.

Disbursement Rule (Sec. 668.28(a)(2))

Creation of a Disbursement Rule

Comments: Several commenters expressed support for the creation of
the disbursement rule. A few other commenters stated that they do not
believe such a rule is necessary, and few of these commenters stated
that it is unnecessary because the funds will be included in the 90/10
calculation in the following fiscal year. These commenters also claimed
that the disbursement rule conflicts with cash management regulations
and forces proprietary institutions to make what they described as a
false 90/10 calculation. A few commenters also recommended that the
Department add a good faith phrase to the regulations to better ensure
that unintentional and unavoidable delays, resulting from various
extenuating circumstances, will not become the basis for administrative
capability findings or other adverse findings or actions against an
institution.
Discussion: We appreciates the commenters' support. The Department
disagrees with comments that the rule is unnecessary. We have observed
through our review of 90/10 calculations and audit workpapers that some
proprietary institutions delay disbursements to students to the next
fiscal year in order to avoid two consecutive 90/10 failures. The
Department also disagrees with commenters that these regulations
conflict with cash management regulations. Proprietary institutions can
still establish disbursement timelines that are consistent with
regulatory requirements (see Sec. 668.14), and we will evaluate
whether an institution made timely disbursements, deviated from its
standing policy, or created policies for the purpose of impacting its
90/10 revenue calculation. In this evaluation, the Department would
also consider if there were factors outside of the institution's
control that impacted its disbursement timelines, and therefore does
not agree with commenters that there is a need to add this to the
regulations.
Changes: None.

Revenue Generated From Programs and Activities (Sec. 668.28(a)(3))

Activities Necessary for the Education and Training of Its Students

Comments: A few commenters opposed the new requirement that
allowable non-Federal revenue from activities conducted by the
proprietary institution that are necessary for the education and
training of its students be related directly to services performed by
students. These commenters objected to the preamble of the NPRM citing
sales of hair care products as an example of disallowed revenue because
commenters claimed that developing sales skills is important for
students' careers.
Discussion: We disagree with these commenters. Requiring that
allowable revenue from these activities be related directly to services
performed by students more closely aligns with the statutory intent of
90/10.
Changes: None.

Ineligible Education and Training Programs

Comments: Several commenters generally supported the changes to
allowable non-Federal revenue generated from ineligible programs. These
commenters encouraged the Department to monitor the percentage of non-
Federal revenue that proprietary institutions derive from ineligible
programs and publish this information.
Discussion: The Department thanks the commenters for their support.
We intend to monitor non-Federal revenues that institutions include in
their 90/10 calculations through appendix C submissions.
Changes: None.
Comments: Several commenters opposed the changes that ineligible
programs must meet for proprietary institutions to be allowed to count
revenue generated from these programs in their 90/10 calculation. These
commenters observed that ineligible programs have quality oversight
measures, including approval by relevant State agencies or
accreditation by another entity, and the commenters encouraged the
Department to recognize the quality of these programs. These commenters
further stated that other guardrails in the HEA, the existing 90/10
regulations, and the educational marketplace ensure that the ineligible
educational programs are subject to consumer protection standards and
that the programs prepare students for gainful employment.
A few commenters stated that the Department's proposed regulations
concerning the curriculum and content of ineligible programs exceed our
statutory authority. One commenter also asserted that our rationale for
the proposed changes to allowable revenue from ineligible programs is
conjecture and does not meet APA standards.
In response to the Department's request for feedback about how to
provide flexibility to proprietary institutions to offer ineligible
programs that provide value to students while ensuring appropriate
guardrails, many commenters supported ensuring that proprietary
institutions offer ineligible programs that provide value to students.
These commenters stated current regulations have allowed proprietary
institutions to provide student opportunities that not only support
their academic pursuits but complement their skills development and
there has been a push toward badging and micro-credentialing as a
mechanism to affirm student skills. These commenters further stated
that the current language in Sec. 668.28(a)(3)(iii)(A) through (D)
more adequately provides the flexibility for proprietary institutions
to offer ineligible programs that provide value to students. Some of
these commenters suggested that, if the Department wants to enact
consumer protection measures, we may consider amending Sec.
668.28(a)(3)(iii)(E) or using the Guide For Audits of Proprietary
Schools and For Compliance Attestation Engagements of Third-Party
Servicers Administering Title IV Programs to provide specific direction
regarding the standards for industry-recognized credential or
certification rather than the proposed changes to Sec.
668.28(a)(3)(iii) introductory text and (a)(3)(iii)(A) through (D).\5\
These commenters stated that auditors could require that proprietary
institutions provide evidence that a credential is, in fact, industry
recognized by documenting job announcements requiring or preferring
such qualifications. They cautioned us against a narrow definition that
will

[[Page 65449]]

limit student opportunities and maintain the current regulatory
language. A few commenters did not support the idea that the programs
need to be related to the proprietary institution's eligible programs,
stated that this requirement is not stated anywhere in statute or
regulations, and stated that the idea that ineligible programs cannot
offer courses that are also offered in title IV-eligible programs
contracts the idea that they must be related.
---------------------------------------------------------------------------

\5\ This guide and accompanying guidance documents can be found
on the Department of Education's Office of Inspector General web
page under Reports and Resources: <a href="https://www2.ed.gov/about/offices/list/oig/nonfed/proprietary.html">https://www2.ed.gov/about/offices/list/oig/nonfed/proprietary.html</a>.
---------------------------------------------------------------------------

Discussion: We recognize that some ineligible programs have
consumer protection and oversight measures, but others may not since
ineligible programs may not be required to be approved by any entity.
This is unlike title IV-eligible programs, which are all required to
meet the standards of accrediting agencies, State authorizing agencies,
and the Department in order to be eligible to participate in the title
IV program. Previously, when the 90/10 calculation (and previously 85/
15) has been changed, proprietary institutions have made changes to
their programs and related activities to meet the new revenue
requirements. Some changes likely strengthened the programs and
provided better outcomes for students, while other changes were likely
made to exploit ambiguities in the regulations and that provided
questionable or no value for students. We expect that proprietary
institutions will adapt to the statutory change that requires all
Federal funds to be included in the numerator of the 90/10 calculation
to remain compliant with 90/10 requirements. In response to this
change, institutions may seek other ways to bring in non-Federal
revenue. The Department wishes to ensure that those revenues are in
line with the statutory intent of the 90/10 calculation, which is that
an institution provides enough value in its programs to account for at
least 10 percent of its revenues. Thus, the Department is implementing
appropriate guardrails that provide value to students without limiting
the ways that institutions may offer innovative and flexible programs.
These guardrails for ineligible programs were developed through
negotiations with Committee members and reflect consensus of the
Committee.
We appreciate feedback from commenters regarding consumer
protection measures. With the guardrails that the regulations enact, it
is not necessary to modify or curtail ineligible programs that meet the
requirements in Sec. 668.28(a)(3)(iii)(E). The Department may further
consider how we can help auditors and proprietary institutions define
industry-recognized credential in a meaningful yet appropriately broad
manner.
These regulations neither prescribe nor limit the curriculum or
content of ineligible programs. In addition, the regulations only apply
to revenue generated from ineligible programs that the institution
wishes to include in its 90/10 calculation.
The Department agrees with commenters that stated that ineligible
programs are not required to be related to the proprietary
institution's title IV programs in order to be counted in the 90/10
revenue calculation under the proposed regulation and that these
programs may differ. We clarify that we do not expect that ineligible
programs must be related to an institution's title IV programs, but we
do expect it to meet the outlined requirements in Sec.
668.28(a)(3)(iii).
Finally, these guardrails only apply to revenue included in the 90/
10 calculation. Proprietary institutions can continue to offer
ineligible programs that do not meet the criteria outlined in Sec.
668.28(a)(3)(iii), but they cannot include revenue generated from these
programs in their 90/10 calculation.
Changes: None.
Comments: Several commenters opposed modifying Sec.
668.28(a)(3)(iii) to exclude revenue from ineligible programs that
include courses also offered in eligible programs. These commenters
opposed the change because they stated that many ineligible programs
include general education courses or other content-specific courses
that are also included in title IV-eligible programs, and it is more
efficient for institutions to be able to offer the same course in both
programs. One commenter stated that it is illogical to exclude these
courses because revenue generated from the same courses would count in
the 90/10 calculation if included in an eligible program. Commenters
also asserted that it is unrealistic to expect proprietary institutions
to not have any overlapping courses. Additionally, some of these
commenters opined that title IV-eligible courses have demonstrated
quality, and therefore the Department's regulations that do not allow
students in ineligible programs to enroll in these courses do a
disservice to these students. These commenters requested the Department
explain the intention of modifying the non-title IV revenue
requirements to prohibit programs that include courses offered in an
eligible program.
A few commenters stated that they understood why the Department
proposed to exclude revenue from ineligible programs that include
courses also offered in title IV-eligible programs, but they believed
it would be more appropriate to limit the number of courses an
ineligible program could incorporate from eligible programs rather than
outright prohibiting these courses. A few commenters asked how the
Department would define ``course'' for the purposes of Sec.
668.28(a)(3)(iii).
Discussion: We recognize that some proprietary institutions will
need to adapt to meet the new requirement that proprietary institutions
must count all Federal revenue in the numerator of the 90/10
calculation. The Department is concerned this change may incentivize
proprietary institutions to push students to enroll in ineligible
programs that generate 90/10 revenues rather than programs that are
eligible for title IV aid, perhaps even ineligible programs that are
similar to, or piecemeal duplicates of, eligible programs if
institutions are allowed to include revenue from ineligible programs
that offer even a limited number of courses offered in eligible
programs. As some commenters noted, there may be eligible programs that
include general education courses, as well as more specialized content,
and institutions might recruit students to take the specialized content
courses that would not be eligible for title IV funds on a standalone
basis. Revenues from students who only enroll in courses from an
eligible program without enrolling in the eligible program will not be
counted in the institution's 90/10 revenues to avoid instances where
students eligible for title IV funds might be persuaded to pay for some
courses out-of-pocket to alter revenues an institution would report in
the 90/10 calculation. The Department is not preventing institutions
from offering any ineligible programs and these requirements only apply
when an institution wants to include revenue from the ineligible
program in its 90/10 calculation.
Regarding the definition of course in the context of ineligible
programs, the Department would determine on a case-by-case basis if an
institution should not count in its 90/10 calculation revenue from an
ineligible program because the ineligible program included content from
an eligible program for purposes of Sec. 668.28(a)(3)(iii).
Changes: None.
Comments: Several commenters requested clarification on proposed
Sec. 668.28(a)(3)(iii)(B) and language included in the preamble of the
NPRM which stated that a non-eligible course would need to be taught by
one of its instructors of an eligible program. These commenters
believed that statement differs from the proposed regulatory language,
which requires that the course

[[Page 65450]]

be taught by one of the institution's instructors. These commenters
stated the proposed rule does not conform to the consensus language and
that our interpretations as expressed in the NPRM preamble will reduce
educational opportunities for students seeking to enter essential
professions. These commenters further stated that the NPRM preamble
describing the proposed changes to Sec. 668.28(a)(3)(iii) arbitrarily
incorporates new language that changes the requirement to one that
requires the non-title IV eligible educational program's courses be
taught by instructors of a title IV eligible program in order for the
associated revenues to be included in the 90/10 calculation.
Discussion: We agree with commenters that the regulatory language
means that the instructor must be employed by the proprietary
institution, not that the instructor must be an instructor in a title
IV-eligible program. The Department clarifies that courses in an
ineligible program must be taught by one of the institution's
instructors, and that instructor may or may not teach in a title IV-
eligible program. We interpret this language to mean an instructor
employed by the institution, not an instructor under independent
contractor status.
Changes: None.
Comments: One commenter supported the proposed regulations that
would allow institutions to include revenue from ineligible programs
offered at an employer facility. Several commenters opposed the
Department's proposed regulations which would disallow revenue from
ineligible programs not offered at the institution's main campus, an
approved additional location, another school facility approved by the
appropriate State agency or accrediting agency, or an employer
facility. One of these commenters observed that institutions can offer
up to half of title IV-eligible programs at an unapproved location. A
few of these commenters asserted that distance education is a
beneficial mode of education and should be allowed when employers
accept training offered through this modality or when the program is
taught at a main campus approved by the appropriate State licensing or
accrediting agency.
Discussion: The Department appreciates the commenter's support for
allowing institutions to include revenue from an ineligible program
offered at an employer facility. We disagree with commenters that we
should allow proprietary institutions to count funds generated from
programs offered at other unapproved locations or through distance
education as non-Federal revenue in their 90/10 calculations. The
Department worked with the Committee to develop the language regarding
the location of ineligible programs and believes that the regulations
strike a balance between providing necessary consumer protections
guardrails for purposes of 90/10, while allowing proprietary
institutions to incorporate revenue from non-title IV programs of value
to students at other approved locations that provide Title IV programs
and from their main campus. The guardrails negotiated by the Committee
require proprietary institutions to exclude revenue generated from
ineligible programs offered through distance education. Restricting
program revenues for 90/10 to sources from approved locations will
better provide a nexus for those ineligible programs to be offered by
the institution's instructors. This will also ensure that the programs
are offered from locations that have authorization from an
institution's accrediting agency and from the states in which they are
located. Limiting these ineligible programs from distance education or
from unapproved locations will also permit greater oversight of the
reported revenues by the Department. After weighing the potential
benefits and risks, the Department has determined that the risk of
abuse outweighs the potential benefits. We decline to allow
institutions to include revenue generated from these ineligible
programs in their 90/10 calculations. We further note that these
regulations only govern revenue generated from ineligible programs that
an institution counts in its 90/10 calculation and does not exclude a
proprietary institution's ability to offer these programs.
Changes: None.
Comments: A few commenters requested clarification that the
appropriate State agency that can approve an ineligible program may be
the agency responsible for the profession and not the State educational
agency. Commenters stated educational programs not eligible for title
IV funding frequently provide specialized training education in
specific trades, including entry-level healthcare programs, electrical
and plumbing programs, and commercial truck driving. The commenters
further stated that in these cases, State agencies outside of the
States' Department of Education are often charged with approving trade-
specific education programs, such as Boards of Contractors, State
Licensing Authorities, Departments of State, Departments of
Transportation, or the State may contract out the certification process
to a third-party acting under the authority of the applicable State
agency.
Discussion: The Department interprets the appropriate State agency
to mean the agency responsible for approving or licensing the program,
which may not be the State education agency.
Changes: None.
Comments: A few commenters expressed concern that the term ``self-
study'' is ambiguous, and depending on the structure of certain
courses, the term ``self-study'' might mean a course that does not
follow a prescribed lecture format, a course that has little or no
direct student or instructor interaction, a course of independent
study, or an asynchronous distance education course. These commenters
requested clarification from the Department for what constitutes
``self-study.'' One commenter claimed the term is impermissibly vague.
Discussion: The Department disagrees with commenters that the term
self-study is vague and believes the definition of self-study course is
self-evident. Section 487(d) of the HEA states that institutions can
count funds paid by a student or on behalf of a student for an
ineligible program in their 90/10 calculation if the revenue is
generated from an ineligible education or training program if it meets
certain requirements related to industry credentialing or external
approvals from a state or accrediting agency. Self-taught or similar
types of self-directed programs often do not represent anything other
than an off-the-shelf product to which the institution adds no value or
enrichment for its students. Even in instances where they do not
represent an off-the-shelf product, they still represent little value-
added by the institution because they are self-taught or directed. One
of the purposes of the 90/10 calculation is to show that what the
institution offers is of sufficient value that students or others are
willing to invest non-Federal money to attend that institution.
Charging for an off-the-shelf product and counting that as non-Federal
revenue does not reflect any value from the institution any more than
revenues from unrelated products an institution might sell.
Changes: None.
Comments: A few commenters stated that the regulations should allow
institutions to count in their 90/10 calculation revenue from programs
that prepare students for initial licensure in a field because the
proposed regulations allow them to count revenue generated by programs
that help students maintain or supplement licensure.
Discussion: Ineligible programs that prepare students for licensure
would

[[Page 65451]]

generally be considered programs that provide an industry-recognized
credential or certification. Therefore, the Department would consider
revenue generated from these programs as permissible non-Federal
revenue for purposes of 90/10, as long as these programs meet the other
criteria outlined in Sec. 668.28(a)(3)(iii).
Changes: None.
Comments: A few commenters noted that the current 90/10 regulations
permit institutions to include revenues from programs that prepare
students to take an examination for an industry-recognized credential
or certification issued by an independent third party to count as non-
title IV revenue in their 90/10 calculation, and the proposed
regulations remove this provision. These commenters recommended that
the Department continue to allow this practice. A few commenters also
disagreed with the Department's assertion that quality programs
generally prepare students to sit for an exam without an additional
test preparation program. A few commenters also stated that students
may struggle with taking an exam for an industry-recognized credential
and noted that these test preparation courses help those students.
A couple of comments also asked for clarification on the proposed
language. They questioned if institutions could include revenue from
ineligible programs that train students for an industry-recognized
credential that is issued by a third party, not the institution, as
non-Federal revenue in their 90/10 calculation. A few of these
commenters provided examples of programs that they believe the
Department should recognize as allowable revenue.
Discussion: Test preparation programs do not constitute education
or training as required by section 487(d) of the HEA. These courses
represent review material, rather than the substantive training
provided to a student that is supposed to underpin the test preparation
classes. Additionally, the Department does not want to inadvertently
incentivize institutions to offer lower-quality education or training
programs that would have to be supplemented by taking a test
preparation course to pass the exam for an industry-recognized
credential in order to generate institutional revenue from the test
preparation class, or add additional requirements such as test
preparation courses that might unnecessarily raise costs for
students.\6\ Institutions may provide test preparation classes so long
as the revenues are not included in the 90/10 revenue calculation.
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\6\ 87 FR 45456.
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The Department clarifies that the institution itself is not
required to provide the industry-recognized credential for the program
to be included in the 90/10 calculation. We consider revenue generated
from ineligible programs that provide education or training needed for
an industry-recognized credential that is issued by a third-party, such
as commercial truck driving or allied health professions, as allowable
non-Federal revenue for purposes of 90/10.
Changes: None.

Application of Funds (Sec. 668.28(a)(4))

Presumption That Federal Funds Are Used To Pay Tuition, Fees, or Other
Institutional Charges

Comments: One commenter recommended that the Department modify the
presumption that Federal funds disbursed directly to a student are used
to pay tuition, fees, and other institutional charges. The commenter
recommended that we clarify that this presumption only applies if the
student makes a payment to the institution and that institutions should
limit the amount that they include as Federal revenue as the smaller
amount of the Federal funds the student received or the payment that
the student made to the institution.
Discussion: The regulations already clarify that proprietary
institutions only make this presumption if a student makes a payment to
the institution. In terms of limiting the payment to the lesser amount
of the Federal funds received or the funds the student paid the
institution, section 487(d) of the HEA states that the institution
should presume that ``any Federal education assistance funds that are
disbursed or delivered to or on behalf of a student will be used to pay
the student's tuition, fees, or other institutional charges.''
Therefore, it would be inconsistent with the statute to limit the
presumption to be either the lesser of the payment or the Federal funds
received.
Changes: None.

Grant Funds Provided by Non-Federal Agencies That Are Comprised of
Federal and State Funds

Comments: Several commenters recommended that the Department not
require proprietary institutions to obtain the breakdown of Federal and
State portions of grant funds from non-Federal agencies because this
would be a de minimis amount and would be unduly burdensome for the
institution. A few other commenters recommended that the dollar amounts
would be so small that the Department should allow institutions to
count the full grant from the non-Federal agency as funds that can
satisfy a student's tuition, fees, or other institutional charges, even
if those grant funds have some Federal dollars. A few commenters
suggested that the Department reduce the burden on institutions by
publishing the Federal and State percentages of grant funds from non-
Federal agencies for institutions to reference. One commenter suggested
that we allow institutions to exclude students from their 90/10
calculations if those students received grant funds from a non-Federal
agency and the proprietary institution is unable to determine the
breakdown of Federal and State funds for the grant. Finally, one
commenter asked to what lengths an institution should go to obtain this
breakdown of grant funds.
Discussion: The Department disagrees with assertions that it will
be unduly burdensome for institutions to obtain the Federal portion of
grant funds. Non-Federal agencies are required to follow strict
accounting procedures for Federal funds, and proprietary institutions
should be able to work with the relevant agencies to obtain this
breakdown.\7\ Institutions, not the Department, are the best situated
entities to be familiar with grants from non-Federal agencies and to
work with those agencies to obtain additional information as necessary.
The statute clearly intends for all Federal funds to be captured in the
numerator of the 90/10 calculation, and it would be inconsistent with
the statute to allow institutions to count certain Federal funds as
reducing other Federal funds or to not count a student's other Federal
revenue in limited situations where the institution cannot obtain the
breakdown of Federal and non-Federal funds. The regulations clarify
that in instances where the institution cannot determine the amount of
Federal funds, the institution must exclude the entirety of the funds
from the calculation.
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\7\ OMB Circular A-87, revised May 10, 2004: <a href="http://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A87/a87_2004.pdf">www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A87/a87_2004.pdf</a>.
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Although institutions must exclude funds for which they cannot
determine the breakdown, we expect institutions to attempt to determine
the Federal and non-Federal breakdown of grant funds. The Department
would evaluate whether the institution sufficiently attempted to
determine the Federal and non-Federal components of grant funds on a
case-by-case basis in when the

[[Page 65452]]

institution is unable to obtain this breakdown.
Changes: None.

Funds Allocated Under Workforce Innovation and Opportunity Act (WIOA)

Comments: A few commenters stated the classification of WIOA-type
funds as Federal education assistance funds would violate section
487(d)(1)(C)(ii) of the HEA, which states that an institution can apply
funds provided under a contractual arrangement with a Federal, State,
or local government agency for the purpose of providing job training to
select individuals to satisfy a student's tuition, fees, or other
institutional charges before it applies Federal funds to those charges.
The commenters further stated that we have long recognized that WIOA
funds fit this definition because WIOA funds are provided under a job
training contract funded for the purpose of providing job training to
dislocated workers and individuals who are unemployed, underemployed,
or disabled. They opined that the Department has long permitted
proprietary institutions to apply WIOA-type funds to tuition and fees
prior to applying title IV funds. The commenters suggested that even
under the ARP, an institution must continue to apply first any WIOA-
type funds to a student's tuition, fees, or other institutional
charges. One commenter concluded that categorizing WIOA-type funds as
Federal education assistance funds and as job training funds applied
first would render the presumption rule superfluous as to WIOA-type
funds, in violation of Supreme Court precedent.\8\
---------------------------------------------------------------------------

\8\ The comment cited McNeill v. United States, 563 U.S. 816,
822 (2011) citing United States v. Wilson, 503 U.S. 329, 334 (1992)
(``[A]bsurd results are to be avoided'')
---------------------------------------------------------------------------

Discussion: Institutions can apply non-Federal portions of WIOA-
type funds to tuition, fees, and other institutional charges. Section
487(d)(1)(C)(ii) of the HEA refers to the application of funds that the
institution receives from a contract. The section does not categorize
those funds as Federal and non-Federal. It would be inconsistent with
the statutory change enacted by the ARP, which states that institutions
must include all Federal education assistance funds in the numerator of
their 90/10 calculation, to continue to allow institutions to first
apply Federal portions of WIOA-type funds to tuition, fees, and other
institutional charges before applying other Federal funds.
Changes: None.

Revenue Generated From Institutional Aid (Sec. 668.28(a)(5))

Institutional Loans

Comments: Many commenters supported the Department's proposal to
clarify that only principal payments on institutional loans count as
non-Fed

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