Home/Federal/Federal Register/2024-16102

Proposed Rule2024-16102

Program Integrity and Institutional Quality: Distance Education, Return of Title IV, HEA Funds, and Federal TRIO Programs

Primary source

Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.

Published

July 24, 2024

Issuing agencies

Education Department

Abstract

The Secretary is proposing to amend the Student Assistance General Provisions regulations governing participation in the student financial assistance programs authorized under title IV of the Higher Education Act of 1965, as amended (HEA), to promote program integrity and institutional quality. These regulations would clarify, update, and consolidate certain provisions that apply to distance education; the return of title IV, HEA funds; and the Federal TRIO programs. A brief summary of the proposed rule is available at www.regulations.gov/ docket/ED-2024-OPE-0050.

Full Text

<html>
<head>
<title>Federal Register, Volume 89 Issue 142 (Wednesday, July 24, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 142 (Wednesday, July 24, 2024)]
[Proposed Rules]
[Pages 60256-60286]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16102]

[[Page 60255]]

Vol. 89

Wednesday,

No. 142

July 24, 2024

Part V

Department of Education

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

34 CFR Parts 600, 643, 644, et al.

Program Integrity and Institutional Quality: Distance Education, Return
of Title IV, HEA Funds, and Federal TRIO Programs; Proposed Rule

Federal Register / Vol. 89 , No. 142 / Wednesday, July 24, 2024 /
Proposed Rules

[[Page 60256]]

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

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 643, 644, 645, and 668

[Docket ED-2024-OPE-0050]
RIN 1840-AD68, 1840-AD85, and 1840-AD92

Program Integrity and Institutional Quality: Distance Education,
Return of Title IV, HEA Funds, and Federal TRIO Programs

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Secretary is proposing to amend the Student Assistance
General Provisions regulations governing participation in the student
financial assistance programs authorized under title IV of the Higher
Education Act of 1965, as amended (HEA), to promote program integrity
and institutional quality. These regulations would clarify, update, and
consolidate certain provisions that apply to distance education; the
return of title IV, HEA funds; and the Federal TRIO programs. A brief
summary of the proposed rule is available at <a href="http://www.regulations.gov/docket/ED-2024-OPE-0050">www.regulations.gov/docket/ED-2024-OPE-0050</a>.

DATES: We must receive your comments on or before August 23, 2024.

ADDRESSES: Comments must be submitted via the Federal eRulemaking
Portal at <a href="http://regulations.gov">regulations.gov</a>. Information on using Regulations.gov,
including instructions for finding a rule on the site and submitting
comments, is available on the site under ``FAQ.'' If you require an
accommodation or cannot otherwise submit your comments via
<a href="http://regulations.gov">regulations.gov</a>, please contact one of the program contact persons
listed under FOR FURTHER INFORMATION CONTACT. The Department will not
accept comments submitted by fax or by email or comments submitted
after the comment period closes. To ensure that the Department does not
receive duplicate copies, please submit your comment only once.
Additionally, please include the Docket ID at the top of your comments.
Privacy Note: The Department's policy is to generally make comments
received from members of the public available for public viewing at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. Therefore, commenters should include in
their comments only information about themselves that they wish to make
publicly available. Commenters should not include in their comments any
information that identifies other individuals or that permits readers
to identify other individuals. If, for example, your comment describes
an experience of someone other than yourself, please do not identify
that individual or include information that would facilitate readers
identifying that individual. The Department reserves the right to
redact at any time any information in comments that identifies other
individuals, includes information that would facilitate readers
identifying other individuals, or includes threats of harm to another
person.

FOR FURTHER INFORMATION CONTACT: Gregory Martin, U.S. Department of
Education, Office of Postsecondary Education, 400 Maryland Avenue SW,
5th floor, Washington, DC 20202. Telephone: (202) 205-4595. Email:
<a href="/cdn-cgi/l/email-protection#3f715a586d5a58716f6d72775a534f7f035e1f574d5a5902" http: ed.gov">ed.gov</a>">NegRegNPRMHelp@<a href="http://ed.gov">ed.gov</a></a>.
If you are deaf, hard of hearing, or have a speech disability and
wish to access telecommunications relay services, please dial 7-1-1.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Abbreviations
II. Executive Summary
III. Summary of Major Provisions
IV. Invitation To Comment
V. Authority for This Regulatory Action
VI. Background
VII. Public Participation
VIII. Negotiated Rulemaking
IX. Significant Proposed Regulations
A. Distance Education
B. Return of Title IV Funds
C. Federal TRIO Programs
X. Regulatory Impact Analysis

I. Abbreviations

CFR: Code of Federal Regulations
CIP Code: Classification of Instructional Programs code
EOC: Educational Opportunity Centers
FFEL: Federal Family Education Loan program
FSA: Federal Student Aid
Freely Associated States: the Republic of Palau, the Federated
States of Micronesia, and the Republic of the Marshall Islands
HEA: Higher Education Act of 1965, as amended
HHS: the United States Department of Health and Human Services
LEA: Local educational agency
PEP: Eligible prison education program
PRWORA: Personal Responsibility and Work Opportunity Reconciliation
Act
R2T4: Return of title IV funds
RIA: Regulatory Impact Analysis
SEA: State educational agency
Title IV, HEA Programs: Student financial assistance programs
authorized under title IV of the HEA
TRIO: Federal outreach and student services programs designed to
identify and provide services for individuals from disadvantaged
backgrounds
TS: Talent Search
UB: Upward Bound

II. Executive Summary

These proposed regulations address three substantive areas:
distance education, return of title IV funds (R2T4), and the Federal
TRIO programs (TRIO). The Department is addressing these areas in an
effort to help ensure students are well served by the institutions of
higher education they attend, increase access to postsecondary
education for disadvantaged students, and ensure that Federal Student
Aid programs work in the best interests of students. As the three
distinct topics are structured and addressed independently in this
proposed rule, the Department generally intends the rule's provisions
to be severable from each other. The Department expects to provide
additional detail on severability in the final rule once we consider
public comments and finalize the regulatory language.
The proposed distance education regulations would help the
Department better measure and account for student outcomes, improve
oversight over distance education, and ensure students are receiving
effective education by expanding the definition of an additional
location to include virtual locations for programs offered entirely
online or through correspondence, adding a definition of ``distance
education course,'' requiring institutions to report their students'
distance education status, and disallowing asynchronous distance
education in clock-hour programs for title IV, HEA purposes. The
proposed R2T4 regulations would help withdrawn students repay
outstanding Direct Loan credit balances, increase the accuracy and
simplicity of performing R2T4 calculations, address unique
circumstances for what constitutes a withdrawal, clarify that distance
education programs are attendance taking, and codify longstanding
policies into regulation. The proposed changes to TRIO would expand
student eligibility and provide greater access to postsecondary
education for disadvantaged students under three programs that offer
student services in a pre-postsecondary education setting--the Talent
Search program, the Educational Opportunity Centers program, and the
Upward Bound program by expanding participant eligibility to include
all students who have enrolled in or who seek to enroll in a high
school in the United States, territories, or Freely Associated States.

[[Page 60257]]

III. Summary of the Major Provisions

As specifically set forth in each of the areas identified below,
the proposed regulations would:

Distance Education (Sec. Sec. 600.2, 668.3, 668.41)

<bullet> Amend Sec. 600.2 to: (1) include in the definition of
additional location virtual locations where 100 percent of an
educational program is provided through distance education or
correspondence courses; (2) revise the definition of clock hour to
reflect that, for title IV, HEA purposes, coursework delivered via
distance education cannot be asynchronous; and (3) add a definition for
distance education course.
<bullet> Amend the academic year definition in Sec. 668.3 to
specify that, for purposes of the title IV, HEA definition of an
academic year, asynchronous coursework offered through distance
education could only be offered in credit-hour programs.
<bullet> Amend Sec. 668.41 to require institutions to report
student enrollment in distance education or correspondence courses,
using a procedure that would be determined by the Department.

Return of Title IV Funds (Sec. Sec. 668.21, 668.22)

<bullet> Amend Sec. 668.21 to allow a student who received a loan
disbursement as part of a title IV credit balance, but never began
attendance in a payment period or period of enrollment, to repay loan
funds they received under the terms of their promissory note.
<bullet> Amend Sec. 668.22 to exempt institutions from performing
an R2T4 calculation in the event that (1) a student is treated as never
having begun attendance; (2) the institution returns all title IV aid
disbursed to the student for that payment period or period of
enrollment; (3) the institution refunds all institutional charges to
the student for that payment period or period of enrollment; and (4)
the institution writes off or cancels any current year balance owed by
the student to the institution due to the institution's return of title
IV funds to the Department.
<bullet> Amend Sec. 668.22 to codify that an institution that is
required to take attendance must, within 14 days of a student's last
date of attendance, document the student's withdrawal date.
<bullet> Amend Sec. 668.22 to require an institution to take
attendance for each course offered entirely through distance education,
except for dissertation research courses that are part of a doctoral
program.
<bullet> Amend Sec. 668.22 to allow a confined or incarcerated
individual, in a term-based setting, to not have to come back from a
leave of absence to where the student left off, and instead, allow the
individual to return at a different point in their prison education
program (PEP).
<bullet> Amend Sec. 668.22 to streamline and make consistent
institutions' calculation of the percentage of the payment period
completed for a clock-hour program.
<bullet> Amend Sec. 668.22 to consider a module part of the
payment period used in the denominator of the R2T4 calculation only
when a student begins attendance in the module.

Federal TRIO Programs (Sec. Sec. 643.3, 644.3, 645.3)

<bullet> Amend Sec. 643.3 to expand who would be able to
participate in a Talent Search project. Eligibility would be extended
to an individual who is enrolled in or seeks to enroll in a high school
in the United States, territories, or Freely Associated States.
<bullet> Amend Sec. 644.3 to expand who would be able to
participate in an Educational Opportunity Centers project. Eligibility
would be extended to an individual who is enrolled in or seeks to
enroll in a high school in the United States, territories, or Freely
Associated States.
<bullet> Amend Sec. 645.3 to expand who would be able to
participate in a Regular or a Math and Science Upward Bound project.
Eligibility (other than for direct cash stipends) would be extended to
an individual who is enrolled in or seeks to enroll in a high school in
the United States, territories, or Freely Associated States.

Costs and Benefits

As further detailed in the Regulatory Impact Analysis, the
Department estimates present value net benefits of $1,434,537,761 over
ten years at a 2 percent discount rate. This is equivalent to an
annualized net benefits of $159,702,107 over ten years. Additionally,
we estimate annualized quantified costs of $9,423,657 related to
paperwork burden.

IV. Invitation To Comment

We invite you to submit comments regarding these proposed
regulations. To ensure that your comments have maximum effect in
developing the final regulations, we urge you to clearly identify the
specific section or sections of the proposed regulations that each of
your comments addresses and to arrange your comments in the same order
as the proposed regulations. The Department will not accept comments
submitted after the comment period closes. To ensure that we do not
receive duplicate copies, please submit your comments only once.
The following tips are meant to help you prepare your comments and
provide a basis for the Department to respond to issues raised in your
comments in the notice of final regulations (NFR):
<bullet> Be concise but support your claims.
<bullet> Explain your views as clearly as possible and avoid using
profanity.
<bullet> Refer to specific sections and paragraphs of the proposed
regulations throughout your comments, particularly in any headings that
are used to organize your submission.
<bullet> Explain why you agree or disagree with the proposed
regulatory text and support these reasons with data-driven evidence,
including the depth and breadth of your personal or professional
experiences.
<bullet> Where you disagree with the proposed regulatory text,
suggest alternatives, including regulatory language, and your rationale
for the alternative suggestion.
<bullet> Do not include personally identifiable information (PII),
such as Social Security numbers or loan account numbers, for yourself
or for others in your submission. Should you include any PII in your
comment, such information may be posted publicly.
Mass Writing Campaigns: In instances where individual submissions
appear to be duplicates or near duplicates of comments prepared as part
of a writing campaign, the Department will post one representative
sample comment along with the total comment count for that campaign to
Regulations.gov. The Department will consider these comments along with
all other comments received.
In instances where individual submissions are bundled together
(submitted as a single document or packaged together), the Department
will post all of the substantive comments included in the submissions
along with the total comment count for that document or package to
Regulations.gov. A well-supported comment is often more informative to
the agency than multiple form letters.
Public Comments: The Department invites you to submit comments on
all aspects of the proposed regulatory language specified in this NPRM
in Sec. Sec. 600.2, 643.3, 644.3, 645.3, 668.3, 668.21, 668.22, and
668.41, and in the Regulatory Impact Analysis and Paperwork Reduction
Act sections.
The Department may, at its discretion, decide not to post or to
withdraw certain comments and other materials that are computer-
generated. Comments containing the promotion of commercial

[[Page 60258]]

services or products and spam will be removed.
We may not address comments outside of the scope of these proposed
regulations in the NFR. Generally, comments that are outside of the
scope of these proposed regulations are comments that do not discuss
the content or impact of the proposed regulations or the Department's
evidence or reasons for the proposed regulations, which includes topics
negotiated but not included in this NPRM.
Comments that are submitted after the comment period closes will
not be posted to Regulations.gov or addressed in the NFR.
Comments containing personal threats will not be posted to
Regulations.gov and may be referred to the appropriate authorities.
We invite you to assist us in complying with the specific
requirements of Executive Orders 12866, 13563, and 14094 and their
overall requirement of reducing regulatory burden that might result
from these proposed regulations. Please let us know of any further ways
we could reduce potential costs or increase potential benefits while
preserving the effective and efficient administration of the
Department's programs and activities.
During and after the comment period, you may inspect public
comments about these proposed regulations by accessing Regulations.gov.
Assistance to Individuals with Disabilities in Reviewing the
Rulemaking Record: On request, we will provide an appropriate
accommodation or auxiliary aid to an individual with a disability who
needs assistance to review the comments or other documents in the
public rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of accommodation or auxiliary
aid, please contact one of the persons listed under FOR FURTHER
INFORMATION CONTACT.

Clarity of the Regulations

Executive Order 12866 and the Presidential memorandum ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand. The Secretary invites comments
on how to make the regulation easier to understand, including answers
to questions such as the following:
<bullet> Are the requirements in the proposed regulations clearly
stated?
<bullet> Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
<bullet> Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing) aid or reduce its
clarity?
<bullet> Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 668.2 General definitions.)
<bullet> Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?
<bullet> What else could we do to make the proposed regulation
easier to understand?
To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section.

V. Authority for This Regulatory Action

The legal basis for these proposed regulations is title IV of the
Higher Education Act of 1965, as amended (HEA), which authorizes the
Federal government's major student financial aid programs that are the
primary source of direct Federal support to students pursuing
postsecondary education. 20 U.S.C. 1070-1099d (sections 400-499 of the
HEA). Institutions participating in title IV programs must satisfy
certain threshold and ongoing requirements, see id., and the Secretary
is given broad authority to carry out program requirements. 20 U.S.C.
1070(b) (section 400(b) of the HEA). As part of its oversight
responsibilities under title IV, the Department seeks to promote
program integrity and institutional quality. See generally 20 U.S.C.
1099c, 1099c-1, 1099c-2 (sections 498, 498A, and 498B of the HEA). To
this end, the Department's student assistance general provisions
regulations establish threshold requirements for institutions to
participate and to continue participation in student financial
assistance programs. See generally 34 CFR parts 600-603, 642-647, 668,
673-676, 682-694. This proposed rule would update, consolidate, and
revise requirements in three distinct title IV areas: the return of
title IV, HEA funds; distance education; and the Federal TRIO programs,
impacting 34 CFR parts 600, 643-645, and 668. The Department's specific
legal authority to propose regulations in these areas is set forth
below.
Distance Education. Section 103(7) of the HEA defines ``distance
education,'' and section 484(l) sets forth rules relating to courses
offered through distance education. Among other things, section 103(7)
requires that distance education support regular and substantive
interaction between students and the instructor, and the modifications
we propose in this NPRM would give the Department the tools to ensure
such programs satisfy this requirement.
Return of Title IV, HEA Funds. Section 484B of the HEA outlines the
process that an institution must follow if a title IV aid recipient
withdraws from the institution during a payment period or period of
enrollment (also known as R2T4). The Department proposes various
clarifying changes to the R2T4 regulations that would benefit both
institutions and students.
Federal TRIO Programs. Section 402A of the HEA outlines the
application process, permissible services, awarding process, and grant
limitations for TRIO. This proposed rule would clarify the scope of
qualified individuals who are eligible to participate in certain TRIO
programs.

VI. Background

Distance Education (Sec. Sec. 600.2, 668.3, 668.41)

The definition of ``distance education'' in Sec. 600.2 lists the
technologies that allow for instruction to occur between instructors
and students who are separated. It also requires that such education
must include regular and substantive interaction between the two
parties and explains what such interaction must entail. With the
development of the technology that supports distance learning and
particularly in the wake of the pandemic, the Department observed that
the use of distance education at eligible institutions has increased
and is likely to continue to do so. However, as the Department noted in
the distance education issue paper and during the negotiated rulemaking
on this issue, we have been hampered in the ability to fully understand
students' participation in distance education, account for differences
in outcomes and conduct oversight, accurately measure taxpayer
expenditures on distance education programs, and gauge the success of
such education.\1\ The proposed changes will assist the Department with
these issues.
---------------------------------------------------------------------------

\1\ <a href="https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/program-integrity-and-institutional-quality-session-1-issue-paper-distance-education-final.pdf">https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/program-integrity-and-institutional-quality-session-1-issue-paper-distance-education-final.pdf</a>.
---------------------------------------------------------------------------

The other distance education issue the Department seeks to address
with this rulemaking involves clock-hour programs, which traditionally
have required considerable hands-on

[[Page 60259]]

instruction to properly prepare students for employment in their field
of study. In the September 2, 2020, final rule on distance education,
the Department was persuaded that allowing for asynchronous instruction
in clock-hour programs was sensible as long as it was adequately
tracked through appropriate technology (85 FR 54742).\2\ However, after
additional review of the issue during its oversight and compliance
activities, and based on complaints received from students, the
Department believes this expansion puts students and taxpayers at risk.
Consequently, the Department is proposing to eliminate asynchronous
instruction for clock-hour programs.
---------------------------------------------------------------------------

\2\ <a href="https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation">https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation</a>.
---------------------------------------------------------------------------

Return of Title IV Funds (Sec. Sec. 668.21, 668.22)

The R2T4 regulations govern the process institutions must conduct
when a title IV recipient ceases attendance during a payment period
(term) or a period of enrollment. Title IV funds are awarded to a
student under the assumption that the student will attend school for
the entire period for which the funds were awarded. When a student
withdraws, they may no longer be eligible for the full amount of title
IV funds that they were originally scheduled to receive and that the
institution disbursed. After an institution completes an R2T4
calculation, funds that were awarded to the student may need to be
returned to the Department.
R2T4 is consistently in the Department's top 10 compliance findings
for schools and yields complex and challenging questions. The
Department proposed the regulatory changes in this section to address
some of the issues in the regulations that have been identified in
these findings.\3\ Through these proposed R2T4 regulations, the
Department seeks to: (1) help withdrawn students repay outstanding
Direct Loan credit balances; (2) increase the accuracy and simplicity
of performing R2T4 calculations; (3) address unique circumstances for
what constitutes a withdrawal; and (4) codify longstanding policies
into regulation.
---------------------------------------------------------------------------

\3\ Program Reviews--<a href="https://studentaid.gov/data-center/school/fines-and-findings">https://studentaid.gov/data-center/school/fines-and-findings</a>; Annual Top Ten School Findings--<a href="https://studentaid.gov/data-center/school/program-reviews">https://studentaid.gov/data-center/school/program-reviews</a>.
---------------------------------------------------------------------------

Federal TRIO Programs (Sec. Sec. 643.3, 644.3, 645.3)

The TRIO programs are Federal outreach and student services
programs designed to identify and provide services for individuals from
disadvantaged backgrounds. Individuals from disadvantaged backgrounds
include low-income individuals, first-generation college students,
students with disabilities, students with limited English proficiency,
students experiencing homelessness, and students in foster care. The
TRIO programs are designed to help students from disadvantaged
backgrounds progress through the academic pipeline from middle school
to postbaccalaureate programs.
Current regulations limit TRIO programs to an individual that is a
citizen or national of the United States, a permanent resident of the
United States, a permanent resident of Guam, the Northern Mariana
Islands, the Trust Territory of the Pacific Islands (Palau), or a
resident of the Freely Associated States (the Federated States of
Micronesia or the Republic of the Marshall Islands). See Sec. Sec.
643.3(a)(1)(i) through (v), 644.3(a)(1)(i) through (v), and 645.3(a)(1)
through (5). An individual is also currently eligible to participate in
the TRIO programs if they are in the United States for other than a
temporary purpose and provide evidence from the Immigration and
Naturalization Service (currently Department of Homeland Security) of
his or her intent to become a permanent resident (i.e., conditional
resident aliens, conditional entrants, self-petitioners under the
Violence Against Women Act (battered immigrants), refugees, asylees,
victims of human trafficking, Cuban-Haitian entrants, persons paroled
into the U.S. for at least one year and Jay Treaty students).
The Department's proposed changes would impact the three TRIO
programs that serve students in a pre-postsecondary education context:
the Upward Bound program, the Talent Search program, and the
Educational Opportunity Centers program. The Upward Bound program
prepares high school students for college while the Talent Search
program encourages participants to complete secondary and postsecondary
education. The Educational Opportunity Centers program provides
financial and academic counseling to qualified individuals, generally
over the age of 19, though individuals under 19 are eligible to receive
program services if they meet the requirements of current 34 CFR
644.3(a)(2)(ii), who want to enter or continue a postsecondary
education program. The Department proposes to broaden participation in
these three programs by expanding eligibility to all disadvantaged
individuals who have enrolled in or who seek to enroll in a high school
in the United States, territories, or Freely Associated States, which
are the geographic areas served by the TRIO programs. This proposal
would allow the three TRIO programs that serve students in the pre-
postsecondary education context to serve students who are already
receiving or seek to receive public educational services from middle
and high schools.
The McNair Scholars program, the Student Support Services program
and the Training Program for Federal TRIO Programs would not be
impacted by these proposed changes. The Department proposes to limit
this eligibility expansion to the three TRIO programs that serve
students in the pre-postsecondary context, because the Department
believes that all who attend high school in the United States should
have the same access to TRIO services. The TRIO provisions would
additionally eliminate the operational burden of separating out
students who are enrolled in public schools but not eligible for TRIO
services under the current rule, enabling a greater focus on delivering
educational services to all students. The proposed rule change would
assist students on their path to and attainment of postsecondary
education.

VII. Public Participation

The Department has significantly engaged the public in developing
this NPRM, as described here and below in the Negotiated Rulemaking
section.
On March 24, 2023, The Department announced public hearings at
which interested parties could comment on the topics suggested by the
Department or suggest additional topics for consideration.\4\ The
Department conducted virtual public hearings on April 11 and 12, 2023.
The Department considered the advice and recommendations submitted by
individuals and organizations in these public hearings in developing
initial proposed regulatory provisions for consideration by the Program
Integrity and Institutional Quality Committee (Committee). You may view
transcripts of the public hearings at <a href="https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">https://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.
---------------------------------------------------------------------------

\4\ 88 FR 17777.
---------------------------------------------------------------------------

The Department also accepted written comments on possible
regulatory provisions that were submitted to the Department by
interested parties and organizations as part of the public hearing
process. You may view the written comments submitted in response to the
March 23, 2023, Federal Register notice on the Federal

[[Page 60260]]

eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a>, within docket ID ED-2023-
OPE-0039. Instructions for finding comments are also available on the
site under ``FAQ.''
On November 29, 2023, the Department published a notice in the
Federal Register (88 FR 83365) announcing the intent to establish a
negotiated rulemaking committee to prepare proposed regulations on: (1)
The Secretary's recognition of accrediting agencies under 34 CFR part
602 and related parts; (2) Institutional eligibility under 34 CFR
600.2, including State authorization as a component of such eligibility
under 34 CFR 600.9; (3) The requirements for distance education under
34 CFR 600.2 that pertain to clock-hour programs and reporting for
students who enroll primarily online; (4) Return of Title IV funds, to
address requirements for participating institutions to return unearned
title IV funds in a manner that protects students and taxpayers while
easing the administrative burden for institutions of higher education
under 34 CFR 668.22; (5) Cash management, to address timely student
access to disbursements of title IV, HEA Federal student financial
assistance and provisions related to credit balances, escheatment, and
loss of such funds under 34 CFR part 668, subpart K; and (6) The
eligibility requirements for participants in TRIO.

VIII. Negotiated Rulemaking

Section 492 of the HEA requires the Secretary to obtain public
involvement in the development of proposed regulations affecting
programs authorized by title IV of the HEA. After obtaining extensive
input and recommendations from the public, including individuals and
representatives of groups involved in the title IV, HEA programs, the
Department, in most cases, must engage in the negotiated rulemaking
process before publishing proposed regulations in the Federal Register.
If negotiators reach consensus on the proposed regulations, the
Department agrees to publish without substantive alteration a defined
group of proposed regulations on which the negotiators reached
consensus--unless the Secretary reopens the process or provides a
written explanation to the participants stating why the Secretary has
decided to depart from the agreement reached during negotiations. You
can find further information on the negotiated rulemaking process at:
<a href="http://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.
On November 29, 2023, the Department published a notice in the
Federal Register (88 FR 83365) announcing its intention to establish a
Committee, the Program Integrity and Institutional Quality Committee,
to prepare proposed regulations for the title IV, HEA programs. The
notice set forth a schedule for Committee meetings, requested
nominations for individual negotiators to serve on the negotiating
Committee, and announced the topics that Committee would address.
The Committee included the following members, representing their
respective constituencies:
<bullet> Business Officers from Institutions of Higher Education:
Joe Weglarz, Marist College, and Dom Chase (alternate), Ivy Tech
Community College of Indiana.
<bullet> Civil Rights Organizations and Consumer Advocates: Carolyn
Fast, The Century Foundation, and Magin Misael Sanchez (alternate),
UnidosUS.
<bullet> Financial Aid Administrators: JoEllen Price, San Jacinto
College, and Zack Goodwin (alternate), University of Nevada, Las Vegas.
<bullet> Historically Black Colleges and Universities, Tribal
Colleges and Universities, and Minority-serving Institutions
(institutions of higher education eligible to receive Federal
assistance under title III, parts A and F, and title V of the HEA):
Charles B. W. Prince, Dillard University, and D'Angelo Sands
(alternate), Texas A&M University-Corpus Christi.
<bullet> Institutional Accrediting Agencies Recognized by the
Secretary: Jamienne S. Studley, WASC Senior College and University
Commission, and Michale McComis (alternate), Accrediting Commission of
Career Schools and Colleges.
<bullet> Legal Assistance Organizations: Robyn Smith, Legal Aid
Foundation of Los Angeles and National Consumer Law Center, and Sophie
Laing (alternate), Pine Tree Legal Assistance.
<bullet> Private Nonprofit Institutions of Higher Education: Erika
Linden, Des Moines University, and Scott Dolan (alternate), Excelsior
University.
<bullet> Programmatic accrediting agencies recognized by the
Secretary, to include State agencies recognized for the approval of
nurse education: Laura Rasar King, Council on Education for Public
Health, and Amy Ackerson (alternate), Missouri State Board of Nursing.
<bullet> Proprietary Institutions of Higher Education: Jillian
Klein, Strategic Education, Inc., and David Cohen (alternate), Five
Towns College and APC Board of Directors.
<bullet> Public Four-Year Institutions of Higher Education: Jason
Lorgan, University of California, Davis, and Alyssa Dobson (alternate),
Slippery Rock University.
<bullet> Public Two-Year Institutions of Higher Education: Jo Alice
Blondin, Clark State College, and Michael Cioce (alternate), Rowan
College at Burlington County.
<bullet> State Attorneys General: Diana Hooley, Massachusetts
Attorney General's Office.
<bullet> State Officials, including State higher education
executive officers, State authorizing agencies, and State regulators of
institutions of higher education: John Ware, Ohio State Board of Career
Colleges and Schools, and Robert Anderson (alternate), State Higher
Education Executive Officers Association.
<bullet> Students or borrowers, including currently enrolled
borrowers, or groups representing them: Jessica Morales, American
University--Washington School of Law, and Emmett Blaney (alternate),
Young Invincibles.
<bullet> U.S. military service members, veterans, or groups
representing them: Barmak Nassirian, Veterans Education Success, and
Ashlynne Haycock-Lohmann (alternate), Tragedy Assistance Program for
Survivors.
<bullet> Federal Negotiator: Gregory Martin, U.S. Department of
Education.
The Department also invited nominations for a Federal TRIO Programs
Subcommittee (Subcommittee). The Subcommittee members were not voting
members of the Committee unless otherwise designated to represent a
constituency; however, they provided a recommendation for TRIO and
served as a resource to the Committee. The Subcommittee members were:
<bullet> Current or former participants in a Federal TRIO Program:
Wade Williams, Crowder College Foundations.
<bullet> Institutions of Higher Education: D'Angelo Sands, Texas
A&M University-Corpus Christi.
<bullet> Public or private agencies or organizations, including
community-based organizations with experience in serving disadvantaged
youth: Emalyn Lapus, Japanese Community Youth Council.
<bullet> Secondary schools, including local educational agencies
with secondary schools: Geof Garner, Multnomah Education Service
District.
<bullet> State Officials, including State Higher Education
Executive Officers, State Authorizing Agencies, and State Regulators of
Institutions of Higher Education: Michael P. Meotti,

[[Page 60261]]

Washington Student Achievement Council.
<bullet> U.S. Department of Education: Aaron Washington, Office of
Postsecondary Education, and Hannah Hodel, Office of General Counsel.
The Committee met for three rounds of negotiations, each of which
was held over four days between January and March 2024. The
Subcommittee met on January 12 and February 9. At its first meeting,
the Committee reached agreement on its protocols and proposed agenda.
The protocols provided, among other things, that the Committee would
operate by consensus. The protocols defined consensus as no dissent by
any member of the Committee and noted that consensus checks would be
taken issue by issue.
The Committee reviewed and discussed the Department's drafts of
regulatory language, as well as alternative language and suggestions
proposed by Committee members. During each negotiated rulemaking
session, provided opportunities for public comment at the end of each
day. Additionally, during and between each negotiated rulemaking
session, non-Federal negotiators obtained feedback from their
stakeholders that they shared with the negotiating committee.
At the meeting on March 4, 2024, the Committee reached consensus on
the Department's proposed regulations on TRIO. The Department has
published the proposed TRIO amendatory language in this NPRM without
substantive alteration to the agreed-upon proposed regulations. The
Committee did not reach consensus on the other issues considered.
For more information on the negotiated rulemaking sessions please
visit <a href="http://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.

IX. Significant Proposed Regulations

We discuss substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory provisions that are technical or otherwise minor in
effect.

A. Distance Education

Definitions (Sec. 600.2)
Current Regulations: The current definition of additional location
in Sec. 600.2 includes two categories: the traditional physical
facilities that are geographically separate from the main campus of the
institution and correctional institutions where students receive
postsecondary educational instruction.
Proposed Regulations: The Department proposes to add a third
category to this definition: virtual locations, through which
institutions offer 100 percent of an educational program by distance
education or correspondence courses, notwithstanding mandatory on-
campus or residential periods of 90 days or less.
Reasons: Under the current regulations and Department processes,
there is no distinction between an institution's on-campus programs and
programs offered entirely online or in a hybrid format. For example,
institutions may have online programs related to on-campus programs
with the same Classification of Instructional Programs (CIP) code,
sometimes with a different curriculum. If they have the same CIP code,
however, the Department is unable to distinguish between the two
programs for many purposes including program oversight, audits, looking
at outcome metrics, and College Scorecard program-level data, including
debt, earnings, and completion. The Department is also unable to
determine the precise amount of title IV funds being expended in
distance education programs or determine the State where the student is
located while enrolled.
Establishing a virtual location as a type of additional location
would distinguish programs offered entirely through distance education
from those that occur fully or partially at a physical facility of the
school or at a correctional institution. The proposed changes would
help the Department measure and better understand student outcomes and
the amount of title IV program funds being expended in each setting and
conduct more accurate program oversight including through better
tailored program reviews. The proposed changes would also improve the
Department's ability to determine the States where title IV, HEA
recipients are located and allow the Department to provide this
information to State oversight entities and the public. This additional
information would improve the ability of State oversight entities to
oversee distance education programs and better assess the risk that
such programs may pose to individuals residing in their States.
In addition, having distinct virtual locations would allow the
Department to account for situations in which an institution ends its
online offerings irrespective of what is occurring at a school's brick-
and-mortar campus or if an institution ended its brick-and-mortar
offerings but continued its online offerings. This would allow the
Department to monitor an institution's compliance with close-out
requirements, consistent with the monitoring done for closures of
brick-and-mortar institutions and locations. Separately identifying
virtual locations would also provide greater protection for students if
an institution offering both distance education and in-person
instruction suspends coursework in one modality but maintains the
other. Students whose modality has been discontinued and who may not
wish to, or may not be able to, continue in the alternative modality,
would be eligible for closed school discharges. For example, students
that enrolled in an on-campus program may have done so with the
expectation that they would be instructed in person, and they may not
have otherwise chosen an online program. Similarly, a student who
enrolled in an online program may not be inclined or able to move into
an on-campus program for a number of reasons, such as preference for a
flexible schedule, not living near the physical campus, or a preference
for online instruction. This regulatory change will provide a clear
mechanism for providing relief.
Although the definition of a virtual location refers primarily to
programs offered entirely through distance education, the Department
proposes to include in the definition an exception for programs that
have limited requirements for students to attend on campus activities,
including preparation activities and residential periods of instruction
of 90 days or less. These exceptions are intended to prevent
institutions from circumventing the requirement to report an additional
location by requiring a minimal amount of on-campus or residential
activities.
The Department notes that the proposed concept of a virtual
additional location would not require additional oversight by States or
accrediting agencies; instead, the Department would approve an
institution's virtual locations if its oversight entities approved or
authorized the institution to offer distance education.
Current Regulations: The current definition of clock hour in Sec.
600.2 allows for distance education in which a synchronous or
asynchronous class, recitation, or lecture provides direct interaction
between students and instructors and for asynchronous learning
activities in which students interact with technology that can monitor
and document the time that they participate in the activity.
Proposed Regulations: The Department proposes removing these
asynchronous options using distance education under the definition of a
clock-hour.
Reasons: The definition of a ``clock hour'' describes the types of
coursework

[[Page 60262]]

and the conditions under which the coursework is offered that may apply
to a student's eligibility for title IV, HEA funds. Coursework that
does not meet this definition may still be conducted in a clock-hour
program but cannot be counted toward a student's eligibility for title
IV, HEA funds, in particular the ability to receive a second or
subsequent disbursement of such funds. Since the very first time that
the Department defined ``clock hour'' for the Basic Educational
Opportunity Grant (BEOG) program, which later became the Pell Grant
program, the Department has defined a ``clock hour'' as a period of
time in which a student is either in a class, lecture, or recitation
with an instructor, or engaged with other types of coursework that are
supervised by an instructor (45 FR 48494). Although the Department
defines a ``clock hour'' differently for correspondence coursework,
such coursework is associated with other significant limitations and
requirements that limit waste, fraud, and abuse.
The Department has long had concerns about allowing clock hours
offered through distance education to count toward a student's
eligibility for title IV, HEA funds, particularly regarding an
institution's ability to adequately identify true engagement with
academic coursework and monitor how long that engagement took place.
However, in the September 2, 2020, final rule on distance education,
the Department was persuaded that clock hours completed through
asynchronous instruction could be permitted to count toward a student's
title IV eligibility as long as each clock hour offered asynchronously
was adequately tracked through appropriate technology (85 FR 54742).\5\
Since that time, the Department's experiences with asynchronous
coursework through interactions with institutions and students during
program reviews and other oversight activities have frequently
demonstrated that its original concerns were well-founded: such
coursework often consists of limited or no engagement between
instructors and students, and even when engagement does happen,
institutions have difficulty adequately monitoring the amount of time
that students spend on asynchronous activities.
---------------------------------------------------------------------------

\5\ <a href="https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation">https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation</a>.
---------------------------------------------------------------------------

Asynchronous learning activities often require a level of
technology that schools lack or fail to meet, resulting in substandard
education consisting of students having to learn material on their own.
For example, the Department has found during program reviews and from
speaking to students that asynchronous learning in clock-hour programs
has often consisted of playing videos, reading assignments or scrolling
through pages, without the meaningful interaction with the coursework
or instructors that is necessary for mastery in hands-on job training
programs and the development of important skills such as critical
thinking and effective communication. The National Accrediting
Commission of Career Arts and Sciences (NACCAS), a Department-
recognized accreditor of cosmetology schools, shows another example in
its definition of asynchronous learning, which includes ``scrolls
through reading material'' and ``works on assignments'' as a learning
activity.\6\ The Department is concerned that these kinds of learning
activities, while helpful for students, would not meet the definition
of a ``clock hour'' because scrolling through materials and working on
assignments are activities that are more comparable to homework than 50
to 60 minutes of in-class or faculty-supervised instruction or
training.
---------------------------------------------------------------------------

\6\ See the 2024 NACCAS handbook here (as of June 13, 2024):
<a href="https://naccas.org/naccas-handbook">https://naccas.org/naccas-handbook</a>.
---------------------------------------------------------------------------

Asynchronous instruction in clock-hour programs also does not
foster direct interaction between students and instructors, which can
make it difficult for students to receive the training necessary for
the types of occupations for which clock-hour programs train students.
Students have repeatedly informed the Department during program reviews
and oversight activities that the lack of direct engagement with
instructors hampered their ability to obtain the skills necessary to
pass certification exams or obtain a job in their field. The
Department's observations during its compliance work are consistent
with studies performed on the issue. As explained in the Regulatory
Impact Analysis, surveys and evaluations of job training programs that
are typically offered in clock hours have shown general concerns that
distance education is not sufficient to provide learners with the type
of ``hands-on'' experience that they need and expect in those kinds of
programs.\7\ One recent study of a technical program found that
students had greater clarity in understanding and confidence to solve
exam questions after synchronous, rather than asynchronous,
instruction.\8\ The same study found that students had significantly
higher exam scores in topics taught through synchronous instruction
compared to asynchronous instruction.\9\ Eliminating the asynchronous
option for clock-hour programs would provide a more effective
education, which would better prepare students for the kinds of
occupations that have traditionally required more hands-on instruction
and training, and which, in many cases, require passing a licensure or
certification exam in order to obtain employment. The Department notes
that this does not prevent institutions from using asynchronous
activities to supplement a student's program of study, but those
activities cannot be counted toward clock hours used for title IV
purposes, just as assigned reading outside of classroom hours does not
count for that purpose.
---------------------------------------------------------------------------

\7\ <a href="https://www.heldrich.rutgers.edu/sites/default/files/2022-06/Process_Evaluation_of_the_Integration_of_Title_I_and_Title_II.pdf">https://www.heldrich.rutgers.edu/sites/default/files/2022-06/Process_Evaluation_of_the_Integration_of_Title_I_and_Title_II.pdf</a>;
<a href="https://www.newamerica.org/education-policy/reports/five-things-policymakers-should-know-about-short-term-credentials/5-students-think-hands-on-training-is-useful-but-few-adults-with-short-term-certificates-receive-this-training">https://www.newamerica.org/education-policy/reports/five-things-policymakers-should-know-about-short-term-credentials/5-students-think-hands-on-training-is-useful-but-few-adults-with-short-term-certificates-receive-this-training</a>.
\8\ <a href="https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx">https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx</a>.
\9\ <a href="https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx">https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx</a>.
---------------------------------------------------------------------------

Current Regulations: None.
Proposed Regulations: We propose to add a definition of distance
education course that would include courses that are offered
exclusively through distance education, notwithstanding in-person non-
instructional requirements, including orientation, testing, academic
support services, or residency experiences.
Reasons: As with the addition of virtual location as a type of
additional location, the proposed addition of a definition for distance
education course would enable the Department to better assess the
effectiveness of distance education and compare its outcomes with those
of traditional in-person instruction. The proposed definition also
would help clarify a term about which there has been some confusion
between institutions and students, as pointed out by negotiators, and
would facilitate determinations of whether institutions are in
compliance with the requirement to acquire additional accreditor
approval when they pass the 50 percent threshold for the number of
classes they offer via distance education, as explained in Dear
Colleague Letter GEN-23-09.\10\
---------------------------------------------------------------------------

\10\ <a href="https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education">https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education</a>.
---------------------------------------------------------------------------

The Department proposes to define a ``distance education course''
as comprising only distance education as

[[Page 60263]]

defined under 34 CFR 600.2 for several reasons. First, we intend for
the definition to be as consistent as possible with the definition of
``distance education'' currently used for the Integrated Postsecondary
Education Data System (IPEDS). We also wish to provide clarity
regarding an institution's calculation of the 50 percent threshold for
distance education courses described above as well as proposed
requirements for institutions to provide student-specific reporting of
distance education coursework described below under Sec. 668.41. It is
not the Department's intent to capture in this definition coursework
that is offered primarily on campus but that includes online components
such as a learning management system where assignments or homework are
maintained or submitted.
Academic Year (Sec. 668.3)
Current Regulations: Current Sec. 668.3(b) sets forth certain
definitions applicable to the title IV programs, and within the
definition of a week of instructional time in Sec. 668.3(b)(2)(ii),
there are two sub-paragraphs stating that institutions offering
asynchronous coursework through distance education must make available
to students the resources necessary for academic engagement, and they
must expect students to perform educational activities demonstrating
academic engagement during the week.
Proposed Regulations: We propose to amend Sec. 668.3(b)(2)(ii)(A)
and (B) to limit asynchronous coursework that can count toward an
institution's definition of an academic year to coursework offered in
credit-hour programs.
Reasons: These edits are necessary to conform the regulations in
Sec. 668.3 with the Department's proposal regarding asynchronous
education in clock-hour programs in Sec. 600.2.
Reporting and Disclosure of Information (Sec. 668.41)
Current Regulations: Current Sec. 668.41 lists institutional
reporting and disclosure requirements.
Proposed Regulations: We propose, in new paragraph (h), to require
institutions to report their enrollment in distance education or
correspondence courses.
Reasons: As requested by many of the negotiators, the Department
proposes to add a requirement in Sec. 668.41 to report each recipient
of title IV, HEA assistance by enrollment status in distance education
or correspondence courses. We believe this will provide the Department
with expanded information to better answer questions about college
access, persistence, completion, and success, and to better inform
student-centered policies for distance education. This reporting
requirement would also improve the Department's ability to determine
whether institutions have reached the 50 percent threshold for distance
education enrollment announced in Dear Colleague Letter GEN-23-09.\11\
When institutions enroll at least 50 percent of their students in
distance education, offer at least 50 percent of their courses or 50
percent of a program via distance education, they must obtain further
accreditor approval beyond the initial approval to deliver distance
education programs.
---------------------------------------------------------------------------

\11\ <a href="https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education">https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education</a>.
---------------------------------------------------------------------------

During negotiations, non-Federal negotiators proposed collecting
student-level distance education information. While the Department did
not take the proposal as written, this change would effectuate the
intent of the proposal, and we would explain the details of this
reporting in guidance pertaining to the operation of the Department's
systems.
The Department proposes to implement this provision no earlier than
July 1, 2026, given the significant amount of change that would be
required in Federal Student Aid (FSA)'s systems. This will also provide
institutions with sufficient time to make any necessary changes to
their own systems and prepare to report the additional information to
the Department. Institutions already report information regarding
distance education enrollment at the aggregate level for IPEDS, however
the Department understands that this requirement may require
institutions to update their systems for reporting distance education
enrollment on a student-by-student basis.

B. Return of Title IV Funds

Treatment of Title IV Grant and Loan Funds if the Recipient Does Not
Begin Attendance at the Institution (Sec. 668.21)
Current Regulations: Currently, under section Sec.
668.21(a)(2)(ii), when a disbursement of title IV aid is made to a
student, but the student does not begin attendance in the payment
period or period of enrollment, the loan servicer issues a final demand
letter, in accordance with 34 CFR 685.211, requiring the student to
immediately return all Direct Loan funds directly received that are
associated with the payment period or period of enrollment.
Proposed Regulations: The Department proposes to amend Sec.
668.21(a)(2)(ii) by removing ``will issue a final demand letter to the
borrower in accordance with 34 CFR 682.412 or 34 CFR 685.211, as
appropriate'' and replacing it with ``will initiate borrower repayment
under the terms of their promissory note.''
Reasons: The Department believes the proposed change would help
students repay loan amounts that were provided to them as credit
balances. Because loan disbursement regulations permit a school to
credit a student's account 10 days before the start of classes,
students who do not actually begin attendance can receive a loan
disbursement. While the part of the disbursement credited to the school
gets returned, the student must repay the funds they received directly.
Currently, students who receive a loan disbursement but never start
attendance receive a final demand letter from the servicer for any
funds not credited to the school. That amount must be repaid in full
immediately. If the student does not or cannot repay the loan funds,
the loan will go into default. If students have spent those funds
already on other necessary expenses, such as housing, they could be
forced to turn to private lenders to repay their loans or end up in
default. To help students repay these credit balances, the Department
proposes, allowing students to repay the loan funds they received under
the terms of their promissory note, rather than requiring immediate
repayment in full. This would provide the student with a formal grace
period and allow the student to repay over time pursuant to a repayment
plan that best meets their needs.
Treatment of Title IV Funds When a Student Withdraws (Sec. 668.22)
Current Regulations: Current Sec. 668.22 addresses treatment of
title IV, HEA funds when a student withdraws.
Proposed Regulations: The Department proposes to add a new Sec.
668.22(a)(2)(ii)(A)(6) that would establish that a student is not
considered to have withdrawn if: (1) the institution's records treat a
student as having never attended courses for that payment period or
period of enrollment; (2) the institution returns all the title IV aid
disbursed to the student for that payment period or period of
enrollment; (3) the institution refunds all institutional charges to
the student for the payment period or period of enrollment; and (4) the
institution writes off or cancels any current year balance owed by the
student to the institution due to the institution's

[[Page 60264]]

returning of title IV, HEA funds to the Department.
Reasons: Current R2T4 regulations under 34 CFR 668.22(a)(1) state
that if a student begins attendance in the payment period, even if only
for one day, an institution must determine the amount of title IV aid
that the student earned as of their withdrawal date. If a student has
not earned all disbursed aid, the unearned portion must be returned to
the Department. This requires an institution to complete an R2T4
calculation for a student even if it has refunded 100 percent of that
student's tuition and fees.
The Department proposes to change these requirements to allow a
school to treat a student as having never attended during a payment
period or period of enrollment if the institution: (1) Treats the
student as never having begun attendance; (2) Returns all of a
student's title IV, HEA funds for that period; (3) Refunds all the
student's institutional charges for that period; and (4) Writes off or
cancels any current year balance owed to the institution that results
from the return of title IV funds. This would permit institutions that
wish to maintain generous tuition refund policies to be exempt from
performing an R2T4 calculation in cases where students are made
financially whole after withdrawing. This would also result in these
withdrawn students having greater Pell Grant lifetime eligibility and
reduce the likelihood of these students owing a debt to the Department
or the institution because the institution would be required to write
off or cancel any current year balance owed to the institution that
resulted from the return of title IV funds.
The proposed changes would address unique circumstances that
currently constitute a withdrawal and may trigger return of funds by
the school or student. While the Department does not have the authority
to prohibit an institution from collecting a debt owed by a student,
the Department seeks to incentivize institutions to not collect debts
resulting from a student withdrawal by providing flexibility in
conducting R2T4 calculations when certain conditions are met. The
Department is aware that some institutions maintain policies that allow
students to receive full tuition and fee refunds in certain
circumstances, for example, if the student attended only a few days
during a payment period or withdrew for medical reasons. These policies
allow students who withdraw to avoid institutional debts and make it
easier for those students to eventually re-enroll and complete their
programs, whether at the same institution or elsewhere.
Use of these generous tuition refund policies would be at the
discretion of the institution. The Department, however, intends for the
reduced burden resulting from this exemption from the R2T4 process to
serve as encouragement for institutions to develop and maintain these
generous refund policies for their students.
Current Regulations: Currently, under Sec. 668.22(b)(2), an
institution that is required to take attendance must document a
student's withdrawal date and maintain the documentation as of the date
of the institution's determination that the student withdrew.
Proposed Regulations: The Department proposes to amend Sec.
668.22(b)(2) to require an institution to document a withdrawal date
within 14 days of the student's last date of attendance. The Department
also proposes to remove the cross-reference to paragraph (l)(3) at the
end of the paragraph.
Reasons: The Department proposes to codify in regulation its
longstanding sub-regulatory guidance requiring schools that are
required to take attendance to determine the date that a student
withdrew within 14 days from the student's last day of attendance. The
Department believes that 14 days is an ample amount of time to document
a student's withdrawal date when taking attendance, and therefore, we
propose to codify the time frame in regulation.
Current paragraph (l)(3) defines the ``date of the institution's
determination that the student withdrew'' for an institution that is
not required to take attendance. Because the proposed provision in
Sec. 668.22 applies only to institutions that are required to take
attendance, the Department proposes to remove the inapplicable cross-
reference.
Current Regulations: Current Sec. 668.22 treats some institutions
as required to take attendance if certain conditions are met but does
not specifically mandate that distance education courses be attendance-
taking for purposes of the title IV return requirements.
Proposed Regulations: The Department proposes to add a new Sec.
668.22(b)(3)(ii) that would require an institution to take attendance,
for purposes of the title IV return calculation, for each course
offered entirely through ``distance education'' as defined in the
proposed changes to Sec. 600.2, except for doctoral dissertation
research courses.
Reasons: Accurate withdrawal dates are critical to the title IV
return calculations to ensure that unearned funds are returned. In the
Department's experience, students in distance education courses
generally do not formally withdraw, so it is critical that an
institution establish an accurate withdrawal date. Under current
regulations, when students withdraw without notification, a school that
is not required to take attendance may use as a withdrawal date either
the last date of a student's academically related activity that it has
on record or the midpoint of the payment period. This can lead to
institutions failing to report an accurate date, or using the date that
allows the institution to keep the most money. From its compliance work
on reviewing distance education, the Department has determined that
institutions can often easily determine when students stop attending a
distance education course, because institutional systems are already
monitoring when students submit assignments or interact with
instructors and students during lectures and course discussions. In
fact, this monitoring is necessary for an institution to establish that
it is meeting the distance education requirement of regular and
substantive interaction. In addition, some institutions with online
courses are already required to take attendance in certain situations
described under 34 CFR 668.22(b)(3).
The Department believes it is illogical to not require an
institution to use a student's actual last date of attendance as a
withdrawal date when the institution already has the mechanism in place
for making that determination. Consequently, to increase the accuracy
of return calculations in distance education courses, the Department
proposes to require institutions to take attendance in such courses for
R2T4 purposes. Schools would be required to use actual attendance data
to determine a withdrawal date for students enrolled entirely in online
courses for a particular payment period or period of enrollment.
Institutions will be able to document the withdrawal date by
documenting ``academic attendance'' as required under Sec.
668.22(b)(1). Under Sec. 668.22(l)(7)(i), academic attendance must
include academic engagement as defined in Sec. 600.2. This would
increase the accuracy of R2T4 calculations for such students, limit
instances of inaccurate calculations and the potential for gaming R2T4
provisions by schools, and better protect student and taxpayer funds.
During negotiations the Department heard that dissertation research
courses for doctoral candidates have a unique format and are structured
in such a way that it would be difficult for an institution to meet an
attendance-taking

[[Page 60265]]

requirement in an online setting. While we note that all distance
education courses are still required to provide regular and substantive
interaction, we believe that dissertation research courses are unique
and are not as likely as other distance education courses to frequently
produce data on academic engagement. For this reason, the Department
proposes to distinguish any academic coursework offered entirely
through distance education that occurs prior to the dissertation
research portion of a doctoral program, where attendance-taking would
be required, from the dissertation research coursework of such program,
where attendance taking would not be required.
Current Regulations: Under Sec. 668.22(d)(1)(vii), an institution
does not have to treat an approved leave of absence as a withdrawal. A
leave of absence is approved if several requirements are met, including
if upon return from leave the student is permitted to complete the
coursework he or she began prior to the leave of absence, but clock-
hour, non-term credit hour program, and subscription-based programs are
exempt from this requirement.
Proposed Regulations: We propose to add an ``eligible prison
education program'' to the list of exceptions in Sec.
668.22(d)(1)(vii) that includes clock-hour, non-term, and subscription-
based programs.
Reasons: On July 1, 2023, the Department published final
regulations that detailed Pell eligibility for confined or incarcerated
individuals in PEPs.\12\ These regulations did not address incarcerated
students who face involuntary interruptions to their academic programs.
For example, an entire correctional facility may be locked down due to
a security issue, interrupting a student's progress in their PEP. In
Sec. 668.22(d), we propose to provide that an incarcerated student
does not have to return from a leave of absence to where the student
left off and, instead, may return to a different point in their PEP.
This would apply to programs of any structure, including term-based
programs. This change would increase flexibility for institutions and
would help boost student retention in PEPs.
---------------------------------------------------------------------------

\12\ <a href="https://www.federalregister.gov/documents/2022/10/28/2022-23078/pell-grants-for-prison-education-programs-determining-the-amount-of-federal-education-assistance">https://www.federalregister.gov/documents/2022/10/28/2022-23078/pell-grants-for-prison-education-programs-determining-the-amount-of-federal-education-assistance</a>.
---------------------------------------------------------------------------

Current Regulations: Currently, under Sec. 668.22(f)(1)(ii)(A),
for clock-hour programs, the percentage of the payment period or period
of enrollment completed is determined by dividing the total number of
clock hours in the payment period or period of enrollment into the
number of clock hours scheduled to be completed as of the student's
withdrawal date.
Proposed Regulations: In Sec. 668.22(f)(1)(ii)(A), we propose to
add that, for clock-hour programs, the institution would divide the
total number of clock hours in the payment period or period of
enrollment into the number of clock hours scheduled to be completed
``since the student began attendance in the payment period or period of
enrollment'' as of the student's withdrawal date.
Reasons: The Department believes this change would increase
accuracy and simplicity in performing R2T4 calculations. Currently,
because the regulations are silent on a specific procedure, for an R2T4
calculation in a clock-hour program performed for a student who has
withdrawn after successfully completing the first payment period of the
program, an institution may use two methods to determine the percentage
of the payment period completed: cumulative and by payment period. Both
methods are based on ``scheduled hours,'' which are the hours a student
was scheduled to complete within a payment period or period of
enrollment as of their withdrawal date. This means an institution
returns funds based on the amount of training that would have been
completed, not necessarily how many hours the student actually
attended. These methods differ significantly when a program contains
two or more payment periods, which leads to widely varying
calculations. The cumulative method considers the scheduled hours a
student would have completed cumulatively across multiple payment
periods, while the payment period method only considers the scheduled
hours that have elapsed during a payment period since the student began
attendance in that payment period.
The Department has observed that, when an institution uses the
cumulative method, many times the percentage of funds earned by the
institution is much larger than the time actually attended, because the
institution is permitted to carry the student into the next payment
period and use those additional scheduled hours. This results in a much
smaller return of title IV funds, which ultimately hurts a student who
had to withdraw from a program. The Department does not believe this is
a desirable result. In addition, in its compliance efforts, the
Department has seen this as an area of abuse in which some institutions
carry students who are not attending into a subsequent payment period
to lower the amount of title IV aid they have to return.
To promote consistency across all calculations, the Department
proposes to change how institutions determine the percentage of the
payment period completed for a clock-hour program by using only the
payment period method. Providing one consistent way to calculate the
percentage of the payment period completed would simplify R2T4 policy,
reduce complexity and confusion, ensure that students are treated
consistently, and eliminate an area of potential abuse.
Current Regulations: Under Sec. 668.22(l)(9), a student in a
program offered in modules is scheduled to complete the days in a
module if the student's coursework in that module was used to determine
the amount of the student' eligibility for title IV, HEA funds from the
payment period or period of enrollment.
Proposed Regulations: The Department proposes to revise Sec.
668.22(l)(9) to provide that a student in a program offered in modules
is scheduled to complete the days in a module only when a student
begins attendance in the module.
Reasons: In 2021 final regulations, the Department made several
changes to R2T4 and modules.\13\ In response, the Department was asked
how an institution determines whether the days in a module are included
in the R2T4 calculation. The Department's response was complex, and
depended on whether the institution uses an R2T4 freeze date and the
types of title IV, HEA aid the student was eligible for during the
payment period or period of enrollment. An R2T4 freeze date is an
optional policy that uses the student's enrollment schedule at a fixed
point to determine the number of days the student is scheduled to
attend during the period for R2T4 purposes. The R2T4 freeze date can
coincide with other dates--for example census dates or Pell
recalculation dates--or the R2T4 freeze date can be a separate date.
Currently, institutions may use multiple R2T4 freeze dates for multiple
modules.
---------------------------------------------------------------------------

\13\ <a href="https://www.federalregister.gov/documents/2020/09/02/2020/18636/distance-education-and-innovation">https://www.federalregister.gov/documents/2020/09/02/2020/18636/distance-education-and-innovation</a>.
---------------------------------------------------------------------------

The ``freeze date'' concept is important under current requirements
because without this date, schools would find it very difficult to
determine the denominator of the R2T4 calculation using the exact
coursework a student was scheduled to attend at the time of their
withdrawal. Currently, regulations

[[Page 60266]]

do not describe this concept; but sub-regulatory guidance outlines what
schools should consider when determining the number of days in a period
when R2T4 is required for a program offered in modules. Audit and
program review findings show that schools often make errors in R2T4
calculations involving modules.
The Department proposes in Sec. 668.22(l)(9) to simplify the
determination by only including the days in a module in the denominator
of the calculation if the student actually attends the module. The
Department believes this will reduce complexity and errors.
Institutions would no longer need to use a freeze date or differentiate
between Pell and Direct loan recipients.
The change would provide consistency across title IV programs,
simplify when and how to count scheduled days in a modular setting, and
reduce burden for institutions and the Department by eliminating the
need for a ``freeze date'' concept.

C. Federal TRIO Programs

Who is eligible to participate in a Talent Search project? (Sec.
643.3)
Current Regulations: Current Sec. 643.3(a)(1)(i) through (v) allow
individuals who are citizens or nationals of the United States,
permanent residents of the United States, permanent residents of Guam,
the Northern Mariana Islands, the Trust Territory of the Pacific
Islands (Palau), or residents of the Freely Associated States (the
Federated States of Micronesia or the Republic of the Marshall Islands)
to participate in a Talent Search project. An individual is also
currently eligible to participate in a Talent Search project if they
are in the United States for other than a temporary purpose and provide
evidence from the Immigration and Naturalization Service (currently
Department of Homeland Security) of his or her intent to become a
permanent resident (i.e., conditional resident aliens, conditional
entrants, self-petitioners under the Violence Against Women Act
(battered immigrants), refugees, asylees, victims of human trafficking,
Cuban-Haitian entrants, persons paroled into the U.S. for at least one
year and Jay Treaty students).
Proposed Regulations: The Department proposes to add a new
paragraph Sec. 643.3(a)(1)(vi) that would allow individuals who are
enrolled in or seek to enroll in a high school in the United States,
territories, or Freely Associated States to participate in a Talent
Search project, if they do not satisfy any of the other eligibility
categories in this section.
Reasons: K-12 public schools must be open to all students
regardless of their immigration status. As such, the Department
believes that all children who attend high school in the United States
should have the same access to TRIO services to assist their pathway
into postsecondary education. This proposal would also align TRIO
programs that serve students in the elementary or secondary context
with other Federal K-12 spending programs that allow recipients (such
as State educational agencies (SEAs) and local educational agencies
(LEAs)) to spend funds on K-12 students without regard to immigration
status, such as the Title I and Title IV programs under the Elementary
and Secondary Education Act. Providing TRIO services to students
without immigration status (students without status) previously
ineligible will additionally eliminate the operational burden of
separating out students who are enrolled in public schools but not
eligible for TRIO services under the current rule, enabling a greater
focus on delivering educational services to all students.
The Talent Search program focuses on completing high school and
increasing postsecondary education attainment. The Department's
proposal to expand eligibility to all individuals who are enrolled in
or seek to enroll in high school would align with the statutory goal of
TRIO serving individuals from disadvantaged backgrounds in order to
``prepare them for a program of postsecondary education.'' This
expansion of eligibility would also better enable grantees to serve
students from groups that are traditionally underrepresented in
postsecondary education, such as students from low-income backgrounds
who would be first-generation college students, which is among the
statutory goals of the Talent Search program (section 402B of the HEA).
In addition, the Committee reached consensus on this provision.
Who is eligible to participate in an Educational Opportunity Centers
project? (Sec. 644.3)
Current Regulations: Current Sec. 644.3(a)(1)(i) through (v)
allows individuals who are citizens or nationals of the United States,
permanent residents of the United States, permanent residents of Guam,
the Northern Mariana Islands, the Trust Territory of the Pacific
Islands (Palau), or residents of the Freely Associated States (the
Federated States of Micronesia or the Republic of the Marshall Islands)
to participate in an Educational Opportunity Centers project. An
individual is also currently eligible to participate in an Educational
Opportunity Centers project if they are in the United States for other
than a temporary purpose and provide evidence from the Immigration and
Naturalization Service (currently Department of Homeland Security) of
his or her intent to become a permanent resident (i.e., conditional
resident aliens, conditional entrants, self-petitioners under the
Violence Against Women Act (battered immigrants), refugees, asylees,
victims of human trafficking, Cuban-Haitian entrants, persons paroled
into the U.S. for at least one year and Jay Treaty students).
Proposed Regulations: The Department proposes to add a new
paragraph Sec. 644.3(a)(1)(vi) that would allow individuals who are
enrolled in or seek to enroll in a high school in the United States,
territories, or Freely Associated States to participate in an
Educational Opportunity Centers project, if they do not satisfy any of
the other eligibility categories in this section.
Reasons: K-12 public schools must be open to all students
regardless of their immigration status. As such, the Department
believes that all children who attend high school in the United States
should have the same access to TRIO services to assist in their
achievement toward the path of postsecondary education. This proposal
would also align TRIO programs that serve students in the elementary or
secondary context with other Federal K-12 spending programs that allow
recipients (such as SEAs and LEAs) to spend funds on K-12 students
without regard to immigration status. This provision, much like with
the other two TRIO provisions addressed in this NPRM, would eliminate
the administrative burden of separating out students who are enrolled
in public schools but not eligible for TRIO services under the current
rule.
Although the Educational Opportunity Centers program is primarily
focused on increasing the number of adult participants who enroll in
postsecondary education institutions, the program also supports high
school seniors who are transitioning into college. The Department's
proposal to expand eligibility to individuals who are enrolled in or
seek to enroll in high school would align with the statutory goal of
TRIO serving individuals from disadvantaged backgrounds on the path
toward postsecondary education. This expansion of eligibility would
also better enable grantees to serve students from groups that are
traditionally

[[Page 60267]]

underrepresented in postsecondary education such as students from low-
income backgrounds who would be first generation college students,
which is among the statutory goals of the Educational Opportunity
Centers program (section 402F of the HEA). In addition, the Committee
reached consensus on this provision.
Who is eligible to participate in an Upward Bound project? (Sec.
645.3)
Current Regulations: Section 645.3(a)(1) through (5) allows
individuals who are citizens or nationals of the United States,
permanent residents of the United States, permanent residents of Guam,
the Northern Mariana Islands, the Trust Territory of the Pacific
Islands (Palau), or residents of the Freely Associated States (the
Federated States of Micronesia or the Republic of the Marshall Islands)
to participate in an Upward Bound project. An individual is also
currently eligible to participate in an Upward Bound project if they
are in the United States for other than a temporary purpose and provide
evidence from the Immigration and Naturalization Service (currently
Department of Homeland Security) of his or her intent to become a
permanent resident (i.e., conditional resident aliens, conditional
entrants, self-petitioners under the Violence Against Women Act
(battered immigrants), refugees, asylees, victims of human trafficking,
Cuban-Haitian entrants, persons paroled into the U.S. for at least one
year and Jay Treaty students).
Proposed Regulations: In new paragraph Sec. 645.3(a)(6), the
Department proposes to provide that individuals who are enrolled in or
seek to enroll in a high school in the United States, territories, or
Freely Associated States may participate in an Upward Bound project, if
they do not satisfy any of the other eligibility categories in this
section, but that such individuals are not eligible for a direct cash
stipend.
Reasons: K-12 public schools must be open to all students
regardless of their immigration status. As such, the Department
believes that all children who attend high school in the United States
should have the same access to TRIO services to assist in their path
towards postsecondary education. This change would also align TRIO
programs that serve students in the elementary or secondary context
with other Federal K-12 spending programs that allow recipients (such
as SEAs and LEAs) to spend funds on K-12 students without regard to
immigration status.
Although the Upward Bound program is primarily focused on preparing
participants for college, a precursor to enter college is obtaining a
high school diploma. The Department proposes to expand eligibility to
individuals who are enrolled in or seek to enroll in high school,
without regard to their citizenship status, to align the eligibility
requirements with the statutory goal of TRIO serving individuals from
disadvantaged backgrounds on the path toward postsecondary education.
This expansion of eligibility would also better enable grantees to
serve students from groups that are traditionally underrepresented in
postsecondary education such as students from low-income backgrounds
and who would be first-generation college students, which is among the
statutory goals of the Upward Bound program (section 402C of the HEA).
In addition, the Committee reached consensus on this provision.
The Department's proposed expansion of student services for the
Upward Bound program would not include providing direct cash stipends
to individuals who do not meet the requirements of Sec. 645.3(a)(1)
through (5) because that would be contrary to Federal statute. The
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(PRWORA) prohibits ``Federal public benefits'' from being awarded to
persons who are not able to demonstrate certain types of eligible
noncitizen statuses as a ``qualified alien'' under 8 U.S.C. 1641(b).
PRWORA defines a ``Federal public benefit'' to include ``any
retirement, welfare, health, disability, public or assisted housing,
postsecondary education, food assistance, unemployment benefit, or any
other similar benefit for which payments or assistance are provided to
an individual, household, or family eligibility unit by an agency of
the United States or by appropriated funds of the United States.'' 8
U.S.C. 1611(c)(1)(B). As stated within the Department of Health and
Human Services (HHS) Interpretation of ``Federal Public Benefit,'' 63
FR 41658 (Aug. 4, 1998), these enumerated benefits exclude ``non-
postsecondary education programs, such as Head Start and elementary and
secondary education.'' The 1998 HHS interpretation also contemplates
that not all benefits or services provided under certain programs would
be considered ``Federal public benefits.'' Id. Therefore, the
Department believes that TRIO grant programs providing student support
services in the secondary context constitute the type of ``incentive
for illegal immigration provided by the availability of public
benefits'' that PRWORA was enacted to discourage. 8 U.S.C. 1601(6).
However, in the context of Upward Bound, the Department has
determined that direct cash stipends provided to program participants
under Sec. 645.42 represent a ``similar benefit'' to those enumerated
benefits under 8 U.S.C. 1611(c)(1)(B) for which, where payment is
provided to an ``individual, household, or family eligibility unit[,]''
falls under the restrictions of PRWORA. Because an individual who fails
to meet the requirements of current Sec. 645.3(a)(1) through (5) would
generally not be a ``qualified alien,'' the Department proposes to
clarify in Sec. 645.3(a)(6) that individuals who qualify for program
participation solely as a result of high school enrollment are not
eligible for a direct cash stipend under this program.

X. Regulatory Impact Analysis

Executive Orders 12866, 13563, and 14094

Regulatory Impact Analysis
Under Executive Order 12866, the Office of Management and Budget
(OMB) must determine whether this regulatory action is ``significant''
and, therefore, subject to the requirements of the Executive Order and
subject to review by OMB. Section 3(f) of Executive Order 12866, as
amended by Executive Order 14094, defines a ``significant regulatory
action'' as an action likely to result in a rule that may--
(1) Have an annual effect on the economy of $200 million or more
(adjusted every three years by the Administrator of the Office of
Information and Regulatory Affairs (OIRA) for changes in gross domestic
product); or adversely affect in a material way the economy, a sector
of the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local, territorial, or Tribal
governments or communities;
(2) Create serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues for which centralized review
would meaningfully further the President's priorities, or the
principles set forth in the Executive Order, as specifically authorized
in a timely manner by the Administrator of OIRA in each case.
This proposed regulatory action is a significant regulatory action
subject to review by OMB under section 3(f)(4) of Executive Order
12866, as amended by

[[Page 60268]]

Executive Order 14094. The Department estimates present value net
benefits of $1,434,537,761 over ten years at a 2 percent discount rate.
This is equivalent to an annualized net benefits of $159,702,107 over
ten years. Additionally, we estimate annualized quantified costs of
$9,423,657 related to paperwork burden. Notwithstanding this
determination, based on our assessment of the potential costs and
benefits (quantitative and qualitative), the Department has determined
that the benefits of this proposed regulatory action would justify the
costs.
The Department has also reviewed the regulations under Executive
Order 13563, which supplements and explicitly reaffirms the principles,
structures, and definitions governing regulatory review established in
Executive Order 12866. To the extent permitted by law, Executive Order
13563 requires that an agency--
(1) Propose or adopt regulations only on a reasoned determination
that their benefits justify their costs (recognizing that some benefits
and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society,
consistent with obtaining regulatory objectives and taking into
account--among other things and to the extent practicable--the costs of
cumulative regulations;
(3) In choosing among alternative regulatory approaches, select
those approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather
than the behavior or manner of compliance a regulated entity must
adopt; and
(5) Identify and assess available alternatives to direct
regulation, including economic incentives--such as user fees or
marketable permits--to encourage the desired behavior, or provide
information that enables the public to make choices.
Executive Order 13563 also requires an agency ``to use the best
available techniques to quantify anticipated present and future
benefits and costs as accurately as possible.'' The Office of
Information and Regulatory Affairs of OMB has emphasized that these
techniques may include ``identifying changing future compliance costs
that might result from technological innovation or anticipated
behavioral changes.''
The Department issues these proposed regulations only on a reasoned
determination that their benefits would justify their costs. In
choosing among alternative regulatory approaches, the Department
selected those approaches that maximize net benefits. Based on the
analysis that follows, the Department believes that these regulations
are consistent with the principles in Executive Order 13563.
The Department has also determined that this regulatory action does
not unduly interfere with State, local, territorial, or Tribal
governments in the exercise of their governmental functions.
As required by OMB Circular A-4, the Department compared the
proposed regulations to the current regulations. In this regulatory
impact analysis, the Department discusses the need for regulatory
action, potential costs and benefits, and the regulatory alternatives
we considered.
Elsewhere in this section under Paperwork Reduction Act of 1995,
the Department identifies and explains burdens specifically associated
with information collection requirements.
1. Need for Regulatory Action
The Department has identified a significant need for regulatory
action to address inequities and inadequate protections for students
and taxpayers in the current regulations.
Distance Education
The HEA and the Department's regulations provide that institutions
of higher education may offer programs through distance education.
Currently, however, the Department has only very limited data about
students enrolled in distance education, which limits the Department's
ability to answer important questions about student pathways and
outcomes through in-person, distance, and hybrid education. For
example, an institution may offer a program that is provided on campus
and a related program of the same CIP code that is provided online. The
Department is currently unable to distinguish between those two
programs in the data it currently receives, which limits its capacity
to provide helpful and reliable information--such as College Scorecard
program-level data, including debt, earnings, and completion--to
students, families, institutions, and the public. This reporting
requirement would also improve the Department's ability to determine
whether institutions have reached the 50 percent threshold for distance
education enrollment announced in Dear Colleague Letter GEN-23-09.\14\
When institutions enroll at least 50 percent of their students in
distance education, offer at least 50 percent of their courses, or 50
percent of a program via distance education, they must obtain further
accreditor approval beyond the initial approval to deliver distance
education programs.
---------------------------------------------------------------------------

\14\ <a href="https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education">https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education</a>.
---------------------------------------------------------------------------

Additionally, because of these limitations, students may be denied
relief in the form of closed school discharges that they should be
entitled to under the HEA in instances in which an institution ends
either on-campus or online learning generally. In such cases, when an
institution closes a program, it closes the entire modality through
which it has provided students instruction. While some students may be
satisfied learning under a different modality, others may have
enrolled, at least in part, specifically to access learning through
that particular modality. If an institution abruptly closes, under
certain conditions, borrowers become eligible for discharges under the
HEA. However, the Department is currently unable to provide relief to
students whose institution remains open even though the modality of
instruction they agreed to when they enrolled has ended.
The proposed regulations would create a ``virtual location'' for
institutions that includes all students who are being instructed
primarily through distance education. The proposed regulations also
would change institutional reporting requirements to specify a
student's distance education status. These changes would enable the
Department to obtain better data and more meaningfully compare the
outcomes of students, particularly for those who are enrolled in
similar programs that are delivered using different modalities. These
provisions would also allow borrowers to receive closed school
discharge if schools end either their online or on-campus operations.
Finally, the additional reporting would allow the Department to better
monitor and oversee the aid programs and institutional accrediting
agencies by ensuring institutions are receiving appropriate review and
approval of distance education offerings.\15\
---------------------------------------------------------------------------

\15\ <a href="https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education">https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2023-05-18/accreditation-and-eligibility-requirements-distance-education</a>.
---------------------------------------------------------------------------

We further propose, with respect to distance education, revisions
to the definition of a clock hour that would improve the integrity of
the title IV, HEA programs and better align how programs award clock
hours with the requirement in the HEA that distance

[[Page 60269]]

education support regular and substantive interaction between students
and instructors. Under current regulations the definition of a clock
hour includes asynchronous learning. Specifically, changes to the
definition of a ``clock hour'' in Sec. 600.2 that went into effect in
2020 provide that asynchronous learning may be offered in clock-hour
programs if it involves ``academic engagement in which the student
interacts with technology that can monitor and document the amount of
time that the student participates in the activity.'' Though at the
time the Department believed this change was appropriate because of a
perceived need for greater institutional and student flexibility with
regard to the time and place that coursework is completed, the
Department's enforcement experience since that time has shown that
unintended consequences outweighed any benefits. First, the Department
has found that the level of engagement necessary to meet the definition
of a clock hour is difficult to monitor because it requires technical
expertise that many clock-hour institutions are unable or unwilling to
obtain. Through program reviews, the Department is also aware of
instances in which clock-hour programs offered through distance
education have not complied with the requirement to ensure that the
technology used documents 50-60 minutes of instruction for each clock
hour in a student's program of study. Lack of such safeguards can
contribute to an overall academic environment in which students do not
receive the quality training necessary for obtaining a job post-
completion.
Further, as a result of its enforcement efforts, the Department is
concerned that asynchronous learning does not sufficiently meet the
requirements of a clock-hour program. Through its program reviews, the
Department has come to better understand that asynchronous instruction
time that has been occurring in clock-hour programs is more similar to
preparation in a correspondence course, where students essentially have
to learn on their own, than time spent with an instructor in a class,
lecture, recitation or in faculty-supervised laboratory, shop training,
or internship. The Department is also concerned that asynchronous
instruction may not provide the appropriate training for the types of
occupations and fields for which clock-hour programs are designed to
train students. Surveys and evaluations of job training programs that
are typically offered in clock hours show that there are concerns
generally that distance education is not sufficient for these types of
programs to provide learners with the type of ``hands-on'' experience
that they need and expect.\16\ This survey data is consistent with
information obtained from student interviews conducted during program
reviews. While some students may prefer asynchronous instruction due to
the need for flexible schedules, studies of technical programs have
shown that students had greater clarity in understanding and confidence
to solve exam questions after synchronous instruction.\17\ Students
also had significantly higher exam scores in topics covered through
synchronous instruction than those taught through asynchronous
instruction.\18\
---------------------------------------------------------------------------

\16\ <a href="https://www.heldrich.rutgers.edu/sites/default/files/2022/06/Process_Evaluation_of_the_Integration_of_Title_I_and_Title_II.pdf">https://www.heldrich.rutgers.edu/sites/default/files/2022/06/Process_Evaluation_of_the_Integration_of_Title_I_and_Title_II.pdf</a>;
<a href="https://www.newamerica.org/education-policy/reports/five-things-policymakers-should-know-about-short-term-credentials/">https://www.newamerica.org/education-policy/reports/five-things-policymakers-should-know-about-short-term-credentials/</a>.
\17\ <a href="https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx">https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx</a>.
\18\ <a href="https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx">https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx</a>.
---------------------------------------------------------------------------

Finally, the use of asynchronous clock hours allows a student to
receive credit for clock hours that do not involve regular and
substantive interaction between the student and an instructor, which is
a fundamental requirement in the HEA for all distance education
programs. The Department remains concerned that as clock-hour programs
increasingly shift toward the use of asynchronous clock hours, the
likelihood that distance education programs offered using clock hours
will not meet the statutory requirements for regular and substantive
interaction. Eliminating the use of asynchronous clock hours for title
IV, HEA purposes, while continuing to allow synchronous clock hours
involving direct instruction provides greater assurance that the
statutory requirements for distance education in clock hour programs
are met.
R2T4
The R2T4 regulations govern the process institutions must conduct
when a title IV, HEA recipient ceases attendance during a payment
period or a period of enrollment. An R2T4 calculation determines, based
on the proportion of a payment period or period of enrollment a student
completed, whether funds must be returned by the school and/or student,
or whether the student is eligible for a post-withdrawal disbursement.
R2T4 calculations differ based on academic calendars and program
format, including the use of clock hours or credit hours and the use of
module courses within terms. R2T4 consistently ranks among the top ten
compliance findings for institutions, is the subject of an entire
volume of sub-regulatory guidance in the FSA Handbook and yields
complex and challenging questions; therefore, the Department believes
that there is a need to take regulatory action immediately to update
and clarify the regulations.
Final Demand Letter
Currently, when a disbursement of Direct Loan funds is made to a
student, but the student does not begin attendance in the payment
period or period of enrollment, the loan servicer issues a final demand
letter requiring the student to immediately return all Direct Loan
funds directly received associated with the payment period or period of
enrollment. Some students may not be able to return all Direct Loan
funds because they have already used those funds to pay for various
noninstitutional educationally related expenses, such as housing. The
Department believes there is a need to provide an alternative solution
to the final demand letter. Therefore, the Department proposes that a
student be able to repay their loans under the terms of their
promissory note (e.g., through an income-driven repayment plan).
Withdrawal Exemption
For some institutions, the R2T4 process is filled with errors,
including issues such as incorrectly determining the withdrawal date or
the number of days in a payment period. To simplify the process for
institutions, the Department is proposing a withdrawal exemption in
which an institution would not need to conduct an R2T4 calculation if
the following conditions are met: (1) the student is treated as never
having begun attendance; (2) the institution returns all title IV, HEA
aid disbursed to the student for that payment period or period of
enrollment; (3) the institution refunds all institutional charges to
the student for that payment period or period of enrollment; and (4)
the institution writes off or cancels any current year balance owed by
the student to the institution due to the institution's return of title
IV funds to the Department.
The proposed withdrawal exemption would reduce the likelihood that
a student owes money back to the school, allow the student to not
exhaust annual and aggregate subsidized aid, including Pell Grants, and
reduce the likelihood the student will have a loan balance

[[Page 60270]]

associated with a program they may not finish.
Last Date of Attendance
The Department's longstanding guidance has been that institutions
required to take attendance must, within 14 days of a student's last
date of attendance, document the student's withdrawal date. The
Department believes that fourteen days is an ample amount of time to
document a student's withdrawal date when taking attendance.
Enforcement by the Department is hampered because it is not currently
codified in regulation. Therefore, to support the Department's
enforcement efforts, it is necessary to codify the time frame in
regulation.
Attendance Taking and Distance Education
Accurate withdrawal dates are key to understanding if and how much
aid needs to be repaid in the event of a student withdrawal. But
students in distance education programs might not formally withdraw
since they are not on campus. Currently, courses offered entirely
through distance education are not required to take attendance unless
the institution is required to do so under Sec. 668.22(b)(2). However,
the very nature of distance education requires regular and substantive
interaction between the student and instructor, and for title IV, HEA
purposes, institutions are required to monitor a student's academic
engagement when a student is learning through distance education. To
determine actual withdrawal dates and produce the most accurate R2T4
calculations, the Department believes it is necessary to require
courses offered entirely through distance education to take attendance.
Leave of Absence
On July 1, 2023, the Department published final regulations that
detailed Pell Grant eligibility for confined or incarcerated
individuals in PEPs.\19\ These regulations did not address students who
are incarcerated and who face involuntary interruptions to their
academic programs. For example, an entire correctional facility may be
locked down due to a security issue, interrupting a student's progress
in their PEP.
---------------------------------------------------------------------------

\19\ <a href="https://www.federalregister.gov/documents/2022/10/28/2022-23078/pell-grants-for-prison-education-programs-determining-the-amount-of-federal-education-assistance">https://www.federalregister.gov/documents/2022/10/28/2022-23078/pell-grants-for-prison-education-programs-determining-the-amount-of-federal-education-assistance</a>.
---------------------------------------------------------------------------

The Department proposes to make changes to the regulations
governing leave of absence to allow a student who is incarcerated to
not have to return from the leave of absence where the student left
off, and instead, the individual could return to a different point in
their PEP. This would apply to programs of any structure, including
term-based programs. This change would increase flexibility for
institutions, and would help boost student retention in PEPs.
Clock-Hour Programs
As a part of the R2T4 calculation, institutions must determine the
percentage of the payment period or period of enrollment the student
completed based on scheduled clock hours if enrolled in a clock-hour
program. There are currently two ways that institutions can make this
determination: the payment period method and the cumulative method. The
cumulative method (as described in the Significant Proposed Regulations
section) usually results in a significant amount of aid earned by the
student compared to the actual time the student attended during the
payment period. The Department believes it is necessary to streamline
this calculation so that the payment period method is standardized
across all clock-hour programs.
R2T4 and Modules
In 2021, the Department published final regulations outlining
several changes to R2T4 and modules.\20\ The regulations immediately
raised a question about how an institution determines whether the days
in a module are included in the R2T4 calculation. The answer is complex
and depends on several variables, including whether the institution
uses an R2T4 freeze date and the type(s) of title IV, HEA aid for which
the student was eligible during the payment period or period of
enrollment.
---------------------------------------------------------------------------

\20\ Distance Education and Innovation--final regulations:
<a href="https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation">https://www.federalregister.gov/documents/2020/09/02/2020-18636/distance-education-and-innovation</a>.
---------------------------------------------------------------------------

The Department believes it is necessary to simplify the
determination by only including days in the module if the student
actually attends the module. This change would reduce complexity and
errors and institutions would no longer need to use a freeze date or
differentiate between Pell Grant and Direct loan recipients.
Federal TRIO Programs
The TRIO programs are Federal outreach and student services
programs designed to identify and provide services for individuals from
disadvantaged backgrounds. TRIO programs serve and assist low-income
individuals, first-generation college students, students with
disabilities, students with limited English proficiency, students
experiencing homelessness, and students in foster care to progress
through the academic pipeline from middle school to postbaccalaureate
programs. Limitations in the current regulations do not allow TRIO
programs to reach all students in the geographic areas that the
programs were meant to serve.
The Department proposes to expand participation in three TRIO
programs that serve students in pre-postsecondary education to all
disadvantaged individuals who are enrolled in or seek to enroll in a
high school in the United States, territories, or Freely Associated
States. K-12 public schools must be open to all students regardless of
their immigration status. As such, the Department believes that all
disadvantaged children who attend high school in the United States
should have the same access to TRIO services to assist in their
achievement toward the path of postsecondary education. This proposal
would also align TRIO programs that serve students in the elementary or
secondary context with other Federal K-12 spending programs that allow
recipients (such as SEAs and LEAs) to spend funds on K-12 students
without regard to immigration status. The provisions in Sec. Sec.
643.3, 644.3, and 645.3 would eliminate the administrative burden of
separating out students who are enrolled in public schools but not
eligible for TRIO services under the current rule.
2. Summary

[[Page 60271]]

----------------------------------------------------------------------------------------------------------------
Regulatory
Provision section Description of proposed provision
----------------------------------------------------------------------------------------------------------------
Distance Education
----------------------------------------------------------------------------------------------------------------
Definitions.............................. Sec. 600.2 Would add virtual locations to the definition of
``additional location''; remove from the definition
of ``clock hour'' asynchronous distance education
options; and add a definition of ``distance
education course.''
Academic year............................ Sec. 668.3 Would make conforming changes to reflect that
asynchronous coursework via distance education can
only occur in credit-hour programs.
Reporting information.................... Sec. 668.41 Would establish a requirement for institutions to
report to the Department students' enrollment in
distance education and correspondence coursework.
----------------------------------------------------------------------------------------------------------------
R2T4
----------------------------------------------------------------------------------------------------------------
Treatment of title IV grant and loan Sec. 668.21 Would allow a student who received a loan
funds if the recipient does not begin disbursement but never began attendance in a payment
attendance. period or period of enrollment to repay loans funds
they received under the terms of a promissory note.
Withdrawal Exemption..................... Sec. 668.22 Would exempt institutions from performing a return of
title IV funds (R2T4) calculation in the event that
(1) a student is treated as never having begun
attendance; (2) the institution returns all tile IV
aid disbursed to the student for that payment period
or period of enrollments; (3) the institution
refunds all institutional charges to the student for
that payment period or period of enrollment; and
(4)the institution writes off or cancels any current
year balance owed by the student to the institutions
due to the institution's return of title IV funds to
the Department.
Last Date of Attendance.................. Sec. 668.22 Would codify that an institution that is required to
take attendance must, within 14 days of a student's
last date of attendance, document the student's
withdrawal date.
Attendance Taking for Distance Education. Sec. 668.22 Would require that an institution is required to take
attendance for each course offered entirely through
distance education, except for doctoral dissertation
research courses.
Leave of Absence for Confined or Sec. 668.22 Would allow a confined or incarcerated individual, in
Incarcerated Individuals. a term-based setting, to not have to return from the
leave of absence to where the student left off, and
instead, the individual could return to a different
point in their PEP.
Percentage of Payment Period Completed Sec. 668.22 Would streamline how institutions determine the
for Clock-Hour Programs. percentage of the payment period completed for a
clock-hour program.
R2T4 and Modules......................... Sec. 668.22 Would modify the regulations to consider a module
part of the payment period (the denominator of the
R2T4 calculation) so long as a student attends the
module.
----------------------------------------------------------------------------------------------------------------
Federal TRIO programs
----------------------------------------------------------------------------------------------------------------
Talent Search program.................... Sec. Would extend program eligibility to individuals who
643.3(vi) are enrolled in or seek to enroll in a high school
in the United States, territories, or Freely
Associated States.
Educational Opportunity Centers program.. Sec. Would extend program eligibility to individuals who
644.3(vi) are enrolled in or seek to enroll in a high school
in the United States, territories, or Freely
Associated States.
Upward Bound program..................... Sec. Would extend program eligibility to individuals who
645.3(6) are enrolled in or seek to enroll in a high school
in the United States, territories, or Freely
Associated States. These individuals would not be
eligible for direct cash stipends.
----------------------------------------------------------------------------------------------------------------

3. Discussion of Costs, Benefits, and Transfers
The Department has analyzed the costs and benefits of complying
with the proposed regulations. Although many of the associated costs
and benefits are not easily quantifiable, the Department currently
believes that the benefits derived from the proposed regulations
outweigh the associated costs, as discussed in sections 3.B. and 3.C.
below.
The proposed regulations, which would apply to over 6,000
postsecondary institutions, would help ensure students are well served
by the institutions of higher education they attend, increase access to
postsecondary education for disadvantaged students, and ensure that the
Federal Student Aid programs work in the best interests of students.
Due to the large number of affected recipients (6,003, as discussed
more fully in the discussion of Establishing the Baseline (Section
3.A)), the variation in likely responses to any regulatory change, and
the limited information available about current practices, the
Department is not able to precisely estimate the likely costs,
benefits, and other effects of the proposed regulations. Despite these
limitations and based on the best available evidence as explained in
the discussion of Establishing a Baseline (Section 3.A), the Department
estimates present value net benefits of $148,421,308 over ten years at
a 2 percent discount rate. This is equivalent to an annualized net
benefit of $16,523,227 over ten years. The proposed regulations are
expected to result in estimated costs of $128,216,509 in the first year
following publication of the proposed regulations and yield significant
benefits beginning in year five as set forth in the below table.\21\
---------------------------------------------------------------------------

\21\ For this ten-year table, a positive figure indicates a cost
while a negative figure indicates net benefits.

------------------------------------------------------------------------
Net annual
Year costs
------------------------------------------------------------------------
Year 1.................................................. $128,216,509
Year 2.................................................. 109,169,616
Year 3.................................................. 55,133,908
Year 4.................................................. 55,133,908
Year 5.................................................. (26,004,836)
Year 6.................................................. (52,009,672)
Year 7.................................................. (78,014,508)
Year 8.................................................. (104,019,344)
Year 9.................................................. (130,024,180)
Year 10................................................. (156,029,016)
---------------
Total Net Present Value (NPV), 2 percent............ (148,421,308)
Annualized, 2 percent............................... (16,523,227)
------------------------------------------------------------------------

[[Page 60272]]

As discussed in the Cost Estimates section (Section 3.B), the Year
1 costs include one-time costs associated with reviewing and making
necessary changes to policies, procedures, and training to implement
the proposed regulations. In addition to these estimated costs, the
Department estimates benefits, which arise from the expanded
eligibility for TRIO programs and ensuing long-term benefits to TRIO
participants that would result from the proposed rule.
The assumptions, data, methodology, and other relevant materials,
as applicable, on which the Department relied in developing its
estimates are described throughout this Regulatory Impact Analysis
(RIA).
3.A. Establishing a Baseline
3.A.1. Number of Affected Entities
Institutions of higher education would be subject to the proposed
regulations. For purposes of establishing a baseline, this includes the
number of institutions of higher education participating in programs
under title IV of the HEA (such as Direct Loans, Federal Work Study,
and Pell grants).
For purposes of this analysis, the Department bases its analysis of
``postsecondary entities'' on ``institutions of higher education'' as
defined in section 102 of the HEA. It is assumed that 6,003
postsecondary institutions would be impacted by the proposed
regulations. Among postsecondary institutions, institutions range from
small, private, professional schools with fewer than 5 students
enrolled in the fall of 2022 to large, public research universities
with enrollments of more than 71,000 students and institutions
operating mostly virtually with enrollments in excess of 156,000
students.
It is important to note that, across postsecondary institutions,
there is wide variation in the number of students served, the number of
employees, administrative structure, and annual revenue. This wide
variation makes estimating the effects of the proposed regulations
challenging, and the Department notes that the estimates provided are
intended to reflect the average burden across the full spectrum of
affected entities. As a result, estimates may be lower than the actual
burden realized by, for example, larger institutions or institutions
with more complex administrative structures, and larger than those
actually realized by smaller institutions with less complex
administrative structures.
3.A.2. Wage Rates
Unless otherwise specified, the Department's model uses mean hourly
wages for personnel employed in the education sector as reported by the
Bureau of Labor Statistics (BLS) \22\ and a loading factor of 2.0 to
account for the employer cost of employee compensation and benefits and
indirect costs (e.g., physical space, equipment, technology costs).
When appropriate, the Department identifies the specific occupation
used by the BLS in its tables to support the reader's analysis. The
Department assumes that inflation-adjusted wage rates remain constant
for the duration of the time horizon.
---------------------------------------------------------------------------

\22\ U.S. Bureau of Labor Statistics, May 2023 National
Industry-Specific Occupational Employment and Wage Estimates, Sector
61-Educational Services, <a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>
(last modified Apr. 3, 2024).
---------------------------------------------------------------------------

3.A.3. Other Information
In addition, throughout this RIA, some described calculations have
results that are fractions. To improve readability, the Department
presents these results as rounded totals in the text (e.g., 1.95 or
3,450 instead of 1.9478 or 3,449.6786), but retains the unrounded value
for purposes of its underlying calculations.
The Department invites comment on all estimates provided herein to
ensure that they accurately reflect realistic assumptions about average
burdens the proposed regulations would impose on the full range of
affected entities.
3.B. Costs of the Proposed Regulations
In this section, the Department estimates monetized cost burdens
associated with the proposed regulations. To assist the public in
reviewing these estimates, the Department has subdivided this analysis,
when appropriate, into the relevant subparts. As described below, the
Department estimates a first-year cost of $19,046,893, with no
estimated costs in subsequent years. The Department estimates proposed
changes would result in a total annualized cost of $2,078,849.
The Department estimates that, upon promulgation of the proposed
regulations, all affected entities would need time to read and
understand the rule. Based on the Department's administrative
experience, we assume this would require, on average, six hours from an
education administrator (educational administrator (postsecondary),
loaded wage rate of $117.32/hour) and six hours from a lawyer
(postsecondary, loaded wage rate of $172.76/hour) for each of the 6,003
IHEs. For loan servicers, we assume this would require, on average, six
hours from an education administrator (business administrator (Business
Operations Specialists loaded wage rate of $85.70/hour)) and six hours
from a lawyer (finance sector, loaded wage rate of $197.84/hour) for
each of the seven loan servicers. In total, the Department estimates
that reading and understanding the proposed rule will have a one-time
cumulative cost of approximately $10,458,957 across all institutions of
higher education.
Distance Education--Reporting and Disclosure of Information
As a result of proposed changes to Sec. 668.41 to require
institutions to report the enrollment status of students in distance
education or correspondence courses, the Department estimates that each
IHE will need to review and revise reporting policies and procedures.
At the IHE level, we assume this would require half an hour from the
education administrator and 1 hour from an administrative assistant
(loaded wage rate of $43.58/hour) for each of the 3,732 IHEs that
reported offering at least one distance education course. In total, the
Department estimates reviewing and revising these procedures will cost
approximately $381,560 in the first year across all impacted IHEs.
Distance Education--Definition of Clock-Hour Program
The proposed changes to the definitions in Sec. 600.2 would remove
asynchronous learning from clock-hour programs offered through distance
education. The Department believes that there are very few institutions
with clock-hour programs that use distance learning to provide portions
of the program, because there are few State or professional licensing
boards that permit distance learning for clock-hour programs. Based on
data available to the Department, there are approximately 8,000 clock-
hour programs operating at approximately 1,700 institutions. The
Department does not have data available on how many of these
institutions or programs are offered through asynchronous learning to
estimate costs, and requests comment on these effects.
Return of Title IV Funds When Student Does not Begin Attendance
Proposed changes to Sec. 668.21 would allow students that do not
begin attendance at an institution to repay any disbursed loan funds
directly received according to the terms of their master promissory
note. Under current regulations, borrowers in this situation would
receive a demand letter from the

[[Page 60273]]

Department and be required to immediately repay the loan balance in
full. The Department would require the Department's seven loan
servicers to update their policies and procedures to align with the
proposed requirements. The Department estimates that the proposed
change would require two hours from a lawyer and half an hour from a
business administrator (Business Operations Specialists $85.70/hour)
for each loan servicer for a total first year cost of approximately
$2,719 across all loan servicers. The Department would ultimately
realize these additional costs through increased contractual costs.
Return of Title IV Funds When Student Withdraws
The proposed addition of Sec. 668.22(a)(2)(ii)(A)(6) would
potentially incentivize institutions to not collect debts resulting
from a student withdrawal by providing flexibility in conducting R2T4
calculations when certain conditions are met. The Department assumes
that IHEs would need to review and revise their R2T4 policies and
procedures. The Department estimates that the proposed change would
require eight hours from an education administrators and two hours from
a lawyer for each IHE for a total first year cost of approximately
$7,708,332 across all institutions.
Any institution that used the cumulative method to determine the
percentage of the payment period completed for a clock-hour program
would be required to update their procedures and policies to only use
the payment period method. The Department does not believe that many
institutions use the cumulative method, however, for those that do, the
Department believes costs would be negligible because institutions
would have until July 1, 2025, to update policies. For more information
on both methods, please see the applicable ``reasons'' discussion in
the Significant Proposed Regulations section.
Institutions that offer programs with modules would need to update
their policies and procedures to account for adjustments in how to
determine the denominator in R2T4 calculations. The Department believes
this would result in overall cost savings because institutions would no
longer need to navigate a complex set of Department rules to determine
whether or not the days in a module should be included in an R2T4
calculation. However, the Department does not maintain comprehensive
information on the use of modules at eligible postsecondary
institutions and therefore cannot estimate the scope of these effects.
Institutions that currently participate in the Second Chance Pell
experimental site and that offer eligible PEPs in a term-based setting
would need to update policies and procedures to allow more flexibility
when students return from a leave of absence. The Department believes
the cost would be negligible.
Federal TRIO Programs--Talent Search (TS), Educational Opportunity
Centers (EOC), Upward Bound (UB) Participant eligibility
Proposed changes to Sec. Sec. 643.3, 643.4, and 643.5 would expand
eligibility for TS, EOC, and UB to any individual who is enrolled in or
seeks to enroll in a high school located in the United States,
territories, or Freely Associated States. The Department believes that
these proposed changes would require current TS, EOC, and UB grantees
to review and revise their participant recruitment and enrollment
policies and procedures. At the grantee level, the Department assumes
this would require two hours from an education administrator for each
of the 2,111 grantees administering TS, EOC, or UB TRIO projects. In
total, the Department estimates that revising project procedures would
cost approximately $495,325.
The proposed regulations would impose minimal additional costs to
TRIO grant recipients under TS, EOC, and UB. While it would increase
the number of students who are eligible to participate, the effect is
only distributional as the funds provided from Congress and to grantees
would be distributed across grantees. This could mean different or
additional participants receive the benefits of TRIO services, but it
would not affect the overall appropriations.
Eligible grantees that offer the Talent Search program, the
Educational Opportunity Centers program, and the Upward Bound program
would be required to update their applications to account for students
who have enrolled in or who seek to enroll in a high school in the
United States, territories, or Freely Associated States. The Department
believe costs would be negligible because grantees already have an
application process for students to participate in these programs, and
we request comment on any costs in this area.
3.C. Benefits of the Proposed Regulations
The Department believes that these proposed regulations would
likely have a wide range of benefits both for students, parents and
caregivers, and the public at large. The discussion that follows
discusses the benefits the Department has attempted to quantify and
monetize.
3.C.1. Monetized Benefits
In this section, the Department discusses monetizable benefits
likely to result from the proposed regulations. In total, the
Department estimates, after accounting for anticipated costs resulting
from enrolling in postsecondary education, annualized benefits from the
proposed regulations of $17,664,756 over the next ten years.

------------------------------------------------------------------------
Annual costs and
Year benefits \23\
------------------------------------------------------------------------
Year 1 Cost........................................... $109,696,616
Year 2 Cost........................................... 109,696,616
Year 3 Cost........................................... 55,133,908
Year 4 Cost........................................... 55,133,908
Year 5 Benefit........................................ (26,004,836)
Year 6 Benefit........................................ (52,009,672)
Year 7 Benefit........................................ (78,014,508)
Year 8 Benefit........................................ (104,019,344)
Year 9 Benefit........................................ (130,024,180)
Year 10 Benefit....................................... (156,029,016)
-----------------
Annualized, 2%.................................... (17,664,756)
Total NPV, 2%..................................... (158,675,187)
------------------------------------------------------------------------

Federal TRIO Programs (TS, EOC, UB) Expanded Eligibility
---------------------------------------------------------------------------

\23\ For this ten-year table, a positive figure indicates a cost
while a negative figure indicates net benefits.
---------------------------------------------------------------------------

Benefits arise from increased earnings from improved educational
attainment of students without status previously ineligible to receive
TRIO program services higher levels of educational attainment and
associated higher wages. The Department believes expanding TS, EOC, and
UB eligibility to students previously ineligible to receive TRIO
program services would result in a net benefit to the public due to the
capacity within TS, EOC, and UB projects to enroll additional
participants.
The Department assumes that the approximately 500,000 elementary
and secondary students without status previously ineligible to receive
TRIO program services are evenly distributed across each high school
grade level (i.e., \1/4\ of the population is currently in each of the
9th through 12th grades). According to data from the Migration Policy
Institute,\24\ only 78 percent of students without status graduate from
high school within four years, compared with 87 percent of all public
high school students. As a result, the Department estimates that, in
the absence of the proposed regulations, approximately 98,000 students
without status previously ineligible to receive TRIO

[[Page 60274]]

program services would graduate from high school each year.
---------------------------------------------------------------------------

\24\ How Many Unauthorized Immigrants Graduate from U.S. High
Schools Annually? (<a href="http://migrationpolicy.org">migrationpolicy.org</a>).
---------------------------------------------------------------------------

For the 2021-2022 reporting period, TS, UB, and EOC projects that
did not meet their enrollment targets had the capacity to serve an
additional 104,111 participants. According to data from the Migration
Policy Institute, fifteen States (See Table 1 footnote) account for 81
percent of all high school graduates without status.\25\ For the
purpose of this analysis and to ensure that we do not overstate the
capacity of these TRIO programs to enroll students without status, the
Department limits the pool of potential enrollees to TRIO projects
operating in these fifteen States.
---------------------------------------------------------------------------

\25\ How Many Unauthorized Immigrants Graduate from U.S. High
Schools Annually? (<a href="http://migrationpolicy.org">migrationpolicy.org</a>)

Table 1--2021-22 TS, UB, and EOC Participation Rates
----------------------------------------------------------------------------------------------------------------
Capacity to
Capacity to serve
Program Funded to Actual served serve additional
serve additional students in 15
students \26\ states \27\
----------------------------------------------------------------------------------------------------------------
TS.............................................. 338,427 287,019 54,416 36,628
UB \28\......................................... 82,391 79,590 5,175 2,652
EOC............................................. 209,735 167,576 44,520 16,473
---------------------------------------------------------------
Total....................................... 630,553 534,185 104,111 55,753
----------------------------------------------------------------------------------------------------------------

For the purposes of this analysis, the Department assumes that TS,
UB, and EOC projects could enroll a maximum of 55,753 participants
without status as a result of this proposed rule and utilizes this
figure as the universe of potential participants.
---------------------------------------------------------------------------

\26\ This calculation of additional capacity excludes projects
that met or exceeded their enrollment goals (`funded to serve''
column figures).
\27\ California, Texas, Florida, New York, New Jersey, Illinois,
Georgia, North Carolina, Virginia, Arizona, Maryland, Washington,
Colorado, Nevada, and Massachusetts.
\28\ Includes Upward Bound Math & Science.

Table 2--Sensitivity Analysis of Potential Number of TRIO Enrollments Resulting From Proposed Rule Using 2021-22
TS, UB, and EOC Participation Rates
----------------------------------------------------------------------------------------------------------------
Capacity to Sensitivity analysis--potential number of TRIO
serve enrollments resulting from proposed rule
Program additional -----------------------------------------------
students 1% 5% 10%
----------------------------------------------------------------------------------------------------------------
TS.............................................. 36,628 366 1,831 3,663
UB.............................................. 2,652 27 133 265
EOC............................................. 16,473 165 824 1,647
---------------------------------------------------------------
Total....................................... 55,753 558 2,788 5,575
----------------------------------------------------------------------------------------------------------------

The Department conducted a sensitivity analysis of the possible
impact of the proposed rule on TS, UB, or EOC enrollment. We assume
that 55,753 is the maximum number of students without status that could
potentially enroll in TS, UB, or EOC as a result of the proposed rule.
The Department assumes that there are a variety of reasons that a
student that would be otherwise eligible as a result of the proposed
rule would ultimately not enroll in TS, UB, or EOC. Therefore, the
Department conducted a sensitivity analysis that analyzed program
enrollment rates of 1, 5, or 10 percent of the universe of eligible
participants. As described below, the benefits of the rule grow as the
size of the TRIO enrollment effect increases. For the purposes of this
RIA we estimate that 5 percent, or 2,788 students without status, would
enroll in TS, UB, or EOC as a result of this rule.
The Department therefore estimates that of the 55,753 estimated
capacity of TS, UB, and EOC projects in States likely to serve students
without status, 1,831 would enroll in TS, 133 would enroll in UB
(including UBMS), and 824 would enroll in EOC. In total, the Department
estimates that this proposed rule would result in 2,788 additional high
school students without status previously ineligible to receive TRIO
services enrolling in TS, UB, or EOC. For the purposes of this analysis
the Department assumes that the 2,788 included as part of this analysis
are students that would not have otherwise graduated from postsecondary
education. The Department invites comments on this assumption.

Table 3--Estimated Additional TRIO Program Participants Based on Proposed Rule
----------------------------------------------------------------------------------------------------------------
TRIO program Postsecondary Postsecondary
Program participants enrollment rate enrollees
----------------------------------------------------------------------------------------------------------------
TS.......................................................... 1831 68 1245
UB.......................................................... 133 75 99
EOC......................................................... 824 57 469
---------------------------------------------------

[[Page 60275]]

Total................................................... 2,788 ................ 1,813
----------------------------------------------------------------------------------------------------------------

According to data from NCES,\29\ in 2020, approximately 43 percent
of high school completers immediately enrolled in a 4-year college or
university and an additional 20 percent immediately enrolled in a 2-
year program. In comparison, according to data from TRIO performance
reports for 2022, 68 percent of TS participants enrolled in college, 75
percent of UB (including UBMS and VUB) participants enrolled in
college, and 57 percent of EOC participants enrolled in college. EOC
enrollment rates are typically lower than TS and UB as EOC participants
include adults who are not connected to formal education systems.\30\
Therefore, the Department estimates that a total of 1,813 students
without status would enroll in postsecondary education as a result of
their participation in TS, UB, or EOC.
---------------------------------------------------------------------------

\29\ Instit. of Educ. Sci., Nat'l Ctr. for Educ. Statistics,
Postsecondary Education, Immediate College Enrollment Rate, <a href="https://nces.ed.gov/programs/coe/indicator/cpa">https://nces.ed.gov/programs/coe/indicator/cpa</a> (last updated May 2023).
\30\ According 2018-2019 data, 36% of EOC participants were
between the age of 19 and 27 and 37% of EOC participants were 28
years or older.
---------------------------------------------------------------------------

For those 1,813 additional students that would enroll in
postsecondary education, the Department assumes that these students
would earn at least some college credit from a 2- or 4-year
institution. Among the 2012 UB cohort, 35 percent of UB participants
that enrolled in postsecondary education earned a degree at a 4-year
IHE while 7 percent of UB participants earned a degree at a 2-year IHE.
For the purposes of this analysis, and due to lack of data, the
Department assumes that postsecondary graduation rates are comparable
between TS, UB, and EOC. We request comment on this assumption.
Therefore, we assume that 58 percent of UB participants did not
complete a bachelor's degree, associate's degree, or certificate within
six years of initial enrollment. For our analysis we identify those
that did not complete a degree or certificate as earning some college
credit.

Table 4--Estimated Additional Postsecondary Completers Based on Proposed
Rule
------------------------------------------------------------------------
Estimated
Postsecondary completers completers
------------------------------------------------------------------------
Some College............................................ 1,052
Certificate/Associate's Degree.......................... 126
Bachelor's Degree....................................... 635
---------------
Total............................................... 1,813
------------------------------------------------------------------------

For several analyses, the Department relies on estimated wages by
educational attainment. For these analyses, the Department relies on
data from BLS \31\ regarding earnings differences across individuals
with different educational attainment. The relevant data are reproduced
in Table 5. Estimated Weekly Earnings of Postsecondary Enrollees by
Highest Level of Attainment, below for easier reference.
---------------------------------------------------------------------------

\31\ Earnings and unemployment rates by educational attainment,
2023. ``Education pays'': U.S. Bureau of Labor Statistics (<a href="http://bls.gov">bls.gov</a>).

Table 5--Estimated Weekly Earnings of Postsecondary Enrollees by Highest Level of Educational Attainment
----------------------------------------------------------------------------------------------------------------
Total
Median usual Unemployment estimated
Highest education attainment Individuals weekly rate (%) weekly
earnings earnings \32\
----------------------------------------------------------------------------------------------------------------
HS Diploma...................................... 0 899 3.9 n/a
Some College.................................... 1,052 992 3.3 1,008,864
Certificate/Associate's Degree.................. 126 1,058 2.7 130,134
Bachelor's Degree............................... 635 1,493 2.2 927,153
---------------------------------------------------------------
Total....................................... 1,813 n/a n/a 2,066,151
----------------------------------------------------------------------------------------------------------------

The Department estimates that these proposed regulations would
directly result in an additional 1,813 students enrolling in and
completing as least some postsecondary education. In addition, the
Department assumes that affected individuals would have average
earnings and employment rates equal to those at high school diploma
level in the baseline, and average earnings and employment rates equal
to their new educational attainment level following implementation of
the rule. The Department estimates that the total weekly earnings of
these students if they had only earned a high school diploma would be
$1,566,058. These students' enrollment in postsecondary education would
result in total weekly earnings of $2,066,151, an increase of $500,093
per week
---------------------------------------------------------------------------

\32\ This total is calculated by subtracting the unemployment
rate from the number of individuals and multiplying that figure by
the median weekly earnings. IE. (1052-35) * $992 = 1,008,864.
---------------------------------------------------------------------------

Based on the earnings and unemployment information described in
Earnings and unemployment rates by educational attainment from the U.S.
Bureau of Labor Statistics,\33\ the Department estimates that the
additional 1,813 students enrolled in postsecondary education could
annually earn, in total, $26,004,836 more than they would have had they
not enrolled in postsecondary education. We request comment on the
assumptions leading to this result. The Department assumes that these
benefits would not accrue until Year 5 and then would annually

[[Page 60276]]

compound in future years as additional cohorts of students without
status previously ineligible to receive TRIO services graduate at
higher rates. To the extent that additional individuals complete
postsecondary education before Year 5, this assumption will
underestimate actual benefits from the proposed regulations.
---------------------------------------------------------------------------

\33\ Earnings and unemployment rates by educational attainment,
2023. ``Education pays'': U.S. Bureau of Labor Statistics (<a href="http://bls.gov">bls.gov</a>).
---------------------------------------------------------------------------

The Department estimates that the benefits of the proposed rule
described above would outweigh costs resulting from lost wages from
delaying entry into the workforce and tuition costs.
Under the proposed changes to Sec. Sec. 643.3, 643.4, and 643.5,
the Department estimates that newly eligible recipients that enroll
postsecondary education would realize an opportunity cost from the loss
of wages they would otherwise receive as a high school graduate
immediately entering into the workforce. The Department estimates that
an additional 1,813 students without status would enroll in
postsecondary education each year as a result of the proposed rule. The
Department assumes that of these students, 1,742 would find employment
and earn a median wage of $899 per week as a high school graduate for
total weekly earnings of $1,566,058. The Department estimates that
annual costs of $81,435,016 during the first two years after the
implementation of the proposed rule to account for students enrolled in
both four-year and two-year postsecondary education. The Department
assumes for the purposes of this analysis that 50 percent of these
students are enrolled at a four-year IHE and therefore will realize an
opportunity cost of $40,717,508 in years three and four. The Department
requests comment on these assumptions.
In addition, under the proposed changes to Sec. Sec. 643.3, 643.4,
and 643.5, the Department estimates that newly eligible recipients that
enroll postsecondary education would realize postsecondary tuition
costs. Due to a lack of available data, the Department assumes that the
1,813 students without status estimated to enroll in postsecondary
education each year as a result of the proposed rule will be equally
divided across four-year public IHEs, four-year private nonprofit IHEs,
two-year public IHEs, and two-year private nonprofit IHEs. The
Department requests comment on these assumptions. Based on NCES
data,\34\ the Department assumes that the average net price to enrolled
students of $11,000 for students at four-year public IHEs, $20,800 for
students at four-year private nonprofit IHEs,\35\ $8,300 for students
at two-year public IHEs, and 21,100 for students at two-year private
IHEs.
---------------------------------------------------------------------------

\34\ Price of Attending an Undergraduate Institution (<a href="http://ed.gov">ed.gov</a>).
\35\ Average net price of attendance is calculated as the
average total cost of attendance minus average grant and scholarship
aid.

----------------------------------------------------------------------------------------------------------------
Net price to
Type of IHE Students student Total
----------------------------------------------------------------------------------------------------------------
Four-year public IHE............................................ 454 11,000 4,994,000
Four-year private nonprofit IHE................................. 453 20,800 9,422,400
Two-year public IHE............................................. 453 8,300 3,759,900
Two-year private IHE............................................ 453 21,100 9,558,300
-----------------------------------------------
Total....................................................... 1,813 .............. 27,734,600
----------------------------------------------------------------------------------------------------------------

The Department estimates that annual costs of $27,734,600 during
the first two years after the implementation of the proposed rule to
account for students enrolled in both four-year and two-year
postsecondary education. The Department assumes for the purposes of
this analysis that 50 percent of these students are enrolled at a four-
year IHE and therefore will realize tuition costs of $14,416,400 in
years three and four. The Department requests comment on these
assumptions.
3.C.2 Non-Monetized Benefits
Distance Education
Changes proposed to provide better data on student outcomes for
students enrolled in distance education would provide benefits for
students in allowing reporting and evaluations of outcomes for students
depending on their enrollment in distance education, traditional on-
site instruction, or a combination of the two. Such analysis is
increasingly advantageous to determine the educational and cost
effectiveness of postsecondary instruction as it becomes more available
at a distance.
Students can also benefit from the change to only allow synchronous
instruction in clock-hour programs offered through distance education.
Because studies have shown better student outcomes when comparing
synchronous and asynchronous instruction, students would likely have
greater persistence and completion, and would also likely benefit from
improved labor market outcomes.\36\
---------------------------------------------------------------------------

\36\ <a href="https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx">https://journals.lww.com/jehp/fulltext/2021/10000/why_people_are_becoming_addicted_to_social_media_.223.aspx</a>.
---------------------------------------------------------------------------

R2T4
Benefits to Students
Students would benefit from these regulations under several of the
proposed regulations. If institutions choose to implement the optional
withdrawal exemption, students who withdraw would not owe any balance
related to any returned title IV, HEA aid to the Department or the
institution. This would alleviate students from the burden of having to
repay title IV, HEA dollars or owing an institutional debt related to a
payment period or period of enrollment that they did not complete.
If a school chooses not to implement the optional withdrawal
exemption, students that received a Direct Loan but did not begin
attendance in their program would be able to repay their loans under
the terms of a promissory note as opposed to the current practice of
receiving a demand letter for the full payment. Students would be able
to benefit from an income-driven repayment plan, or standard payment
plans with payments that could potentially be paid over 30 years.
Students who are incarcerated at times may need to (or be forced
to) take a break in their PEP, including activities out of their
control such as prison-wide lockdowns or involuntary transfers to other
facilities. The proposed regulations would benefit incarcerated
students allowing them to not have to come back from the leave of
absence where they left off (as current regulations require), and
instead, the student could come back at a different point in their
eligible prison education program, affording greater flexibility in
their academic progression.
Benefits to Institutions
Institutions would benefit under several of these proposed
regulations. Currently, an institution offering clock-

[[Page 60277]]

hour programs may use two methods to determine the percentage of the
payment period completed: cumulative, and by payment period. The
proposed regulations would require institutions to use the payment
period method when calculating the number of scheduled hours completed
in clock-hour programs. This change would reduce the complexity of the
R2T4 calculations and the inconsistency in the manner in which the
calculation is done for clock-hour programs at different institutions.
Currently institutions implement complex sub-regulatory guidance to
determine the number of days in the payment period for a program
offered in modules, even if the student did not attend the module. The
proposed regulations would benefit institutions through the requirement
that the student actually attend the module for the days in the module
to be included in the payment period. It would also eliminate the need
for a ``freeze date'' (explained in the discussion section), further
reducing complexity.
Benefits to the Taxpayer
Overall, we believe that the more accurate calculations and
reductions in complexity would benefit the taxpayer by reducing errors
in R2T4 calculations, resulting in more accurate amounts being returned
to the Department and further supporting the integrity of the title IV,
HEA programs. R2T4 consistently ranks in the Top 10 compliance
findings,\37\ costing the Federal government time and money to provide
assistance through training and conducting program reviews in an effort
to identify and correct R2T4 errors committed by institutions. We
believe the proposed changes would also help alleviate some compliance
issues related to R2T4.
---------------------------------------------------------------------------

\37\ Annual Top Ten School Findings and School Fine Reports:
<a href="https://studentaid.gov/data-center/school/fines-and-findings">https://studentaid.gov/data-center/school/fines-and-findings</a>.
---------------------------------------------------------------------------

For example, we have proposed a requirement that schools that offer
distance education courses entirely online begin taking attendance for
those courses. As a result, we anticipate more accurate calculations
through the use of actual withdrawal dates from attendance records,
thus providing taxpayers a more accurate accounting of title IV, HEA
funds returned.
TRIO
As discussed above, the proposed changes to TRIO would align TRIO
programs that serve students in the elementary or secondary context
with other Federal K-12 spending programs that allow recipients (such
as SEAs and LEAs) to spend funds on K-12 students without regard to
immigration status. This would eliminate the administrative burden of
separating out students who are enrolled in public schools but not
eligible for TRIO services under the current rule.
4. Accounting Statement
As required by OMB Circular A-4, the Department has prepared an
accounting statement showing the classification of the expenditures
associated with the provisions of these regulations. This table
provides the best estimate of the changes in annual monetized benefits
and costs of these proposed regulations.

------------------------------------------------------------------------
Annualized
Provision benefits
------------------------------------------------------------------------
2% discount
rate
------------------------------------------------------------------------
TRIO Expanded eligibility--Postsecondary earnings.......... $17,664,756
------------------------------------------------------------------------
Annualized
costs
------------
2% discount
rate
------------------------------------------------------------------------
Reading and Understanding the New Rule..................... $1,141,529
Distance Education--Reporting and disclosure of information 41,645
R2T4--Student does not begin attendance.................... 297
R2T4--Student withdrawal................................... 841,316
TRIO Expanded Eligibility.................................. 35,105,062
------------------------------------------------------------------------

5. Alternatives Considered
As part of the development of these proposed regulations, the
Department engaged in a negotiated rulemaking process in which we
received comments and proposals from non-Federal negotiators
representing numerous impacted constituencies. These included higher
education institutions, consumer advocates, students, financial aid
administrators, accrediting agencies, and State attorneys general. Non-
Federal negotiators submitted a variety of proposals relating to the
issues under discussion. Information about these proposals is available
on our negotiated rulemaking website at <a href="http://www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html">www2.ed.gov/policy/highered/reg/hearulemaking/2023/index.html</a>.
5.1 Distance Education
During negotiations there was no disagreement with the Department's
proposal to amend the definition of ``additional location'' to
separately identify virtual locations and to define ``distance
education course'' (which was based on a negotiator suggestion), so
there was little discussion on these topics.
The negotiators also did not disagree with the general idea of
requiring institutions to report students' enrollment in distance
education. There were suggestions about what that reporting should
entail, including more detailed data about the extent of students'
enrollment in distance education and not just whether they are in-
person or distance education students. The discussion settled on
reporting students as having one of three statuses: fully in-person,
fully at a distance, or a hybrid of the two. This would be a simple
determination for schools that would also provide sufficient
information for the Department. Because specific details about this
reporting are yet to be determined, the proposed regulation establishes
the general requirement and notes that reporting will be in accordance
with procedures to be established by the Secretary.
Some negotiators disagreed with the proposed elimination of
asynchronous distance education in the definition of clock-hour
programs in Sec. 600.2. Negotiators representing various institutional
sectors contended that instruction in clock-hour programs need not be
entirely hands-on, that there is a didactic component that lends itself
to asynchronous instruction, and that schools have been able to master
the technology necessary for close accounting of student academic
engagement. These negotiators suggested limiting the amount of a clock-
hour program that can occur asynchronously to 50 percent. Based on our
review of clock-hour programs that delivered substandard education with
little direct instructor interaction, we disagree that schools have the
technology and resources to adequately monitor student academic
engagement, as discussed in the section above on the proposed revisions
to distance education. Allowing 50 percent of instruction to be
asynchronous would still permit substandard education to occur. We thus
reaffirmed that elimination of asynchronous distance education in
clock-hour programs would be appropriate.
5.2 R2T4
Confined or Incarcerated Individuals and R2T4
The Department initially proposed to exempt confined or
incarcerated individuals from R2T4 if the students withdrew from a
program due to circumstances outside of their control, such as a
correctional facility-wide lockdown or an involuntary transfer to a
different facility. Upon further review, we determined that we do not
have the legal authority to waive R2T4

[[Page 60278]]

requirements for a targeted group of students. In addition, the
Department heard concerns from several negotiators that confined or
incarcerated individuals may reach their Pell grant lifetime
eligibility used (LEU) faster under this proposal without obtaining an
academic credential. And finally, the Department heard from some
additional negotiators that some postsecondary institutions have
already established policies that account for involuntary breaks in
PEPs, such as waiving all charges related to the affected payment
period, and our initial proposal might have caused institutions to
revise or remove beneficial student polices already in place.
To address the negotiators' concerns, the Department instead
proposed a new condition under the leave of absence provisions (Sec.
668.22(d)), targeted at confined or incarcerated individuals that take
a break from their PEP due to events at their correctional facility,
which would give students and institutions, especially in term-based
settings, more flexibility when students return from a leave of
absence. In term-based settings, the proposal would allow a confined or
incarcerated individual to not have to come back from the leave of
absence resuming where the student left off, and instead, the
individual could resume at a different point in their PEP. The
postsecondary institution would still have to adhere to all other
requirements of a leave of absence as we propose they remain unchanged.
Direct Assessment Programs and R2T4
The Department considered exempting direct assessment programs
offered through distance education from the proposed requirement under
Sec. 668.22(b)(3)(i)(D) that would require an institution to take
attendance for each course offered entirely through distance education.
A negotiator stated three concerns: (1) requiring an R2T4 calculation
that is artificially based on dates of attendance, in a program
structure that is not designed around seat time, would disincentivize
progression and punish students who complete program requirements more
quickly than anticipated; (2) requiring attendance in direct assessment
programs would not increase the accuracy of R2T4 calculations, because
the amount of funds earned by these students is not correlated to time
and an attendance-based calculation does not accurately reflect the
actual amount of coursework completion for students who take advantage
of self-paced instruction; and (3) to offset these negative effects,
institutions may feel compelled to add pedagogically unnecessary
content or participation requirements to courses in order to increase
the frequency of attendance-taking opportunities. The negotiator argued
that doing so would undermine the advantages of self-paced direct
assessment programs and could unnecessarily increase program length and
cost.
The Department is not persuaded by these arguments, because all
distance education courses are still required to provide regular and
substantive interaction. Direct assessment programs offered through
distance education do not pose unique attendance-based challenges that
justify exemption from the requirement. Direct assessment programs,
like all other programs, are required to determine a withdrawal date,
which is the last date of academic attendance as determined by the
institution's academic records. The Department believes that
institutions that offer direct assessment programs through distance
education already have systems in place that sufficiently monitor
academic engagement and thus can easily determine attendance and, by
extension, a student's withdrawal date.
Withdrawal Exemptions and R2T4
As part of our 2019 negotiated rulemaking, the Department adopted a
withdrawal exemption for programs offered in modules that treat a
student as not withdrawn if the student successfully completes one or
more modules that make up 49 percent or more of the number of days in
the payment period. The Department's initial proposal with negotiators
suggested removing the 49 percent withdrawal exemption, which, for
students that do not qualify for another withdrawal exemption, would
mean that more money would be returned to the Department and students
would not exhaust their aid eligibility as quickly. The Department also
believed that removing the 49 percent withdrawal exemption would
eliminate observed confusion between this figure and the 60 percent
completion requirement under the R2T4 calculation, and eliminate the
continued need for significant guidance and training on how to
determine whether a student qualifies for the exemption.
Many negotiators disagreed with the elimination of the 49 percent
withdrawal exemption. Negotiators stated that their institutions had
already updated systems and policies to account for the exemption and
that it was serving students well. Negotiators also pointed out that
the exemption has only been in regulation since 2021 and, instead of
eliminating the exemption, the Department should provide more guidance
and training to assist those institutions that may be having some
difficulty implementing this regulatory requirement. In light of these
negotiator concerns and suggestions, the Department decided to retain
this exemption.
5.3 TRIO
Expanding the Eligibility Proposal to All TRIO Programs
The current proposal for the Upward Bound Program, the Educational
Opportunity Centers, and the Talent Search program would allow an
individual to participle in these programs if they are enrolled in, or
seek to enroll in, high school in the United States. All of these three
TRIO programs serve students at the secondary school level. The
Department also considered, at the suggestion of a negotiator,
expanding the eligibility proposal to Student Support Services and the
McNair Scholars Program, which are postsecondary level TRIO programs.
The Department determined to limit eligibility expansion to the
three identified secondary school programs based on our belief that all
children who attend high school in the United States should have the
same access to public TRIO services to assist in their path toward
postsecondary education. This proposal also aligns TRIO with the
treatment of students in other Federal K-12 spending programs, which
allow recipients (such as State education agencies and local education
agencies) to spend funds on K-12 students without regard to immigration
status.
The TRIO programs have limited resources, with the TRIO programs
currently serving less than 10 percent of the eligible population. The
Department is proposing to expand eligible participants to focus on the
most vulnerable population: children who do not yet have the basic
education that comes from high school completion, which is a necessary
step toward postsecondary education.
Not Regulating TRIO
The Department considered not regulating, but as noted in the
previous section, K-12 public schools are open to students regardless
of their immigration status. As such, the Department believes that all
children who attend high school in the United States should have the
same access to TRIO services to assist their pathway into postsecondary
education.

[[Page 60279]]

6. Regulatory Flexibility Act
This section considers the effects that the proposed regulations
may have on small entities in the educational sector as required by the
Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. The purpose of
the RFA is to establish as a principle of regulation that agencies
should tailor regulatory and informational requirements to the size of
entities, consistent with the objectives of a particular regulation and
applicable statutes. The RFA generally requires an agency to prepare a
regulatory flexibility analysis of any rule subject to notice and
comment rulemaking requirements under the Administrative Procedure Act
or any other statute unless the agency certifies that the rule will not
have a ``significant impact on a substantial number of small
entities.'' As noted in the RIA, the Department does not expect that
the regulatory action will have a significant budgetary impact, but
there are some costs to small institutions that are described in this
Initial Regulatory Flexibility Analysis.
Description of the Reasons for Agency Action
The Secretary is proposing new regulations to ensure students are
well served by the institutions of higher education they attend,
increase access to postsecondary education for disadvantaged students,
and ensure that Federal Student Aid programs work in the best interests
of students. Proposed regulations for distance education would help the
Department better measure and account for student outcomes, improve
oversight over distance education, and ensure students are receiving
effective education by requiring additional reporting of programs
offered entirely through online education, requiring students' distance
education enrollment status, and disallowing asynchronous distance
education in clock-hour programs for title IV, HEA purposes. The
proposed R2T4 regulations would help withdrawn students repay
outstanding Direct Loan credit balances, increase the accuracy and
simplicity of performing R2TV calculations, add additional clarity to
institutions on reporting, and codify longstanding policies. The
proposed TRIO regulations would expand student eligibility and provide
greater access to postsecondary education for disadvantaged students
who have enrolled or seek to enroll in a high school in the United
States, territories, or Freely Associated States.
Succinct Statement of the Objectives of, and Legal Basis for, the
Regulations
Through the proposed regulations, the Department aims to address
inequities and inadequate protections for students to ensure the
Federal Student Aid programs work to accomplish postsecondary access
and completion. This includes ensure the Department, students, and
families have the information needed to answer important questions
about enrollment in and success with distance education, the ability
provide closed school discharges where a program closes, that students
that withdraw are able to repay their debt, and that disadvantaged
students have the opportunity to access and succeed in postsecondary
education.
The Department's authority to the proposed regulations stems
primarily from multiple statutory enactments: first, 20 U.S.C. 1070-
1099d (sections 400-499 of the HEA) which authorizes the Federal
government's major student financial aid programs; second, 20 U.S.C.
1070(b) (section 400(b) of the HEA) which outline the Secretary's broad
authority to carry out program requirements; and third, the sections
that govern the Department's oversight responsibility under title IV 20
U.S.C. 1099c, 1099c-1, 1099c-2 (sections 498, 498A, and 498B of the
HEA). The specific statutory sources of this authority are detailed in
the Authority for This Regulatory Action section above.
Description of and, Where Feasible, an Estimate of the Number of
Small Entities to Which the Regulations Will Apply as noted above, SBA
defines small proprietary institutions of higher education (IHEs) based
on revenue. These regulations apply, however, to all IHEs, which cannot
be compared across institutions and sectors using the SBA revenue size
standard because the RFA does not measure non-profit and public sector
IHEs based on revenue. As a result, for purposes of the proposed
regulations, the Department defines ``small entities'' by reference to
enrollment, as it has done in other rulemakings, to allow meaningful
comparison of regulatory impact across all types of IHEs in the for-
profit, non-profit, and public sectors.\38\ The Department notes that
enrollment and revenue are correlated for all IHES and that IHEs with
higher enrollment tend to have the resources and infrastructure in
place to more easily comply with the Department's regulations in
general and the proposed regulations in particular. Since enrollment
data is more readily available to the Department for all IHEs, the
Department has used enrollment as the basis to identify small IHEs in
prior rulemakings and continues to use enrollment to identify small
IHEs in the proposed regulations. This approach also allows the
Department to use the same metric to identify small IHEs across the
for-profit, non-profit, and public sectors, and it treats public IHEs
operated at the behest of jurisdictions with a population of more than
50,000 but with low enrollment as small, which the SBA's standard would
not treat as small. Lastly, the North American Industry Classification
System (NAICS), under which SBA's revenue standards in 13 CFR 121.201
are generally established, set different revenue thresholds for IHEs
that provide different areas of instruction (e.g., cosmetology,
computer training, and similar programs) and there is no existing data
that aligns those different revenue standards to the different types of
regulated IHEs. Similarly, where an institution provides instruction in
several of these areas, it is unclear which revenue threshold to apply
for purposes of the Department's RFA analysis.
---------------------------------------------------------------------------

\38\ For additional background on the Department's justification
for using an enrollment-based size standard, see ``Student
Assistance General Provisions, Federal Perkins Loan Program, Federal
Family Education Loan Program, and William D. Ford Federal Direct
Loan Program'' proposed rule, published in the Federal Register on
July 31, 2018, 83 FR 37242, and final rule, published in the Federal
Register on September 23, 2019, 84 FR 49788; and ``Gainful
Employment'' final rule published in the Federal Register on July 1,
2019, 84 FR 31392. The Department notes that the alternative size
standards that are used in this NPRM are identical to the
alternative size standards used in the GE regulations published in
the Federal Register on October 10, 2023. See 88 FR 70175.
---------------------------------------------------------------------------

As explained above, the enrollment-based size standard remains the
most relevant standard for identifying all IHEs subject to the proposed
regulations. Therefore, instead of the SBA's revenue-based size
standard, which applies only to proprietary IHEs, the Department has
defined ``small IHE'' as (1) a less-than-two-year institution with an
enrollment of fewer than 750 students, or (2) an at-least two-year but
less-than-four-year institution, or a four-year institution, with
enrollment of fewer than 1,000 students.\39\ As a result

[[Page 60280]]

of discussions with the SBA Office of Advocacy, this is an update from
the standard used in some prior rules, such as the ``Financial Value
Transparency and Gainful Employment (GE), Financial Responsibility,
Administrative Capability, Certification Procedures, Ability to Benefit
(ATB),'' published in the Federal Register on May 19, 2023, 88 FR
32300, ``Improving Income Driven Repayment for the William D. Ford
Federal Direct Loan Program and the Federal Family Education Loan
(FFEL) Program, published in the Federal Register on July 10, 2023, 88
FR 43820, and the proposed regulations, ``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,'' published in the Federal
Register on October 28, 2022. 87 FR 65426. Those prior regulations
applied an enrollment standard for a small two-year institution of less
than 500 full-time-equivalent (FTE) students and for a small 4-year
institution, less than 1,000 FTE students.\40\ The Department consulted
with the SBA Office of Advocacy on the alternative standard for this
rulemaking. The Department continues to believe this approach most
accurately reflects a common basis for determining size categories that
is linked to the provision of educational services and that it captures
a similar universe of small entities as the SBA's revenue standard. In
accordance with section 601 of the RFA, the Department seeks comment on
the appropriateness of this alternative size standard as it relates to
this rule.
---------------------------------------------------------------------------

\39\ In regulations prior to 2016, the Department categorized
small businesses based on tax status. Those regulations defined
``nonprofit organizations'' as ``small organizations'' if they were
independently owned and operated and not dominant in their field of
operation, or as ``small entities'' if they were institutions
controlled by governmental entities with populations below 50,000.
Those definitions resulted in the categorization of all private
nonprofit organizations as small and no public institutions as
small. Under the previous definition, proprietary institutions were
considered small if they are independently owned and operated and
not dominant in their field of operation with total annual revenue
below $7,000,000. Using FY 2017 IPEDs finance data for proprietary
institutions, 50 percent of 4-year and 90 percent of 2-year or less
proprietary institutions would be considered small. By contrast, an
enrollment-based definition applies the same metric to all types of
institutions, allowing consistent comparison across all types.
\40\ In those prior rules, at least two-year but less-than-four-
years institutions were considered in the broader two-year category.
In this proposed rule, after consulting with the SBA Office of
Advocacy, we separate this group into its own category. Based on
this consultation, we have also increased the enrollment threshold
for less-than-two-year institutions from 500 to 750 in order to
treat a similar number of institutions as small under the
alternative enrollment standard as would be captured under a revenue
standard.
---------------------------------------------------------------------------

We note that the Department's revised alternative size standard and
the SBA's revenue standard identify a similar number of total
proprietary IHEs, with greater than 93 percent agreement between the
two standards. Using the Department's revised alternative size
standard, approximately 61 percent of all IHEs would be classified as
small for these purposes. Based on data from NCES, in 2022, small IHEs
had an average enrollment of approximately 289 students. In contrast,
all other IHEs had an average enrollment of approximately 5,509
students.

Table 1--Number of Small IHEs Under Enrollment-Based Definition
----------------------------------------------------------------------------------------------------------------
Less than 2-
4-year 2-year year Total
----------------------------------------------------------------------------------------------------------------
Not Small....................................... 1,548 639 84 2,271
Small........................................... 1,219 936 1,577 3,732
---------------------------------------------------------------
Total....................................... 2,767 1,575 1,661 6,003
----------------------------------------------------------------------------------------------------------------
Source: 2022 IPEDS data reported to the Department.

In addition, the following tables show the breakdown of this 93
percent agreement, using institutional-level data relating to the 2,334
private for-profit IHEs that were identified using 2022 IPEDS data.\41\
The enrollment size standard identifies 2,073 for-profit IHEs as small,
and the revenue size standard identifies 2,044 for-profit IHEs as
small, with a core of the same 1,917 for-profit IHEs identified as
small under both standards. There are 156 IHEs that are only identified
as small under the enrollment standard and 127 IHEs that are only
identified as small under the revenue standard. Below are descriptive
statistics of those for-profit IHEs identified as small by only one of
the measures.
---------------------------------------------------------------------------

\41\ 2022 IPEDS downloaded from <a href="https://nces.ed.gov/ipeds/datacenter/DataFiles.aspx">https://nces.ed.gov/ipeds/datacenter/DataFiles.aspx</a>.
---------------------------------------------------------------------------

Table 2 shows the distribution of revenues and the average
enrollments of the 156 for-profit IHEs identified as small under only
the enrollment size standard. A large majority of these for-profit IHEs
do not have revenue data available in IPEDS. The average enrollment for
this group with no revenue data available is 210 students.

Table 2--Small IHEs Under Enrollment Size Standard Only
------------------------------------------------------------------------
Average
Revenue category Number of IHEs enrollment
------------------------------------------------------------------------
No Data................................. 149 210
$35-40 million.......................... 4 580
$41-55 million.......................... 2 696
Above $55 million....................... 1 320
-------------------------------
Total............................... 156 226
------------------------------------------------------------------------

Table 3 shows the distribution of enrollments and the average
revenues of the 127 for-profit IHEs identified as small under only the
revenue size standard. Six of these 127 IHEs do not have enrollment
data available through IPEDS. There are 57 IHEs in the bin of ``1,000-
1,249 students'', which is closest to the enrollment threshold for for-
profits, and average revenue for these IHEs is $13.3 million. To the
extent that the proposed alternative size standard covers for-profit
IHEs that would not otherwise be covered (and the revenue standard
covers for-profit

[[Page 60281]]

IHEs that would not be covered by the enrollment standard), the
Department proposes to treat certain for-profit IHEs as small and
others as not small because of the reasons for proposing an alternative
size standard explained in this section above.

Table 3--Small IHEs Under Revenue Size Standard Only
------------------------------------------------------------------------
Average
Enrollment category Number of IHEs revenue
------------------------------------------------------------------------
No Data................................. 6 $1,206,508
1,000-1,249 students.................... 57 13,269,753
1,250-1,499 students.................... 23 19,122,831
1,500-1,749 students.................... 13 19,247,730
1,750-1,999 students.................... 14 23,287,464
Above 2,000 students.................... 14 23,527,952
-------------------------------
Total............................... 127 16,606,901
------------------------------------------------------------------------

Tables 4 and 5 show the distribution of institution levels for for-
profit IHEs identified as small by the enrollment size standard only
and by the revenue size standard only, respectively.

Table 4--Level of For-Profit IHEs Identified as Small Under the
Enrollment Size Standard Only
------------------------------------------------------------------------
Level Number of IHEs
------------------------------------------------------------------------
Less than 2 years (below associate)..................... 73
At least 2 but less than 4 years........................ 45
Four or more years...................................... 38
---------------
Total............................................... 156
------------------------------------------------------------------------

Table 5--Level of For-Profit I

[…truncated; see source link]

View on FederalRegister.gov →Plain-text source

Indexed from Federal Register on July 24, 2024.

This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.