[Federal Register Volume 59, Number 28 (Thursday, February 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2863]
[[Page Unknown]]
[Federal Register: February 10, 1994]
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Part III
Department of Education
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30 CFR Part 600
Institutional Eligibility Under the Higher Education Act of 1965, as
Amended; Proposed Rule
DEPARTMENT OF EDUCATION
34 CFR Part 600
RIN 1840-AB87
Institutional Eligibility Under the Higher Education Act of 1965,
as Amended
AGENCY: Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary proposes to amend the regulations governing
institutional eligibility under the Higher Education Act of 1965, as
amended (HEA). The proposed regulations would implement new HEA
statutory provisions that were added by the Higher Education Amendments
of 1992 and the Higher Education Technical Amendments of 1993. In
general, these new statutory provisions tightened the eligibility
requirements for institutions participating in the student financial
assistance programs authorized under Title IV of the HEA (Title IV, HEA
programs). The proposed regulations also would clarify existing
provisions, and, in keeping with the statutory changes, tighten
procedures governing institutional eligibility determinations.
DATES: Comments must be received on or before March 14, 1994.
ADDRESSES: All comments concerning these proposed regulations should be
addressed to Cheryl Leibovitz, U.S. Department of Education, 400
Maryland Avenue, SW. (Regional Office Building 3, room 4318),
Washington, DC 20202-5346.
A copy of any comments that concern information collection
requirements should also be sent to the Office of Management and Budget
at the address listed in the Paperwork Reduction Act section of this
preamble.
FOR FURTHER INFORMATION CONTACT: Cheryl Leibovitz. Telephone: (202)
708-7888. Individuals who use a telecommunications device for the deaf
(TDD) may call the Federal Information Relay Service (FIRS) at 1-800-
877-8339 between 8 a.m. and 8 p.m., Eastern time, Monday through
Friday.
SUPPLEMENTARY INFORMATION: The Higher Education Amendments of 1992,
Public Law 102-325 and the Higher Education Technical Amendments of
1993, Public Law 103-208, amended the HEA in several areas relating to
institutional eligibility. These areas include, among others: The
definition and treatment of a ``branch campus,'' a ``correspondence
course,'' and a ``telecommunications course;'' the enrollment of
incarcerated students and ability-to-benefit students; the percentage
of its revenues that an eligible proprietary institution of higher
education can derive from Title IV, HEA program funds; and the filing
of an institution for bankruptcy. The Secretary discusses each of these
subjects in more detail later in the preamble.
These proposed regulations were subject to a regulations
negotiation process as required by section 492 of the HEA. Under that
process, the Secretary convened four regional meetings to obtain public
involvement in the development of these proposed regulations. These
meetings were held in San Francisco, Atlanta, New York, and Kansas
City. At these meetings, the Secretary provided attendees with a list
of issues that needed to be addressed in these proposed regulations. A
summary of the responses of the attendees is contained in Appendix A to
these proposed regulations.
Groups that attended the regional meetings nominated individuals to
participate in regulation negotiations. The Secretary selected
regulation negotiators from the names nominated and chose negotiators
to reflect all the groups that participate in the Title IV, HEA
programs, such as students, student financial aid administrators, and
various types of eligible institutions.
In accordance with section 492(b) of the HEA, the Secretary
prepared draft proposed regulations and negotiated the provisions of
that draft with the negotiators. Consensus was reached regarding
Sec. 600.7(c)(3)(ii), the proposed requirement for a degree-granting
institution to demonstrate a 50% completion rate for incarcerated
students enrolled in the institution's nonassociate or nonbachelor
degree programs if the institution wishes to qualify those programs for
a waiver from the provision that limits an institution's enrollment of
incarcerated regular students to less than 25 percent. This and other
related provisions are discussed in greater detail in the discussion on
Sec. 600.7. The remaining regulatory provisions reflect the agreement
of the great majority of the negotiators.
The following discussion reflects proposed significant changes to
the existing Institutional Eligibility regulations. Proposed changes
are discussed in the order in which they appear in the proposed
regulations text. If a provision applies to more than one section or is
included in more than one section, it is discussed the first time it
appears with an appropriate reference to its other appearances.
Section 600.2 Definitions
``Award year.'' The Secretary proposes to this definition to these
regulations from the Student Assistance General Provisions regulations
because the term ``award year'' now applies to these regulations as
well.
``Branch campus.'' Section 498(j) of the HEA directs the Secretary
to define this term. For consistency, the Secretary proposes to adopt
the existing definition set forth in 34 CFR 607.7(b) of the
Strengthening Institutions Program regulations authorized under Title
III, Part A, of the HEA.
``Correspondence course'' and ``telecommunications course.'' The
definition of a telecommunications course essentially restates the
statutory definition contained in section 484(m)(4) of the HEA. As
provided in section 484(m)(1) of the HEA, as a general rule a
telecommunications course is not considered a correspondence course.
However, as further indicated in that section, a telecommunications
course offered at an institution would be considered a correspondence
course if the sum of telecommunications courses and correspondence
courses offered by the institution equals or exceeds 50 percent of the
total courses offered at the institution.
In addition, as reflected in section 484(m)(4) of the HEA, a home
study course that is offered by an institution through video cassette
or video disc recordings in an award year would qualify as a
telecommunications course rather than a correspondence course only if
the institution also delivers the instruction on the cassettes or discs
to students in person, i.e., to students physically attending classes
at the institution, during that same award year.
If a course is part residential and part correspondence, the
Secretary considers the course to be a correspondence course. This
straightforward interpretation eliminates the need for the Secretary to
address all the troublesome issues involving the quantity of education
that an institution claims to provide in a correspondence program.
``Educational program.'' Under the HEA, a community college may
qualify as an eligible institution of higher education if it offers a
two-year educational program that is acceptable for full credit toward
a bachelor's degree at a four-year institution. Therefore, the
Secretary wishes to clarify that under the definition of an educational
program, which requires that such a program lead to a degree,
certificate, or other educational credential, the Secretary considers
that a transcript that a student receives for successfully completing
the two-year program is a recognized educational credential.
``Incarcerated student.'' The Secretary proposes to define this
term to mean a student who is confined in a correctional facility.
However, the Secretary proposes that students who are in less formal
arrangements, such as half-way houses, home detention, or sentenced to
serve only weekends, would not be considered incarcerated.
(Incarcerated students have limited costs of attendance under the Title
IV, HEA programs, they are ineligible to receive loans under Title IV
of the HEA, their enrollment may affect the eligibility of an
institution if more than 25 percent of that institution's enrollment
consists of incarcerated students, and certain incarcerated students
are ineligible for Federal Pell Grants.)
In general, if incarcerated students attend an institution of
higher education, they attend under a specific arrangement between the
institution and the facility in which they are incarcerated. Thus,
institutions are aware of the identity and number of enrolled
incarcerated students. By being so aware, institutions will be able to
abide by the limitations imposed on those students when awarding Title
IV, HEA program funds, and the institutions themselves will be able to
avoid becoming ineligible as a result of admitting too many
incarcerated students.
By defining incarcerated students to exclude students in halfway
houses and home detention, or serving weekend sentences, the admission
of those students would not affect an institution's eligibility, and
the students would not be subject to the special conditions described
above. Thus, the Secretary's proposed definition would eliminate a
burden on institutions of identifying these students as incarcerated
students and would allow the students access to Federal Pell Grant
funds and loans under Title IV of the HEA. However, if an institution
is aware that a student is living in a halfway house, is under home
detention or is serving a weekend sentence, and believes it is
inappropriate for that student to obtain a FFEL program loan, the
institution is free to refrain from certifying the FFEL program
application of the student.
``One-academic-year training program.'' The Secretary proposes to
revise the definition of a ``one-year training program'' to be
consistent with the definition of an ``academic year'' in section
481(d) of the HEA. Under the statutory definition, an academic year
must include at least ``30 weeks of instructional time.'' The Secretary
will more fully define an ``academic year'' in proposed regulations to
be published shortly after these regulations.
``Recognized equivalent of a high school diploma.'' Under the
Secretary's current policy, this term includes (1) the academic
transcript of a student who has successfully completed at least a two-
year program that is acceptable for full credit toward a bachelor's
degree; or (2) documentation that a student has excelled academically
in high school and has met the formalized, written admission policies
of the institution. This latter criterion addresses the ``academically
gifted'' early admission student at a college or university. The
Secretary proposes to amend the regulatory definition of a recognized
equivalent of a high school diploma to include those criteria. Based on
negotiated rulemaking, the Secretary is considering requiring that a
student be in at least the upper quartile of his or her high school
class to have ``excelled academically in high school''.
Section 600.3 Special Conditions
The Secretary proposes to delete this section because it is no
longer needed. The requirements contained in paragraphs (a) and (b) are
no longer needed because institutions offering only correspondence
courses are no longer eligible institutions. The requirement that an
institution be legally authorized to provide postsecondary education in
the State in which it is physically located is now contained in
Secs. 600.4, 600.5, and 600.6.
The Secretary proposes to delete paragraph (c)(1) because that
paragraph restates the requirement in section 1201(a)(2) of the HEA,
i.e. an institution must be legally authorized to provide postsecondary
education in its State, that is made applicable to proprietary
institutions of higher education under section 481(b)(2) of the HEA,
and made applicable to postsecondary vocational institutions by section
481(c)(2) of the HEA. Institutions are required to abide by those
statutory requirements regardless of whether they are repeated in
regulations. Thus, the Secretary wishes to reiterate that it is the
Secretary's view that if the State in which an institution is
physically located requires an institution to provide its programs in
clock hours in order to be legally authorized to provide postsecondary
education in that State, that institution satisfies section 1201(a)(2)
of the HEA only if it provides its programs in clock hours. The
elimination of Sec. 600.3(c)(1) does not affect that result.
The Secretary proposes to delete paragraph (d)(1) in view of the
regulations published in the Federal Register of July 23, 1993 (58 FR
39618-39623) that established a relationship between credit hours and
clock hours for Title IV, HEA program purposes. The Secretary proposes
to delete paragraphs (c)(2) and (d)(2) because ``vocational schools''
are no longer eligible institutions under the HEA.
Section 600.4 Institution of Higher Education
Section 496(e) of the HEA provides that the Secretary may not
recognize the accreditation or preaccreditation of an institution
unless the institution agrees to submit any dispute involving the final
denial, withdrawal, or termination of its accreditation to arbitration
before initiating any other legal action. The Secretary, in this
section and Secs. 600.5 and 600.6, proposes that the referenced
arbitration be binding arbitration so that any legal action after
arbitration would be limited to whether the arbitrator's decision was
arbitrary or capricious. The Secretary believes that this approach best
carries out the purpose of section 496(e) by limiting, to the maximum
extent possible, litigation in this area. This same provision is also
included in Secs. 600.5 and 600.6.
The Higher Education Amendments of 1992 removed the transfer-of-
credit alternative to accreditation from the definition of an
institution of higher education in section 1201(a) of the HEA. However,
section 2(n) of the Higher Education Technical Amendments of 1993
provides that unaccredited institutions that lost their institutional
eligiblity because the transfer-of-credit alternative was removed from
section 1201(a) of the HEA may regain that institutional eligibility,
for a limited time, provided they meet certain conditions. Because
section 2(n) affects only a dozen institutions and the provision for
regaining eligibility is only temporary, the Secretary proposes to
remove the references to the transfer-of-credit alternative to
accreditation in this section. Under section 2(n), an unaccredited
institution that satisfied the transfer-of-credit alternative to
accreditation on July 22, 1992 will be considered to meet the
requirements of section 1201(a)(5) of the HEA (concerning accreditation
or preaccreditation) if--
(1) By February 18, 1994, the institution has applied for
accreditation to a nationally recognized accrediting agency or
association;
(2) By December 20, 1995, the institution is fully accredited by
that accrediting agency or association or, if not so fully accredited,
is preaccredited by that agency or association if that agency or
association has been recognized by the Secretary to grant
preaccreditation status; and
(3) The institution otherwise satisfies the requirements of section
1201 (a)(1) through (a)(4).
The Higher Education Technical Amendments of 1991 (Pub. L. 102-26,
enacted on April 9, 1991) amended the requirements for admitting
students who do not have a high school diploma or its recognized
equivalent. As a result of Public Law 102-26, to maintain its
eligibility an institution is no longer required to demonstrate that a
student who does not possess a high school diploma or its recognized
equivalent has met certain requirements. Any references to these
previous requirements have been removed from this section and also from
Secs. 600.5 and 600.6.
Currently, the regulations provide that an institution is not
eligible to participate in the Part B loan programs if the institution
uses or employs commissioned salespersons to promote the availability
of Part B loan program loans at that institution. The Higher Education
Amendments of 1992 added several provisions to the institutional
program participation agreement. One of these provisions is that, with
the exception of recruiting foreign students residing in foreign
countries who are not eligible for Title IV, HEA program assistance, an
institution may not pay a commission, bonus, or other incentive payment
based directly or indirectly on success in securing enrollments or
financial aid to a person or entity engaged in recruiting, admission,
or making decisions regarding student financial assistance.
As a result of this new program participation agreement requirement
(which is broader in nature than the provision in current regulations),
the Secretary proposes to remove all references in this section to
commissioned salespersons in the current regulations. Instead,
provisions pertaining to the use of commissioned salespersons will be
proposed when the Secretary publishes, shortly after these proposed
regulations, a notice of proposed rulemaking for the Student Assistance
General Provisions regulations that deal with the program participation
agreement.
Section 600.5 Proprietary Institution of Higher Education
The statute requires that in order for an educational institution
to qualify as a proprietary institution of higher education, it must
have been in existence for at least two years. Under current
regulations, the Secretary considers an institution to have been in
existence for two years only if it has been legally authorized to
provide, and has provided, during the 24 months (except for normal
vacation periods) preceding the date of application for eligibility, a
continuous training program to prepare students for gainful employment
in a recognized occupation. The Secretary is proposing to make two
changes to this provision. Conforming proposals are also included in
Secs. 600.6 and 600.7.
Under the first proposed change, during the two-year period
preceding the institution's date of application, the institution will
not be penalized if it failed to provide training because it
temporarily closed due to a natural disaster that affected the
institution or its students. This proposed change represents the
Secretary's current policy.
The purpose of the two-year rule is to have an institution
establish that it is a viable institution that offers quality
educational programs for which students will pay their own money before
students can receive Title IV, HEA Program funds to enroll in those
programs. The Secretary believes that this purpose is strengthened if
the programs that the institution offers when it applies for
institutional eligibility are substantially the same as the programs
that the institution offered during the preceding two-year period. The
Secretary further believes that this purpose is not served if an
institution merely offers one very short program for two years and then
applies for institutional eligibility offering a host of much longer
and substantially different programs. Therefore, under the second
proposed change, the Secretary has proposed that to satisfy the two-
year rule, an institution must offer over the two-year period a
training program that is substantially the same in subject matter and
length of program as the training program it offers at the time of
application.
Section 481(b)(6) of the HEA adds a new eligibility criterion to
the definition of a proprietary institution of higher education. That
section requires that a proprietary institution must derive at least
fifteen percent of its revenues from non-Title IV, HEA program funds.
Put another way, the section prohibits a proprietary institution of
higher education from deriving more than 85 percent of its revenues
from Title IV, HEA program funds. Using this latter approach, the
Secretary proposes the fraction contained in Sec. 600.5(d)(1) to
measure this criterion, i.e., the ``85 percent rule.''
In proposing this rule, the Secretary had to interpret the term
``revenue.'' In general, at least three interpretations are possible.
One interpretation would limit revenues to those funds received by the
institution from tuition and fees; the second would allow an
institution to include revenues received by the institution from any
source for any purpose; the third would limit revenues to tuition and
fees plus revenues from other activities carried out by the institution
that are necessary to the education or training programs offered by the
institution.
These three interpretations are illustrated in the following
example. A cosmetology institution owns several beauty salons. In one
of the salons, students perform all the hair cutting as part of their
program of training. Under the first interpretation, the only revenues
that the institution could count would be the tuition and fees it
charged its students. Under the second interpretation, the institution
could count all revenues it received from all its beauty salons plus
the tuition and fees it charged to its students. Under the third
interpretation, the institution could count the tuition and fees it
charged plus revenues it received from the one beauty salon at which
the students performed the service.
The Secretary believes that the purpose of the new statutory
criterion is to require proprietary institutions to attract students
based upon the quality of their programs, not solely because the
institutions offer Federal student financial assistance. Thus, under
the statute, these institutions must attract students who will pay for
their programs with funds other than Title IV, HEA program funds. On
the other hand, the Secretary recognizes that many institutions,
because of their locations, provide educational opportunities to
students in low-income areas who cannot attend postsecondary education
without Title IV, HEA program funds. The Secretary considered these two
factors, as well as the fact that the criterion relates to whether an
institution qualifies as an educational institution, in selecting his
proposed interpretation of the term ``revenue.''
The Secretary believes that counting only the income received from
students' tuition and fees is too limiting; on the other hand, the
Secretary believes it is inappropriate to count as revenues income from
businesses that are owned and operated by the institution, regardless
of the relationship between the educational institution and the
businesses. The Secretary chose the third interpretation because the
permitted revenues generated by the institution relate to the purpose
of the institution, providing training to students, and are generated
as a necessary part of that training. The Secretary recognizes that the
third interpretation will make the rule more difficult to administer
because it will be necessary for an institution to determine which of
its revenue-producing activities are ``necessary'' for its students'
education or training.
In proposed Sec. 600.5(d)(2)(vi), the Secretary has listed criteria
that would have to be satisfied to make a determination that activities
are necessary for students' education or training. Examples of revenue-
producing activities provided by an institution that are necessary for
its students' education or training are provided below:
Revenues produced by a restaurant that is owned and
operated by a culinary institution where the institution's students
purchase the food, cook the meals, or wait on the tables.
Revenues produced by a theater that is owned and operated
by an institution that provides training in acting, music, or dance
where the artistic endeavors that produce the revenues are performed by
the institution's students or where the theater is run by the
institution's students.
Revenues produced by an auto mechanic shop that is owned
and operated by an institution providing auto mechanic training where
the institution's students repair vehicles.
To avoid inappropriate manipulation of information under the 85
percent rule, the Secretary proposes special rules regarding the
calculation of the correct percentage. Thus, Title IV, HEA program
funds provided to a student would be considered to be used to pay that
student's institutional charges regardless of whether the institution
credits the student's account with those funds or provides those funds
directly to the student. Of course, Title IV, HEA program funds would
be considered to satisfy a student's institutional charges only to the
extent of those charges. Thus, if total institutional charges are
$5,000, and the student received $6,000 of Title IV, HEA program funds,
only $5,000 would be considered to be used to satisfy institutional
charges. In addition, the Title IV, HEA program funds included in the
numerator and the revenue described in the denominator would not
include any refunds paid to or on behalf of students under the
institution's refund policy since the institution does not have access
to these funds.
The Secretary proposes two exceptions to the first rule. The
Secretary wishes to encourage proprietary institutions to obtain non-
Federal, non-loan student aid funds from independent outside sources.
As a result, under the first exception, the Secretary would not
consider that Title IV, HEA program funds were used to satisfy
institutional charges to the extent that those charges were satisfied
by grant funds received from non-Federal public agencies or from
private sources that are independent of the institution.
For example, if total institutional charges are $5,000, and the
student received $5,000 of Title IV, HEA program funds and a $1,000
scholarship from a local business, only $4,000 of the Title IV, HEA
program funds would be considered to be used to satisfy institutional
charges.
Under the second exception, the Secretary proposes that Federal
Work-Study (FWS) and State Student Incentive Grant (SSIG) program funds
not be counted as Title IV, HEA program funds. The Secretary proposes
to exclude FWS Program funds because (1) the Federal share of FWS
Program payments to students must be paid directly to the student and
cannot be applied to a student's account for institutional charges; (2)
not all FWS Program earnings are necessarily applied to a student's
cost of attendance, i.e., there may be job-related costs; and (3) FWS
Program earnings are derived from Federal, institutional, and other
sources. The Secretary proposes to exclude SSIG Program funds because a
significant portion of SSIG Program awards come from State funds, and
in many cases, an institution will not be able to determine the portion
that comes from Federal sources.
Finally, the Secretary proposes to determine whether an institution
satisfies the 85 percent rule, as well as the requirements contained in
Sec. 600.7(a)(1)(i), by evaluating an institution over a period of time
rather than at one particular point in time. Title IV, HEA program
funds, other than FFEL program funds, are generally measured over an
award year (July 1 of one year through June 30 of the next year). Thus,
with regard to the numerator of the fraction contained in
Sec. 600.5(d)(1), the Title IV, HEA program funds that would have to be
reported are those funds that were used to pay institutional charges
over a complete award year.
Under accounting principles, revenues received by an institution
are reported on a ``financial statement'' that is prepared on a fiscal
year basis. Therefore, in order to audit the revenue that an
institution includes in the denominator of the fraction in
Sec. 600.5(d)(1), it is necessary to have those revenues reported on a
fiscal year basis.
The Secretary proposes not to require an institution to change its
fiscal year to coincide with an award year. As a result, if an
institution's fiscal year is not on a July 1 to June 30 basis, and the
institution chooses not to change its fiscal year, the reporting period
for the numerator in Sec. 600.5(d)(1) would not be same as the
reporting period for the denominator. Consequently, the Secretary
proposes special rules to address this possibility.
Each year, an institution would have to determine the revenues it
received for its latest fiscal year, and would have to determine the
Title IV, HEA program funds it received for institutional charges for
the award year that most closely corresponds to that fiscal year. For
example, if an institution's fiscal year runs from October 1, 1993
through September 30, 1994, that fiscal year overlaps two award years:
October 1, 1993 through June 30, 1994 is in the 1993-94 award year, and
July 1, 1994 through September 30, 1994 is in the 1994-95 award year.
Since nine months of the institution's fiscal year are in the 1993-94
award year, that is the award year that would be used to determine the
amount in the numerator. Moreover, the institution would have to
determine the Title IV, HEA program funds that were used to pay
institutional charges for that entire award year, including the period
of July 1, 1993 to September 30, 1993. Similarly, if an institution's
fiscal year runs from May 1, 1994 through April 30, 1995, the
institution would use the Title IV, HEA program funds it received
during the 1994-95 award year because 10 months of that award year,
July 1, 1994 through April 30, 1995 fell in that institution's fiscal
year.
If the institution's fiscal year is January through December, the
fiscal year would fall equally into two award years, i.e., a fiscal
year of January 1, 1993 through December 31, 1993 would have six months
in the 1992-93 award year (January 1, 1993 through June 30, 1993) and
six months in the 1993-94 award year (July 1, 1993 through December 31,
1993). In such a case, the Secretary intends the institution to
initially elect to be counted in either the earlier or later award
year, and that election would be permanent for future years.
The Secretary also proposes reporting requirements to accommodate
the different reporting periods. In the first example where the
institution's fiscal year runs from October 1, 1993 through September
30, 1994, the appropriate award year, 1993-94, would be completed
before the institution's fiscal year. Under this circumstance, the
Secretary proposes that the institution would have to report to the
Secretary within 60 days from the end of its fiscal year, e.g.,
November 29, 1994, if it derived more than 85 percent of its revenues
from Title IV, HEA program funds. A 60-day reporting period would be
allowed in this instance to provide time for the institution to submit
an audited financial statement.
In the second example, where the institution's fiscal year runs
from May 1, 1994 through April 30, 1995, the fiscal year would be
completed before the award year was completed. Under this circumstance,
the Secretary proposes that the institution would have to report to the
Secretary within 31 days from the end of the relevant award year i.e.,
July 31, 1995, if it derived more than 85 percent of its revenues from
Title IV, HEA program funds. As institutions are tracking their use of
Title IV funds throughout the award year, they should be prepared to
have year-end data available shortly after the end of the award year.
An institution that determines that its Title IV, HEA Program
revenues did not exceed 85 percent of its revenues for the relevant
periods need not report that information to the Secretary. However, it
must have the certified public accountant who performs its annual
audited financial statement certify to the accuracy of the information
used in that calculation and the calculation itself, and have the
accountant submit that certification to ED with the audited financial
statement.
Under Sec. 600.41, Loss of eligibility, the Secretary proposes that
if an institution derived more than 85 percent of its revenues from
Title IV, HEA program funds, it would become ineligible on the last day
of the award year used in the institution's calculation, if the award
year is completed after the fiscal year used in that calculation. The
institution would become ineligible on the last day of the fiscal year
used in that calculation if the award year used in that calculation was
completed on or before the fiscal year. Thus, in the first example, the
loss of eligibility would be effective on September 30, 1994, while in
the second example, the loss of eligibility would be effective on June
30, 1995. As a result, because the institution would generally be
considered eligible until the end of the applicable award or fiscal
year, the institution would not be liable for the Title IV, HEA program
funds it disbursed or delivered during that year. However, the
Secretary expects an institution to keep track of its revenues at all
times. Therefore, the institution would be liable for the Title IV, HEA
program funds it disbursed or delivered after the relevant award or
fiscal year.
The Secretary proposes that if an institution loses its eligibility
as a result of failing to satisfy the 85 percent rule, to regain its
eligibility it would have to demonstrate that it satisfied all the
relevant eligibility requirements for a complete award year if it
became ineligible on the last day of an award year, or for a complete
fiscal year if it became ineligible on the last day of its fiscal year.
The Secretary proposes that an institution initially self-report
that it derived more than 85 percent of its revenues from Title IV, HEA
program funds. If the Secretary determines that an institution made
little or no effort to comply with this requirement over the reporting
period, the Secretary anticipates imposing a fine on the institution.
If the institution does not report that its Title IV, HEA program
revenues exceeded 85 percent of its revenues for the relevant period,
and the Secretary learns of this situation when the audited financial
statement is submitted or through other means, the Secretary
anticipates terminating the institution's eligibility and imposing a
fine on the institution. The Secretary requests comments on the manner
in which the fine amount should be determined, including whether the
fine should equal the Title IV, HEA Program funds the institution
received after the date it should have notified the Secretary that the
Title IV, HEA program funds exceeded 85 percent of its revenues.
Section 600.7 Conditions of Institutional Ineligibility
Section 481(a)(3) of the HEA provides that an otherwise eligible
institution loses that eligibility if certain conditions are met. One
of those conditions relates to the type of courses that the institution
offers. The other three conditions relate to the type of students the
institution admits.
With regard to the first condition, an otherwise eligible
institution loses that eligibility if more than 50 percent of its
courses are correspondence courses. With regard to the latter three
conditions, an otherwise eligible institution loses its eligibility if
50 percent or more of its students are enrolled in correspondence
courses, 25 percent or more of its students are incarcerated students,
or, for an institution that does not offer programs for which at least
an associate or bachelor's degree is offered, 50 percent or more of its
students are ``ability to benefit'' students. However, if an
institution satisfies the provisions of section 521(4)(C) of the
Perkins Act, it does not lose its eligibility if more than 50 percent
of its courses are correspondence courses or if 50 percent or more of
the students are correspondence students.
As indicated in the discussion regarding the 85 percent rule for
proprietary institutions, the Secretary proposes to determine whether
an institution becomes ineligible under these conditions by evaluating
an institution over a period of time rather than at one particular
point in time. The period of time the Secretary proposes for these
additional conditions is a complete award year. Moreover, as with the
85 percent rule for proprietary institutions, institutions would be
required to report to the Secretary if these conditions rendered them
ineligible. Furthermore, each institution's compliance with these
provisions would be confirmed through the institution's required
compliance audit.
The Secretary proposes that institutions report to the Secretary by
July 31 following the end of each award year if they have failed to
meet one of the conditions listed in this section. For purposes of
these conditions, if as a result of an institution's calculations, any
of the resulting percentages is within 10 percent of the applicable
percentage, the institution would have to have performed, for the
applicable award year or fiscal year, a financial and compliance audit
of its Title IV, HEA programs. The certified public accountant who
prepares the audit would have to certify the accuracy of the
institution's calculations. The institution would have to retain the
report of that audit and all relevant supporting documentation in
accordance with 34 CFR 668.23(h) (governing the establishment and
maintenance of an institution's records). The institution would only
have to submit the report to the Secretary if the certified public
accountant determined that the institution had failed to meet any of
the allowable percentages.
If an institution loses its eligibility under one of these
conditions, to regain its eligibility it would have to demonstrate that
it did not fall within one of these conditions for a subsequent
complete award year. The institution would also have to demonstrate
that it has appropriately revised its administrative policies and
procedures to prevent the institution from meeting one of these
conditions in the future.
If an institution becomes ineligible as a result of one of the
conditions in this section, the Secretary proposes that the date of
ineligibility be the last day of the award year for which the
calculation resulting in that condition is used. As a result, the
institution would not generally be liable for the Title IV, HEA program
funds it disbursed or delivered during the applicable award year but it
would be responsible for any funds it disbursed or delivered during any
subsequent award year. Furthermore, the Secretary anticipates imposing
a fine on the institution if it is determined that the institution made
no or little effort to comply with these provisions during the relevant
award year.
With regard to whether more than 50 percent of an institution's
courses are correspondence courses, the Secretary proposes special
rules dealing with telecommunications courses and the number of courses
an institution offers. The rule dealing with telecommunications courses
is derived from section 484(m)(1) of the HEA, and provides that if the
sum of correspondence and telecommunications courses equals or exceeds
50 percent of the total courses offered by the institution for an award
year, the telecommunications courses would be considered correspondence
courses.
As a result of the 1993 Technical Amendments, the Secretary may
waive the requirement that an institution may not have 50 percent or
more of its students enrolled in correspondence students, for an
institution that offers a 2-year associate-degree or 4-year bachelor's-
degree program or both, for good cause. The Secretary solicits comments
from the public as to what should be considered ``good cause''.
With regard to the counting of students, the Secretary proposes
that institutions should count only ``regular students,'' and should
count those students on the basis of a ``head count,'' rather than on
the basis of full-time equivalency. Thus, if an institution enrolls 500
regular full-time students and 500 regular half-time students, the
number of regular students considered enrolled would be 1,000.
Moreover, the Secretary proposes that institutions count a student only
once during an award year regardless of the number of times he or she
enrolls or reenrolls during that period.
Section 481(a)(3)(C) of the HEA authorizes the Secretary to waive
the 25 percent incarcerated student provision for public or nonprofit
private institutions that offer two- or four-year programs that result
in an associate or bachelor's degree. The Secretary proposes to
exercise this waiver authority under the following circumstances: If
the institution requesting the waiver only offers two- or four-year
programs leading to an associate, bachelor's or more advanced degree,
the Secretary would waive the ``incarcerated student'' provision for
the entire institution. However, based on negotiated rulemaking, if the
institution also offers other educational programs, the Secretary would
grant the waiver for the two- or four-year programs that result in
associate, bachelor's, or more advanced degrees, but would grant a
waiver for those other educational programs only if the incarcerated
students enrolled in those other programs have at least a 50 percent
completion rate. The Secretary proposes a formula for calculating that
completion rate in Sec. 600.7(d)(1)(iii).
Section 481(a)(3)(D) of the HEA, as amended by the Higher Education
Technical Amendments of 1993, allows the Secretary to waive the
limitation on the percentage of students without a high school diploma
or its recognized equivalent enrolled at a nondegree institution if the
institution is a nonprofit institution that demonstrates to the
satisfaction of the Secretary that it exceeds the limitation because it
serves, through contracts with Federal, State, or local government
agencies, significant numbers of those students. The Secretary requests
comments regarding the conditions under which the Secretary will grant
this waiver. Issues for which comments are requested are: the purpose
of the referenced contracts, what constitutes a ``significant'' number
of students, and the duration of a waiver.
Section 481(a)(4) of the HEA provides that an institution loses its
eligibility if it files for bankruptcy, or if its owner or chief
executive officer is convicted of or pleads guilty to a crime involving
the acquisition, use, or expenditure of Title IV, HEA program funds, or
has been judicially determined to have committed fraud involving Title
IV, HEA program funds.
With regard to bankruptcy, the Secretary proposes to define a
filing institution for purposes of this provision to include--(1) any
entity affiliated with the institution that seeks protection in a
bankruptcy court against an actual or prospective action against the
institution by the Secretary, a State, an accrediting agency or a
guaranty agency under the FFEL programs; and (2) any entity whose
resources were provided to the Secretary to enable the Secretary to
certify that the institution was financially responsible and
administratively capable. The Secretary proposes this expansive
definition of a filing institution to prevent an institution from
indirectly obtaining bankruptcy protection while avoiding the
consequences under the HEA of filing for bankruptcy.
Section 600.8 Treatment of a Branch Campus
Under section 498(j) of the HEA, as amended by the 1993 Technical
Amendments, the Secretary is charged with defining a ``branch campus.''
Moreover, under that section, a branch campus has to be certified by
the Secretary before it may participate as part of the institution in a
Title IV, HEA program. A branch of a proprietary institution or a
postsecondary vocational institution does not have to satisfy the
``two-year rule.'' However, such a branch campus is required to be in
existence for at least two years before it may seek certification as a
main campus or free-standing institution.
Section 600.9 Written Agreements Between an Eligible Institution and
Another Institution or Organization
This section has been revised to reflect the fact that as of
October 1, 1992, institutions that are not accredited or preaccredited
are no longer eligible institutions under the HEA.
The Secretary proposes to add a provision to this section that
would prevent an eligible institution from entering into an agreement
with an ineligible institution if that ineligible institution had its
eligibility terminated by the Secretary. The purpose of this proposal
is to prevent an institution that has lost its eligibility from
continuing to participate in the Title IV, HEA programs through a
contractual relationship with an eligible institution.
Section 600.10 Date, Extent, Duration, and Consequence of Eligibility
If an institution wishes to participate in the Title IV, HEA
programs, it has to satisfy the definitional requirements of an
eligible institution, and also has to satisfy the standards of
financial responsibility and administrative capability required for
that participation. In the past, the Secretary made separate,
independent determinations with regard to those two requirements.
However, the Secretary is now proposing to merge the procedures under
which those determinations are made.
Accordingly, the Secretary proposes that if an institution applies
to participate in the Title IV, HEA programs, the date on which the
institution would be eligible to so participate is the date on which
the Secretary signs that institution's program participation agreement
required under section 487 of the HEA. The execution of that agreement
represents the Secretary's determination that the institution satisfies
both the institutional eligibility requirements and the standards of
financial responsibility and administrative capability contained in 34
CFR, part 668, subpart B. In other words, on the date that the
Secretary signs an institution's program participation agreement, the
institution becomes both eligible for and a full participant in the
applicable Title IV, HEA programs.
With regard to an HEA program other than a Title IV, HEA program,
the Secretary would continue the current practice of designating an
institution as an eligible institution as of the date the Secretary
receives all the information necessary to make that determination.
However, designation as an eligible institution does not make the
institution a participant in any non-Title IV, HEA program. Instead,
that eligibility designation would continue to mean that the
institution is eligible to apply to participate in non-Title IV, HEA
programs.
Under Sec. 600.10(b) of the current regulations, if an institution
adds a location after the institution received its eligibility
designation from the Secretary, that new location is not included
within that designation. The Secretary proposes to amend that provision
so that a location added after the institution receives its eligibility
designation, or an existing location not previously included in that
designation, would be considered part of that eligibility designation
if the institution offers less than 50 percent of an educational
program at that location.
Under Sec. 600.10(c) of the current regulations, an institution may
add an educational program and have that program included in the
institution's eligibility without notifying the Secretary. Further, the
institution may provide Title IV, HEA program funds to students
enrolled in that program based upon the institution's determination
that the program qualified as an eligible program under applicable
statutes and regulations.
In view of the expanded certification requirements contained in
title IV, part H, subpart 3, of the HEA, the Secretary proposes that,
except as provided below, an institution would have to notify the
Secretary each time it adds an educational program and would have to
have that program designated as an eligible program by the Secretary
before students enrolled in that program may receive Title IV, HEA
program funds.
The exceptions proposed by the Secretary would allow an institution
to add an educational program, without notice and approval by the
Secretary, if (1) the program leads to an associate, bachelor's, or
more advanced degree; or (2) the program prepares students for gainful
employment in the same or related recognized occupation as a previously
designated eligible program at that institution, and the program is at
least 8 semester or trimester hours, 12 quarter hours, or 600 clock
hours. In effect, under these proposed regulations, an institution will
have to get approval from the Secretary only for two types of new
vocational programs. One type includes new vocational programs that are
not similar to the vocational programs already offered by the
institution; the other type includes vocational programs that are
similar to the vocational programs already offered by the institution
but provide between 300 and 599 clock hours of instruction. These
latter programs are the ones described in section 481(e)(2) of the HEA.
For them to become eligible programs, the institution must demonstrate
that students enrolled in those programs have a 70 percent completion
rate and a 70 percent placement rate. Moreover, if the institution can
make those demonstrations, students enrolled in those programs are
eligible only for loans under the FFEL programs. In a future NPRM, the
Secretary will propose regulations implementing the provisions
governing eligible programs as defined in section 481(e) of the HEA,
including provisions governing the calculation of placement and
completion rates.
However, there will be no change with regard to an institution's
incorrect determination of program eligibility. Under this
circumstance, the institution continues to be liable for all Title IV,
HEA program funds received by the institution or its students for
attendance in that ineligible program.
The changes in Sec. 600.10 (d) and (e) will be discussed with the
changes in Sec. 600.20, 600.21, and 600.30.
In accordance with section 498(g) of the HEA, Sec. 600.11(d)
provides that an institution's period of eligibility expires four years
after the date that the Secretary determines that the institution is
eligible, except that the Secretary may specify a shorter period of
time.
The Secretary proposes changes to Sec. 600.21, ``Eligibility
notice,'' that are necessary to reflect these proposed changes.
Section 600.11 Special Rules Regarding Institutional Accreditation
The provisions of this section would paraphrase sections 496(h)
through 496(j) of the HEA. Thus, the Secretary will not recognize an
institution's change of accrediting agency unless the institution
provides the Secretary with a reasonable basis for making the change.
The Secretary also will not recognize accreditation or preaccreditation
by more than one accrediting agency unless the institution demonstrates
the need for multiple accreditation or preaccreditation, and the
institution will have to choose one agency to be used to establish its
eligibility under the HEA.
If an accrediting agency terminates an institution's accreditation
or preaccreditation for cause, or if an institution voluntarily
withdraws its accreditation or preaccreditation under a show cause or
suspension order, the institution will be considered ineligible for 24
months unless the accrediting agency that terminated the institution
for cause or issued the show cause or suspension order rescinds its
action. Finally, if an institution loses its accreditation or
preaccreditation for religious reasons, the Secretary will consider
that institution to be otherwise eligible for an additional 18 months,
during which time the institution may obtain alternative accreditation
or preaccreditation. If the institution does not obtain that
alternative accreditation or preaccreditation during that 18-month
period, it would lose its eligibility under the HEA because of its lack
of accreditation or preaccreditation at the end of that 18-month
period.
The Secretary proposes the 18-month period for obtaining
alternative accreditation or preaccrediation under the religious
provision to be consistent with section 498(h)(2) of the HEA that has a
maximum 18-month period for an institution to obtain alternative
accreditation or preaccreditation when the institution's accrediting
agency has its recognition withdrawn by the Secretary.
Section 600.31 Change in Ownership Resulting in a Change in Control
This section would be revised to reflect changes required by
section 498(i) of the HEA. Section 498(i) of the HEA adopted the list
in current regulations of examples of changes of control. The statute
went one step further, however, in allowing the Secretary to exclude
from treatment as changes of control certain changes, including a
change resulting from the death of an owner of an institution, if the
owner's ownership interest is sold or transferred to either a family
member or a current stockholder in the corporation that owns the
institution. Similarly, the Secretary could exclude from that treatment
a change that the Secretary determines to be the result of a routine
business practice. The Secretary proposes to add these options to these
regulations without elaboration.
Section 498(i) of the HEA requires an eligible institution that
undergoes a change in ownership that results in a change of control to
be treated, for purposes of establishing its eligibility, as if it were
a new institution. A new institution, of course, is not an eligible
institution until it demonstrates to the Secretary that it satisfies
eligibility requirements and has the requisite administrative and
financial capability to merit certification to participate in the Title
IV, HEA programs. Thus, two consequences of the statutory change are
that (1) an eligible institution loses its eligibility and its
participation in any HEA program on the date that the institution
undergoes the change of ownership that results in a change in control,
and (2) the provisions of current Sec. 600.31(a) allowing the
institution to be treated as the same institution, provided that the
new owner satisfies the conditions contained therein, are superseded by
the requirement that an institution may not participate in a Title IV,
HEA program after it undergoes a change in ownership and control until
it reestablishes its eligibility.
Therefore, the Secretary would remove current paragraphs (a)(1)
through (a)(6) of Sec. 600.31, that provide that for an eligible
institution to be treated as the same institution, the new owner has to
agree to be liable, or the old and new owners have to agree to be
jointly and severally liable, for HEA program funds received and
improperly used before the change in ownership resulting in a change of
control.
Also, under those provisions of current regulations, which are
being deleted from these regulations, the new owner is required to
honor all student enrollment contracts in effect before the date of the
change; the institution is required to submit to the Secretary
financial information on the new owner and on the institution for its
most recent complete fiscal year together with other financial
information that the Secretary might request; the institution is
required to provide for the retention of records relevant to the
institution's eligibility for and participation in HEA programs; and,
for an institution that divided into two or more institutions, all
resulting institutions are required to submit jointly to the Secretary
a statement designating the successor to the original institution.
Because under section 498(i) of the HEA an eligible institution
that changes ownership resulting in a change of control must
reestablish its eligibility, that institution would have to satisfy all
the applicable requirements of this part after that change, including
the applicable institutional definition or definitions and the
requirement to reapply for eligibility. Section 498(i) exempts the
institution, in qualifying to meet the definition of a proprietary
institution of higher education or a postsecondary vocational
institution, from the requirement to be in existence for at least two
years, unless the institution was in existence as a branch campus for
less than two years. Paragraph (a)(2) of Sec. 600.31 would reflect the
exemption from the ``two-year rule.''
Because under section 498(i) the eligibility of an institution that
changes ownership resulting in a change of control and the
institution's certification for participation in any Title IV, HEA
program lapse on the date of the change, the Secretary cannot, in
entering into a new program participation agreement with the new owner
for any program, continue to make the agreement effective on the date
of the change, as has been past practice. Under the new law, the
institution becomes eligible and able to participate in a Title IV, HEA
program only when a new agreement is executed after a change of
ownership. In a separate NPRM, the Secretary will propose a revision to
34 CFR 668.12 to reflect this change in the controlling statute.
Current regulations authorize a substantial, if limited, degree of
continued Title IV, HEA funding for students enrolled at an institution
that has undergone a change of ownership resulting in a change of
control. Under 34 CFR 668.25 (governing loss of participation in a
Title IV, HEA program), an institution that does not close may continue
to deliver or disburse Title IV, HEA program funds to students who were
enrolled on the date of the end of participation and who had received
commitments of Title IV, HEA program aid or, under the FFEL programs,
the proceeds of an initial FFEL program disbursement prior to that
date. This provision reduces the negative impact of the lapse of
eligibility that occurs on the date of the change of ownership.
Students enrolled after the change of ownership takes place, however,
qualify for Title IV, HEA program funds only if they are still enrolled
on the date on which the institution receives a new program
participation agreement and regains its status as an eligible,
participating institution.
The Secretary recognizes that it may be desirable to clarify in the
regulations the standards for identifying the ``parent'' of an
institution, and for determining what constitutes a change in
``control,'' within the meaning of section 498(i). The Secretary
invites comment on what those standards should be. Some institutions
owned by publicly traded corporations are already subject to, and
presumably conversant with, Securities and Exchange Commission (SEC)
rules that rely on regulatory definitions of ``control'' and ``parent''
at 17 CFR 230.405; those definitions could prove useful to adopt
generally in these and related Title IV, HEA program regulations. For
those institutions that are owned by closely held corporations, the
Secretary invites comment on whether the Secretary should by regulation
treat the acquisition of, or relinquishment of, a 50 percent ownership
interest in the corporation as the bright line for recognizing a change
of ownership and control of that entity. For those institutions owned
or controlled by corporations that are not closely held or institutions
not owned by publicly traded corporations required to be registered
with the SEC, the Secretary invites comment on whether the acquisition
of, or relinquishment of, a 25 percent interest in the respective
corporations together with control of the corporation should be viewed
as a change of ownership and control within the meaning of this section
of the regulations, in the same way it is viewed in 34 CFR
668.13(d)(3). The Secretary also invites comment on whether a change in
organization from for-profit to nonprofit status should be regarded as
a change of ownership that results in a change of control within the
meaning of section 498(i).
Section 498(h) of the statute authorizes the Secretary to
provisionally certify an institution that undergoes a change in
ownership for participation in a Title IV, HEA program for not more
than three award years. The implementation of that provision will be
discussed in another NPRM. The Secretary notes that in many, if not
most, changes of ownership and control, the successor institution
remains liable for financial obligations incurred under the prior
ownership, whether or not the institution formally assumed or
reaffirmed its liability. This continued obligation follows as a matter
of course in those instances in which the change of ownership occurs in
a transaction such as a sale of a controlling interest in the stock of
the corporation that owns the institution. In those instances in which
the change of ownership occurs through an asset sale by the corporate
owner of the institution, the Secretary regards the purchaser as liable
for the financial obligations associated with the institution prior to
the change of ownership when there is a continuity of management,
personnel, facilities, and general business operations of the
institution through the sale, and the seller effectively ceases
business operations as a school after the sale. However, for purposes
of this discussion, it should be noted that if an institution of sound
reputation undergoes a change of ownership and demonstrates a full and
persuasive commitment to honor all obligations and liabilities incurred
under the prior ownership (including those commitments currently
provided for in paragraph (a) (1) through (6) of Sec. 600.31), the
Secretary may use that provisional certification to permit that
institution to resume participation after an accelerated Department
review.
A consequence of this provisional certification is that an
institution that is certified is not entitled to the procedural
advantages of section 487(c)(1)(F) of the HEA, which would otherwise
apply to administrative action to terminate the participation in a
Title IV, HEA program of the institution. Thus, the Secretary would
provide an opportunity for an institution that has changed ownership to
minimize the interruption between its loss of eligibility and
participation under the old ownership and its new eligibility and
participation under the new ownership in exchange for the institution's
agreeing to be provisionally certified.
Section 600.32 Eligibility of Additional Locations
The Secretary proposes to add to this section the requirement that
an ``acquiring'' institution be responsible for the payment of refunds
of the institution it is acquiring. This addition is consistent with
the treatment of this situation in the Student Assistance General
Provisions regulations, 34 CFR part 668.
Section 600.40 Loss of Eligibility
The Secretary proposes to revise this section to indicate the date
on which an institution loses its eligibility if it loses that
eligibility under the 85 percent rule in Sec. 600.5 or under the
conditions contained in Sec. 600.7(a)(1)(i). The rules for each of
those circumstances were discussed previously and are clearly stated in
the proposed regulations. The section makes explicit that an
institution loses its eligibility as a result of its violation of the
provisions of Sec. 600.5 or Sec. 600.7, regardless of its status on the
date a hearing is held to terminate that eligibility.
Section 600.41 Termination and Emergency Action Proceedings
The Secretary proposes a simpler, faster show-cause procedure for
terminating an institution's eligibility if the loss of eligibility
results from: statutory changes that made a previously eligible
institution ineligible; the loss of accreditation, preaccreditation, or
State legal authority to provide postsecondary education; or the
provisions of Sec. 600.5(a)(8) or Sec. 600.7(a). The Secretary proposes
this simpler, faster show-cause proceeding because neither the facts
nor the law would be in dispute in the proceeding.
If an institution no longer qualifies as an eligible institution
because it is in violation of a statutory or regulatory provision
governing institutional eligibility, or its type of eligibility
designation has been repealed, its status as an eligible institution
would be terminated. Moreover, since the institution itself would
report to the Secretary that it was not in compliance with the
applicable eligibility requirements of Sec. 600.5 or Sec. 600.7, there
would also be no question of fact in dispute. Similarly, there would be
no dispute that an institution lost its State license or its
accreditation since that status would be confirmed by a written
statement by the State or the accrediting agency.
Under the show-cause procedures, the Secretary would inform the
institution that it is no longer an eligible institution and the reason
for that loss of eligibility. If the institution wished to contest that
determination, it would have to provide the Secretary with
documentation supporting its continuing eligibility. In general, the
Secretary would base a final decision on written submissions. The
institution could request an oral evidentiary hearing, but the
Secretary would grant that request only if the institution could
demonstrate that its eligibility could not be decided by written
submissions. However, given the matter at issue in this type of
proceeding, the Secretary anticipates that a request for an oral
evidentiary hearing would rarely be justified.
The 1993 Technical Amendments amended section 487(c)(1)(F). Before
the amendment, the Secretary was required to provide a hearing before
terminating ``the eligibility for any (Title IV, HEA program) of any
otherwise eligible institution * * *'' After the amendment, section
487(c)(1)(F) provides that the Secretary must provide a hearing before
terminating the ``participation in any [Title IV, HEA program] of an
eligible institution * * *'' As a result of this change, the Secretary
requests comments as to whether he should remove an institution's
designation of eligibility solely through a show-cause proceeding.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. The small entities that would be affected by these proposed
regulations are institutions of postsecondary education. These
regulations make a number of modifications and reduce potential abuse
in the Title IV, HEA programs. These changes will result in a minimal
increase in the recordkeeping burden. However, these changes would not
significantly increase institutions' workloads or costs associated with
administering the Title IV, HEA programs and therefore would not have a
significant economic impact on a substantial number of small entities.
Paperwork Reduction Act of 1980
Sections 600.4, 600.5, 600.7, 600.8, 600.10, 600.20, 600.30, and
600.31, contain information collection requirements. As required by the
Paperwork Reduction Act of 1980, the Department of Education will
submit a copy of these sections to the Office of Management and Budget
(OMB) for its review. (44 U.S.C. 3504(h)).
These proposed regulations contain records that would affect
postsecondary institutions that wish to participate in the Title IV,
HEA programs. An estimate of the total annual reporting and
recordkeeping burden that would result from the collection of the
information is 15,900 burden hours for this package.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, OMB, room 3002, New Executive
Office Building, Washington, DC 20503; Attention: Daniel J. Chenok.
Invitation to Comment
Interested persons are invited to submit comments and
recommendations regarding these proposed regulations.
All comments submitted in response to these proposed regulations
will be available for public inspection, during and after the comment
period, in Room 4318, Regional Office Building 3, 7th and D Streets,
SW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m., Monday
through Friday of each week except Federal holidays.
Assessment of Educational Impact
The Secretary particularly requests comments on whether the
proposed regulations in this document would require transmission of
information that is being gathered by or is available from any other
agency or authority of the United States.
List of Subjects in 34 CFR Part 600
Administrative practice and procedure, Colleges and universities,
Consumer protection, Education, Grant programs--education, Loan
programs--education, Reporting and recordkeeping requirements, Student
aid.
Dated: February 2, 1994.
Richard W. Riley,
Secretary of Education.
(Catalog of Federal Domestic Assistance Number: does not apply)
The Secretary proposes to amend title 34 of the Code of Federal
Regulations by revising part 600 to read as follows:
PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT
OF 1965, AS AMENDED
Subpart A--General
Sec.
600.1 Scope.
600.2 Definitions.
600.3 [Reserved].
600.4 Institution of higher education.
600.5 Proprietary institution of higher education.
600.6 Postsecondary vocational institution.
600.7 Conditions of institutional ineligibility.
600.8 Treatment of a branch campus.
600.9 Written agreement between an eligible institution and another
institution or organization.
600.10 Date, extent, duration, and consequence of eligibility.
600.11 Special rules regarding institutional accreditation or
preaccreditation.
Subpart B--Procedures for Establishing Eligibility
600.20 Application procedures.
600.21 Eligibility notification.
Subpart C--Maintaining Eligibility
600.30 Institutional notification requirements.
600.31 Change in ownership resulting in a change of control.
600.32 Eligibility of additional locations.
Subpart D--Loss of Eligibility
600.40 Loss of eligibility.
600.41 Termination and emergency action proceedings.
Authority: 20 U.S.C. 1088, 1091, 1094, 1099b, 1099c, and 1141,
unless otherwise noted.
Subpart A--General
Sec. 600.1 Scope.
This part establishes the rules and procedures that the Secretary
uses to determine whether an educational institution qualifies in whole
or in part as an eligible institution under the Higher Education Act of
1965, as amended (HEA). An eligible institution may apply to
participate in programs authorized by the HEA (HEA programs).
(Authority: 20 U.S.C. 1088, 1094, 1099b, 1099c, and 1141)
Sec. 600.2 Definitions.
The following definitions apply to terms used in this part:
Accredited: The status of public recognition that a nationally
recognized accrediting agency grants to an institution or educational
program that meets certain established qualifications and educational
standards.
Award year: The period of time from July 1 of one year through June
30 of the following year.
Branch Campus: A location of an institution that is geographically
apart and independent of the main campus of the institution. The
Secretary considers a location of an institution to be independent of
the main campus if the location--
(1) Is permanent in nature;
(2) Offers courses in educational programs leading to a degree,
certificate, or other recognized educational credential;
(3) Has its own faculty and administrative or supervisory
organization; and
(4) Has its own budgetary and hiring authority.
Clock hour: A period of time consisting of--
(1) A 50- to 60-minute class, lecture, or recitation in a 60-minute
period;
(2) A 50- to 60-minute faculty-supervised laboratory, shop
training, or internship in a 60-minute period; or
(3) Sixty minutes of preparation in a correspondence course.
Correspondence course: (1) A ``home study'' course provided by an
institution under which the institution provides instructional
materials, including examinations on the materials, to students who are
not physically attending classes at the institution. When students
complete a portion of the instructional materials, the students take
the examinations that relate to that portion of the materials, and
return the examinations to the institution for grading.
(2) A home study course that provides instruction in whole or in
part through the use of video cassettes or video discs in an award year
is a correspondence course unless the institution also delivers the
instruction on the cassette or disc to students physically attending
classes at the institution during the same award year.
(3) A course at an institution that may otherwise satisfy the
definition of a ``telecommunications course'' is a correspondence
course if the sum of telecommunications and other correspondence
courses offered by that institution equals or exceeds 50 percent of the
total courses offered at that institution.
(4) If a course is part correspondence and part residential
training, the Secretary considers the course to be a correspondence
course.
Educational program: A legally authorized postsecondary program of
organized instruction or study that leads to an academic or
professional degree, vocational degree or certificate, or other
recognized educational credential. However, the Secretary does not
consider that an institution provides an educational program if the
institution does not provide instruction itself (including a course of
independent study), but merely gives credit for one or more of the
following: instruction provided by other institutions or schools;
examinations provided by agencies or organizations; or other
accomplishments such as ``life experience.''
Eligible institution: An institution that--(a) Is one or more of
the following:
(1) An institution of higher education, as defined in Sec. 600.4.
(2) A proprietary institution of higher education, as defined in
Sec. 600.5.
(3) A postsecondary vocational institution, as defined in
Sec. 600.6; and
(b) Meets all the other applicable provisions of this part.
Federal Family Education Loan (FFEL) programs: The loan programs
(formerly called the Guaranteed Student Loan (GSL) Programs) authorized
by Title IV-B of the HEA, including the Federal Stafford Loan, Federal
PLUS, Federal Supplemental Loans for Students (Federal SLS), and
Federal Consolidation Loan programs, in which lenders use their own
funds to make loans to enable students or their parents to pay the
costs of the student's attendance at eligible institutions. The Federal
Stafford Loan, Federal PLUS, Federal Supplemental Loans for Students
(Federal SLS), and Federal Consolidation Loan programs are defined in
34 CFR part 668.
Incarcerated student: A student who is serving a criminal sentence
in a Federal, State, or local penitentiary, prison, jail, reformatory,
work farm, or other similar correctional institution. A student is not
considered incarcerated if that student is in a half-way house or home
detention or is sentenced to serve only weekends.
Legally authorized: The legal status granted to an institution
through a charter, license, or other written document issued by the
appropriate agency or official of the State in which the institution is
physically located.
Nationally recognized accrediting agency: An agency or association
that the Secretary recognizes as a reliable authority to determine the
quality of education or training offered by an institution or a program
offered by an institution. The Secretary recognizes these agencies and
associations under the provisions of 34 CFR part 602 and publishes a
list of the recognized agencies in the Federal Register.
Nonprofit institution: An institution that--
(1) Is owned and operated by one or more nonprofit corporations or
associations, no part of the net earnings of which benefits any private
shareholder or individual;
(2) Is legally authorized to operate as a nonprofit organization by
each State in which it is physically located; and
(3) Is determined by the U.S. Internal Revenue Service to be an
organization to which contributions are tax deductible in accordance
with section 501(c)(3) of the Internal Revenue Code.
One-academic-year training program: An educational program that is
at least one academic year as defined under section 481(d)(2) of the
HEA.
Preaccredited: A status that a nationally recognized accrediting
agency or association, recognized by the Secretary to grant that
status, has accorded an unaccredited public or private nonprofit
institution that is progressing toward accreditation within a
reasonable period of time.
Recognized equivalent of a high school diploma:
(1) A General Education Development Certificate (GED);
(2) A State certificate received by a student after the student has
passed a State authorized examination that the State recognizes as the
equivalent of a high school diploma;
(3) An academic transcript of a student who has successfully
completed at least a two-year program that is acceptable for full
credit toward a bachelor's degree; or
(4) For a person who is seeking enrollment in an educational
program that leads to at least an associate degree or its equivalent
and who has not completed high school but who excelled academically in
high school, documentation that the student excelled academically in
high school and has met formalized, written admission policies of the
institution.
Recognized occupation: An occupation that is--
(1) Listed in an ``occupational division'' of the latest edition of
the Dictionary of Occupational Titles, published by the U.S. Department
of Labor; or
(2) Determined by the Secretary in consultation with the Secretary
of Labor to be a recognized occupation.
Regular student: A person who is enrolled or accepted for
enrollment at an institution for the purpose of obtaining a degree,
certificate, or other recognized educational credential offered by that
institution.
Secretary: The Secretary of the Department of Education or an
official or employee of the Department of Education acting for the
Secretary under a delegation of authority.
State: A State of the Union, American Samoa, the Commonwealth of
Puerto Rico, the District of Columbia, Guam, the Trust Territory of the
Pacific Islands (Palau), the Virgin Islands, and the Commonwealth of
the Northern Mariana Islands.
Telecommunications course: A course offered in an award year
principally through the use of television, audio, or computer
transmission, including open broadcast, closed circuit, cable,
microwave, or satellite, audio conferencing, computer conferencing, or
video cassettes or discs. The term does not include a course that is
delivered using video cassettes or disc recordings unless that course
is delivered to students physically attending classes at an institution
providing the course during the same award year. If the course does not
qualify as a telecommunications course it is considered to be a
correspondence course, as provided for in paragraph (3) of the
definition of correspondence course in this section.
Title IV, HEA program: Any of the student financial assistance
programs listed in 34 CFR 668.1(c).
(Authority: 20 U.S.C. 1071 et seq.; 1078-2, 1085, 1088, 1099b,
1099c, and 1141 and 26 U.S.C. 501(c))
Sec. 600.3 [Reserved]
Sec. 600.4 Institution of higher education.
(a) An institution of higher education is a public or private
nonprofit educational institution that--
(1) Is in a State, or for purposes of the Federal Pell Grant,
Federal Supplemental Educational Opportunity Grant, Federal Work-Study,
and Federal TRIO programs may also be located in the Federated State of
Micronesia or the Marshall Islands;
(2) Admits as regular students only persons who--
(i) Have a high school diploma;
(ii) Have the recognized equivalent of a high school diploma; or
(iii) Are beyond the age of compulsory school attendance in the
State in which the institution is physically located;
(3) Is legally authorized to provide an educational program beyond
secondary education in the State in which the institution is physically
located;
(4) Provides an educational program--
(i) For which it awards an associate, baccalaureate, graduate, or
professional degree;
(ii) That is at least a two-academic-year program acceptable for
full credit toward a baccalaureate degree; or
(iii) That is at least a one-academic-year training program that
leads to a certificate, degree, or other recognized educational
credential and prepares students for gainful employment in a recognized
occupation; and
(5) Is--
(i) Accredited or preaccredited; or
(ii) Approved by a State agency listed in the Federal Register in
accordance with 34 CFR part 603, if the institution is a public
postsecondary vocational educational institution that seeks to
participate only in Federal assistance programs.
(b) An institution is physically located in a State if it has a
campus or other instructional site in that State.
(c) The Secretary does not recognize the accreditation or
preaccreditation of an institution unless the institution agrees to
submit any dispute involving the final denial, withdrawal, or
termination of accreditation to binding arbitration before initiating
any other legal action.
(Authority: 20 U.S.C. 1094 and 1141(a))
Sec. 600.5 Proprietary institution of higher education.
(a) A proprietary institution of higher education is an educational
institution that--
(1) Is not a public or private nonprofit educational institution;
(2) Is in a State;
(3) Admits as regular students only persons who--
(i) Have a high school diploma;
(ii) Have the recognized equivalent of a high school diploma; or
(iii) Are beyond the age of compulsory school attendance in the
State in which the institution is physically located;
(4) Is legally authorized to provide an educational program beyond
secondary education in the State in which the institution is physically
located;
(5) Provides an eligible program of training, as defined in 34 CFR
668.8, to prepare students for gainful employment in a recognized
occupation;
(6) Is accredited;
(7) Has been in existence for at least two years; and
(8) Has no more than 85 percent of its revenues derived from Title
IV, HEA program funds, as determined under paragraph (d) of this
section.
(b)(1) The Secretary considers an institution to have been in
existence for two years only if it has been legally authorized to
provide, and has provided, during the 24 months (except for normal
vacation periods and periods when the institution temporarily closes
due to a natural disaster that affects the institution or the
institution's students) preceding the date of application for
eligibility, a continuous training program to prepare students for
gainful employment in a recognized occupation that is substantially the
same in length and subject matter as the educational program it is
currently providing.
(2) In determining whether an applicant institution satisfies the
requirement contained in paragraph (b)(1) of this section, the
Secretary does not count any period during which the applicant
institution was a part of another eligible proprietary institution of
higher education, postsecondary vocational institution, or vocational
school.
(c) An institution is physically located in a State if it has a
campus or other instructional site in that State.
(d)(1) An institution satisfies the requirement contained in
paragraph (a)(8) of this section by examining its revenues under the
following formula:
Title IV, HEA program funds the institution used to satisfy
tuition, fees, and other institutional charges to students.
Revenue generated by the institution from tuition, fees, and
other institutional charges, plus revenue generated by the
institution from other activities conducted by the institution, to
the extent not included in tuition, fees, or other institutional
charges, that are necessary for its students' education or training.
(2) Under the fraction contained in paragraph (d)(1) of this
section--
(i) The revenue included in the denominator is from the
institution's last complete fiscal year;
(ii) The Title IV, HEA program funds included in the numerator are
from the award year that most closely corresponds to the fiscal year
reported in the denominator and do not include State Student Incentive
Grant (SSIG) and Federal Work-Study program funds. (The SSIG and FWS
programs are defined in 34 CFR 668.2);
(iii) The Title IV, HEA program funds in the numerator and the
revenue described in the denominator do not include any refunds paid to
or on behalf of students under the institution's refund policy;
(iv) The amount charged for books, supplies, and equipment is not
included in the numerator or the denominator unless the amount is
included in tuition, fees, or other institutional charges;
(v) With regard to the numerator, any Title IV, HEA program funds
disbursed or delivered to or on behalf of a student shall be presumed
to be used to pay the student's tuition, fees, or other institutional
charges, to the extent that those tuition, fees, and other charges were
not satisfied by grant funds provided by non-Federal public agencies or
private sources independent of the institution, regardless of whether
the institution credits those funds to the student's account or pays
those funds directly to the student; and
(vi) With regard to the denominator, revenue generated by the
institution from other activities conducted by the institution that are
necessary for its students' education or training includes only revenue
for those activities that--
(A) Are conducted on campus or at a facility under the control of
the institution;
(B) Are performed under the supervision of a member of the
institution's faculty; and
(C) Are required to be performed by all students in a specific
educational program at the institution.
(3) Notwithstanding paragraph (d)(2) of this section, for the 1992-
93 award year, the institution may not include in the numerator or
denominator of the fraction contained in paragraph (d)(1) of this
section, the Title IV, HEA program funds it disbursed or delivered to
its students before October 1, 1992.
(e) For purposes of the calculation required in paragraph (a)(8) of
this section, the institution shall substantiate the required
calculations by having the certified public accountant who prepares its
audited financial statement required under 34 CFR 668.23 certify the
accuracy of the institution's calculation, and include that
certification as part of the audited financial statement.
(f) An institution shall notify the Secretary if it fails to
satisfy the requirement contained in paragraph (a)(8) of this section
by the later of--
(1) Sixty days following the end of the fiscal year used in the
fraction contained in paragraph (d) of this section, if the award year
used in the fraction was completed on or before the end of that fiscal
year; or
(2) Thirty-one days following the end of the award year used in the
fraction contained in paragraph (d) of this section, if that award year
was completed after the fiscal year used in the fraction.
(g) If an institution loses its eligibility because it failed to
satisfy the requirement contained in paragraph (a)(8) of this section,
to regain its eligibility it must demonstrate compliance with all
eligibility requirements--
(1) For at least the fiscal year following the fiscal year used in
the fraction contained in paragraph (d) of this section, if the award
year used in that fraction was completed on or before the end of that
fiscal year; or
(2) For at least one award year following the award year used in
the fraction contained in paragraph (d) of this section, if the award
year was completed after the fiscal year used in that fraction.
(h) The Secretary does not recognize the accreditation or
preaccreditation of an institution unless the institution agrees to
submit any dispute involving the final denial, withdrawal, or
termination of accreditation to binding arbitration before initiating
any other legal action.
(Authority: 20 U.S.C. 1088)
Sec. 600.6 Postsecondary vocational institution.
(a) A postsecondary vocational institution is a public or private
nonprofit educational institution that--
(1) Is in a State;
(2) Admits as regular students only persons who--
(i) Have a high school diploma;
(ii) Have the recognized equivalent of a high school diploma; or
(iii) Are beyond the age of compulsory school attendance in the
State in which the institution is physically located;
(3) Is legally authorized to provide an educational program beyond
secondary education in the State in which the institution is physically
located;
(4) Provides an eligible program of training, as defined in 34 CFR
668.8, to prepare students for gainful employment in a recognized
occupation;
(5) Is--
(i) Accredited or preaccredited; or
(ii) Approved by a State agency listed in the Federal Register in
accordance with 34 CFR part 603, if the institution is a public
postsecondary vocational educational institution that seeks to
participate only in Federal assistance programs; and
(6) Has been in existence for at least two years.
(b)(1) The Secretary considers an institution to have been in
existence for two years only if it has been legally authorized to
provide, and has provided, during the 24 months (except for normal
vacation periods and periods when the institution temporarily closes
due to a natural disaster that directly affects the institution or the
institution's students) preceding the date of application for
eligibility, a continuous training program to prepare students for
gainful employment in a recognized occupation that is substantially the
same in length and subject matter as the educational program it is
currently providing.
(2) In determining whether an applicant institution satisfies the
requirement contained in paragraph (b)(1) of this section, the
Secretary--
(i) Counts any period during which the applicant institution
qualified as an eligible institution of higher education;
(ii) Counts any period during which the applicant institution was
part of another eligible institution of higher education, provided that
the applicant institution continues to be part of an eligible
institution of higher education; and
(iii) Does not count any period during which the applicant
institution was a part of another eligible proprietary institution of
higher education or postsecondary vocational institution.
(c) An institution is physically located in a State if it has a
campus or instructional site in that State.
(d) The Secretary does not recognize the accreditation or
preaccreditation of an institution unless the institution agrees to
submit any dispute involving the final denial, withdrawal, or
termination of accreditation to binding arbitration before initiating
any other legal action.
(Authority: 20 U.S.C. 1088 and 1094(c)(3))
Sec. 600.7 Conditions of institutional ineligibility.
(a) General rule. (1) For purposes of Title IV of the HEA, an
educational institution that otherwise satisfies the requirements
contained in Secs. 600.4, 600.5, or 600.6 nevertheless does not qualify
as an eligible institution under this part if--
(i) For its latest complete award year--
(A) More than 50 percent of the institution's courses were
correspondence courses as calculated under paragraph (b) of this
section;
(B) Fifty percent or more of the institution's enrolled regular
students were enrolled in correspondence courses;
(C) Twenty-five percent or more of the institution's regular
enrolled students were incarcerated;
(D) Fifty percent or more of its enrolled regular students had
neither a high school diploma nor the recognized equivalent of a high
school diploma, and the institution did not provide a four-year or two-
year educational program for which it awards a bachelor's degree or
associate degree, respectively;
(ii) The institution, or an affiliate of an institution that has
the power, by contract or ownership interest, to direct or cause the
direction of the management or policies of the institution, files for
bankruptcy; or
(iii) The institution, its owner, or its chief executive officer--
(A) Has pled guilty to, has pled nolo contendere to, or is found
guilty of, a crime involving the acquisition, use, or expenditure of
Title IV, HEA program funds; or
(B) Has been judicially determined to have committed fraud
involving Title IV, HEA program funds.
(2) For purposes of paragraph (a)(1)(ii) of this section--
(i) The institution includes any entity affiliated with the
institution if that entity seeks specific judicial relief in a
bankruptcy court with regard to an action taken or to be taken against
the institution by the Secretary, a State agency, an accrediting
agency, or a lender or guaranty agency under the FFEL programs; and
(ii) The institution includes all the entities whose financial
resources were presented to the Secretary, either through a combined or
consolidated balance sheet or other document, to demonstrate that the
institution was financially responsible and administratively capable
under the standards contained in 34 CFR part 668, subpart B.
(b) Special provisions regarding correspondence courses and
students--(1) Treatment of telecommunications courses. For purposes of
paragraphs (a)(1)(i) (A) and (B) of this section, the Secretary
considers a telecommunications course to be a correspondence course if
the sum of telecommunications courses and other correspondence courses
the institution provided during that award year equaled or exceeded 50
percent of the total number of courses it provided during that year.
(2) Calculating the number of courses. For purposes of paragraphs
(a)(1)(i) (A) and (B) of this section--
(i) A correspondence course may be a complete educational program
offered by correspondence, or one course provided by correspondence in
an on-campus (residential) educational program;
(ii) A course must be considered as being offered once during an
award year regardless of the number of times it is offered during that
year; and
(iii) A course that is offered both on campus and by correspondence
must be considered two courses for the purpose of determining the total
number of courses the institution provided during an award year.
(3) Exception. The provisions contained in paragraphs (a)(1)(i) (A)
and (B) of this section do not apply to an institution that qualifies
as a ``technical institute or vocational school used exclusively or
principally for the provision of vocational education to individuals
who have completed or left high school and who are available for study
in preparation for entering the labor market'' under section 521(4)(C)
of the Carl D. Perkins Vocational and Applied Technology Education Act.
(c) Special provisions regarding incarcerated students--(1)
Exception. The Secretary may waive the prohibition contained in
paragraph (a)(1)(i)(C) of this section, upon the application of an
institution, if the institution is a nonprofit institution that
provides four-year or two-year educational programs for which it awards
bachelor's or associate degrees, respectively.
(2) If the nonprofit institution that applies for a waiver consists
solely of four-year or two-year educational programs for which it
offers bachelor's or associate degrees, respectively, or both types of
programs, the Secretary waives the prohibition contained in paragraph
(a)(1)(i)(C) of this section for the entire institution.
(3) If the nonprofit institution that applies for a waiver does not
consist solely of four-year or two-year educational programs for which
it offers bachelor's or associate degrees, respectively, or both types
of programs, the Secretary waives the prohibition contained in
paragraph (a)(1)(iii) of this section--
(i) For the four-year and two-year programs that lead,
respectively, to bachelor's and associate degrees; and
(ii) For the other programs the institution offers, if the
incarcerated regular students enrolled in those other programs have a
completion rate of 50 percent or greater.
(d) Special provisions for students who do not have a high school
diploma or the recognized equivalent. The Secretary may waive the
limitation contained in paragraph (a)(1)((i)(D) of this section if a
nonprofit institution demonstrates to the satisfaction of the Secretary
that it exceeds that limitation because it serves, through contracts
with Federal, State, or local government agencies, significant numbers
of students who do not have a high school diploma or its recognized
equivalent.
(e) Special provisions. (1) For purposes of paragraph (a)(1)(i) of
this section, when counting regular students, the institution shall--
(i) Count each regular student without regard to the full-time or
part-time nature of the student's attendance (i.e., ``head count''
rather than ``full-time equivalent'');
(ii) Count a regular student once regardless of the number of times
the student enrolls during an award year; and
(iii) Determine the number of regular students who enrolled in the
institution during the relevant award year by--
(A) Calculating the number of regular students who enrolled during
that award year; and
(B) Excluding from the number of students in paragraph
(d)(1)(iii)(A) of this section, the number of regular students who
enrolled but subsequently withdrew or were expelled from the
institution and were entitled to receive a 100 percent refund of their
tuition and fees less any administrative fee that the institution is
permitted to keep under its fair and equitable refund policy;
(2) For the purpose of calculating a completion rate under
paragraph (c)(3)(ii) of this section, the institution shall--
(i) Determine the number of regular incarcerated students who
enrolled in the other programs during the last completed award year;
(ii) Exclude from the number of regular incarcerated students
determined in paragraph (d)(2)(i) of this section, the number of those
students who enrolled but subsequently withdrew or were expelled from
the institution and were entitled to receive a 100 percent refund of
their tuition and fees, less any administrative fee the institution is
permitted to keep under the institution's fair and equitable refund
policy;
(iii) Exclude from the total obtained in paragraph (d)(2)(ii) of
this section, the number of those regular incarcerated students who
remained enrolled in the programs at the end of the applicable award
year; and
(iv) From the total obtained in paragraphs (d)(2)(iii) of this
section, determine the number of regular incarcerated students who
received, during the applicable award year, the degree, certificate, or
other recognized educational credential awarded for successful
completion of the program;
(v) Divide the total obtained in paragraph (d)(2)(iv) of this
section by the total obtained in paragraph (d)(2)(iii) of this section
and multiply by 100.
(3)(i) For purposes of paragraph (a)(1)(i) of this section, the
institution shall substantiate the required calculations by having the
certified public accountant who prepares its audit report required
under 34 CFR 668.23 certify to the accuracy of the institution's
calculations. That certification must be included with the
institution's audit report.
(ii) For purposes of paragraph (a)(1)(i) of this section,
notwithstanding 34 CFR 668.23, as a result of the institution's
calculation, if the resulting percentage is within 10 percent of the
applicable percentage specified in paragraph (a)(1)(i) of this section,
the institution shall have performed for the applicable award year or
fiscal year, a financial and compliance audit of its Title IV, HEA
programs. The certified public accountant who prepares the audit shall
certify the accuracy of the institution's calculation. The institution
shall retain the report of that audit and all relevant supporting
documentation in accordance with 34 CFR 668.23(h) (governing the
establishment and maintenance of an institution's records) but, except
in accordance with paragraph (g) of this section, need not submit the
report to the Secretary.
(f) Notice to the Secretary. An institution shall notify the
Secretary--
(1) By July 31 following the end of an award year if it falls
within one of the prohibitions contained in paragraph (a)(1)(i) of this
section; or
(2) Within 10 days if it falls within one of the prohibitions
contained in paragraphs (a)(1)(ii) or (iii) of this section.
(g) Regaining eligibility. (1) If an institution loses its
eligibility because of one of the prohibitions contained in paragraph
(a)(1)(i) of this section, to regain its eligibility, it must
demonstrate--
(i) Compliance with all eligibility requirements;
(ii) That it did not fall within any of the prohibitions contained
in paragraph (a)(1) of this section for at least one award year; and
(iii) That it changed its administrative policies and practices to
ensure that it will not fall within any of the prohibitions contained
in paragraph (a)(1)(i) of this section.
(2) If an institution loses its eligibility because of one of the
prohibitions contained in paragraphs (a)(1)(ii) or (iii) of this
section, this loss is permanent. The institution's eligibility cannot
be reinstated.
(Authority: 20 U.S.C. 1088 and 1091)
Sec. 600.8 Treatment of a branch campus.
To obtain eligibility under this part, a branch campus of an
institution shall satisfy, in its own right, all the applicable
institutional eligibility requirements except the ``two-year'' rule
contained in Sec. 600.5(a)(7) or 600.6(a)(6).
(Authority: 20 U.S.C. 1099c)
Sec. 600.9 Written agreement between an eligible institution and
another institution or organization.
(a) Without losing its eligibility under this part, an eligible
institution may enter into a written agreement with another institution
or organization under which the latter provides all or a part of the
educational program of students enrolled in the eligible institution
if--
(1) The eligible institution gives credit to students enrolled in
that program on the same basis as if it provided that program itself;
and
(2) The other provisions of this section are satisfied.
(b) If an eligible institution enters into a written agreement with
another eligible institution, there is no limit on the portion of a
student's educational program that may be provided under the agreement.
(c) If an eligible institution enters into an agreement with an
institution or organization that is not an eligible institution--
(1) The ineligible institution or organization may provide up to 25
percent of the educational program of a student enrolled in the
eligible institution; or
(2) The ineligible institution or organization may provide more
than 25 percent but not more than 50 percent of the educational program
of a student enrolled in the eligible institution if--
(i) The eligible institution and the ineligible institution or
organization are not owned or controlled by the same individual,
partnership, or corporation;
(ii) The eligible institution's accrediting agency, or if the
institution is a public postsecondary vocational educational
institution, state agency listed in the Federal Register in accordance
with 34 CFR part 603, specifically determines that the institution's
agreement meets the agency's standards for the contracting out of
educational services; and
(iii) The ineligible institution has not had its eligibility
terminated by the Secretary.
(Authority: 20 U.S.C. 1094)
Sec. 600.10 Date, extent, duration, and consequence of eligibility.
(a) Date of eligibility. (1) If the Secretary determines that an
applicant institution satisfies all the statutory and regulatory
eligibility requirements, the Secretary considers the institution to be
an eligible institution as of the date--
(i) For purposes of participating in any Title IV, HEA program, the
Secretary has signed the institution's program participation agreement
described in 34 CFR part 668, subpart B; and
(ii) For purposes other than participating in any Title IV, HEA
program, the Secretary has received all the information necessary to
make that determination.
(2) If an eligible institution seeks eligibility, for purposes of a
Title IV, HEA program, for a location or educational program not
previously designated eligible, and the Secretary determines that the
location or educational program satisfies all the statutory and
regulatory eligibility requirements, the Secretary considers the
location or program to be eligible to participate in that Title IV, HEA
program as of the date the Secretary certifies that location or program
to so participate.
(b)(1) Extent of eligibility. If the Secretary determines that the
entire applicant institution, including all its locations and all its
educational programs, satisfies the applicable requirements of this
part, the Secretary extends eligibility to all educational programs and
locations identified on the institution's application for eligibility.
(2) If the Secretary determines that only certain educational
programs or certain locations of an applicant institution satisfy the
applicable requirements of this part, the Secretary extends eligibility
only to those educational programs and locations that meet those
requirements and identifies the eligible educational programs and
locations in the eligibility notice sent in accordance with
Sec. 600.21.
(3) Eligibility does not extend to any location that an institution
establishes after it receives its eligibility designation if the
institution provides at least 50 percent of an educational program at
that location.
(c) Subsequent additions of educational programs. (1) Except as
provided in paragraph (c)(2) of this section, if an eligible
institution adds an educational program after it has been designated as
an eligible institution by the Secretary, the institution must apply to
the Secretary to have that additional program designated as an eligible
program of that institution.
(2) An eligible institution that adds an educational program after
it has been designated as an eligible institution by the Secretary does
not have to apply to the Secretary to have that additional program
designated as an eligible program of that institution if the additional
program--
(i) Leads to an associate, baccalaureate, professional or graduate
degree; or
(ii)(A) Prepares students for gainful employment in the same or
related recognized occupation as an educational program that has
previously been designated as an eligible program by the Secretary; and
(B) Is at least 8 semester hours, 12 quarter hours, or 600 clock
hours.
(3) If an institution incorrectly determines under paragraph (a)(2)
of this section that an educational program satisfies the applicable
statutory and regulatory eligibility provisions without applying to the
Secretary for approval, the institution is liable to repay to ED all
the student financial assistance and other ED program funds it or its
students received who were enrolled in that educational program.
(d) Duration of eligibility. (1) If an institution participates in
a Title IV, HEA program, the Secretary's designation of the institution
as an eligible institution under the HEA expires when the institution's
program participation agreement, as described in 34 CFR part 668,
subpart B, expires.
(2) If an institution does not participate in any Title IV, HEA
program, the Secretary's designation of the institution as an eligible
institution under the HEA does not expire as long as the institution
continues to satisfy the statutory and regulatory requirements
governing its eligibility.
(e) Consequence of eligibility. (1) If, as a part of its
institutional eligibility application, an institution indicates that it
wishes to participate in the Title IV, HEA programs and the Secretary
determines that the institution satisfies the applicable statutory and
regulatory requirements governing institutional eligibility, the
Secretary will determine whether the institution satisfies the
standards of administrative capability and financial responsibility
contained in 34 CFR part 668, subpart B.
(2) If, as part of its institutional eligibility application, an
institution indicates that it does not wish to participate in any Title
IV, HEA program and the Secretary determines that the institution
satisfies the applicable statutory and regulatory requirements
governing institutional eligibility, the institution is eligible to
apply to participate in any HEA program listed by the Secretary in the
eligibility notice it receives under Sec. 600.21. However, the
institution is not eligible to participate in those programs, or
receive funds under those programs, merely by virtue of its designation
as an eligible institution under this part.
(Authority: 20 U.S.C. 1088 and 1141)
Sec. 600.11 Special rules regarding institutional accreditation or
preaccreditation.
(a) Change of accrediting agencies. For purposes of
Secs. 600.4(a)(5)(i), 600.5(a)(6), and 600.6(a)(5)(i), the Secretary
does not recognize the accreditation or preaccreditation of an
otherwise eligible institution if that institution is in the process of
changing its accrediting agency, unless the institution provides to the
Secretary--
(1) All materials related to its prior accreditation or
preaccreditation; and
(2) Materials demonstrating reasonable cause for changing its
accrediting agency.
(b) Multiple accreditation. The Secretary does not recognize the
accreditation or preaccreditation of an otherwise eligible institution
if that institution is accredited or preaccredited as an institution by
more than one accrediting agency, unless the institution--
(1) Provides to each such accrediting agency and the Secretary the
reasons for that multiple accreditation or preaccreditation;
(2) Demonstrates to the Secretary reasonable cause for that
multiple accreditation or preaccreditation; and
(3) Designates to the Secretary which agency's accreditation or
preaccreditation the institution uses to establish its eligibility
under this part.
(c) Loss of accreditation or preaccreditation. (1) An institution
may not be considered eligible for 24 months after it has had its
accreditation or preaccreditation withdrawn, revoked, or otherwise
terminated for cause, unless the accrediting agency that took that
action rescinds that action.
(2) An institution may not be considered eligible for 24 months
after it has withdrawn from its accreditation or preaccreditation
voluntarily under a show-cause or suspension order issued by an
accrediting agency, unless that agency rescinds its order.
(d) Religious exception. (1) If an institution loses its
accreditation or preaccreditation, the Secretary permits the
institution to be considered eligible for purposes of complying with
the provisions of Secs. 600.4, 600.5, and 600.6 if the Secretary
determines that its loss of accreditation or preaccreditation--
(i) Is related to the religious mission or affiliation of the
institution; and
(ii) Is not related to its failure to satisfy the accrediting
agency's standards.
(2) If the Secretary permits an unaccredited institution to be
considered eligible under the provisions of paragraph (d)(1) of this
section, the Secretary considers that unaccredited institution to be
eligible for a period sufficient to allow the institution to obtain
alternative accreditation or preaccreditation, except that period may
not exceed 18 months.
(Authority: 20 U.S.C. 1099b)
Subpart B--Procedures for Establishing Eligibility
Sec. 600.20 Application procedures.
(a) An institution that wishes to establish its eligibility to
apply to participate in any program authorized by the HEA must first
apply to the Secretary for a determination that it qualifies as an
eligible institution.
(b) A previously designated eligible institution must apply to the
Secretary for a determination that the institution continues to meet
the standards in this subpart upon the request of the Secretary or if
the institution wishes to--
(1) Continue to be eligible beyond the scheduled expiration of the
institution's current of eligibility designation;
(2) Include in the institution's eligibility--
(i) A branch campus that is not currently included in the
institution's eligibility; or
(ii) A location that is not currently included in the institution's
eligibility, if--
(A) The institution at that location offers 100 percent of an
educational program; or
(B) The institution at that location offers at least 50 percent of
an educational program and the Secretary requires the institution to
apply for eligibility under Sec. 600.30(c)(2);
(3) Continue to be eligible following a change in its name,
location, or address of the institution or continue to include in the
institution's eligibility--
(i) A branch campus that has changed its name, location, or
address; or
(ii) Another location that has changed its name, location, or
address, if--
(A) That location offers 100 percent of an educational program; or
(B) The Secretary requires the institution to apply for eligibility
under Sec. 600.30(c)(2)(ii)(B); or
(4) Reestablish eligibility following a change in ownership that
results in a change in control according to the provisions of
Sec. 600.31.
(c) An institution applying for designation as an eligible
institution shall--
(1) Apply on the form prescribed by the Secretary; and
(2) Provide all the information and documentation requested by the
Secretary to make a determination of its eligibility.
(Authority: 20 U.S.C. 1088 and 1141)
Sec. 600.21 Eligibility notification.
(a) The Secretary notifies an institution in writing--
(1) Whether the applicant institution qualifies in whole or in part
as an eligible institution under the appropriate provisions in
Secs. 600.4, 600.5, 600.6 and 600.7;
(2) Whether the institution is certified to participate in the
Title IV, HEA programs if the institution applied to participate in
those programs; and
(3) Of the HEA programs in which it is eligible to participate, and
the HEA programs for which it is eligible to apply to participate.
(b) If only a portion of the applicant qualifies as an eligible
institution, the Secretary specifies in the notice the locations or
educational programs that qualify as the eligible institution.
(c) If the Secretary receives a notice from an institution as a
result of Sec. 600.30(a)(3), the Secretary--
(1) Notifies the institution that the location is an eligible
location of that institution, identifies the HEA programs in which the
institution may participate without further action, and that the
extension of eligibility and participation is effective on the date
that the Secretary received the institution's notice; or
(2) Notifies the institution that the institution must apply for
eligibility of that location under Sec. 600.20.
(d) In making the determination under paragraph (c) of this
section, the Secretary takes into account the institution's ability
adequately to provide education or training at the location, including
such factors as--
(1) The percentage of an educational program offered at the
location; and
(2) The financial and administrative capability of the institution.
(Authority: 20 U.S.C. 1088, 1099c, and 1141)
Subpart C--Maintaining Eligibility
Sec. 600.30 Institutional notification requirements.
(a) Except as provided in paragraph (b) of this section, an
eligible institution shall notify the Secretary in writing, at an
address specified by the Secretary in a notice published in the Federal
Register, no later than 10 days after the change occurs, of any change
in the following information provided in the institution's eligibility
application:
(1) Its name.
(2) Its address.
(3) The name, number, and address of locations other than the main
campus at which it offers at least 50 percent of an educational program
and the percentages of the educational program that it provides at each
location.
(4) The way the institution measures program length (e.g. a change
from clock hours to credit hours).
(5) Its ownership, if that ownership change results in a change in
control of the institution.
(6) Its status, as a proprietary, nonprofit, or public institution.
(7) The exercise of a person's substantial control over the
institution, if the person did not previously exercise that control.
The Secretary generally considers a person to exercise substantial
control over an institution if the person--
(i) Directly or indirectly holds at least a 25 percent ownership
interest in the institution;
(ii) Holds, together with another member or other members of his or
her family, at least a 25 percent ownership interest in the
institution;
(iii) Represents, either alone or together with other persons,
under a voting trust, power of attorney, proxy, or similar agreement
one or more persons who hold either individually or in combination with
the other persons represented or the person representing them, at least
a 25 percent ownership in the institution;
(iv) Is a member of the board of directors, the chief executive
officer, or other executive officer of--
(A) The institution; or
(B) An entity that holds at least a 25 percent ownership interest
in the institution.
(b) An eligible institution that is owned by a publicly traded
corporation shall notify the Secretary in writing, at an address
specified by the Secretary in a notice published in the Federal
Register, of any change in the information that is described in
paragraphs (a) (5) through (7) of this section at the same time that
the institution notifies the institution's accrediting agency, but no
later than 10 days after the corporation learns of the change.
(c) The Secretary notifies the institution in writing if any
reported change affects the institution's eligibility, and the
effective date of that change.
(d) The institution's failure to inform the Secretary of the
information described in paragraph (a) of this section within the time
period stated in that paragraph may result in adverse action against
it, including its loss of eligibility.
(e)(1) For the purposes of this section, an ownership interest is a
share of the legal or beneficial ownership or control of, or a right to
share in the proceeds of the operation of, an institution or
institution's parent corporation.
(2) The term ownership interest includes, but is not limited to--
(i) An interest as tenant in common, joint tenant, or tenant by the
entireties;
(ii) A partnership; and
(iii) An interest in a trust.
(3) The term ownership interest does not include any share of the
ownership or control of, or any right to share in the proceeds of the
operation of--
(i) A mutual fund that is regularly and publicly traded;
(ii) An institutional investor; or
(iii) A profit-sharing plan, provided that all employees are
covered by the plan.
(f) For the purposes of this section, the Secretary considers a
member of a person's family to be a parent, sibling, spouse or child;
spouse's parent or sibling; or sibling's or child's spouse.
(Authority: 20 U.S.C. 1088 and 1141)
Sec. 600.31 Change in ownership resulting in a change of control.
(a)(1) If an eligible institution undergoes a change of ownership
that results in a change in control, the institution shall reestablish
its status as an eligible institution after the change.
(2) To establish its status as an eligible institution under this
part, an institution that undergoes a change of ownership and control
must satisfy all the applicable requirements contained in Secs. 600.4,
600.5, and 600.6, except that if the institution is a proprietary
institution of higher education or postsecondary vocational
institution, it need not have been in existence for two years before
seeking eligibility, unless it was in existence as a branch campus for
less than two years.
(b) For the purposes of this part, a change in ownership of an
institution that results in a change of control means any action by
which a person or corporation obtains new authority to control the
actions of that institution. That action may include, but is not
limited to--
(1) The sale of the institution or the majority of its assets;
(2) The transfer of the controlling interest of stock of the
institution or its parent corporation;
(3) The merger of two or more eligible institutions;
(4) The division of one institution into two or more institutions;
(5) The transfer of the controlling interest of stock or assets of
the institution to its parent corporation; or
(6) The transfer of the liabilities of an institution to its parent
corporation.
(c) Except as provided in paragraph (d) of this section, an action
that may be treated as not resulting in a change in control includes,
but is not limited to--
(1) The death or retirement of an owner of an institution, when the
owner's interest is sold or transferred to either a family member or a
current stockholder of the corporation; or
(2) Another action determined by the Secretary to be a routine
business practice.
(Authority: 20 U.S.C. 1099c)
Sec. 600.32 Eligibility of additional locations.
(a) Except as provided in paragraphs (b) and (c) of this section,
to qualify as an eligible location, an additional location of an
eligible institution must satisfy the applicable requirements of this
section and Secs. 600.4 through 600.6.
(b) To qualify as an eligible location, an additional location is
not required to satisfy the two-year requirement of Secs. 600.5(a)(7)
or 600.6(a)(6), unless--
(1) The location was a facility of another institution that has
closed or ceased to provide educational programs for a reason other
than a normal vacation period or a natural disaster that directly
affects the institution or the institution's students;
(2) The applicant institution acquired, either directly from the
institution that closed or ceased to provide educational programs, or
through an intermediary, the assets at the location; and
(3) The institution from which the applicant institution acquired
the assets of the location--
(i) Owes a liability for a violation of an HEA program requirement;
and
(ii) Is not making payments in accordance with an agreement to
repay that liability.
(c) Notwithstanding paragraph (b) of this section, an additional
location is not required to satisfy the two-year requirement of
Secs. 600.5(a)(7) or 600.6(a)(6) if the applicant institution agrees--
(1) To be liable for all improperly expended or unspent HEA program
funds received by the institution that has closed or ceased to provide
educational programs;
(2) To be liable for all unpaid refunds owed to students who
received Title IV, HEA program funds; and
(3) To abide by the policy of the institution that has closed or
ceased to provide educational programs regarding refunds of
institutional charges to students in effect before the date of the
acquisition of the assets of the additional location for the students
who were enrolled before that date.
(d) For purposes of this section, an ``additional location'' is a
location of an institution that was not designated as an eligible
location in the eligibility notification provided to an institution
under Sec. 600.21.
(Authority: 20 U.S.C. 1088 and 1141)
Subpart D--Loss of Eligibility
Sec. 600.40 Loss of eligibility.
(a)(1) Except as provided in paragraphs (a) (2) and (3) of this
section, an institution or a location or educational program of an
institution loses its eligibility on the date that--
(i) The institution, location, or educational program fails to meet
any of the eligibility requirements of this part;
(ii) The institution or location permanently closes; or
(iii) The institution or location ceases to provide educational
programs, for a reason other than a normal vacation period or a natural
disaster that directly affects the institution or a location or the
students of the institution or location.
(iv) The institution's period of participation, as specified under
Sec. 668.13, expires, or the institution's provisional certification is
revoked under Sec. 668.13; or
(v) The Secretary receives a notice from the appropriate State
Postsecondary Review Entity designated under Subpart 1 of Part H of
Title IV of the HEA that the institution's participation should be
withdrawn.
(2) If an institution loses its eligibility because it violated the
requirements of Sec. 600.5(a)(8), as evidenced by the determination
under provisions contained in Sec. 600.5(d), it loses its eligibility--
(i) On the last day of the fiscal year used in the fraction
contained in Sec. 600.5(d), if the award year used in the fraction was
completed on or before the end of that fiscal year; or
(ii) On the last day of the award year used in the fraction
contained in Sec. 600.5(d), if that award year was completed after the
fiscal year used in the fraction.
(3) If an institution loses its eligibility under the provisions of
Sec. 600.7(a)(1)(i), it loses its eligibility on the last day of the
award year being evaluated under that provision.
(b) If the Secretary undertakes to terminate the eligibility of an
institution because it violated the provisions of Sec. 600.5(a)(8) or
600.7(a), the presiding official, if a hearing is requested, must
terminate the institution's eligibility if it violated those
provisions, notwithstanding its status at the time of the hearing.
(c)(1) If the Secretary designates an institution or any of its
educational programs or locations as eligible on the basis of
inaccurate information or documentation, the Secretary's designation is
void from the date the Secretary made the designation, and the
institution or program or location, as applicable, never qualified as
eligible.
(2) If an institution closes its main campus or stops providing any
educational programs on its main campus, it loses its eligibility as a
whole, or for the programs no longer offered at its main campus,
respectively, at all its locations on the date it closes that campus or
stops providing any educational program at that location.
(d) Except as otherwise provided in this part, if an institution
ceases to satisfy any of the requirements for eligibility under this
part--
(1) It must notify the Secretary within 30 days of the date that it
ceases to satisfy that requirement; and
(2) It becomes ineligible to continue to participate in any HEA
program as of the date it ceases to satisfy any of the requirements.
(Authority: 20 U.S.C. 1085, 1088, and 1141)
Sec. 600.41 Termination and emergency action proceedings.
(a) If the Secretary believes that a previously designated eligible
institution as a whole, or at one or more of its locations, does not
satisfy the statutory or regulatory requirements that define that
institution as an eligible institution, the Secretary may--
(1) Terminate the institution's eligibility designation in whole or
as to a particular location--
(i) Under the procedural provisions applicable to terminations
contained in 34 CFR 668.81, 668.83, 668.86, 668.87, 668.88, 668.89,
668.90(a)(1), (a)(4), and (c)-(f), and 668.91; or
(ii) Under a show-cause hearing, if the institution's loss of
eligibility results from--
(A) Its previously qualifying as an eligible vocational school;
(B) Its previously qualifying as an eligible institution,
notwithstanding its unaccredited status, under the transfer-of-credit
alternative to accreditation (as that alternative existed in 20 U.S.C.
1085, 1098, and 11412 and Sec. 600.8 until July 23, 1992);
(C) Loss of accreditation or preaccreditation;
(D) Loss of legal authority to provide postsecondary education in
the State in which it is physically located; or
(E) Violations of the provisions contained in Sec. 600.5(a)(8) or
600.7(a);
(2) Limit, under the provisions of 34 CFR 668.86, the authority of
the institution to disburse, deliver, or cause the disbursement or
delivery of funds under one or more Title IV, HEA programs as otherwise
provided under 34 CFR 668.25 for the benefit of students enrolled at
the ineligible institution or location prior to the loss of eligibility
of that institution or location; and
(3) Initiate an emergency action under the provisions contained in
34 CFR 668.83 with regard to the institution's participation in one or
more Title IV, HEA programs.
(b) If the Secretary believes that an educational program offered
by an institution that was previously designated by the Secretary as an
eligible institution under the HEA does not satisfy relevant statutory
or regulatory requirements that define that educational program as part
of an eligible institution, the Secretary may in accordance with the
procedural provisions described in paragraph (a) of this section--
(1) Undertake to terminate that educational program's eligibility
under one or more of the Title IV, HEA programs under the procedural
provisions applicable to terminations described in paragraph (a) of
this section;
(2) Limit the institution's authority to deliver, disburse, or
cause the delivery or disbursement of funds provided under that Title
IV, HEA program to students enrolled in that educational program, as
otherwise provided in 34 CFR 668.25; and
(3) Initiate an emergency action under the provisions contained in
34 CFR 668.83 with regard to the institution's participation in one or
more Title IV, HEA programs with respect to students enrolled in that
educational program.
(c)(1) An action to terminate and limit the eligibility of an
institution as a whole or as to any of its locations or educational
programs is initiated in accordance with 34 CFR 668.86(b) and becomes
final 20 days after the Secretary notifies the institution of the
proposed action, unless the designated department official receives by
that date a request for a hearing or written material that demonstrates
that the termination and limitation should not take place.
(2) Once a termination under this section becomes final, the
termination is effective with respect to any commitment, delivery, or
disbursement of funds provided under an applicable Title IV, HEA
program by the institution--
(i) Made to students enrolled in the ineligible institution,
location, or educational program; and
(ii) Made on or after the date of the act or omission that caused
the loss of eligibility as to the institution, location, or educational
program.
(3) Once a limitation under this section becomes final, the
limitation is effective with regard to any commitment, delivery, or
disbursement of funds under the applicable Title IV, HEA program by the
institution--
(i) Made after the date on which the limitation became final; and
(ii) Made to students enrolled in the ineligible institution,
location, or educational program.
(d) After a termination under this section of the eligibility of an
institution as a whole or as to a location or educational program
becomes final, the institution may not certify applications for, make
awards of or commitments for, deliver, or disburse funds under the
applicable Title IV, HEA program, except--
(1) In accordance with the requirements of 34 CFR 668.25(c) with
respect to students enrolled in the ineligible institution, location,
or educational program;
(2) After satisfaction of any additional requirements, imposed
pursuant to a limitation under paragraph (a)(2) of this section, which
may include the following:
(i) Completion of the actions required by 34 CFR 668.25 (a) and
(b).
(ii) Demonstration that the institution has made satisfactory
arrangements for the completion of actions required by 34 CFR 668.25
(a) and (b).
(iii) Securing the confirmation of a third party selected by the
Secretary that the proposed disbursements or delivery of Title IV, HEA
program funds meet the requirements of the applicable program.
(iv) Using institutional funds to make disbursements permitted
under this paragraph and seeking reimbursement from the Secretary for
those disbursements.
(Authority: 20 U.S.C. 1094)
Appendix A--Summary of Attendees' Responses at Regional Meetings on
Part 600--Institutional Eligibility Under the Higher Education Act
of 1965, as Amended
Note: This appendix will not appear in the Code of Federal
Regulations.
I. Sections 481(a)(3) and (4) of the HEA provide that an
institution is no longer an eligible institution if--
It offers more than 50 percent of its courses by
correspondence, unless the institution is an institution that meets
the definition in section 521(4)(C) of the Carl D. Perkins
Vocational and Applied Technology Education Act;
It enrolls 50 percent or more of its students in
correspondence courses (unless the institution meets the definition
in section 521(4)(C) of the Carl D. Perkins Vocational and Applied
Technology Education Act);
More than 25 percent of its students are incarcerated
(except that the Secretary may waive this prohibition for a
nonprofit institution that provides a 2-year or 4-year degree);
It admits more than 50 percent of its students under
ability-to-benefit provisions in section 484(d) of the HEA and does
not provide a 2-year or 4-year degree program;
The institution has filed for bankruptcy; or
The institution, its owner, or its chief executive
officer committed a crime or fraud involving Title IV, HEA program
funds.
Issues that the community was asked to address and the
community's views:
1. How should the appropriate percentages be calculated?
Offers more than 50 percent of its courses by
correspondence. This issue was only addressed at two of the regional
meetings, where the consensus was that the calculation should be
made by dividing the number of courses offered at the institution by
correspondence by the total number of courses offered at the
institution.
Enrolls 50 percent or more of its students in
correspondence courses. This issue was only addressed at one of the
regional meetings where the consensus was that the calculation
should be made by dividing the number of students enrolled in
correspondence courses by the number of students enrolled at the
institution.
More than 25 percent of its students are incarcerated.
This issue was not addressed at any of the regional meetings.
Admits more than 50 percent of its students under
ability-to-benefit provisions in section 484(d) of the HEA and does
not provide a 2-year or a 4-year degree program. This issue was only
addressed at one of the regional meetings, where the consensus was
that the calculation should be made by dividing the number of
ability-to-benefit students admitted by the total number of students
admitted to the institution.
What courses should be considered in calculating the
correspondence percentages? This issue was only addressed at two of
the regional meetings. At one of the regional meetings, the
consensus was that only those courses offered solely by
correspondence should be counted for these purposes. At the other
regional meeting the consensus was that only courses in an eligible
program under Title IV of the HEA should be counted.
2. How should the Department collect this information?
This issue was only addressed at one of the regional
meetings, where the consensus was that a determination of compliance
with this provision should be made by the Department during a
program review and should be based on information on file at the
institution.
3. How often should the percentage be calculated or requested by
the Secretary?
There was a consensus in all four regional meetings
that the percentages should be calculated annually.
4. How should ``incarcerated students'' be defined? Should the
definition include residents of halfway houses or those under home
restriction?
There was a consensus in all four regional meetings
that an ``incarcerated student'' should be defined as an individual
confined to a penal institution and should not include individuals
in halfway houses or in home restriction.
5. What criteria should be used to determine if an institution
qualifies for a waiver of the provision governing the percentage of
incarcerated students?
This issue was addressed by three of the four regional
meetings, where the consensus appeared to be that the Secretary
should not consider waiving this provision for any institution not
already covered by the statute.
II. Section 481(b) provides that a proprietary institution must,
pursuant to regulations, obtain at least 15 percent of its revenue
from non-Title IV, HEA program sources to be an eligible
institution.
Issues that the community was asked to address and the
community's views:
1. How should the term ``revenue'' be defined?
The majority opinion in three of the four regional
meetings was that all income should be considered in calculating an
institution's revenue. The majority opinion in the fourth regional
meeting was that the term revenue should include income derived from
educational sources.
2. What process should be used to monitor compliance?
The consensus in all four regional meetings was that
the institution's annual financial statement should be used to
monitor compliance with this requirement.
3. How often should the percentage be calculated or requested by
the Department?
The consensus in three of the regional meetings was
that the percentage should be calculated and requested annually. The
consensus in the fourth regional meeting was that while the
percentage should be calculated annually, the determination of
whether an institution was in compliance with this provision should
be based on a two-year average.
4. How should FFEL program proceeds that have been delivered
directly to a student be considered in determining this percentage?
There was a consensus in all four regional meetings
that FFEL program proceeds that have been delivered directly to a
student should not be considered as revenue for purposes of this
provision.
III. Section 498(i) provides that an institution that undergoes
a change in ownership that results in a change in control may not be
considered the same institution and must be considered a new
institution for the purpose of being certified as eligible to
participate in the Title IV programs. However, the new institution
is not required to have been in existence for two years prior to
seeking that certification, unless the institution was in existence
as a branch for less than two years. The statute lists examples of
changes of ownership that result in a change in control, and allows
certain changes resulting from the death of an owner or changes from
routine business practices to be treated as changes in control.
Issues that the community was asked to address and the
community's views:
1. Should the Secretary seek by regulations to define
circumstances that do or do not constitute a change in control in
addition to those listed in the statute, or should the Secretary be
permitted to make that decision on a case-by-case basis?
This issue was only addressed at two of the regional
meetings, where the consensus was that the Secretary should not
define circumstances that do or do not constitute a change in
control in addition to those listed in the statute. Instead, the
Secretary should make the decision on a case-by-case basis.
2. What are the ``routine business practices'' that do not
produce a change in control?
This issue was only addressed at two of the regional
meetings. The consensus at one of the regional meetings was that
regulations should permit changes of ownership that result because
of dissolutions of marriages and any transfers to family members not
to be treated as changes in control. At the other regional meeting
the consensus was that situations should be reviewed on a case-by-
case basis.
IV. Section 498(j) provides that a branch of an eligible
institution is a separate institution and shall separately meet all
the requirements of Title IV of the HEA, except that the institution
may not be required (under sections 481(b)(5) or 481(c)(3) to be in
existence for 2 years prior to seeking that certification unless the
institution was in existence as a branch for less than 2 years.
Issues that the community was asked to address and the
community's views:
1. How should the term ``branch'' be defined?
A precise definition was only offered at one of the
regional meetings, where a branch campus was defined as a location
that contains an administrative staff, student services, and
instructional staff, and offers an entire educational program
leading to a degree, certificate, or diploma at that site.
2. Should a branch be specifically and separately licensed by
the State in which it is located as a branch campus?
This issue was only addressed at two of the regional
meetings, where the consensus was that a branch should be separately
licensed by the State in which it is located.
3. Should a branch be specifically accredited by its accrediting
agency?
This issue was addressed at two of the regional
meetings, where the consensus was that a branch should be
specifically accredited by its accrediting agency.
[FR Doc. 94-2863 Filed 2-9-94; 8:45 am]
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