Federal Potpourri
Presented at the
National Association of State Administrators
and Supervisors of Private Schools
(NASASPS)
Sharon H. Bob, Ph.D
Powers Pyles Sutter & Verville PC
April 26, 2010
1
Congressional Activities and
Department of Education Actions
 HEOA
 ARRA
 HCERA
 Default Rates
 Program Integrity Proposals
2
Higher Education Opportunity Act
(HEOA)
 Enacted: 8/14/2008
 DCL(GEN-08-12): 12/31/2008
 Final Rules:




General Provisions: 10/29/2009
Lender/School Issues: 10/28/2009
Accreditation: 10/27/2009
Effective Date: 7/1/2010
3
HEOA Disclosures
4
College Costs
 Objective is transparency and a bit of shame
and glory
 Measurement starting point is the average
tuition and fees for first-time, full-time
undergraduate students enrolled at the
institution
5
College Costs (cont.)
 Starting in July 2011, ED will make information
available to the public


Information presented by category of school (4yr
public, 4yr private NP, 4yr private FP, 2yr public,
2yr private NP, 2yr private FP, less than 2yr
public, etc.)
List of 5% of institutions per category with
highest tuition and fees for most recent academic
year
6
College Costs (cont.)
 List of 5% of institutions per category with
highest “net price” for most recent academic
year (net price deducts average need-based
and merit-based grant aid from tuition and fees
via formula)
 List of 5% of institutions per category with
largest increase in tuition and fees over the
three most recent academic years for which
data are available (1st year used as base year)
(exempt if increase is $599 or less)
7
College Costs (cont.)
 List of 5% of institutions per category with
largest increase in net price over the three most
recent academic years for which data are
available (1st year used as base year) (exempt if
increase is $599 or less)
 List of 10% of institutions per category with
lowest tuition and fees for most recent academic
year
 List of 10% of institutions per category with
lowest “net price” for most recent academic year
8
College Costs (cont.)
 Schools in top 5% for largest increase over
three year period must submit a report to ED
addressing several issues including major areas
of increase in school’s budget and an
explanation of those increases, and a
description of the schools’ efforts to reduce
costs
9
Net Price Calculator
 On October 29, 2009, U.S. Dept of Education
made available a template for the Net Price
Calculator that institutions may use or see:
http://www.ed.gov/policy/highered/leg/hea08/index.html
 Institutions have 2 years from the release of the
template to post their calculator
 An institution may use either the net price
calculator developed by Department or it may
develop its own

Institutionally developed calculators must include
“at a minimum the same data elements” found in
the Department’s template
10
Net Price Calculator (cont.)
“to help current and prospective students, families,
and other consumers estimate the individual net
price of an institution of higher education for a
student. The calculator shall be developed in a
manner that enables current and prospective
students, families, and consumers to determine an
estimate of a current or prospective student’s
individual net price at a particular institution.”
P.L. 110-315, sec. 132 (h) (1).
11
Definition of Net Price
Institutions’
price of
attendance
for FTFT
students
Total need- and merit-based
federal, state, and institutional
grant aid awarded to FTFT
students
Number of FTFT students
receiving such aid
Price of attendance =
average annual cost of tuition
and fees, room and board,
books, supplies, and
transportation
12
Textbooks
 Intent is to decrease costs to students and
increase transparency
 Publisher must disclose:






Cost of text at college bookstore
Cost of text to public
Copyright dates of 3 prior editions
Description of content revisions
Whether available in other formats
(paperback, unbound)
Provision of ISBN (International Standard
Book Number)
13
Textbooks (cont.)
 Secretary may not regulate in this area.
 Effective July 1, 2010.
14
Textbooks (cont.)
 Institution must provide to its college bookstore:


The institution’s course schedule; and
For each course offered, the information must
include recommended textbooks and
supplemental material.
 Institutions are encouraged to provide
information on:




Renting textbooks;
Purchasing used textbooks;
Textbook buy-back programs; and
Alternative content delivery programs.
15
Institutional and Financial Assistance
Information for Students (Section 485(a) of the
HEA)
 Previously, disclosure requirements ended at
“O,” now extend to “V.”
 Includes new disclosures and requirements:


Must disclose any plans the institution has for
improving the academic programs;
Must disclose the terms and conditions for
federal loan programs;
16
Institutional and Financial Assistance
Information for Students (cont.)


Requires institutions to develop plans to detect
and prevent unauthorized distribution of
copyrighted material on information technology
systems, including offering alternatives to illegaldownloading or peer-to-peer distribution of
intellectual property;
Must disclose placement in employment and
types of employment obtained by graduates.
Placement statistics if calculated;
17
Institutional and Financial Assistance
Information for Students (cont.)


Must disclose the retention rate of certificate- or
degree-granting, full-time undergraduate
students entering the institution;
Must disclose policies on vaccinations;
18
Institutional and Financial Assistance
Information for Students (cont.)

Requires institutions to disaggregate data on
completion/graduation rates based on student
gender, race/ethnicity, and receipt of Pell Grants;
receipt of specific federal loans but non-receipt of
Pell Grants; and non-receipt of Pell Grants or
specific federal loans;



Will not apply to 2-year degree-granting institutions
until 2011-2012.
Expands Entrance/Exit Counseling disclosures;
Adds four crimes to the list of hate crime
statistics to be reported in the Campus Security
Report;
19
Institutional and Financial Assistance
Information for Students (cont.)



Requires institutions to immediately notify the
campus community in the event of a significant
emergency and publish procedures to evacuate;
Must report on fire safety if have on-campus
housing facilities;
Requires institutions to implement procedures for
managing reports of missing persons who reside
in on-campus facilities and have been missing for
more than 24 hours;
20
Institutional and Financial Assistance
Information for Students (cont.)


Requires institutions to disclose transfer credit
policy, including any criteria used to evaluate
transfer of credit earned at another institution;
Requires institutions to provide each student,
upon enrollment, with a “separate, clear, and
conspicuous written notice” of the penalties
associated with drug-related offenses; and
21
Institutional and Financial Assistance
Information for Students (cont.)
 After being notified by the Secretary that a
student has lost eligibility for financial aid due to
a drug-related offense, institutions must notify
the student in a “reasonable and timely manner”
in a “separate, clear, and conspicuous written
notice” of the loss of aid eligibility and ways to
regain eligibility.
22
Student Achievement, (cont.)

Rules of Construction added:



Nothing restricts the accrediting agency’s ability to
set and apply its standards to the institutions and
programs it reviews;
Institutions may develop and use their own
standards on student achievement; and
The Secretary may not promulgate regulations on
student achievement.
23
Accrediting Agency Rules
24
Distance Education
 HEOA requires accrediting agencies to make
sure that institutions have processes in place to
ensure that the student who enrolls in a
distance education course is the same student
who participates and completes the course.

Distance Education: Defined as instruction to
students separated from instructor,
synchronously or asynchronously, through
regular & substantive interaction.
 HEOA requires that an accrediting agency must
have site evaluators trained to evaluate distance
education offerings.
25
Monitoring Growth
 HEOA requires an accrediting agency to have
procedures to monitor the growth of programs at
institutions experiencing significant enrollment
growth, as evidenced by headcount data
collected annually.
 Significant enrollment growth is any 50% or
greater increase in headcount enrollment in
fiscal year and must be reported to ED, if
agency has notified Secretary of a change in its
scope.
26
Due Process
 HEOA expands due process standards,
including:





Specification of clear and consistent standards;
An opportunity for a written response;
An opportunity to appeal any adverse action;
Appeal panel may not include persons who took
adverse action;
The right to representation by counsel;
27
Due Process, (cont.)


An opportunity for institutions to put forward new
evidence that relates to a financial matter; and
Submission to the Secretary of a summary of
actions that includes the award of accreditation
or reaccreditation of an institution and adverse
actions (including probation).
28
Transfer of Credit
 Institutions are required to disclose publicly
their transfer of credit policies, including any
criteria used for those decisions and a list of
schools with which it has articulation
agreements.
 Accrediting agencies are required to confirm
that the institutions they review have these
policies in place.
 HEOA restricts the Secretary and NACIQI’s
ability to require institutions to have any
particular policy in place.
29
Teach-Outs
 HEOA includes new provisions in the accreditation
and PPA provisions to ensure that a teach-out plan
exists when a school closes.
 The teach-out plan must be submitted for approval
when:



The Department notifies the accrediting agency that an
institution is closing;
The accrediting agency acts to withdraw, terminate or
suspend an institution’s accreditation; or
The institution notifies the accrediting agency of its intent
to close.
30
American Recovery and
Reinvestment Act (ARRA)
 Enacted: 2/17/2009
 P.L.111-5 provides $507 billion in spending
programs and $282 billion in tax cuts. About
$80 billion is available for K-12 and higher
education. About $30 billion is available to
students and parents for the next two
academic years and includes the following:

Provides $15.6 billion in Pell Grant
appropriations, which will:

Increase the maximum Pell Grant by $500 for
2009-2010 to $5,350; and
31
American Recovery and
Reinvestment Act (ARRA) (cont.)


Increase the maximum Pell Grant for 2010-2011
to $5,550;
Increases the Federal Work-Study allocation
by $200 million making FWS over $1 billion
($980 million plus $200 million):


Institutions subject to new reporting requirements
if received over $25,000; and
About 1,800 institutions received over $25,000;
32
American Recovery and
Reinvestment Act (ARRA) (cont.)

Creates a new American Opportunity Tax
Credit, which replaces and expands the
current Hope Scholarship tax credit for two
years. At a cost of nearly $14 billion over 10
years, the new tax credit will:



Cover up to $2,500 (up from $1,800) for tuition
and fees as well as textbook purchases per year
for four years of college;
Phase out for individuals with incomes of $80,000
and $160,000 for couples; and
Be partially refundable (40% or $1,000) so lowincome families who do not pay taxes will receive
33
a refund;
American Recovery and
Reinvestment Act (ARRA) (cont.)
Provides $74 million to the Department of
Education for student aid administration and
audits and investigations;
 Allows computers to count as qualified
expenses under 529 savings plans; and
 Creates a $53.6 billion state stabilization fund,
which includes $39.5 billion in direct aid to
schools, which will help local school districts
avoid layoffs and cuts to education services.
In addition, P.L.111-5 also included almost $3
billion for programs under the Workforce
Investment Act that provides money for job training.

34
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152)
 Signed into law: 3/30/2010
 DCL (GEN-10-05): 4/2/2010
 President Obama said: “By cutting out the
middlemen,” $68 billion in the coming years
will be reinvested by making higher education
more affordable.
“Today we are making the student loan
system work for students and families.”
35
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.
Republicans said: “Under this bill, all higher
education institutions will be forced to switch
into the Federal Direct Loan (DL) program by
June 30, 2010, subjecting students, parents
and schools to a one-size-fits-all government
option, eliminating competition and consumer
choice.”
36
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.
 The reconciliation bill includes many of the
provisions included in the Student Aid and
Fiscal Responsibility Act (“SAFRA”) that had
passed the House on September 17, 2009:


Direct Loans: All loans first disbursed on July
1, 2010 must be originated through the Direct
Loan Program;
FFEL Eliminated: No new (first disbursed)
Stafford, PLUS, or consolidation loans may be
disbursed through the FFEL program after
June 30, 2010;
37
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.


Pell Shortfall: The bill appropriates $13.5
billion to fund projected short-falls in the Pell
appropriation levels through FY 2012;
Pell Grant Increases: The bill invests $36
billion into the Pell Grant Program over the
next ten years to increase the annual Pell
Grant to $5,550 in 2010-2011 to $5,975 by
2017-2018. Starting in the 2014-2015 award
year, the mandatory add-on to the Pell Grant
Program will increase annually based on
changes to the Consumer Price Index;
38
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.


Income-Based Repayment Plan: Beginning
July 1, 2014, new borrowers will qualify for the
Income-Based Repayment Plan if the
borrower’s standard repayment exceeds 10%
of discretionary income (reduced from the
current 15%). Discretionary income is the
amount of the borrower’s AGI that exceeds
150% of the poverty line for the borrower’s
family size. Loan forgiveness occurs after 20
years (currently it is 25 years);
In-School Consolidation: Borrowers who have
loans in the Direct Loan Program, the FFEL
39
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.

Program, or loans purchased by the
Department of Education under the Ensuring
Continued Access to Student Loans Act
(“ECASLA”) may consolidate those loans into
a Direct Consolidation Loan between July 1,
2010 to July 1, 2011. The borrower must
have at least one loan in each of two of the
three categories and have not yet entered
repayment on at least one of those loans;
Direct Loans for Foreign Schools: Schools
outside the United States are now eligible to
participate in the Direct Loan Program;
40
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.


College Access Challenge Grant Program:
Funding for the program is increased to $150
million annually from FY 2010 to FY 2014.
These formula grants allow states to help
organizations provide services that will
increase the number of low-income students
who are prepared to enter and succeed in
college and manage their student loans, such
as financial literacy and debt management
skills;
Servicing Contracts for State Non-Profits:
Non-profit state entities can be eligible for
Direct Loan servicing contracts in that state;
41
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.


TAA for Communities: The bill appropriates
$500 million a year for fiscal years 2010 to
2014 in the Community College and Career
Training Grant Program for community
colleges to develop and improve educational
and career training programs;
Assistance to Institutions: The Secretary is
required to provide technical assistance to
institutions of higher education participating or
seeking to participate in the Direct Loan
Program and is given $50 million for FY 2010
in funding to provide such assistance; and
42
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.

HBCUs: The bill invests $2.55 billion in
Historically Black Colleges and Universities
and Minority-Serving Institutions to provide
students with the support they need to stay in
school and graduate.
 Excluded from the reconciliation bill that had
been included in the House-passed bill
Student Aid and Fiscal Responsibility Act,
H.R. 3221:

Because including those provisions could
have posed a threat of being ruled out of order
by the Senate, the Andrews/Souder 90/10
43
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.

language that would have given institutions an
additional fiscal year to meet the 90/10 the
requirement was excluded as was the
language that would have given proprietary
schools two years of noncompliance before
being moved to provisional status;
The proposal to extend the period from July 1,
2011 to July 1, 2012 whereby unsubsidized
Stafford Loan borrowing authorized by
ECASLA is treated as non-Title IV revenue
was also excluded;
44
Health Care and Education Reconciliation
Act of 2010 (HCERA) (P.L. 111-152) cont.



The proposal to restructure the Perkins Loan
Program was eliminated because the House
Democrats needed to find more savings to
offset the costs of the health care provisions;
The proposal to eliminate asset data from the
need analysis formula was excluded because
of a need to find savings; and
The proposal to impose an income cap of
$150,000 beginning on July 1, 2011 that would
prohibit receipt of a Pell Grant or subsidized loan
was also excluded from HCERA because it did
not meet the requirements of the Bryd Rule.
45
ED Issues Three Year Cohort
Default Rate
 ED releases unofficial trial 3-year Cohort Default
Rates for FY 2005, FY 2006, and FY 2007 on
12/14/09, which are posted publicly.
 3-year CDR is the percentage of borrowers entering
repayment on loans in fiscal years and defaulting in
that fiscal years are in the 2 subsequent fiscal
years.
 ED will continue to calculate and publish 2-year
cohort default rates until 3 sets of 3-year cohort
default rates are published.
 Beginning FY 2014, only 3-year cohort default rates
are published (FY 2009, FY 2010 and FY 2011).
46
*Defaults Nearly Double with
Three-Year Rates
Sector
2-year rate
3-year rate
Private 2-year
8.7%
16.2%
Private 4-year
3.7%
6.3%
For-profit
11.0%
21.2%
Public 2-year
9.9%
16.2%
Public 4-year
4.4%
7.1%
Total
6.7%
11.8%
The 3-year rates are informational only.
*Performed by Student Lending Analysis
47
Negotiated Rulemaking Ends Without
Reaching Consensus on Program Integrity
Issues
 Public Hearings: Summer 2009
 Neg Reg: Fall 2009
 NPRM: Late Spring Early Summer
 Final Regulations: 11/1/2010
 Effective Date: 7/1/2011
48
ED Holds Negotiated Rulemaking Sessions on
14 Program Integrity Issues – ED says Current
Regulations Cause Fraud and Abuse
In December 2009, ED introduced 14 issues
subject to Neg Reg. The issues are:
 Definition of High School Diploma
(Yes)
 Ability-to-Benefit
(Yes)
 Misrepresentation of Information to Students
and Prospective Students
(Yes)
 Incentive Compensation
(No)
 State Authorization as a Component of
Institutional Eligibility
(No)
 Employment in a Recognized Occupation
(No)
49
ED Holds Negotiated Rulemaking Sessions on
14 Program Integrity Issues – ED says Current
Regulations Cause Fraud and Abuse
 Definition of a Credit Hour
(Yes)
 Agreements between Institutions of
Higher Education
(Yes)
 Verification of Information included on
Student Aid Applications
(Yes)
 Satisfactory Academic Progress
(Yes)
 Retaking Coursework
(Yes)
 Return of Title IV Funds, Term-Based
Programs with Modules or Compressed
Courses
(No)
50
ED Holds Negotiated Rulemaking Sessions on
14 Program Integrity Issues – ED says Current
Regulations Cause Fraud and Abuse (cont.)
 Return of Title IV Funds, Taking
Attendance
 Disbursements of Title IV Funds
(No)
(Yes)
51
Neg Reg – Issues that Reached Tentative
Agreement
Issues that Reached Tentative Agreement:
 Definition of a High School Diploma
(Validity)

Beginning with the 2011-2012 award year, a
student completing the FAFSA will be required
to list the name of the secondary school or
entity that provides a secondary school
program of study and the state that awarded
his/her high school diploma;
52
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


If the secondary school or entity the student
provides does not match the list of secondary
schools maintained by the Department or if the
student does not provide the name of the
secondary school or entity or the state that
issued the diploma, the Department may flag the
student's FAFSA for further review by the
institution to determine if the applicant has a
valid high school diploma before the student can
receive any Title IV aid; and
The Department will provide guidance to help
schools evaluate the validity of a high school
diploma for purposes of awarding financial aid.
53
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Ability-to-Benefit
 The statutory language permits an applicant to
take 6 credits in the institution's program to
demonstrate ability-to-benefit, and the
Department proposed a 225 clock hour
equivalent;
 As a result of findings by the Government
Accountability Office (GAO), the proposed rules
would strengthen the process to certify and
decertify test administrators;
54
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


Test publishers would be required to notify
institutions and students if it determines that a
test administrator improperly administered a
test; and
The new language would update current
regulations regarding the administration of tests
for individuals with disabilities to reflect current
terms and changes to other statutes.
55
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Misrepresentation of Information to
Students and Prospective Students


The proposed language would establish the
types of activities that constitute substantial
misrepresentation by an institution, including
Title IV eligible institutions that have contracts or
agreements with non-eligible institutions.
Institutions that make substantial
misrepresentations could lose their eligibility to
participate in Title IV funding or face limitations
on their participation in Title IV funding.
56
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


Currently, ED rules prohibit any “substantial
misrepresentation made by [an] institution
regarding the nature of its educational program,
its financial charges or the employability of its
graduates.” (34 C.F.R. 668.71-75).
Current rules describe the parties to whom false,
erroneous, or misleading statements may not be
made.
57
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

FTC published guidelines for consumers to use
to avoid deceptive advertising and promotional,
marketing, and sales practices by vocational
training providers. (16 C.F.R. 254) The FTC
produces the FTC Guides on Private Vocational
and Distance Education Schools found at:
http://www.access.gpo.gov/nara/cfr/waisidx_09/16cfr254_09.ht
ml
58
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


FTC only has jurisdiction over non-degree forprofit entities
ED’s proposal:




Clearly states that its regulations apply to all
institutions;
Expands activities to include advertising
promotional materials, or in the marketing or sale
of programs of instruction;
Adds language to clarify the broad population to
whom it applies (i.e., state agency, accrediting
agency); and
Adds language to ensure that the institution shares
59
information it knows or should know to secure
employment in a recognized occupation.
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

Reaction from Non-Federal Negotiators:



Most agreed that further regulations would not
effectively prevent institutions from
misrepresenting information and ED should focus
on enforcing current rules;
Concern about adopting FTC rules to the higher
education community because too specific and
not applicable outside the for-profit sector; and
Consumer groups say ED didn’t go far enough.
60
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Definition of Credit Hour
 Currently, the Department’s rules do not define
a “credit hour” except for conversion of clock
hours to credit hours for non-degree programs.
 Accrediting agencies and states, to varying
degrees, establish standards and criteria for
degree levels.
 The HEA and implementing regulations require
accrediting agencies to have standards to
evaluate an institution’s or program’s “measures
of program length and the objectives of the
degrees or credentials offered.”
61
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


The Department has relied on accrediting
agencies to make a judgment about program
length and the amount of credit an institution
or program grants for course work.
ED is concerned that the lack of a definition of
a credit hour may be the basis for abuse.
62
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


OIG has been conducting reviews of
accrediting agencies’ standards for program
length and expressed concern about ED’s
reliance on accrediting agencies’ assessment
of a factor that is a component of Title IV.
ED’s proposal:

Defines a Credit Hour:
 Unit of measurement that consists of 1 hour of
classroom or direct faculty instruction and a
minimum of 2 hours of outside student work for
about 15 weeks for 1 semester/trimester hour of
credit or 10-12 weeks for 1 quarter hour of credit,
or the equivalent over a different amount of time;63
and
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 At least a comparable amount of work for other
activities (i.e., lab work, internships, practica,
studio work); or
 If above not appropriate, institution responsible
for the credit hours awarded, as represented in
intended learning outcomes and verified by
evidence of achievement, and for ensuring the
equivalencies are in accordance with accrediting
agency requirements.
64
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

Additional accrediting agency requirements:
 Must conduct an effective review and evaluation
of the reliability and accuracy of the institution’s
assignment of credit hours to ensure compliance
with ED’s credit hour definition; and
 Expected to use sampling or other methods in
the evaluation to ensure compliance.
65
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

Modifies current formula where the institution
does not provide the clock hours that serve as the
basis for the credit hours awarded for each
program, or the credit hours are not in compliance
or the program must be offered in clock hours:
 A semester or trimester must include 37.5 clock
hours instead of 30 clock hours of instruction;
and
 A quarter must include 25 clock hours instead of
20 clock hours of instruction.
66
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Agreements Between Institutions of
Higher Education

ED proposed a requirement to disclose any
agreements between an eligible institution and
an ineligible institution. If there is an
arrangement between for-profit institutions
with common ownership or control, the
institution granting the credential would have
to provide more than 50 percent of the
program.
67
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Verification


Currently, an institution is required to verify the
application information of no more than 30% of
its total number of applicants and an applicant
who is selected for verification must document
certain items of information used in the need
analysis. (34 C.F.R. 51-61)
ED’s Proposal:

Simplifying the FAFSA and permitting data
importation from the IRS make a comprehensive
review of the verification process advisable;
68
Neg Reg – Issues that Reached Tentative
Agreement (cont.)



Makes verification regulations flexible to permit
ongoing changes and to provide assurance that
students receiving federal financial aid are
eligible;
Requires schools to verify 100% of all CPSselected applicants;
Allows ED to select only targeted data elements
on a student-specific basis;
69
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


An applicant that has not filed and is not required
to file must provide a copy of his/her W-2 as
acceptable documentation;
Removes data elements recently eliminated from
need analysis (i.e., untaxed Social Security
income, foreign income exclusions, etc.);
70
Neg Reg – Issues that Reached Tentative
Agreement (cont.)




Changes updating rules to permit changes in a
student’s marital status;
Requires that all verification data changes be
sent to the CPS for processing;
Removes the $400 tolerance; and
Updates verification definitions to reflect current
terminology.
71
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

Reaction from Non-Federal Negotiators:



Seemed to favor allowing ED to select new data
elements and to specify which ones apply to any
specific student;
Many noted that the current verification system
represents a large administrative burden; and
Rather than making regulatory changes, ED
would announce new data elements and related
documentation requirements in the Federal
Register for the applicable award year.
72
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Satisfactory Academic Progress


Currently, to be eligible for Federal financial
aid, a student must make SAP, and the school
must have a published policy.
A SAP policy is considered reasonable if it
contains both qualitative and quantitative
standards along with other elements.
73
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

ED’s Proposal:



Closes perceived loopholes including the effect of
retaking coursework on meeting the qualitative
component; the limited basis upon which some
institutions measure SAP; the overuse of
probation as a possible means to circumvent
rules, appeal rights, and the application of SAP
for graduate programs;
Moves standards to 34 C.F.R. 668.34;
Incorporates proposed definitions;
74
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


Outlines provisions that monitor progress at the
end of each payment period and for those that
monitor progress more or less frequently;
Defines financial aid probation when a student
fails to make SAP and has appealed and has had
financial aid eligibility re-instated. A student may
receive financial aid for one payment period. At
the end, must meet SAP or meet requirements of
the student’s academic plan to qualify for further
financial aid;
75
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

Defines financial aid warning as a status when a
student fails to make SAP and may continue to
receive financial aid for one payment period. May
be granted without an appeal.
76
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Retaking Courses


Adds language to the definition of "full-time
student" in 34 C.F.R. 668.2 to allow repeated
courses to count towards a student's
enrollment status for term-based programs.
Current rules for non-term programs would
continue unchanged.
77
Neg Reg – Issues that Reached Tentative
Agreement (cont.)
 Disbursements of Title IV Funds


ED wants to ensure that students with
estimated Title IV credit balances are able to
obtain books and supplies at the beginning of
the period.
Schools would continue to have the ability to
disburse funds at the times and amounts that
are in the student's best interest.
78
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


Would require early disbursements of
anticipated credit balances to eligible students
if the students met all disbursement
requirements no later than 10 days before the
start of the payment period, and the
requirement would only apply to students who
will have a Title IV credit balance.
Does not change existing institutional liability
should the student fail to begin attendance in
any courses.
79
Neg Reg – Issues that Reached Tentative
Agreement (cont.)

Provides institutions with the flexibility to
determine the method to provide funds to
students, which may include a book voucher or
crediting books to the student's account. The
institution would have to ensure that students
can acquire necessary books and supplies by
the seventh day of the payment period. The
value amount that would have to be made
available to students would be the lesser of the
amount the institution determines the student
needs for books and supplies or the projected
student's credit balance;
80
Neg Reg – Issues that Reached Tentative
Agreement (cont.)


ED agreed to provide preamble language that
schools may use the value of the books and
supplies component in the student's cost of
attendance as the amount for the
disbursement.
Credit balances not subject to payment for
books and supplies would remain subject to
current regulations found in 34 C.F.R.
668.164(e) requiring payment within 14 days
of the creation of the credit balance.
81
Neg Reg – Issues that Did Not Reach
Tentative Agreement
 Incentive Compensation


ED proposed eliminating 12 safe harbors that
provide institutions methods to provide
incentives to those involved in recruiting or in
making financial aid awards.
ED proposes that "Eligible institutions,
organizations that are contractors to eligible
institutions and other entities may make meritbased adjustments to employee compensation
provided that such adjustments are not based
on success in securing student enrollments or
the award of financial aid."
82
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)

ED commented that most institutions consider
many factors in making merit-based awards or
bonuses and the proposal eliminates one of
the factors.
83
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)
 State Authorizations

The Department questioned whether
institutions in a state that do not meet ED
expectations for state oversight should remain
eligible for Title IV funding. The non-federal
negotiators were concerned about language
that appeared in earlier versions but was
dropped regarding states that delegate certain
functions to accrediting agencies.
84
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)
 Gainful Employment in a Recognized
Occupation

Current rules:



For-profit institutions and postsecondary
vocational institutions are subject to the criteria
that all of the programs must prepare students for
gainful employment in a recognized occupation.
Institutions of higher education are subject to the
criteria only for their non-degree programs.
There is no definition of “gainful employment.”
85
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)

ED’s proposal:


The use of a student loan debt-to-income ratio as
a primary indicator of "gainful employment,"
where debt would include all forms of student
loans, except for institutional payment plans;
The proposal is based on the Department's
determination that graduates should be able to
repay their loan debt in ten years without using
more than 8 percent of their expected earnings in
the occupation; and
86
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)

Alternative methods would be included in the
rules to demonstrate program eligibility, such
as using actual earnings rather than the
Bureau of Labor Statistics’ (BLS) statistics or
demonstrating a 90 percent repayment rate on
Title IV loans among the institution’s
graduates over a three-year period.
87
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)
 Return of Title IV and Terms with Modules
and Mini-Sessions

Current Rules:


If a student completes a module in a term-based
program, the return of Title IV is not required.
ED’s concerned that some institutions have
established very short modules of only a few days
as the first module and, if it is completed and the
student withdraws, the student is not considered
to have withdrawn for purposes of return of Title
IV calculations.
88
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)

ED’s proposal:

A student would be considered withdrawn
from a term constructed of modules,
compressed courses or mini-sessions if the
student does not complete all days or clock
hours in the payment period that the student
was scheduled to complete prior to
withdrawing.
89
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)
 Return of Title IV and Attendance

Current Rules:




An institution is required to take attendance if an
outside entity has such a requirement.
This does not include institutions that are
voluntarily taking attendance.
New additions to the definition of a school that is
required to take attendance.
ED’s proposal:

The institution itself has a requirement that its
instructors take attendance; or
90
Neg Reg – Issues that Did Not Reach
Tentative Agreement (cont.)

The institution or an outside entity has a
requirement that can only be met by taking
attendance or a comparable process, including
but not limited to, requiring that students in a
program demonstrate attendance in the classes
of that program, or a portion of that program.
91
Questions??
Sharon H. Bob, Ph.D. – [email protected]
Powers Pyles Sutter & Verville PC
1501 M Street NW, Seventh Floor | Washington, DC
20005
tel 202.466.6550 | fax 202.785.1756
April 26, 2010
92
Sharon H. Bob, Ph.D.
Practice Areas:
• Education
• Title IV Eligibility & Compliance
• Program Reviews and IG Audits
• Accreditation
• Mergers & Acquisitions
• Public Policy & Government
Relations
• State Licensing
• Education Policy
Member:
• NASFAA
• CCA
Education:
• Ph.D., University of Maryland,
1976
• BA, State University of Buffalo,
1971, summa cum laude
Sharon H. Bob, Ph.D., Higher Education Specialist on Policy and Regulation, is a
member of the Education Group at the Washington, D.C. law firm of Powers Pyles Sutter
& Verville, P.C. Dr. Bob advises all sectors of higher education regarding strategic issues
pertaining to their participation in the federal student financial assistance programs,
accreditation, licensure, education tax benefits, and related regulatory matters.
Dr. Bob advises public and private colleges and universities, as well as private and
publicly-traded companies. In this role, she provides clients with detailed technical
guidance related to compliance with applicable statute and regulations. She regularly
assists postsecondary educational institutions on issues relating to institutional eligibility,
program eligibility, student eligibility, financial responsibility and administrative capability
standards, changes of ownership, adding locations and programs, program reviews and
compliance audits, and institutional responsibilities for the education tax benefits.
Through training seminars and on-site reviews, she assists clients in complying with the
federal requirements for administering federal student financial assistance. Dr. Bob has
authored numerous articles on federal financial aid issues for The Greentree Gazette,
NASFAA's Journal of Student Financial Aid, NASFAA's Student Aid Transcript, the
Career College Link, and other higher education publications and frequently speaks at
meetings of college officials and student aid administrators.
Dr. Bob received her undergraduate degree summa cum laude from the State University
of New York at Buffalo and was elected to Phi Beta Kappa. She received her doctorate
from the University of Maryland.
Powers Pyles Sutter & Verville is a Washington, D.C.-based law firm that focuses on
health care, education, and the law of tax-exempt organizations.
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