Federal Potpourri Presented at the National Association of State Administrators and Supervisors of Private Schools (NASASPS) Sharon H. Bob, Ph.D Powers.

Federal Potpourri Federal Potpourri Presented at the Presented at the

National Association of State Administrators National Association of State Administrators and Supervisors of Private Schoolsand Supervisors of Private Schools

(NASASPS)(NASASPS)

Sharon H. Bob, Ph.DSharon H. Bob, Ph.D

Powers Pyles Sutter & Verville PCPowers Pyles Sutter & Verville PC

April 26, 2010April 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

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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)

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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


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

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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).

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Definition of Net Price

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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

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.

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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;

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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 illegal-downloading or peer-to-peer distribution of intellectual property;

Must disclose placement in employment and types of employment obtained by graduates. Placement statistics if calculated;

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Must disclose the retention rate of certificate- or degree-granting, full-time undergraduate students entering the institution;

Must disclose policies on vaccinations;

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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


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;

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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

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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

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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.

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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;

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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; and31

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;

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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 low-income families who do not pay taxes will receive a refund;

33


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.”

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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


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;

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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;

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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

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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


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


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

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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

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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;

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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.

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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).

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*Defaults Nearly Double with Three-Year RatesSector 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%

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The 3-year rates are informational only.*Performed by Student Lending Analysis

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

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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)

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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)

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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 (No) Disbursements of Title IV Funds

(Yes)

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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;

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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.

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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;

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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.

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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.

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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


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.html

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FTC only has jurisdiction over non-degree for-profit 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 information it knows or should know to secure employment in a recognized occupation.

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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.

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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.”

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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.

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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; and

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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.

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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.

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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.

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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.

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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;

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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 CPS-selected applicants;

Allows ED to select only targeted data elements on a student-specific basis;

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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.);

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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.

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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.

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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;

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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;

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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.

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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.

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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.

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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;

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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.

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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 merit-based 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


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

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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


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.

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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

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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.

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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

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Sharon H. Bob, Ph.D.

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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.

Practice Areas:• Education• Title IV Eligibility & Compliance• Program Reviews and IG Audits• Accreditation • Mergers & Acquisitions• Public Policy & Government

Relations• State Licensing• Education PolicyMember:• NASFAA• CCAEducation:• Ph.D., University of Maryland,

1976• BA, State University of Buffalo,

1971, summa cum laude

Federal Potpourri Presented at the National Association of State Administrators and Supervisors of Private Schools (NASASPS) Sharon H. Bob, Ph.D Powers.

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