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Negotiated Rulemaking Outcomes on Federal Student Aid Integrity Rules

February 10, 2010

Here is a summary of the issues of particular interest to private colleges and universities.  These were addressed in the negoitated rulemaking sessions on a package of new integrity rules for the federal student aid programs.  Those sessions concluded on January 29, 2010, without achieving consensus on the full package.  Consensus was, however, reached on specific issues as noted below.

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Definition of a Credit Hour

Background:  To ensure equity for federal student aid recipients and to administer its programs appropriately, the department argued it needed a federal definition of a credit hour that could be applied uniformly to all academic endeavors.  Most of the non-federal negotiators thought that the appropriateness of course credit hours was better left to the accreditors.

The issue came to the forefront because, according to the department, students in clock hour (seat time) programs, that convert those hours to credits, end up receiving more aid for less time spent than do students receiving credit under the Carnegie system.  The department also has proposed to increase the number of hours of "instructional time" that would be required in converting that time to credit hours.  This was most strenuously opposed by the cosmetology representatives.

Outcome:  Ultimately, the decision of the appropriateness of course credits was left in the hands of the academic community, not federal auditors.  The credit-clock hour conversation formula also was changed.

(Consensus reached)

State Authorization as a Component of Institutional Eligibility

Background:  Arising from a problem in California where students received federal financial aid at schools without state authorization, the department proposed a new regulatory section to define the meaning and extent of state authorization of colleges or certain non-degree programs.

The non-federal negotiators objected to the sweeping language - which for many states meant changing their laws - requiring states to monitor an institution's education programs to assure quality, financial viability, and compliance with state laws.  A particularly vexing requirement was that institutions must have agreements with any states whose residents take distance education courses from the institution.

Outcome:  Language was modified significantly both to protect private, not-for-profit institutions from the proposed expansion of state regulation over them through state licensure laws, and to provide the department with the tools to go after disreputable institutions.  Still, the consumer advocate negotiator dissented.

(No consensus)

Gainful Employment in a Recognized Occupation

Background:  To address the problem of students having high levels of debt for expensive job training programs with little benefit, the department proposed two formulaic options for assessing whether students received adequate and affordable training.  While this is primarily a proprietary school issue, it may have implications for one-year non-degree programs at traditional colleges.

Outcome:  The department offered to assume the burden of doing the mathematical calculations to determine if a proposed ratio of an institution's (or program's) price to student debt to student income meets the standard established by the department.  Unfortunately, even institutions likely to pass muster would still have to provide considerable data to the department for analysis.

(No consensus)

Incentive Compensation

Background:  Because of continuing abuse in compensation of admissions recruiters on a per-student basis - principally in the for-profit sector - the department proposed elimination of all "safe harbors" related to incentive compensation.  As the regulations apply to all sectors, some traditional colleges have been concerned about the impact on their use of third parties in enrollment activities.

The language agreed to by the department, which applies to institutions and third parties, banned "any commission, bonus, or other incentive payment based directly or indirectly upon success in securing enrollments or the award of financial aid," but allowed other merit-based salary increases.

Outcome:  At the last minute, the for-profit negotiator - who had been in agreement with the proposal - presented language opening loopholes the department wished to close.  The department would not accept the language, and the negotiator dissented.

(No consensus reached)

Definition of a high school diploma

Background:  To stem the growing problem of high school diploma mills and ineligible students receiving student aid, the department proposed language that would have all colleges develop and maintain lists of good, bad, and questionable high schools, and then use the lists in determining student aid eligibility.  Nearly all the non-federal negotiators objected, on the basis that no nationally comprehensive list of recognized high schools exists,

Outcome:  The department agreed to develop such lists of high schools itself, and to compare that list to the high school information on a student's FAFSA.  Colleges would be required to resolve remaining discrepancies.

(Consensus reached)

Misrepresentation of Information to Students and Prospective Students

Background:  The department proposed regulatory language to expand the persons, entities, and information to which misrepresentation rules apply.  Non-federal negotiators acknowledged the department's concerns about misrepresentation.  They argued, however, that the wording and scope of the proposed language could infringe on academic freedom, and weren't compatible with the realities of college operations and teaching.

Outcome:  While preserving an effective mean of addressing abuse, the department agreed to limit action to those misrepresentations that are "substantial."

(Consensus reached)

Satisfactory Academic Progress (SAP)

Background:  The department is concerned that students are receiving federal student aid despite lack of academic progress.  Negotiators worked out issues around timing, especially for short programs.

Outcome:  The proposed rules would require an institution to have a reasonable SAP policy, including a schedule of incremental progress, and to evaluate student progress at the end of each payment period or the end of an academic year.

(Consensus reached)

Agreement Between Institutions

Background:  The department was concerned that some agreements between institutions, especially when one of the institutions was not Title IV eligible, were not fair to students.  The regulation was clearly focused on for-profit school practices, and not on the kinds of overseas study programs offered by traditional colleges.

Outcome:  The regulation will make it more difficult for for-profit institutions to get around institutional eligibility requirements.

(Consensus reached)

Ability to Benefit Tests (ATB Tests)

Background:  According to the department's inspector general, abuses in the administration and grading of ATB tests at for-profit schools have enabled unqualified students to attend college and obtain federal student aid.

Outcome:  The department, consumer advocates, and test publishers were able to tighten the process.

(Consensus reached)

Delivery of Financial Aid

Background:  The department raised several issues related to operational aspects of providing federal student aid.  These included inconsistencies in retaking courses, the return of Title IV aid (attendance documentation and modular courses), verification of eligibility, and disbursement of aid.

Outcome:  Agreement came quickly on the retaking-courses issue through a minor technical clarification.  Non-federal negotiators accepted the department's plan to change verification of the accuracy of a student's FAFSA, by having institutions focus only on verifying a single item selected by the Department.  The disbursement of credit balances - mostly a community college issue - will provide institutions flexibility, and will be limited to students receiving Pell Grants.  The complexity of issues on the return of Title IV aid, however, revealed problems that could not be resolved  in the course of the negotiations.

(Consensus reached on retaking courses, verification
and disbursement, but not on return of Title IV aid.)

 

 

Contact Maureen Budetti maureen@naicu.edu