The Department of Education recently issued final regulations addressing the integrity of programs authorized under Title IV of the Higher Education Act and partial regulations affecting programs focused on gainful employment. The program integrity provisions apply to all postsecondary institutions.
Understanding the new regulations is critical, given that the ED has the authority to withhold Title IV funding from institutions that do not comply.
The new rules address most items included in the ED’s proposed regulations published in July 2010, but not those on gainful employment programs’ eligibility for federal student aid. (See box.) The newly adopted rules will go into effect on July 1, 2011, while those on gainful employment information collection and verification and updating of student aid application information are slated for release early in 2011. Despite that delay, the gainful employment program rules will become effective on July 1, 2012.
Measures to protect students, consumers
The new regulations expand the following consumer-protection requirements:
• Misrepresentation. The HEA authorizes the ED to fine, suspend or terminate institutions that substantially misrepresent the nature of their educational programs, financial charges or graduates’ employability.
According to the new rules, “misrepresentation” means false, erroneous or misleading statements made not only by the eligible institution, but also those made by a representative, “or any ineligible institution, organization, or person with whom the eligible institution has an agreement” to provide marketing, advertising, recruiting or admissions services.
The new definition also clarifies that “misleading” statements include those made in writing, visually, orally, or through other means that have “the capacity, likelihood, or tendency to deceive or confuse.”
However, the new definition does not cover statements made by students on social media websites or by uninterested third-party contractors (e.g., food vendors).
The ED states it will apply a “rule of reasonableness” and take various factors into account when addressing complaints of misrepresentations.
• Incentive compensation. The regulations remove the “safe harbor” provisions that allowed compensation practices that the ED deemed questionable under the current rule. The new rule applies to any entity or person engaged in student recruitment or admission activities or who makes decisions regarding financial awards.
A two-part test should be used to determine if a payment is permissible. First, institutional officials must decide whether the payment is a commission, bonus or other incentive payment — defined as an award of money or something of value paid or given to a person or entity for services rendered. Second, they must determine if the reward is provided based in any part, directly or indirectly, on a person successfully securing enrollments or financial aid for prospective students. The activities in question facilitate students’ admission or matriculation for any period of time or aid them in receiving financial aid.
If the answer to each of the two questions is affirmative, the commission, bonus or incentive payment would not be permitted under the statute.
Although coaches, college presidents and chief executive officers are not expressly included, the ED cautioned that the two-part test should be applied before they accept any payment or compensation. However, the rule does not prohibit bonus payments to coaches as long they are rewarding behavior other than securing an enrollment.
• State authorization. Colleges and universities must be legally authorized as educational institutions by a state if it has a process to review and appropriately act on complaints about them, including enforcing applicable state laws. Institutions unable to comply with this requirement by July 1, 2011, may request extensions up to July 1, 2013. But they must provide an explanation from their state concerning how it will be able to modify its procedures to comply within the extended time frame.
Distance education and online programs must obtain certification in all states where they provide education.
Eligibility for federal aid
The new rule imposes certain obligations on institutions to ensure that only students who have a high school diploma or pass a bona fide “ability to benefit” test receive financial aid under Title IV. Those obligations include:
• Verification. Institutions must evaluate the validity of a student’s high school diploma if officials or the ED have reason to believe it is not valid.
The ED clarified that a certified statement from the student would not be considered sufficient documentation.
• Ability to benefit. To improve the ED’s oversight of how ability-to-benefit tests are administered, the regulation provides new test approval procedures and criteria, including those related to tests for speakers of other languages and persons with disabilities.
• Credit hour. Because credit inflation can lead to awarding excessive student financial aid, the rule defines a credit hour and establishes procedures for accrediting agencies to determine whether an institution’s credit-hour use is acceptable. The definition is used solely for federal program purposes so institutions may still set their own standards for academic progress.
Learn new disclosure, reporting requirements imposed by partial gainful employment rule
The Department of Education’s new rules partially cover the requirements for Title IV eligibility for programs that prepare students for gainful employment. The provisions apply to all institutions that offer nondegree programs and almost all degree programs at for-profit institutions.
The rules establish the following new requirements:
• Program approval. Institutions must notify the ED at least 90 days prior to offering a new program and provide documentation demonstrating:
The ED will determine whether additional information is required. An institution that provides a notice and does not receive a request for more documentation may proceed with plans to offer the new program based on its own determination that it is an eligible program that prepares students for gainful employment in a recognized occupation.
• Reporting and disclosures. Institutions must provide prospects with each gainful employment program’s graduation and job placement rates. They must also provide the ED with information necessary to determine student debt levels and incomes after program completion.
Until the IPEDS system is available, institutions that are required by their accrediting agencies or by their state to calculate a placement rate must disclose that rate. For colleges required to calculate the rate at the institutional level, the calculation must be done according to the accrediting agency or state methodology. All institutions must disclose the accrediting agency or state-required placement rate.
These disclosures must be made in a “clear, timely and meaningful manner.” Institutions are expected to post this information on their programs’ websites with a “prominent and direct link” to that page on every website page about the program.
Also, the information “must be displayed in an open format that can be retrieved, downloaded, indexed and searched by commonly used search engines.” The ED defined “open format” as one that is “platform-independent, machine-readable and available to the public without restrictions that hinder reuse of the information.”
Finally, the disclosures must be prominently displayed on any program promotional materials.
However, institutions don’t have to report debt acquired by students while attending other institutions unless the institutions were under common ownership or were related entities.
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