U.S. Department of Education Publishes Proposed Regulations Addressing Program Integrity and Student Aid Programs

Publication Number 11 June 28, 2010


U.S. Department of Education Publishes Proposed Regulations Addressing Program Integrity and Student Aid Programs

On June 18, 2010, the U.S. Department of Education (USDE) published a Notice of Proposed Rulemaking in the Federal Register addressing program integrity and student aid programs. The proposed regulations provide rules and definitions for a range of issues, several of which will affect accrediting organizations and the institutions and programs they accredit.

The publication of proposed regulations follows a round of negotiated rulemaking – during which the federal government consults with constituents to draft or revise regulations – held by USDE from late 2009 to early 2010. This was the second negotiated rulemaking held since passage of the Higher Education Opportunity Act of 2008 (HEOA) that included accreditation-related issues. The rulemaking committee did not reach consensus on a number of the issues, leaving USDE free, under the committee’s protocol, to propose regulations without following any of the agreements reached.

A 45-day public comment period on the rules ends August 2, 2010. In the Federal Register notice, USDE provides staff contact information for each of the issues covered by the proposed regulations. Final regulations will be issued by November 1, 2010 and will become effective on July 1, 2011.

The Impact on Accreditation

During the negotiated rulemaking (see CHEA Federal Update #8), CHEA identified several issues that would have an impact on accrediting organizations, as well as on the institutions and programs they accredit:

Misrepresentation of Information to Students and Prospective Students: The proposed regulations broaden the definition of misrepresentation in current regulation to include false, erroneous or misleading statements that are made directly or indirectly to a student, prospective student or "any member of the public" by an institution, its representatives or any institution, organization or person with whom the institution has an agreement. The list of parties to whom misrepresentations may not be made has been increased to include accrediting organizations and state agencies. False, erroneous or misleading statements about an institution’s accredited status are expressly disallowed. Misrepresentations now also include student endorsements or testimonials given “under duress” or as a precondition for a student to participate in a program.

The proposed regulations will hold institutions responsible not only for actual false and misleading statements but also for statements that have the “…capacity, likelihood or tendency to deceive or confuse.” According to USDE, the new rules will strengthen the Department’s regulatory authority against eligible institutions that engage in substantial misrepresentations. A finding of misrepresentation may lead to loss of eligibility for federal funds.

State Authorization As a Component of Institutional Eligibility: The proposed regulations define what constitutes state authorization of an institution to operate and grant certifications or degrees, for Title IV eligibility. Current regulations do not define or describe the statutory requirement that an institution must be legally authorized in a state. Under the new rules, the institution’s authorization must be subject to adverse action by the state. USDE notes that, while state authorization was in the past viewed as a “minimal” requirement, the Department now views state authorization as a “substantial requirement where the State is expected to take an active role” not only in approving institutions but also in monitoring and “responding appropriately” to public complaints about institutions.

The proposed regulations clarify that states may continue to rely on accrediting organizations as proxies for authorization. However, states are required to perform certain functions themselves, such as establishing a process to review and act on complaints concerning an institution.

Definition of a Credit Hour: Current regulation does not contain a definition of a credit hour. The proposed regulations establish a definition of a credit hour that is consistent with the Carnegie Unit (“one hour of classroom or direct faculty instruction and a minimum of two hours of out of class student work each week for approximately 15 weeks for one semester or trimester hour of credit, or ten to twelve weeks for one quarter hour of credit, or the equivalent amount of work over a different amount of time”). The proposed rules also allow institutions to establish equivalencies that are demonstrated by “learning outcomes and verified achievement.” A method to convert clock hours to credit hours is included in the proposed regulations.

The new rules require that accrediting organizations, as part of accreditation reviews, must evaluate the reliability and accuracy of the institution’s assignment of credit hours and take action to address any deficiencies identified. This creates new review and reporting requirements for accrediting organizations and the institutions and programs they accredit, in addition to the current requirement that accrediting organizations assess an institution’s measure of program length. If the accrediting organization finds “systemic noncompliance” with the accreditor’s policies or “significant noncompliance” regarding one or more programs at the institution, the accrediting organization is now required to “promptly notify” USDE.

The proposed regulations also add a requirement that, to authorize an institution, states must review and evaluate the institution’s policies and procedures for the assignment of credit hours and the institution’s application of its policies and procedures in assigning credit hours to its programs and courses.

Gainful Employment and Incentive Compensation

The proposed regulations do not include a definition of gainful employment, an issue that generated considerable controversy during the negotiated rulemaking. The proposed rules do include a requirement that institutions disclose graduation and job-placement rates, both to USDE and to the public. USDE is considering a definition of gainful employment – which may include a student debt to expected earnings ratio – and may issue additional regulatory language later this summer.

With regard to incentive compensation, the proposed regulations remove “safe harbor” provisions for persons or entities engaged in student recruitment or admission activities, another contentious issue during the negotiated rulemaking. Safe harbors are exceptions to the law prohibiting college recruiters and admissions officers from being paid on the basis of their success in enrolling students.

The new rules also: (a) require institutions to establish a means of determining the validity of a student’s high school diploma if its validity is questioned by either the institution or USDE, (b) create new regulations for tests to determine a student’s “ability to benefit,” (c) address the eligibility of students who do not have a high school diploma or its equivalent for Title IV student aid, (d) revise the definition of unsubsidized student financial aid to include additional federal loan programs, (e) expand the definition of a “full-time student,” (f) address issues related to calculating a return of Title IV or HEA program funds and (g) revise the requirements for student verification of information on their Free Application for Federal Student Aid. While these regulatory changes will have little or no impact on accreditation, in many instances they will create new requirements for higher education institutions and programs.

Hearings by the House and Senate Address For-Profit Education, Credit Hours and Accreditation

The House Education and Labor Committee held a hearing on June 17, 2010 on accrediting organizations and credit hours. The following week, the Senate Committee on Health, Education, Labor and Pensions held a hearing on June 24, 2010 on for-profit higher education. Together, these two hearings demonstrate a strong interest by the House and Senate in oversight of issues that have an impact on accreditation.

U.S. House of Representatives Hearing on Accreditation and Credit Hours

The House Education and Labor Committee hearing on June 17, 2010 focused on accrediting organizations’ review of institutions’ policies on credit hours and program length. Kathleen Tighe, USDE’s Inspector General (IG), provided an overview of recent Department reports on credit hours and program length with regard to the three largest regional accreditors. Other witnesses included Sylvia Manning, President of the North Central Association’s Higher Learning Commission; and Michale McComis, Executive Director of the Accrediting Commission of Career Schools and Colleges.

In his prepared opening statement, Committee Chair George Miller (D-California) indicated his concern about the increased cost of higher education and growing student indebtedness, as well the cost to students and taxpayers of inflated credit hours. While initially stating that the need for greater higher education accountability regarding the assignment of credit hours cut across all types of institutions, his closing commented suggested a particular concern with the for-profit sector. He cited the IG’s findings that the three regional accreditors did not have definitions for credit hours and that only one of the three has a definition of program length.

Several committee members echoed Miller’s comments and noted the importance of a clear definition of credit hours, such as the definition included in USDE’s proposed regulations. Both witnesses from accrediting organizations testified that while having an established federal definition for a credit hour would not be harmful, such a definition, by itself, would not enhance academic quality.

With regard to accreditation, the committee:

  • Expressed a strong interest in greater federal involvement in the assigning of credit hours, perhaps including standardization at the federal level.
  • Raised a number of questions about current accrediting organizations’ monitoring of assignments of credit hour by the institutions and programs they accredit.
  • Explored the appropriate assignment of credit hours as this relates to academic quality.

The two-hour hearing concluded with Miller noting that the committee likely will ask representatives from the accreditation community to meet with committee members to discuss issues raised both by the IG reports and by the questions and answers at the hearing.

Senate HELP Committee Hearing on For-Profit Education

The Senate Health, Education, Labor and Pensions (HELP) Committee hearing on June 24, 2010 was  the first in a series the committee plans to hold on for-profit higher education. In a news release announcing the hearing, Committee Chair Tom Harkin (D-Iowa) said “The Committee will examine a broad range of issues related to the growing role of the for-profit higher education sector, including the scope and rapid growth of the federal investment in for-profit higher education and the corresponding opportunities and risks for students and taxpayers.”

The hearing’s witnesses included Steven Eisman, Portfolio Manager for FrontPoint Financial Services, Yasmine Issa, a former student at Sanford Brown Institute and Margaret Reiter, former California Supervising Deputy Attorney General, all of whom had previously expressed concerns about for-profit higher education. Also testifying at the hearing were Kathleen Tighe, USDE’s Inspector General and Sharon Thomas Parrot, Senior Vice President of Government and Regulatory Affairs and Chief Compliance Officer for DeVry, Inc.

Two issues dominated the hearing: a call for additional reliable information and a view that that students are not well-served by for-profit education. Comments and questions at the hearing focused on the debt burden of students at for-profit schools, the lack of a standard definition either for a credit hour or program length, the need for more information and data concerning graduation and job placement statistics and recruiting practices. Harkin maintained that there were too many things not known about the for-profit sector, e.g., long-term defaults, the extent of to which for-profit institutions profit from federal dollars and student outcomes.

Committee members, while noting the important role that for-profit colleges and universities play in higher education, expressed concern about “bad actors” in this community. The role of accreditation in reviewing for-profit institutions and programs, as well as accreditation’s role in assuring quality, also received significant attention at the hearing.

With regard to accreditation, the committee:

  • Asked questions about whether accreditation governance is appropriately free from conflict of interest.
  • Asked questions about how well accrediting organizations were carrying out their responsibilities to provide data about institutions to the federal government, e.g., job placement information.
  • Called for additional action to assure that accredited status means quality.

Future HELP Committee hearings on for-profit education will be scheduled beginning in July.

Together, the hearings by the two committees suggested that the U.S. Congress:

  • Is approaching higher education quality with a particular emphasis on consumer protection.
  • Has a growing interest in becoming more active in additional oversight of accreditation operation and structure and its gatekeeping role.

Members of Congress Call for Study of For-Profit Higher Education

On June 21, 2010, five members of the U.S. Senate and House of Representatives asked the Government Accountability Office (GAO) to conduct “a review of the for-profit or ‘proprietary’ postsecondary education sector and the sector’s share of revenue derived from Federal student aid funding.” The five Democrats included Senator Tom Harkin and Congressman George Miller, chairs of the Senate and House education committees. No timetable has been established for GAO to complete its review.

The letter requesting the study asked GAO to examine a number of issues, some of which have a direct relationship to accreditation. Issues to be examined by GAO include recent growth and change in for-profit higher education, what is known about the quality of educational programs offered by for-profit institutions and the outcomes for students, whether existing program integrity safeguards are sufficient to protect against waste, fraud and abuse and how much of the revenue of for-profit institutions comes from various federal funding sources, including Title IV.

USDE To Issue Accrediting Organization Recognition Guide

A draft “Guide to the Accrediting Agency Recognition Process” remains under review by USDE, with a final version expected this summer. The draft guide was first circulated in February 2010, followed by USDE-hosted meetings with representatives from the accreditation community.

USDE produced recognition guidance documents in 2000 and 2005. According to USDE, the guide is designed to update past guidance and to help accrediting organizations understand the process for federal recognition. The guide’s introduction notes that it contains “information about how the Department of Education interprets the regulations and suggestions of the kinds of documentation an agency might provide in its application to demonstrate its compliance with each of the regulatory requirements.”

National Advisory Committee on Institutional Quality and Integrity to Begin Meeting in December

The first meeting of the newly reconstituted National Advisory Committee on Institutional Quality and Integrity (NACIQI), the federal advisory body to the Secretary of Education that provides recommendations on the recognition of accrediting organizations, is scheduled for December 1-3, 2010. Prior to that meeting, members of the Committee will undergo training by USDE. The committee has not met since July 2008.

The committee is made up of 18 members who are appointed by the U.S. Senate, the U.S. House of Representatives and the U.S. Department of Education (USDE). The House and Senate appointees are now being “vetted,” a review process for appointees to all federal advisory committees. USDE's appointees already have undergone the vetting process.