The Department of Education (ED) published new rules on October 30, 2015, finalizing a Notice of Proposed Rulemaking (NPRM) published on May 18, 2015. The general effective date of these final rules is July 1, 2016. This article describes a number of provisions covered in the final rule, except for certain major new cash management rules that will be described in a separate article in the coming days.
Repeated Coursework (668.2)
The final rule simplifies the treatment of repeated coursework in term-based programs by eliminating the provision that currently prohibits an institution from paying for previously passed courses that must be repeated because the student failed another course. Use of Title IV funds to pay for repeating a previously passed course remains limited to one time.
Provision for Purchasing Books and Supplies [668.164(m)]
Current regulations [at 668.164(i)] require institutions to provide a way for Pell Grant-eligible students to obtain or purchase books and supplies by the seventh day of a payment period if certain conditions, including the likelihood of a Title IV credit balance, are met. The new rule broadens this provision to encompass students who are eligible for any Title IV funds.
The amount to be made available, the method by which the books and supplies are made available, and the right of the student to opt out of that method, remain unchanged.
Prior Year Charges
The final rule incorporates into regulation a revised version of the current policy that allows a limited amount of current year funds to be applied to prior year charges. Current regulation specifies the amount of prior year charges that may be paid with current year funds, but the details of that policy are described in Dear Colleague Letter GEN-09-11. The allowable amount ($200 or less) that is currently in regulation remains unchanged, but the new rule allows schools flexibility in determining what is the “current” and “prior” year. The concept that aid intended for a current year must be used for expenses associated with that current year except for only a de minimis amount continues to underlie the regulation.
Current policy specifies a single period of time as the current year, depending on whether a Direct Loan was part of the aid package, even though a Direct Loan may be awarded for a different period of time than other Title IV assistance. Under the new rules, the definition has been revised as follows:
The final rule also clarifies that a prior year is any loan period or award year prior to the current loan period or award year. Thus, aid that was intended to cover fall and spring, but does not arrive until spring, can be used to pay fall charges even though other Title IV had already been disbursed in the fall. To carry out this principle, the new rule states that all allowable unpaid prior payment period charges from payment periods in the current award year or loan period for which the student was eligible for Title IV aid can be brought forward and associated with the current payment period.
Crediting a Student’s Ledger Account for Books and Supplies [668.164(c)(2)]
The proposed rules would have required an institution that includes the costs of books and supplies as part of tuition and fees to separately disclose those costs and explain why including them is in the best financial interests of students. The final rule does not include this disclosure; instead, it sets the conditions under which an institution may include books and supplies in tuition and fees, for the purpose of crediting the student’s account.
When Title IV funds are disbursed by crediting a student’s ledger account, the final rules allow an institution to pay tuition, fees, and institutionally provided room and board, as is currently the case. In addition, the final rule allows an institution to use Title IV funds to pay for purchases of “books, supplies, and other educationally related goods and services provided by the institution for which the institution obtains the student’s or parent’s authorization.” This language is somewhat more specific than current regulation, which simply allows crediting the account for “other educationally related charges incurred by the student at the institution” if authorization is obtained.
However, an institution may include the costs of books and supplies as part of tuition and fees under the final rule, and use Title IV funds to cover those costs without obtaining authorization, if:
Alternately, the institution may include books and supplies in tuition and fees, and use Title IV funds to pay for them without obtaining authorization, if:
ED acknowledged that these changes from the proposed rule were made because commenters made a persuasive argument that including books and supplies would not only enable an institution to negotiate better prices for its students, it would result in students having required course materials at the beginning of a term or payment period.
Clock-to-Credit-Hour Conversion [668.8(k)]
The final rule streamlines the requirements governing clock-to-credit-hour conversion by removing the provisions under which a State or Federal approval or licensure action requires a program to be measured in clock hours for Title IV purposes. This change does not affect the basic regulatory definition of credit hour found at 600.2, the programs subject to the conversion formula, or the conversion formula itself.
Prorating Charges [668.164(c)(5)]
Under the final rules, an institution that charges a student up front for more than one payment period (for example, for the entire program of study) must prorate those charges for the purpose of crediting Title IV funds to a student’s ledger account. The purpose of this new provision is to ensure that a student receives a credit balance to use for non-institutional educational expenses in each payment period, rather than having to wait until a final payment period to receive any credit balance. Proration would include charges for books and supplies that are allowed to be included in tuition and fees.
This is the first in a series of articles on the final rules.
Publication Date: 11/3/2015