The final round of negotiations on Title IV general provisions finished in consensus last Friday. Negotiators successfully navigated 19 issues, only five of which had tentative agreement prior to last week's meeting. Not all of the agreed-upon language has been provided by the Department and it is unclear if a final version will be released from the Department prior to the Notice of Proposed Rulemaking that is expected to come out within the next few months.

Following the Notice of Proposed Rulemaking will be a comment period of at least 30 days to allow the financial aid community at-large and the general public to suggest any further changes. Negotiation rules prohibit any negotiators from commenting negatively on the package after consensus.

The Department will then publish a Notice of Final Rules, which will also include a preamble discussing any further changes made by the Department in response to public comment. The Notice of Final Rules will also contain an implementation date for the regulations and must be published by November 1, in order to be implemented the following July 1.

This article builds on what had been agreed on during round two of negotiations, and focuses on the changes that were made in round three. A summary of the second round of negotiations on General Provisions is available in these two articles:

• Part 2 Of NASFAA's Summary: Second Round Of Negotiated Rulemaking On General Provisions
• Second Round Of Negotiated Rulemaking On General Provisions Concludes

This is the first of two articles that will analyze these latest draft proposed regulations. The second article will be posted shortly.

Consistent Enrollment Status Definitions for All Title IV Programs

The draft proposed regulatory language would consolidate the definitions for a full-time student, half-time student, and three-quarter time student for all Title IV programs in §668.2(b). For an undergraduate student, minimum full-time standards would continue to be defined based on the structure of the student's program of study, and institutions would have the option to set a higher full-time standard for its programs of study. The proposed full-time definition would also clarify how that status is defined for students enrolled in correspondence coursework.

In the final round of negotiations, the Department dropped its proposal to increase the number of clock hours required for full time from 24 clock hours per week to 35 clock hours per week. No other changes are proposed to the regulatory minimum full-time standards. Full-time status for graduate students would continue to be determined by the institution. Except for students enrolled in programs of study by correspondence, half-time for both undergraduate and graduate students would be defined as half the academic work load of the applicable minimum full-time standard.

Consistent Definitions for Undergraduate Student, Graduate or Professional Student and First-Professional Degree for All Title IV Programs

Currently there are wording differences in the definitions of "undergraduate student" and "graduate student" in the various program-specific regulations. The proposed draft regulations would define "first professional degree" based on the definition used by the Integrated Postsecondary Education Data System (IPEDS), and would consolidate and move the definitions for undergraduate and graduate or professional students to §668.2(b). References to these terms in §674.2(b), §675.2(b), §676.2(b), §682.200, §690.2, and §691.2 would be removed.

Under the proposed draft, a graduate or professional student would be defined as one who is not receiving Title IV aid as an undergraduate for the same period of enrollment, is enrolled in a program or course above the bachelor's level or in a program leading to a first professional degree, and has completed the equivalent of three years of full-time study either prior to beginning or as part of the graduate or professional degree program. Language was added to the definition of an "undergraduate student" to clarify that any student who is enrolled in a dual degree program would be considered an undergraduate student for purposes of federal student aid for at least the first three academic years in the program.

Definition of Independent Study

Current regulations do not define the term "independent study." Negotiators spent considerable time focusing on how students in independent study courses receive instruction. Ultimately however, federal negotiators stated during the final round that the Department does not believe that a definition is needed at this time other than for direct assessment programs. Federal negotiators then offered a more narrow definition of independent study specifically for direct assessment programs. Under the proposed definition, a student would be considered to be enrolled in independent study within a direct assessment program if:

• The course of study has predefined objectives;
• The student works with a faculty member on how to meet those objectives;
• The student and faculty member agree on what work is required, how the work will be evaluated, and the time frame for completion of the work; and
• The student interacts with the faculty member on a regular and substantive basis.

A nonfederal negotiator expressed concern that the language requiring an instructor to interact with a student on a "regular and substantive" basis was too vague and might be too difficult to implement on any type of consistent basis. However, federal negotiators pointed out the vagueness of that language was intentional and works to the advantage of the schools in being able to flexibly apply those standards as they see fit. On the other hand, removing the language completely would reduce this definition to the point where it would become meaningless. It was decided to leave the proposed language as-is.

Timing of Loan Disbursements and Requirements to Use Consistent Disbursement Periods for Title IV Programs, Where Allowed Under the Law

In the prior round of negotiations, the Department proposed regulatory language that would amend the definitions of "payment period" by defining, for each type of academic program structure, the same payment period for all Title IV programs, except where prohibited by law. The Department modified the proposed regulatory language in response to concerns raised by the nonfederal negotiators in previous rounds of negreg.

The revised language would eliminate the proposed payment period definition changes for all Title IV programs related to the remaining portion of a clock-hour program and a nonterm program. Instead of always requiring two equal payment periods regardless of the length of the remaining portion, a second payment period would be required only if the remaining portion is more than half of an academic year. However, if the remaining portion of the student's program is half of an academic year or shorter, any FFEL or Direct Loan certified or originated for that final payment period would have to be disbursed in two installments unless the school is exempt from the multiple disbursement requirements based on its cohort default rate as specified in 682.604(c)(10) or 685.301(b)(8). Similar changes were made to the proposed payment period definitions for FFEL and Direct Loan purposes related to the remaining portions of academic programs that are offered in nonstandard credit-hour terms that are not substantially equal.

The final draft proposed regulations also clarify that for a student enrolled in a clock hour or a nonterm program, the second payment period does not begin until the student successfully completes, as applicable, half the clock hours or credit hours in the program, academic year, or remainder of the program. Under the proposed language, a student has successfully completed the required hours if the institution considers the student to have passed the coursework associated with those hours. If the institution is unable to determine when a student has successfully completed half of the clock or credit hours, the student would be considered to begin the second payment period on the later of the date, as determined by the institution, that the student has completed half the academic coursework or half the number of weeks of instructional time in the program, academic year, or remainder of the program.

The proposed payment period regulations would also codify current Department guidance published in the Federal Student Aid Handbook regarding students who withdraw after 180 days and then transfer into another nonterm credit-hour program or a clock-hour program at the same institution. For such a student, the proposed rules would give institutions the option of either treating the student as having withdrawn and placing him or her in a new payment period, or considering the student to be re-entering in the same payment period provided the following conditions are met

1. The student must be continuously enrolled at the institution
2. The coursework in the payment period from which the student transferred must be substantially similar to that the student will be taking when he or she first transfers into the new program
3. The payment periods must be substantially equal in length of weeks of instructional time and, as applicable, credit or clock hours
4. There are little or no changes in the student's institutional charges associated with the payment period.

Under current regulations, institutions may use either the payment period or period of enrollment when performing return of Title IV funds calculations for students enrolled in programs other than a standard term program. Whichever period the institution chooses to use, it must use that period for all students in the same academic program. However, for transfer students and for readmitted students who subsequently withdraw, institutions may make a separate selection provided it uses the same treatment for all students in that category.

The draft proposed regulatory language would modify these re-entry requirements for nonstandard term credit-hour programs. For such nonstandard term programs, if a student has a FFEL or Direct Loan as well as assistance of from any of the other Title IV programs, the payment periods for the FFEL or Direct Loan will not coincide with the payment periods for the other Title IV programs. Thus, if the institution chooses to use the payment period basis for the return of Title IV calculations, the institution would be required to use the payment period that ends later and attribute to that payment period the Title IV aid that was disbursed and could have been disbursed.

Determining Loan Eligibility for Nonstandard Term Programs

Students enrolled in nonstandard credit-hour programs currently do not become eligible for a new annual Stafford Loan limit until they have completed both the number of credit hours and weeks of instruction time in an academic year. During the prior meeting, the federal negotiators provided draft language that would apply to students enrolled in credit-hour programs offered in nonstandard terms having substantially equal terms that are at least nine weeks the same rules as used for students enrolled in standard term, credit-hour programs. That is, the student enrolled in such nonstandard term credit-hour programs would be eligible for the next annual loan limit when the academic year calendar has elapsed. In the final round of negotiations, the draft language was modified to clarify that each of the nonstandard terms must contain at least nine weeks of instructional time.

Minimum Period for Certifying a Loan

Under current regulations, the minimum period for which a school may certify or originate Stafford Loans for students enrolled in programs that are not standard credit-hour programs is the lesser of the length of the program's academic year or the academic year. Students who transfer from such programs to a new school within their borrower-based academic year (BBAY) are put in a precarious situation because they must wait for their prior academic year (i.e., both weeks and credit or clock hours) to expire before regaining eligibility for maximum annual loan limits. A transfer student may borrow the remaining balance of his or her annual loan limit from his or her academic year at the previous institution, but the new school would be required to certify that loan for an entirely new academic year.

In the previous meeting, federal negotiators proposed regulatory language that would allow a school to certify or originate a loan for a single nonstandard term, provided that the terms are substantially equal in length and no term is less than nine weeks. During the final round of negotiations, federal negotiators provided draft proposed regulatory language that would make two additional changes in the minimum period for which schools may certify or originate a FFEL or Direct Loan for students enrolled nonterm programs, clock-hour programs, and nonstandard term credit-hour programs offered in terms that are not substantially equal or have nonstandard terms less than 9 weeks. The first proposed change would apply to students who transfer to a new school within their BBAY. The new school would be allowed to certify or originate a loan for the remaining portion of the student's program or academic year. However, the amount certified or originated may not exceed the remaining balance of the students' annual loan limit. The second proposed change would apply to students who complete degree requirements for one program, and begin within the same BBAY a new academic program at the same institution. In this situation, the institution would be able to certify or originate loans for the remaining balance of students' annual loan limits at the loan level associated with their new program of study.

By Eileen Welsh
NASFAA Assistant Director for Professional Assessment, Training, and Regulatory Assistance

Justin Draeger, assistant director for communications, also contributed to this article.

Posted 04/26/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.