Federal Register: August 6, 2009

Volume 74, Number 150

[Proposed Rules]

[Page 39497-39533]

[PDF version of document]

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Part IV

Department of Education

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34 CFR Parts 600 and 602

 Institutional Eligibility Under the Higher Education Act of 1965, as
Amended, and the Secretary's Recognition of Accrediting Agencies;
Proposed Rule

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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 602

RIN 1840-AD00
[Docket ID ED-2009-OPE-0009]


Institutional Eligibility Under the Higher Education Act of 1965,
as Amended, and the Secretary's Recognition of Accrediting Agencies

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the regulations in 34 CFR part
600, governing institutional eligibility, and part 602, governing the
Secretary's recognition of accrediting agencies. The Secretary is
amending these regulations to implement changes to the Higher Education
Act of 1965, as amended (HEA), resulting from enactment of the Higher
Education Reconciliation Act of 2005 (HERA), Public Law 109-171, and
the Higher Education Opportunity Act (HEOA), Public Law 110-315, and to
clarify, improve, and update the current regulations.

DATES: We must receive your comments on or before September 8, 2009.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal
or via postal mail, commercial delivery, or hand delivery. We will not
accept comments by fax or by e-mail. Please submit your comments only
one time, in order to ensure that we do not receive duplicate copies.
In addition, please include the Docket ID at the top of your comments.
     Federal eRulemaking Portal: Go to www.regulations.gov to
submit your comments electronically. Information on using
Regulations.gov, including instructions for accessing agency documents,
submitting comments, and viewing the docket, is available on the site
under ``How to Use This Site.''
     Postal Mail, Commercial Delivery, or Hand Delivery. If you
mail or deliver your comments about these proposed regulations, address
them to Ann Clough, U.S. Department of Education, 1990 K Street, NW.,
room 8043, Washington, DC 20006-8542.

    Privacy Note: The Department's policy for comments received from
members of the public (including those comments submitted by mail,
commercial delivery, or hand delivery) is to make these submissions
available for public viewing in their entirety on the Federal
eRulemaking Portal at www.regulations.gov. Therefore, commenters
should be careful to include in their comments only information that
they wish to make publicly available on the Internet.


FOR FURTHER INFORMATION CONTACT: Ann Clough. Telephone: (202) 502-7484
or via the Internet at: ann.clough@ed.gov
    If you use a telecommunications device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an
accessible format (e.g., braille, large print, audiotape, or computer
diskette) on request to the contact person listed under FOR FURTHER
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:

Invitation To Comment

    We invite you to submit comments regarding these proposed
regulations. To ensure that your comments have maximum effect in
developing the final regulations, we urge you to identify clearly the
specific section or sections of the proposed regulations that each of
your comments addresses and to arrange your comments in the same order
as the proposed regulations.
    We invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
take to reduce potential costs or increase potential benefits while
preserving the effective and efficient administration of the program.
    During and after the comment period, you may inspect all public
comments about these proposed regulations by accessing Regulations.gov.
You may also inspect the comments, in person, in room 8043, 1990 K
Street, NW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m.,
Eastern time, Monday through Friday of each week except Federal
holidays.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking
Record

    On request, we will supply an appropriate aid, such as a reader or
print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of aid, please contact the person
listed under FOR FURTHER INFORMATION CONTACT.

Negotiated Rulemaking

    Section 492 of the HEA requires the Secretary, before publishing
any proposed regulations for programs authorized by title IV of the HEA
(title IV, HEA programs), to obtain public involvement in the
development of the proposed regulations. After obtaining advice and
recommendations from individuals and representatives of groups involved
in, or affected by, the Federal recognition of accrediting agencies,
the Secretary must subject the proposed regulations for the title IV,
HEA programs to a negotiated rulemaking process. All proposed
regulations that the Department publishes must conform to final
agreements resulting from that process unless the Secretary reopens the
process or provides a written explanation to the participants in that
process stating why the Secretary has decided to depart from the
agreements. Further information on the negotiated rulemaking process
may be found at: www.ed.gov/policy/highered/leg/hea08/index.html.
    On September 8, 2008, the Department published a notice in the
Federal Register (73 FR 51990) announcing our intent to establish
negotiated rulemaking committees to develop proposed regulations to (1)
implement the changes made to the HEA by the HEOA, and (2) possibly
address the provision added to section 207(c) of the HEA by the HEOA
that requires the Secretary to submit to a negotiated rulemaking
process any regulations the Secretary chooses to develop under amended
section 207(b)(2) of the HEA, regarding the prohibition on a teacher
preparation program from which the State has withdrawn approval or
terminated financial support from accepting or enrolling any student
who received title IV aid.
    On December 31, 2008, the Department published a notice in the
Federal Register (73 FR 80314) announcing our intent to establish five
negotiated rulemaking committees to prepare proposed regulations. The
notice indicated that no requests from the public were received to
negotiate the provision added to section 207(c) of the HEA. The five
committees that were established were: (1) A committee on lender and
general loan issues (Loans Team I); (2) a committee on school-based
loan issues (Loans Team II); (3) a committee on accreditation issues;
(4) a committee on discretionary grant programs; and (5) a committee on
general and non-loan programmatic issues. The notice informed the
public that, due to the large volume of changes made by the HEOA that
needed to be implemented through negotiated rulemaking, not all
provisions would be addressed during this round of committee meetings.
The notice requested nominations of individuals

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for membership on the committees who could represent the interests
significantly affected by the proposed regulations and had demonstrated
expertise or experience in the relevant subjects under negotiation. The
Accreditation Committee (``the Committee'') met in three sessions to
develop proposed regulations: session 1, March 4-6, 2009; session 2,
April 21-23, 2009; and session 3, May 18-19, 2009. This notice of
proposed rulemaking (NPRM) proposes regulations relating to
accreditation that were discussed by the Committee.
    The Department developed a list of proposed regulatory changes from
advice and recommendations submitted by individuals and organizations
in testimony to the Department in a series of six public hearings held
on:
     September 19, 2008, at Texas Christian University in Fort
Worth, Texas.
     September 29, 2008, at the University of Rhode Island in
Providence, Rhode Island.
     October 2, 2008, at the Pepperdine University in Malibu,
California.
     October 6, 2008, at Johnson C. Smith University in
Charlotte, North Carolina.
     October 8, 2008, at the U.S. Department of Education in
Washington, DC.
     October 15, 2008, at Cuyahoga Community College in
Warrensville Heights, Ohio.
    In addition, the Department accepted written comments on possible
regulatory changes submitted directly to the Department by interested
parties and organizations. All regional meetings and a summary of all
comments received orally and in writing are posted as background
material in the docket and may also be accessed at www.ed.gov/HEOA.
Staff within the Department also identified issues for discussion and
negotiation.
    The Accreditation Committee was made up of the following members:
     Michale McComis, Accrediting Commission of Career Schools
and Colleges of Technology, and Roger Williams (alternate), Accrediting
Council for Continuing Education and Training.
     Ralph Wolff, Accrediting Commission for Senior Colleges
and Universities, Western Association of Schools and Colleges, and
Belle Wheelan (alternate), Commission on Colleges, Southern Association
of Colleges and Schools.
     Sharon Tanner, The National League for Nursing Accrediting
Commission, and Betty Horton (alternate), Association of Specialized
and Professional Accreditors.
     Marshall Hill, Nebraska Coordinating Commission for
Postsecondary Education, and Kathryn Dodge (alternate), New Hampshire
Postsecondary Education Commission.
     Alan Mabe, University of North Carolina, and Mary Anne
Hanner (alternate), Eastern Illinois University.
     Sonia Jacobson, Georgetown University, and Susan Hattan
(alternate), National Association of Independent Colleges and
Universities.
     Ronald Blumenthal, Kaplan Higher Education, and William
Clohan (alternate), DeVry Inc.
     Linda Michalowski, California Community Colleges, and Jim
Hermes (alternate), American Association of Community Colleges.
     Michael Offerman, Capella Education Company, and Muriel
Oaks (alternate), Washington State University.
     Phyllis Worthy Dawkins, Johnson C. Smith University, and
Jos[eacute] Jaime Rivera (alternate), University of the Sacred Heart.
     Kendal Nystedt, University of Arizona, and Jacob Littler
(alternate), Mesabi Range College.
     Terry Hartle, American Council on Education, and Becky
Timmons (alternate), American Council on Education.
     Kay Gilcher, U.S. Department of Education.
    The Committee's protocols provided that the Committee would operate
by consensus, meaning there must be no dissent by any member in order
for the Committee to be considered to have reached agreement. Under the
protocols, if the Committee reaches final consensus on all issues, the
Department will use the consensus-based language in the proposed
regulations and members of the Committee and the organizations whom
they represent will refrain from commenting negatively on the package,
except where permitted by the agreed-upon protocols.
    During its meetings, the Committee reviewed and discussed drafts of
proposed regulations. At the final meeting in May 2009, the Committee
reached consensus on all of the proposed regulations in this NPRM. More
information on the work of this committee may be found at: www.ed.gov/
policy/highered/reg/hearulemaking/2009/accreditation.html.

Summary of Proposed Changes

    This NPRM reflects the Department's proposals to revise current
regulations and adopt new regulations governing the recognition of
accrediting agencies as a result of the following changes made to the
HEA by the HERA and the HEOA:
     The addition of a definition of ``distance education'' and
separate references to distance education and correspondence education.
(See section 103 of the HEA).
     The addition of an eligible program under title IV of the
HEA--an instructional program that uses direct assessment of a
student's learning in lieu of credit or clock hours. (See section
418(b)(4) of the HEA).
     The addition of a definition of a ``teach-out plan'' and a
new provision that agencies must require the institutions they accredit
to submit a teach-out plan to the agency under certain circumstances.
(See sections 487(f)(2) and 496(c)(3) of the HEA).
     The addition of several new provisions pertaining to
distance education and correspondence education. (See sections
496(a)(4)(B) and 496(q) of the HEA).
     Expanded due process requirements for agencies. (See
section 496(a)(6) of the HEA).
     The addition of a requirement that accrediting agencies
confirm that institutions have transfer of credit policies. (See
section 496(c)(9) of the HEA).
     The addition of a requirement that accreditation team
members be well-trained and knowledgeable about their responsibilities
regarding distance education. (See section 496(c)(1) of the HEA).
     The addition of requirements that agencies monitor
enrollment growth at institutions. (See sections 496(c)(2) and 496(q)
of the HEA).
     Changes to agency disclosure requirements. (See section
496(c)(7) of the HEA).
    The NPRM also reflects changes to existing regulations governing
institutional eligibility by revising the definition of
``correspondence course'' to be compatible with the new definition of
``correspondence education'' in the accrediting agency recognition
regulations.
    Further, the NPRM reflects changes to existing regulations
governing the process for recognizing accrediting agencies, including
the following:
     The addition of a definition of ``recognition''.
     Modifications to record-keeping and confidentiality
requirements.
     Combining current subparts C and D into one subpart in
order to streamline procedures for agency review; establishing the
senior Department official as the deciding official, with appeal to the
Secretary;

[[Page 39500]]

and providing a list of the various laws regarding public requests for
information with which the Secretary must comply.
     Additions and modifications to existing requirements
related to substantive change.

Significant Proposed Regulations

    We group major issues according to subject, with appropriate
sections of the proposed regulations referenced in parentheses.

Definitions

Correspondence Course (Sec.  600.2)

    Statute: There is no definition of ``correspondence course'' in the
HEA. Institutional eligibility requirements in section 102(a)(3) of the
HEA generally provide that institutions offering more than 50 percent
of their courses by correspondence, or enrolling 50 percent or more of
their students in correspondence courses, are ineligible for title IV,
HEA program assistance.
    Current Regulations: Current Sec.  600.2 contains a definition of
``correspondence course''. The definition describes how a
correspondence course is delivered to students who are not physically
attending classes at the institution. It does not address the nature of
the pedagogy.
    Proposed Regulations: The proposed regulations would amend the
definition of ``correspondence course'' in Sec.  600.2 to draw a
clearer contrast with distance education, defined in section 103 of the
HEA. The proposed definition addresses pedagogy by noting that the
interaction between the instructor and the student in a correspondence
course is limited, is not regular and substantive, and is primarily
initiated by the student. The proposed definition also notes that a
correspondence course is typically designed so that a student proceeds
through the course at the student's own pace.
    Reasons: Because of the different statutory treatment of distance
education and correspondence courses, it is critical to differentiate
between the two delivery modes. A definition of correspondence course
that focuses exclusively on the exchange of materials between the
institution and a student does not draw a useful distinction because
both distance education and correspondence courses are delivered to
students who are separated from the instructor. Given that the primary
distinguishing factor between the two is the nature of the interaction
between the instructor and the student, the definition must include
information about this characteristic of the pedagogy, or instructional
model.

Distance Education (Sec. Sec.  600.2; 602.3)

    Statute: Section 103 of the HEA defines ``distance education'' as
education that uses one or more technologies to deliver education to
students who are separated from the instructor and to support regular
and substantive interaction between the students and the instructor,
either synchronously or asynchronously. The definition contains a list
of technologies.
    Current Regulations: Current regulations in Sec.  600.2 do not
include a definition of ``distance education''. However, current
regulations in Sec.  600.2 include a definition of ``telecommunications
course'', which was previously used in the HEA and corresponding
regulations. This definition of ``telecommunications course'' is
essentially the same as the new definition of ``distance education'' in
the HEA, as amended by the HEOA.
    Current regulations in Sec.  602.3 include a definition of
``distance education'' that encompasses correspondence study.
    Proposed Regulations: The proposed regulations would add the
statutory definition of ``distance education'' in both Sec. Sec.  600.2
and 602.3. The definition would state that ``distance education'' means
education that uses one or more technologies to deliver instruction to
students who are separated from the instructor and to support regular
and substantive interaction between the students and the instructor,
either synchronously or asynchronously. The technologies may include
the internet; one-way and two-way transmissions through open broadcast,
closed circuit, cable, microwave, broadband lines, fiber optics,
satellite, or wireless communications devices; audio conferencing; or
video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or CD-ROMs
are used in a course in conjunction with any of the other technologies
listed.
    Reasons: The proposed regulations reflect changes made by the HEOA.

Compliance Report (Sec.  602.3)

    Statute: There is no definition of ``compliance report'' in the
HEA. Under section 496(l) of the HEA, to continue to be recognized by
the Secretary, an agency that has been determined by the Secretary to
be out of compliance with any of the criteria for recognition, or to
have failed to apply those criteria effectively, may be given no more
than 12 months to come into compliance, except upon grant of an
extension for good cause shown.
    Current Regulations: ``Compliance report'' is not used in the
current regulations in part 602 governing the Secretary's recognition
of accrediting agencies.
    Proposed Regulations: The proposed regulations would add a
definition of ``compliance report'' in Sec.  602.3. A ``compliance
report'' would be defined as a written report that the Department
requires an agency to file to demonstrate that the agency has addressed
deficiencies specified in a decision letter from the senior Department
official or the Secretary.
    Reasons: The proposed regulations would combine former subparts C
and D, which detail the Secretary's process for recognizing accrediting
agencies, and the process whereby an accrediting agency's recognition
could be limited, suspended, or terminated, into a single subpart C.
The proposed regulations in subpart C would allow agencies to be out of
compliance for no more than 12 months, after which time a decision on
recognition would be made on the basis of a compliance report. The
proposed definition of ``compliance report'' in Sec.  602.3 describes
this key component of the recognition process.

Correspondence Education (Sec.  602.3)

    Statute: There is no definition of ``correspondence education'' in
the HEA. Section 496(a)(4)(B) and (q) of the HEA includes references to
correspondence education alongside references to distance education.
Section 496(a)(4)(B) provides that if an agency has, or seeks to
include, within its scope of recognition the evaluation of the quality
of institutions or programs offering distance education or
correspondence education, it must meet various requirements, which are
specified in that section. It further provides that a recognized agency
may add distance education or correspondence education to its scope of
recognition by providing written notice to the Secretary. Section
496(q) of the HEA provides that the Secretary must require a review at
the next available National Advisory Committee on Institutional Quality
and Integrity (``NACIQI'' or ``Advisory Committee'') meeting of a
change in scope of an accrediting agency that expanded its scope of
recognition to include distance education or correspondence education
by written notice to the Secretary, if the enrollment of an institution
accredited by that agency that offers distance education or
correspondence education increases by 50 percent or more within any one
institutional fiscal year.
    Current Regulations: Current regulations in Sec.  602.3 include a

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definition of ``distance education'' that encompasses correspondence
study as well as education delivered to students using one or more
technologies specified in the definition.
    Proposed Regulations: The proposed regulations would add a
definition of ``correspondence education'' in Sec.  602.3. The proposed
definition would clearly distinguish between correspondence education
and distance education, particularly with respect to the nature of the
interaction between the instructor and the students. ``Correspondence
education'' would be defined as education provided through one or more
courses by an institution under which the institution provides
instructional materials, by mail or electronic transmission, including
examinations on the materials, to students who are separated from the
instructor. The proposed definition would specify that interaction
between the instructor and the student is limited, is not regular and
substantive, and is primarily initiated by the student and that
correspondence courses are typically self-paced. The proposed
definition would also specify that correspondence education is not
distance education.
    Reasons: Section 496 of the HEA refers several times to ``distance
education or correspondence education''. For example, the HEA requires
that an agency's standards ``effectively address the quality of an
institution's distance education or correspondence education'' and that
an agency require ``an institution that offers distance education or
correspondence education to have processes through which the
institution establishes that the student who registers in a distance
education or correspondence education course or program is the same
student who participates in and completes the program and receives the
academic credit.'' The separate references to these two types of
education indicate that they are distinct from one another for HEA
purposes.
    The Department originally proposed a definition of ``correspondence
education'', adapted from the definition of ``correspondence course''
in current Sec.  600.2, that included ``home study'' and described how
information is sent back and forth between the institution and the
student. The non-Federal negotiators commented that the term ``home
study'' is no longer in general use. In addition, they stated that the
significant difference between distance education and correspondence
education is that correspondence education generally is designed to be
self-paced, with minimal interaction between the student and the
instructor. The Department amended the proposed definition to remove
the term ``home study'' and to include the concepts relating to
pedagogy or instructional model.

Designated Federal Official (Sec.  602.3)

    Statute: The HEA does not include a definition of ``Designated
Federal Official''. Section 10(e) and (f) of the Federal Advisory
Committee Act (FACA), 5 U.S.C. Appdx. 1, refers to a ``designated
officer or employee of the Federal Government'' who has
responsibilities under FACA related to advisory committee meetings.
    Current Regulations: Current regulations do not include a
definition of ``Designated Federal Official''.
    Proposed Regulations: The proposed regulations in Sec.  602.3 would
define ``Designated Federal Official'' as the Federal officer
designated under section 10(f) of FACA, 5 U.S.C. Appdx. 1.
    Reasons: Section 114(d)(2)(A) of the HEA authorizes the Chairperson
of the NACIQI to establish the agenda for Advisory Committee meetings.
Prior to passage of the HEOA, the Chairperson of NACIQI did not have
this role. FACA requires that a designated officer or employee of the
Federal Government approve the agenda for an advisory committee
meeting. The proposed definition of ``Designated Federal Official'',
which specifies the role of the Federal officer under FACA, is needed
to clarify that, although the HEA now authorizes the Chairperson of the
Advisory Committee to establish the agenda, it must still be approved
by the Federal official designated under FACA.

Direct Assessment Program (Sec.  602.3)

    Statute: Section 481(b)(4) of the HEA stipulates that for purposes
of title IV, HEA programs, ``eligible program'' includes an
instructional program that uses direct assessment of student learning,
or recognizes the direct assessment of student learning by others, in
lieu of credit hours or clock hours as a measure of student learning.
The assessment must be consistent with the institution's or program's
accreditation. The HEA also provides that the Secretary will determine
initially whether each program for which an institution proposes to use
direct assessment is an eligible program.
    Current Regulations: There are no current regulations in part 602
that reflect direct assessment programs. Regulations for Federal
Student Aid Programs in 34 CFR 668.10 list the information an
institution must provide to the Secretary in order to have a direct
assessment program approved as an eligible program for title IV, HEA
purposes. 34 CFR 668.10 includes a requirement that an accrediting
agency review and approve the program for inclusion in the
institution's grant of accreditation, and that the agency evaluate the
institution's claim of the direct assessment program's equivalence in
terms of credit or clock hours.
    Proposed Regulations: The proposed regulations would add a
definition of ``direct assessment program'' in Sec.  602.3 that
incorporates the language of the HEA and includes the accrediting
agency role in approving a direct assessment program for title IV, HEA
purposes, consistent with the requirements in 34 CFR 668.10. A ``direct
assessment program'' would be defined as an instructional program that,
in lieu of credit hours or clock hours as a measure of student
learning, utilizes direct assessment of student learning, or recognizes
the direct assessment of student learning by others, and meets the
conditions of 34 CFR 668.10. For title IV, HEA purposes, the
institution must obtain approval for the direct assessment program from
the Secretary under 34 CFR 668.10(g) or (h), as applicable. As part of
that approval, the accrediting agency must evaluate the programs and
include them in the institution's grant of accreditation or
preaccreditation; and review and approve the institution's claim of
each direct assessment program's equivalence in terms of credit or
clock hours.
    Reasons: The proposed definition of ``direct assessment program''
would restate definitional language from the HEA, refer to the section
of the Student Assistance General Provisions regulations that relate to
direct assessment programs, and indicate the accrediting agency role in
approving a direct assessment program. Some of the non-Federal
negotiators indicated their unfamiliarity with direct assessment
programs and asked for clarification of the term and of the phrase ``or
recognizes the direct assessment of student learning by others.'' In
particular, they asked whether prior learning assessment, where
students demonstrate that they possess college-level knowledge of a
subject that has been acquired outside of a traditional classroom
setting, such as at work, through volunteer service, or through other
experiences, would be covered by the proposed definition. In response,
the Department explained that, because prior learning assessment is a
process that results in a student being granted a certain number of
academic credits (or credit hours), prior learning does not meet the
definition of a direct assessment program.

[[Page 39502]]

    A direct assessment program is one where the institution identifies
a set of competencies that a student must demonstrate through
successful performance on assessments in order to be awarded an
academic credential. The skills and knowledge that a student has
acquired outside of the institution may help the student to complete
the assessments associated with one or more of the competencies more
quickly than another student, and to accelerate completion of a full
program. A student who is enrolled in a direct assessment program is
not required to earn a certain number of credits, or to remain in the
program for a specific length of time. The institution may develop the
assessments, or it may rely upon assessments developed by others, to
measure the student's learning.
    The Department notes that ``direct assessment program'' has no
fixed meaning outside the context of the title IV, HEA Federal student
aid programs. The process that an institution has to go through to gain
approval from the Secretary for a direct assessment program to be
eligible for title IV, HEA program purposes under 34 CFR 668.10, which
includes reviews and actions on the part of accrediting agencies, is
sufficient to satisfy program eligibility requirements of the HEA.

Recognition (Sec.  602.3)

    Statute: The HEA does not include a definition of ``recognition''.
    Current Regulations: There is no definition of ``recognition'' in
the current regulations.
    Proposed Regulations: The proposed regulations would add a
definition of ``recognition'' in Sec.  602.3. Under the proposed
definition, ``recognition'' would mean an unappealed determination by
the senior Department official, or a determination by the Secretary on
appeal, that an accrediting agency complies with the criteria for
recognition and that the agency is effective in its application of
those criteria. As a result of that determination of compliance, an
accrediting agency that has been given a grant of recognition by the
Secretary is regarded as a reliable authority regarding the quality of
education or training offered by the institutions or programs it
accredits. The proposed definition would specify that the grant remains
in effect for the term specified except upon a determination made in
accordance with subpart C, as revised in these proposed regulations,
that the agency no longer complies with the criteria for recognition or
that it is no longer effective in its application of those criteria.
    Reasons: The proposed definition would clarify that, through
proceedings conducted under subpart C of part 602, the Department may
withdraw recognition before the period of recognition granted expires.
The definition would also reflect that, although an agency that is
recognized is deemed a reliable authority regarding the quality of
education or training offered by the institutions or programs it
accredits, recognition is based on a determination that the agency is
in compliance with the statutory and regulatory criteria for
recognition and is effective in its application of those criteria.

Scope of Recognition (Sec.  602.3)

    Statute: The HEA does not include a definition of ``scope of
recognition''. Section 496(a)(4)(B) of the HEA requires an accrediting
agency that has or wants to include distance education or
correspondence education in its scope of recognition to demonstrate
that its standards effectively address the quality of an institution's
distance education or correspondence education.
    Current Regulations: Current regulations in Sec.  602.3 define
``scope of recognition'' and identify five areas for which recognition
may be granted.
    Proposed Regulations: The proposed regulations would amend the
definition of ``scope of recognition'' in Sec.  602.3 by adding the
phrase ``or correspondence education'' to paragraph (5), which
addresses activities related to distance education.
    Reasons: The proposed regulations reflect changes made by the HEOA.

Teach-Out Agreement (Sec.  602.3)

    Statute: Section 496(c)(6) of the HEA requires that teach-out
agreements between institutions be approved by the accrediting agency
in accordance with its standards. The HEA does not provide a definition
of ``teach-out agreement''.
    Current Regulations: Current regulations in Sec.  602.3 provide a
definition of ``teach-out agreement'', which is a written agreement
between institutions that provides for the equitable treatment of
students. It applies in situations where an institution stops offering
an educational program before all students enrolled in that program
have completed their program of study. Under Sec.  602.24(c) of the
current regulations, if an agency is an institutional accrediting
agency, and its accreditation or preaccreditation enables institutions
to obtain eligibility to participate in title IV, HEA programs, the
agency must require an institution that enters into a teach-out
agreement with another institution to submit that teach-out agreement
to the agency for approval.
    Proposed Regulations: The proposed regulations would amend the
definition of ``teach-out agreement'' by limiting its scope to
situations where an institution, or a location of an institution that
provides one hundred percent of at least one program offered, ceases to
operate before all enrolled students have completed their program of
study. In addition, the definition would require that the agreement
provide a reasonable opportunity for affected students to complete
their program of study. The proposed changes to current regulations in
Sec.  602.24(c) are discussed under ``Teach-out Plans and Agreements.''
    Reasons: The Department initially proposed amending the definition
of ``teach-out agreement'' to make it clear that the agreement should
provide for a reasonable opportunity for students to complete their
program of study if an institution or an institutional location that
provides one hundred percent of at least one program, stops offering
one or more of its programs before all students have completed their
program of study. There was consensus with adding the language about
providing a reasonable opportunity for students to complete their
program of study.
    However, several of the non-Federal negotiators objected to the
proposal that a teach-out agreement cover an institutional location
that stops offering one or more of its programs. They noted that this
is a common occurrence and that it is the responsibility of the
institution to respond to the needs of its students when this happens.
A teach-out agreement should only apply in situations where the
institution or location providing one hundred percent of at least one
program ceases to operate. The Department concurred.

Teach-Out Plan (Sec.  602.3)

    Statute: Section 496(c)(3) of the HEA requires an institution to
submit for approval to the accrediting agency a teach-out plan under
specified conditions. Section 487(f)(2) of the HEA defines a ``teach-
out plan'' as a written plan developed by an institution that provides
for the equitable treatment of students if an institution ceases to
operate before all students have completed their program of study, and
may include, if required by the institution's accrediting agency, a
teach-out agreement between institutions.
    Current Regulations: Current regulations do not include a
definition of ``teach-out plan''.
    Proposed Regulations: The proposed regulations would add a
definition of ``teach-out plan'' in Sec.  602.3. The

[[Page 39503]]

proposed regulations would define a ``teach-out plan'' as a written
plan developed by an institution that provides for the equitable
treatment of students if an institution, or an institutional location
that provides one hundred percent of at least one program, ceases to
operate before all students have completed their program of study, and
may include, if required by the institution's accrediting agency, a
teach-out agreement between institutions.
    Reasons: The Department proposes a definition that incorporates the
statutory definition and clarifies that the requirement for an
institution to have a teach-out plan applies when an institutional
location that provides one hundred percent of at least one program
ceases to operate before all students have completed their program of
study. This is consistent with the treatment of locations under the
closed school discharge provisions in 34 CFR 682.402(d)(1)(ii)(C) and
685.214(a)(2)(ii). Under these provisions, a student's loan may be
discharged if the student is not able to complete the program of study
for which the loan was provided because the institution, or any
location or branch the student attended, closed. The proposed language
was acceptable to the non-Federal negotiators.

Other Major Issues

Accreditation Team Members (Sec.  602.15)

    Statute: Section 496(c)(1) of the HEA stipulates that in order to
be recognized by the Secretary as a reliable authority as to the
quality of education or training offered by an institution seeking to
participate in title IV, HEA programs, the agency must perform, at
regularly established intervals, on-site inspections and reviews of
institutions of higher education (which may include unannounced site
visits) with particular focus on educational quality and program
effectiveness, and ensure that accreditation team members are well-
trained and knowledgeable with respect to their responsibilities. The
HEOA added a reference to distance education to the HEA's requirement
that team members be well-trained and knowledgeable with respect to
their responsibilities.
    Current Regulations: Current regulations in Sec.  602.15(a)(2)
require individuals serving on agency review teams and decision-making
bodies and establishing agency policies to be competent and
knowledgeable, qualified by education and experience in their own
right, and trained by the agency on its standards, policies, and
procedures.
    Proposed Regulations: Proposed Sec.  602.15(a)(2) would clarify
that an individual's qualifications and the agency's training of that
individual on his or her responsibilities regarding the agency's
standards, policies, and procedures, to conduct its on-site
evaluations, apply or establish its policies, and make its accrediting
and preaccrediting decisions, should be appropriate for that
individual's role. In addition, the proposed regulations would specify
that if an agency's scope of recognition includes the evaluation of
distance education and correspondence education, then the individuals
must be trained in their responsibilities regarding distance education
and correspondence education.
    Reasons: The Department noted that the statutory language included
the new reference to ``responsibilities regarding distance education''
and that in several other provisions of section 496 of the HEA,
distance education is paired with correspondence education. The
Department's initial proposal included a reference to ``correspondence
education'' in this section but did not limit in any way the
requirement that individuals be trained in their responsibilities
regarding distance education and correspondence education. Some non-
Federal negotiators asked that the requirement apply only to those
agencies that have distance education and correspondence education in
their scope of recognition. The Department agreed with this suggestion
and also with the observation made during the negotiations that only
those individuals who evaluate institutions that offer distance
education or correspondence education would need to be qualified and
trained accordingly.
    A non-Federal negotiator presented a revised draft for
consideration by the negotiators, which addressed this issue and
further clarified the requirement. This language was acceptable to all
the negotiators and is reflected in the proposed regulations.

Record Keeping and Confidentiality (Sec. Sec.  602.15; 602.27)

    Statute: Section 496(a) of the HEA requires the Secretary to
establish recognition criteria by which the Secretary will determine,
for the purposes of the HEA or other Federal purposes, if an agency or
association is a reliable authority as to the quality of education or
training offered by the institutions or programs it accredits. These
criteria require that the agency adhere to sound administrative
requirements. Section 496(a)(4) provides that the Secretary's
recognition criteria must require that recognized agencies consistently
apply and enforce their standards for the duration of the accreditation
period. Section 496(o) requires the Secretary to promulgate regulations
establishing procedures for recognition. Section 496(n) requires the
Secretary to conduct a comprehensive evaluation of accrediting agencies
seeking recognition, including an independent evaluation of the
information provided by the agency. Section 487(a)(15) of the HEA
requires, as part of the institution's Program Participation Agreement
in title IV, HEA programs, that the institution acknowledge the
authority of the Secretary, the institution's accrediting agency, and
others to share information pertaining to the institution's eligibility
to participate in title IV, HEA programs, and regarding any fraud and
abuse on the part of the institution.
    Current Regulations: Section 602.15(b)(1) of the current
regulations requires an accrediting agency to maintain complete and
accurate records of its last two full accreditation or preaccreditation
reviews of each institution or program it accredits and provides a list
of the various documents that must be included in those records.
Section 602.27(e) of the current regulations requires agencies to
disclose to the Department the name of any accredited institution or
program that the agency has reason to believe is failing to meet title
IV, HEA program responsibilities or is engaged in fraud or abuse, along
with the agency's reasons for concern. Section 602.27(f) of the current
regulations provides for the Secretary to ask the agency for
information that may bear upon an institution's compliance with title
IV, HEA program responsibilities and stipulates that the Secretary may
ask for this information in order to assist the Department in resolving
problems with the institution's participation in the title IV, HEA
programs.
    Proposed Regulations: The proposed regulations in Sec.
602.15(b)(1) would require the accrediting agency to retain its records
of its last full accreditation or preaccreditation review of each
institution or program it accredits. Proposed Sec.  602.15(b)(2) would
require the agency to maintain records of all its decisions made
throughout an institution's or program's affiliation with the agency
regarding the accreditation and preaccreditation of the institution or
program, which would include the accrediting agency's decisions about
substantive changes that affect the title IV, HEA program eligibility.
    The Department proposes to restructure the regulations in Sec.
602.27 to include a new paragraph (b) to address

[[Page 39504]]

the confidentiality of communications between the agency and the
Department. Specifically, proposed Sec.  602.27(b) would address
situations in which an agency has a policy relating to notification to
an accredited institution or program of communications that occur
between the agency and the Department pursuant to proposed Sec.
602.27(a)(6) and (7) (i.e., current Sec.  602.27(e) and (f)). Under the
proposed regulations, these policies would need to provide for a case-
by-case review by the agency of the contact with the Department and the
circumstances surrounding it to assess whether that contact should
remain confidential. The proposed regulation would further require that
upon a specific request by the Department to keep the contact
confidential, the agency must consider the contact confidential.
Proposed Sec.  602.27(a)(6) would remove the language in current Sec.
602.27(e) acknowledging that the Secretary may ask for information to
assist in resolving problems with title IV, HEA program participation.
    Reasons: As reflected in section 496(m) of the HEA, the Department
engages in recognition proceedings to ensure that accrediting agencies
that serve as gatekeepers for Federal programs are reliable authorities
as to the quality of postsecondary education provided by the
institutions or programs they accredit. The Department has had some
concern about accrediting agencies maintaining sufficient information
relevant to an institution's accreditation, as is necessary for
agencies to fulfill their gatekeeping roles. Additionally, there has
been a significant increase over time in the number of substantive
changes at institutions that affect an institution's title IV, HEA
program eligibility.
    Agencies have not always been able to provide the Department with
information related to substantive changes. While needing to ensure
that required documentation is retained by agencies, the Department
does not want to overly burden agencies by requiring them to retain
multiple cycles of information, which can be voluminous. Therefore, the
proposed regulations in Sec.  602.15(b)(1) would require that an agency
retain all documentation of its last full accreditation or
preaccreditation review of each institution or program. The proposed
regulations in Sec.  602.15(b)(2) would require agencies to retain all
decisions made throughout an institution's affiliation with the agency
and significantly related correspondence for substantive changes as
well as for decisions regarding the accreditation or preaccreditation
of an institution or program. Appropriate documentation must be
retained with all decisions.
    The non-Federal negotiators agreed with the proposed changes to
Sec.  602.15(b)(1) to reduce the number of review cycles of information
to be retained. None of the negotiators objected to the proposed
requirement that agencies retain information about substantive changes.
Several non-Federal negotiators expressed concern about the proposed
changes related to confidentiality. Issues of confidentiality regarding
contact between the Department and accrediting agencies have long been
a concern to the Department.
    The Department respects the important role that collegiality and
frank exchanges play in effective accrediting practice. However, the
Department has found that agency policies providing for automatic
disclosure to accredited institutions and programs of all departmental
communications are at odds in some circumstances with both the
gatekeeping role of recognized accreditors and the Department's
fiduciary responsibilities to ensure that Federal programs are run
efficiently and effectively and are protected against fraud and abuse.
In trying to reach the proper balance, the Department has proposed
changes to Sec.  602.27(b), including a requirement for agencies with
policies regarding notification to an institution or program of contact
with the Department to review each contact on a case-by-case basis to
properly assess whether confidentiality should be maintained. In
addition, if the Department specifically requests that a contact it has
with an agency remain confidential, then the agency is required to
consider that contact confidential. The Department believes these
provisions strike the appropriate balance, and are necessary to ensure
that the Federal fiscal interest and the interests of students and
institutions are fully protected. The sentence in current Sec.
602.27(e) referring to the Secretary's authority to request information
from accrediting agencies to resolve problems with title IV, HEA
program participation would be removed as extraneous.
    Non-Federal negotiators expressed concern about the Department's
initial proposal in this area, which would have prohibited an agency
from establishing a policy of providing notification to an institution
regarding contact with the Department. The Department revised its
proposed approach in response, to permit agencies to have policies
within the limits described above, and the non-Federal negotiators did
not object to the revised language.

Student Achievement (Sec.  602.16)

    Statute: Section 496(a)(5)(A) of the HEA provides that an
accrediting agency's standard by which it assesses an institution's
success with respect to student achievement in relation to the
institution's mission may include different standards for different
institutions or programs, as established by the institution including,
as appropriate, consideration of State licensing examinations, course
completion, and job placement rates. The phrase ``which may include
different standards for different institutions or programs, as
established by the institution'' was added by the HEOA.
    The Rule of Construction in section 496(p) of the HEA, added by the
HEOA, stipulates that an accrediting agency is not restricted from
setting, with the involvement of its members, and applying,
accreditation standards for or to institutions or programs that seek
review by the agency. In addition, the Rule of Construction stipulates
that an institution is not restricted from developing and using
institutional standards to show its success with respect to student
achievement, which achievement may be considered as part of any
accreditation review.
    Current Regulations: Current regulations in Sec.  602.16(a)(1)(i)
replicate the statutory language in section 496(a)(5)(A) of the HEA,
except that they do not include the phrase that was added by the HEOA.
    Proposed Regulations: The proposed regulations in Sec.
602.16(a)(1)(i) would replicate the new statutory language in section
496(a)(5)(A) of the HEA. The proposed regulations in Sec.  602.16(e)
would replicate the Rule of Construction in section 496(p).
    Reasons: While section 496(g) of the HEA, as amended by the HEOA,
prohibits the Secretary from establishing any criteria that specify,
define, or prescribe the standards that accrediting agencies use to
assess any institution's success with respect to student achievement,
the Secretary is obligated to amend the current regulations that do not
reflect the new language in the HEA regarding the kind of student
achievement standards recognized agencies must have.
    The Department's initial proposed regulations did not include the
Rule of Construction from the statute. Several non-Federal negotiators
asked that the Rule of Construction be incorporated into the
regulations. The Department included in the proposed regulations

[[Page 39505]]

the Rule of Construction from the statute. The non-Federal negotiators
agreed with the Department that an accrediting agency would need to
make a judgment about whether an institution developed and used
reasonable standards to show its success with respect to student
achievement.

Distance Education and Correspondence Education (Sec. Sec.  602.16;
602.17; 602.18; 602.27)

    Statute: Section 496(a)(4)(B) of the HEA, as amended by the HEOA,
specifies that if an agency has or seeks to include within its scope of
recognition the evaluation of the quality of institutions or programs
offering distance education or correspondence education, the agency
must, in addition to meeting the other requirements, demonstrate that
its standards effectively address the quality of an institution's
distance education or correspondence education with respect to the
standards specified in section 496(a)(5). However, the statute provides
that the agency is not required to have separate standards, procedures,
or policies for the evaluation of distance education or correspondence
education in order to meet the requirements of section 496(a)(4)(B).
Section 496(a)(4)(B) of the HEA, as amended by the HEOA, also provides
that if an accrediting agency that accredits institutions is already
recognized by the Secretary, it will not be required to obtain the
approval of the Secretary to expand its scope of recognition to include
distance education or correspondence education, provided that the
agency notifies the Secretary in writing of the change in scope.
    Section 496(a)(4)(B) further specifies that an agency must require
an institution that offers distance education or correspondence
education to have processes through which the institution establishes
that the student who registers in a distance education or
correspondence education course or program is the same student who
participates in and completes the program and receives the academic
credit.
    Section 496(q) of the HEA specifies that the Secretary shall
require a review, at the next available Advisory Committee meeting, of
any recognized accrediting agency that has included distance education
or correspondence education in its scope of recognition through written
notice to the Secretary, if the enrollment of an institution the agency
accredits that offers distance education or correspondence education
has increased by 50 percent or more within any one institutional fiscal
year.
    Current Regulations: Current regulations require an agency to
submit to the Secretary any proposed change in its policies,
procedures, or accreditation or preaccreditation standards that might
alter its scope of recognition. Current regulations do not include any
requirement for verifying the identity of students enrolled in distance
education or correspondence education courses and programs.
    Proposed Regulations: The Department proposes to restructure Sec.
602.16 and add a new paragraph (c). The new paragraph would provide
that if an agency has or seeks to include within its scope of
recognition the evaluation of the quality of institutions or programs
that offer distance education or correspondence education, the agency's
standards must effectively address the quality of its institutions'
distance education or correspondence education in the specified areas.
The agency would not be required to have separate standards,
procedures, or policies for the evaluation of distance education or
correspondence education.
    Section 602.17, which requires the application of accrediting
standards in reaching an accrediting agency decision, would be amended
by adding a new paragraph (g) to implement the new student verification
requirements. The proposed regulations would provide that agencies
require institutions that offer distance education or correspondence
education to have processes in place through which the institution
would establish that the student who registers in a distance education
or correspondence education course or program is the same student who
participates in and completes the course or program and receives the
academic credit. The agency would meet this requirement if it requires
institutions to verify the identity of a student who participates in
class or coursework by using methods such as a secure login and pass
code or proctored examinations, and new or other technologies and
practices that are effective in verifying student identity. The agency
would also be required to make clear, in writing, that institutions
must use processes that protect student privacy and must notify
students at the time of registration or enrollment of any projected
additional student charges associated with the verification of student
identity.
    Section 602.18 would be amended to reflect changes made by the HEOA
to section 496(a)(4) regarding an institution's application and
enforcement of standards that respect its stated mission, including
religious mission.
    As noted in the discussion of record-keeping and confidentiality,
Sec.  602.27 would be restructured. The proposed regulations would add
a new paragraph (5) to redesignated paragraph (a) that would provide
for notification to the Secretary that an agency is expanding its scope
of recognition to include distance education or correspondence
education as provided for in section 496(a)(4)(B)(i)(I) of the HEA, as
amended by the HEOA. The proposed regulations would specify that the
expansion of scope would be effective on the date the Department
receives the notification.
    Reasons: The proposed changes to the regulations reflect changes to
the HEA made by the HEOA. The proposed regulations would require an
agency's standards to address distance education and correspondence
education effectively if the agency evaluates institutions offering
distance education or correspondence education.
    Some of the non-Federal negotiators asked whether an agency whose
scope of recognition already includes distance education would be
required to notify the Secretary if it wanted to expand its scope to
include correspondence education, now that correspondence education is
specified separately in the law. The Department's position is that, as
the definition of distance education in the current regulations
includes correspondence study, any previous grant of a scope of
recognition that included distance education automatically encompassed
correspondence education, and there is no need for further action on
the part of agencies currently recognized for distance education by the
Department. If the proposed regulations are finalized as drafted, the
Department contemplates including on its Web site listing of recognized
accrediting agencies a notation that agencies having a scope of
recognition that included distance education as of the August 14, 2008,
enactment of the HEOA are also recognized for correspondence education
pending re-evaluation of each agency as it comes before the Department
for renewal of recognition. Once the regulations become effective,
agencies whose scope includes distance education that come up for
renewal of their recognition would be expected to demonstrate how they
evaluate both distance education and correspondence education in
accordance with proposed Sec.  602.16(c). An agency that accredits
institutions and does not already include distance education or
correspondence education in its scope of recognition but that desires
to do so would need to either submit a

[[Page 39506]]

notification of expansion of scope (for distance education,
correspondence education, or both), or request an expansion of scope to
include these in applying for renewal of recognition, and in either
event, in subsequent reviews for renewal of recognition, demonstrate
how it evaluates these modes of education in accordance with proposed
Sec.  602.16(c). An agency that accredits only programs could not
expand its scope by notification because section 496(q) of the HEA
limits this option to institutional accreditors. Because of the
limitation, programmatic accreditors would be required to apply for an
expansion of scope to include distance education, correspondence
education, or both. The Department proposes to include programmatic
accreditors that accredit stand-alone institutions in the set of
agencies that may expand their scope by notification.
    In addition to the changes the Department initially proposed for
Sec.  602.27(a)(5) to reflect the substance of the new statutory
provision for including distance education or correspondence education
in an agency's scope of recognition upon written notice by a recognized
agency to the Secretary, the non-Federal negotiators requested that the
Department include the applicable statutory citation in the proposed
regulation. The Department agreed. The Department also included a
provision specifying the effective date of such a notification so it
would be clear to both agencies and the Department when the change in
scope was effective.
    Much of the discussion regarding distance education at the
negotiated rulemaking sessions centered on the new requirement to
verify student identity. Some of the non-Federal negotiators expressed
concern about the cost of implementing the new provisions, saying they
wanted to ensure that the requirements would be affordable. They were
reluctant to include requirements that would be considered ``forward-
looking'' in that they would address new or emerging technologies for
verifying student identity. The Department's initial position was that
the concern about forward-looking requirements could be addressed by
specifying that new identification technologies and practices would
have to be adopted only as they become widely accepted, reasoning that
a technology or practice would not become widely accepted and used
unless it was affordable. Nevertheless, several non-Federal negotiators
were concerned about including the ``widely accepted'' language and
proposed revising the draft regulation to require instead use of ``new
or other technologies and practices that are effective in verifying
student identity,'' in addition to secure logins and pass codes and
proctored examinations. As one of the non-Federal negotiators
explained, peer reviewers conducting on-site reviews will assess an
institution's use of technology and verification practices in relation
to those technologies and practices that are widely used and are
affordable, and if an institution is using ineffective methods of
identification verification, they will note that finding. The non-
Federal negotiators also wanted to make it explicit that the methods
used to verify the identity of students would be determined by the
institution. As the draft language provided that the methods chosen
must be effective in verifying student identification, the Department
accepted the changes proposed by the non-Federal negotiators.
    The Department originally proposed specifying that institutions
should not use or rely on technologies that interfere with student
privacy. Several non-Federal negotiators recommended retaining this
concept, but rephrasing the language to present the concept more
positively. Non-Federal negotiators also suggested including language
about processes or methods, which would be broader than referring to
technologies. For these reasons, the proposed requirement related to
student privacy was restated to require that institutions make clear in
writing that institutions must use processes that protect student
privacy. To address the concern of several non-Federal negotiators that
students be made aware in advance of any additional charges associated
with administering distance education or correspondence education
examinations, the proposed regulations would require institutions to
notify students at the time of registration or enrollment of any
projected additional charges associated with verification of student
identity.

Due Process (Sec. Sec.  602.18; 602.23; 602.25)

    Statute: The HEOA amended section 496(a)(6) of the HEA to include
expanded due process requirements with which agencies must comply. The
new provisions require that an agency establish and apply review
procedures throughout the accrediting process, including evaluation and
withdrawal proceedings, which comply with specified due process
procedures. The agency must provide adequate written specification of
requirements, including clear standards for an institution of higher
education or program to be accredited, and clearly identify any
deficiencies at the institution or program examined. In evaluation and
withdrawal proceedings, the procedures must provide sufficient
opportunity for a written response by an institution or program
regarding any deficiencies identified by the agency, to be considered
by the agency within a timeframe determined by the agency and prior to
final action.
    Upon written request of an institution or program, the agency must
provide an opportunity for the appeal of any adverse action, including
denial, withdrawal, suspension, or termination of accreditation, taken
against the institution or program, prior to such action becoming final
at a hearing before an appeals panel. The appeals panel will not
include current members of the agency's underlying decision-making body
that made the adverse decision, and its members must be subject to a
conflict of interest policy. The agency's due process procedures must
provide for the right of an institution or program to representation
and participation by counsel during an appeal of an adverse action.
    The due process procedures must also provide for a process, in
accordance with written procedures developed by the agency, through
which an institution or program, before a final adverse action based
solely upon a failure to meet a standard or criterion pertaining to
finances, may on one occasion seek review of significant financial
information that was unavailable to the institution or program prior to
the determination of the adverse action, and that bears materially on
the financial deficiencies identified by the agency. If the agency
determines that the new financial information submitted by the
institution or program meets the criteria of significance and
materiality, the agency must consider the new financial information
prior to the adverse action becoming final. Any determination by the
agency with respect to the new financial information is not separately
appealable by the institution or program.
    Current Regulations: Current due process regulations in Sec.
602.25 require that an agency have procedures that afford an
institution or program a reasonable period of time to comply with an
agency's requests for information and documents. An agency must notify
an institution or program in writing of any adverse action or action to
place the institution or program on probation or show cause and the
basis for the action. Institutions or programs must be permitted to
appeal an adverse action, and they have the right to be

[[Page 39507]]

represented by counsel during the appeal. The agency must notify the
institution or program in writing of the result of its appeal and the
basis for the decision.
    Proposed Regulations: The proposed regulations would amend the due
process provisions in Sec.  602.25, and two other sections, Sec. Sec.
602.18 and 602.23, that bear on due process requirements.
    Section 602.18, ``Ensuring consistency in decision-making,'' would
be amended to include a new paragraph (a) that would require an agency
to have written specification of the requirements for accreditation and
preaccreditation that includes clear standards for an institution or
program to be accredited. The proposed regulations in Sec.  602.18
would also include a new paragraph (e) that would require an agency to
provide an institution or program with a detailed written report that
clearly identifies any deficiencies in the institution's or program's
compliance with agency standards.
    Section 602.23, ``Operating procedures all agencies must have,''
would be amended by removing the phrase ``upon request'' from the
requirement in paragraph (a) that an agency must maintain and make
available to the public certain written materials. The current
regulations would also be changed by adding at the end of current
paragraph (c)(1), which concerns the review of complaints, a
stipulation that an agency may not complete its review and make a
decision regarding a complaint against an institution unless, in
accordance with published procedures, it ensures that the institution
or program has sufficient opportunity to provide a response to the
complaint.
    The proposed regulations would restructure Sec.  602.25 of the
current regulations to accommodate the appropriate placement of several
new statutory requirements by redesignating several current paragraphs,
removing current paragraph (c) and adding several new paragraphs. New
paragraph (a) would require an agency to provide adequate written
specification of its requirements, including clear standards, for an
institution or program to be accredited or preaccredited. New paragraph
(c) would require an agency to provide written specification of any
deficiencies identified at the institution or program examined. New
paragraph (d) would require an agency to provide sufficient opportunity
for a written response by an institution or program regarding any
deficiencies identified by the agency, to be considered by the agency
within a timeframe determined by the agency and before any adverse
action is taken.
    Some of the information in current paragraph (c) would be included
in a new paragraph (f), including the requirement that an agency
provide an opportunity, upon written request of an institution or
program, for the institution or program to appeal any adverse action
prior to the action becoming final. New paragraph (f) would also
provide that the appeal must take place before an appeals panel that
may not include current members of the agency's decision-making body
that took the initial adverse action and is subject to a conflict of
interest policy. The appeals panel would affirm, amend, or reverse the
adverse action. At the option of the agency, either the appeals panel
or the original decision-making body would be responsible for
implementing the decision of the appeals panel.
    Under the proposed regulations in paragraph (f)(2), the agency
would be required to recognize the right of the institution or program
to employ counsel to represent the institution or program during its
appeal, and this would include making any presentation that the agency
permits the institution or program to make on its own during the
appeal.
    The proposed regulations in paragraph (h)(1) would require an
agency to provide a process, in accordance with written procedures,
through which an institution or program may seek review of new
financial information if all of the following conditions are met: (1)
The financial information was not available to the institution or
program until after the decision that is subject to appeal was made;
(2) the financial information provided is significant and bears
materially on the financial deficiencies identified by the agency (the
criteria of significance and materiality would be determined by the
agency); and (3) the only remaining deficiency cited by the agency in
support of a final adverse action decision is the institution's or
program's failure to meet an agency standard pertaining to finances.
Under proposed paragraph (h)(2), a review of new financial information
would be permitted only one time, and a determination by the agency
with respect to the new information provided would not provide the
basis of an appeal.
    Reasons: The Department proposes changes to all of the sections of
the regulations that have a bearing on due process to implement the new
HEA requirements contained in the HEOA. With respect to ensuring
consistency in agency decisions, the Department initially proposed
requiring that agencies provide institutions or programs with a written
report that assessed the institution's or program's compliance with the
agency's standards, including any deficiencies identified by the
agency. Some of the non-Federal negotiators suggested changing the
language to require that agencies provide institutions or programs with
reports that clearly identify any deficiencies in the institution's or
program's compliance with agency standards. The Department agreed to
adopt the alternate language proposed by the non-Federal negotiators.
    The additional provisions on an agency's handling of complaints
were proposed to make it clear that institutions or programs must be
given sufficient opportunity to provide a response to a complaint
before the agency takes any action.
    There was considerable discussion during the negotiated rulemaking
sessions about the proposed new language in Sec.  602.25. Some of the
non-Federal negotiators described their current appeals process, and
indicated that when an appeal is received, it is reviewed by a separate
appeals panel that then makes a recommendation to the board or
commission, which in turn makes the decision on the appeal. It became
clear during the discussion that even though the appeals panel might
have members who did not serve on the original decision-making body,
the appeals panel made a recommendation, rather than a decision, and
the original decision-making body was under no obligation to accept the
recommendation. This is problematic because, if an appeals panel
conclusion is not the final decision, the effect of a successful appeal
may be negated.
    The Department proposed requiring that the appeals panel be a
decision-making body, noting that the statute calls for an opportunity
to appeal an action ``prior to such action becoming final at a hearing
before an appeals panel * * * .'' The Department also noted that the
reference to the original decision being made by the agency's
``underlying decisionmaking body'' made clear that the appeals panel
was a decision-making body. Otherwise, there would be no need to refer
to the original body as the ``underlying'' decision-making body. This
proposal generated a significant amount of discussion and concern.
Several non-Federal negotiators expressed concern that if the appeals
panel were a separate decision-making body that made an accreditation
decision, it would need to comply with all the requirements for an
agency decision-making body, including

[[Page 39508]]

having as one of its members a member of the public, and would result
in a decision being made by a smaller and less diverse body than the
board or commission.
    Other non-Federal negotiators stated that, in some cases, an
appeals panel might need additional information and need to solicit
information from the original decision-making body. In other cases, an
appeals panel might determine that the original decision did not take
into account all the necessary information, and therefore should be
reversed or amended. In some cases, a successful appeal would identify
a procedural error made in earlier proceedings, but would not involve
an inquiry into substantive issues for purposes of making the
accreditation decision. In a circumstance where the appeals panel
determined that some citations of deficiencies were supported and
others were not, there would need to be a new decision on
accreditation, but the appeals panel might not be in a position to make
that decision. Upon consideration of these scenarios, the Department
proposed having the appeals panel affirm, amend, or reverse the adverse
action, but permitting either the appeals panel or the original
decision-making body to implement the decision of the appeals panel.
This would provide agencies with some flexibility. However, to make it
clear that the original decision-making body could not disregard a
decision made by the appeals panel, the proposed regulations include a
provision that if the original decision-making body is responsible for
implementing the decision, it must act in a manner consistent with the
appeals panel's decision. The proposed regulations would not require
agencies to provide institutions or programs with a continual
opportunity to appeal.
    There was also discussion during negotiated rulemaking about
whether the new financial information that may now be provided would
have to be reviewed during an appeal, or whether it could be reviewed
at an earlier time. The Department revised the proposed regulations to
allow for flexibility in handling the new financial information. The
new financial information could be reviewed during an appeal or at an
earlier stage. In either case the agency could exercise discretion to
designate in its procedures which group of people will conduct the
review. Under the proposed provisions, it would be possible to stay an
appeal while a separate body reviewed the financial information.
    Finally, there was extensive discussion about the circumstances
under which an agency should be deemed to be taking a final adverse
action based solely on failure to comply with financial criteria. Some
of the non-Federal negotiators expressed their belief that to trigger
the new provision that allows for new financial information to be
considered an institution or program must have been cited initially
only on deficiencies related to financial criteria. The Department's
position, reflecting the language in the statute, is that an
institution or program could have been cited initially for multiple
issues, but that if all of the issues involving non-financial criteria
were resolved, new financial information could be brought forward for
review before the adverse action became final. This position is
reflected in the proposed regulations.

Monitoring and Reevaluation of Accredited Institutions and Programs
(Sec.  602.19)

    Statute: Section 496(c)(1) of the HEA requires accrediting agencies
to perform on-site inspections and reviews of institutions of higher
education at regularly established intervals. Section 496(c)(2) of the
HEA includes a requirement that accrediting agencies monitor the growth
of programs at institutions experiencing significant enrollment growth.
Section 496(a)(4)(A) requires agencies to consistently apply and
enforce standards that ensure that the courses or programs offered are
of sufficient quality to achieve their stated objectives for the
duration of the accreditation period.
    Section 496(a)(4)(B)(i)(II) of the HEA permits a recognized agency
to expand its scope of recognition to include distance education or
correspondence education by notifying the Secretary of that change in
writing. This eliminates the need for a recognized agency to obtain
separate approval from the Secretary for the change. However, section
496(q) of the HEA requires review by the NACIQI of an agency that
changed its scope through written notice to the Secretary if the
enrollment of an institution that offers distance education or
correspondence education that is accredited by that agency increases by
50 percent or more within any one institutional fiscal year.
    Current Regulations: Current regulations in Sec.  602.19 require an
accrediting agency to evaluate, at regularly established intervals, the
institutions or programs it has accredited or preaccredited. The agency
is required to monitor institutions or programs throughout their
accreditation or preaccreditation period to ensure that they remain in
compliance with agency standards. Current regulations require agencies
to conduct special evaluations or site visits as necessary.
    Proposed Regulations: The proposed regulations would amend Sec.
602.19(b) by requiring that an agency demonstrate it has, and
effectively applies, a set of monitoring and evaluation approaches that
enables the agency to identify problems with an institution's or
program's compliance with agency standards, and that takes into account
institutional program strengths and stability. Proposed Sec.  602.19(b)
would require that these approaches to monitoring include periodic
reports, and collection and analysis of key data and indicators
identified by the agency, including, but not limited to, fiscal
information and measures of student achievement. This section of the
proposed regulations would include a cross-reference to Sec.  602.16(f)
to clarify that an agency is not precluded from setting and applying
its own accreditation standards; nor are institutions of higher
education precluded from developing and using institutional standards
to show their success with respect to student achievement.
    The proposed regulations would add new paragraphs (c) through (e)
to this section. Section 602.19(c) of the proposed regulations would
require an agency to monitor the overall growth of the institutions or
programs it accredits and to collect information on headcount
enrollment at least annually. Section 602.19(d) of the proposed
regulations would add a requirement for institutional accrediting
agencies to monitor the growth of programs at institutions experiencing
significant enrollment growth and would provide that the determination
of what is significant growth would be made by the agency. Finally, the
proposed regulations, in Sec.  602.19(e), would require an agency that
has notified the Secretary in writing of an expanded scope, as provided
in section 496(a)(4)(B)(i)(II) of the HEA, to monitor the headcount
enrollment of each institution it has accredited that offers distance
education or correspondence education. If any of those institutions
experiences an increase in headcount enrollment of 50 percent or more
within one institutional fiscal year, the agency would be required to
report that information to the Secretary within 30 days of acquiring
that information.
    Reasons: Many of the proposed regulations would implement changes
required by the HEOA. These changes include the requirements that
agencies monitor growth of programs at institutions experiencing
significant

[[Page 39509]]

enrollment growth and monitor headcount enrollment at institutions the
agency accredits that offer distance or correspondence education. Other
changes to the current regulations are being proposed, as a result of
discussions both during the negotiated rulemaking process and within
the Department, in an effort to ensure that the regulations properly
reflect statutory requirements and provide for greater consistency
while accommodating differences across institutions. The Department
believes the current regulatory requirement regarding an agency's
monitoring to ensure compliance with all of an agency's standards is
too broad in scope and too limiting in method. Therefore the proposed
regulations would stipulate that an agency monitor an institution to
identify specific problems with the institution's or program's
compliance with accrediting agency standards and provide more
flexibility for agencies as to how they manage the review.
    The Department's initial proposal for this section of the
regulations would have required an agency to collect and analyze key
data and performance indicators, and included an illustrative list of
the data an agency might collect and analyze when monitoring
institutions or programs. Some non-Federal negotiators expressed
concerns about the illustrative list in the proposed regulations. Some
stated their belief that certain items on that list encroached on areas
where the Secretary is prohibited from regulating, while others wanted
the list eliminated altogether because it could be interpreted as a
requirement that agencies collect all the information included on the
list and, thus, could increase institutional burdens. It was also noted
that programmatic accrediting agencies do not collect specific
financial data, such as audits. A few non-Federal negotiators objected
to the use of the term ``performance indicators'' because they stated
that this could lead to a requirement that an agency establish ``bright
lines'' for assessing these indicators. Still other negotiators
indicated that they had no objections to including an illustrative list
in the regulations.
    The Department clarified that the goal was not to be prescriptive,
and that the list was intended to be illustrative, as shown by the use
of the words ``these may include but are not limited to.'' The
Department also reminded the non-Federal negotiators that much of the
proposed language was already in the standards section of the statute
and current regulations. In addition, the Department noted that this
section of the regulations concerns monitoring--the agency's
application and enforcement of its standards, policies, and
procedures--rather than the substance of agency accrediting standards,
as to which the Secretary is prohibited from regulating.
    Based on the discussions with negotiators and among Department
staff, as well as a shared goal of all participants to ensure proper
monitoring of institutions and programs, the proposed language in Sec.
602.19(b) was modified. The modifications reflect a proposal made by
the non-Federal negotiators to combine some of the paragraphs from the
initial proposal and to eliminate redundancy.
    The proposed language would provide accrediting agencies with
flexibility regarding their monitoring of institutions and programs and
at the same time ensure they will review and analyze key data and
indicators, including fiscal information and measures of student
achievement. The Department expects agencies to examine and take
appropriate action based on the fiscal, student achievement, and other
data collected through the monitoring process. The Department noted
that this is an area of great importance and that the Department's
responsibility to ensure effective and efficient monitoring takes place
is fundamental. The Department made clear that it accepted the
proposals by the non-Federal negotiators because the proposals
adequately reflect these principles.

Substantive Change (Sec.  602.22)

    Statute: Section 496(a) of the HEA requires the Secretary to
establish recognition criteria to determine if an accrediting agency is
a reliable authority as to the quality of education or training offered
by an institution or program it accredits.
    Section 496(a)(1) of the HEA requires an agency to demonstrate the
ability and experience to operate as an accrediting agency. Section
496(a)(4) of the HEA requires an agency to consistently apply and
enforce standards that ensure courses or programs are of sufficient
quality to achieve the stated objectives for which they are offered
throughout the duration of the accreditation period. Section 496(a)(5)
of the HEA requires the agency to have standards that address the
quality of an institution or program in a number of areas. The first
area is an institution's or program's success with respect to student
achievement in relation to an institution's mission, including, as
appropriate, consideration of course completion, consideration of State
licensing examinations, and job placement rates. In addition, standards
must address an institution's or program's curricula; faculty;
facilities, equipment, and supplies; fiscal and administrative
capacity; recruiting and admissions practices, academic calendars,
catalogs, publications, grading, and advertising; measures of program
length and the objectives of the degrees or credentials offered; record
of student complaints; and record of compliance with an institution's
program responsibilities under title IV of the HEA. Finally, section
496(c) of the HEA requires the agency to follow various operating
procedures, including, but not limited to, conducting regular on-site
visits to institutions it accredits, monitoring the growth of programs
at institutions with significant enrollment growth, reviewing an
institution's plans for the addition of new branch campuses, and
conducting visits to new branch campuses and to institutions following
a change of ownership.
    Current Regulations: Section 602.22 of the current regulations
requires an agency to maintain an adequate substantive change policy
that ensures any substantive change to the educational mission or
program or programs of an institution after it has been accredited does
not adversely affect the capacity of the institution to continue to
meet the agency's standards. Section 602.22(a)(2) lists seven types of
changes that, at the least, must be included in the agency's definition
of substantive change. Section 602.22(b) of the current regulations
allows the agency to establish procedures to grant prior approval of a
substantive change. Section 602.22(c) provides that if the agency's
accreditation of an institution enables the institution to participate
in title IV, HEA programs, the agency's procedures for approval of an
additional location must include certain processes.
    Proposed Regulations: The proposed regulations would amend the list
of events that would constitute a substantive change. Proposed Sec.
602.22(a)(2)(iii) would include the addition of courses or programs
that represent a significant departure ``from the existing offerings of
educational programs,'' in place of the current language regarding a
significant departure ``in content.'' Proposed Sec.  602.22(a)(2)(iv)
would be amended to clarify that the addition of programs of study at a
degree or credential level different from, rather than only those above
the level already included in the institution's accreditation, would be
considered a substantive change. (The meaning of ``program of study''
is elaborated on further within this

[[Page 39510]]

preamble in the discussion of Sec.  602.24, teach-out plans and
agreements.)
    The proposed regulations would add to the list of substantive
changes, a provision to implement the requirement in 34 CFR
668.5(c)(3)(ii)(C) that an eligible institution's accrediting agency
determine that an institution's arrangement to contract out more than
25 percent of an educational program to entities that are not eligible
on their own to participate in title IV, HEA programs meets the
agency's standards for the contracting out of educational services.
    The proposed regulations would further modify Sec.  602.22(a)(2) by
adding a new paragraph (viii) to provide greater flexibility to
accrediting agencies in granting prior approval of additional locations
where at least 50 percent of an educational program is offered. The new
flexibility would apply to institutions that, according to agency
criteria, have demonstrated sufficient capacity to add locations, and
no longer need prior agency approval for each addition. These criteria
would require an institution to provide satisfactory evidence that it
has: A system to ensure quality across a distributed enterprise that
includes clearly identified academic control; regular evaluation of the
locations; adequate faculty, facilities, resources and academic and
student support systems; financial stability; and long-range planning
for expansion. To qualify for these preapprovals, an institution must
also have successfully completed at least one cycle of accreditation of
maximum length offered by the agency and one renewal, or been
accredited for at least ten years, and already have at least three
additional locations that the agency has approved. The agency must
require timely reporting by the institution to the agency of each
additional location established under the agency's approval and the
agency's preapproval may not extend longer than five years. The
proposed regulations would not allow the agency to preapprove an
institution's addition of locations under this process after the
institution undergoes a change in ownership until and unless the
institution demonstrates it meets the conditions outlined in this
section of the proposed regulations under its new ownership. Further,
agencies would be required to have an effective mechanism for visiting
a representative sample of additional locations approved under
paragraph (a)(2)(viii) at reasonable intervals.
    The proposed regulations in new paragraphs Sec.  602.22(a)(2)(ix)
and (x) would also require that agencies include as substantive changes
the acquisition of any other institution or program or location of
another institution, and the addition of a permanent location at the
site of a teach-out the institution is conducting.
    The proposed changes to Sec.  602.22(a) also would include the
addition of a new paragraph (3) requiring an agency to define, as part
of its substantive change policy, when changes made at or proposed by
an institution are considered sufficiently extensive to require the
agency to conduct a new comprehensive review of that institution.
    Proposed changes to Sec.  602.22(b) would retain the agency's
ability to determine its own procedures for granting prior approval of
a substantive change. However, those procedures must specify an
effective date on which the change would be included in the program's
or institution's accreditation. The proposed regulations would require
that the effective date not be retroactive, with a limited exception
for changes of ownership.
    Finally, a proposed addition to Sec.  602.22(c) would clarify the
requirement that an agency have an effective mechanism for conducting
visits to additional locations of institutions that operate more than
three additional locations. The proposed regulations specify that the
agency must visit a representative sample of those locations at
reasonable intervals.
    Reasons: In recognition of the pace at which change is occurring
within the higher education community, including the addition of new
locations of institutions, the development of new curricula, and
ownership changes, the Department believed that it was important to
bring these issues to the negotiators for discussion. The Department
sought to ensure continued effective compliance with the statute in
developing regulations that recognize the changing nature of higher
education, while maintaining fiduciary responsibility.
    Many institutions now operate as distributed enterprises. That
business model is one that encompasses the establishment of multiple
locations operated within the context of a single administrative
system. The current regulations pertaining to substantive change do not
accommodate this type of innovative model, because an accrediting
agency must focus on individual additional locations of an institution.
The current regulations do not allow an agency to determine if an
institution has a system to ensure quality across a distributed
enterprise and to consider the unit of analysis to be the system as a
whole rather than each individual location.
    The Department's approach to address new types of institutional
organizational structures was to use the substantive change provisions
to modify and clarify the additional location approval requirements
that apply to traditional institutions, and those that apply to
institutions that operate on a model where the establishment of
locations is a standard practice that is carried out in a manner that
ensures quality across all of the individual locations. Initial
language proposed by the Department to the negotiators did not, in the
opinion of some non-Federal negotiators, provide the appropriate
clarity, and some non-Federal negotiators questioned the proposed use
of the phrase ``addition of multiple locations'' rather than simply
using ``the addition of locations'' noting that a change in the
phrasing may lead to some confusion. Some non-Federal negotiators
stated that the Department's proposed restructuring of the regulations
was difficult to follow and that the two headings the Department
initially proposed to add in order to draw a distinction between types
of institutions were misleading. The Department agreed to review the
language and redrafted the proposed regulations by further
restructuring the language, and removing the headings. However, the
Department retained use of the phrase ``distributed enterprise''
because it describes the concept intended without unduly limiting the
business models covered.
    Some non-Federal negotiators raised a concern about the language
initially proposed in Sec.  602.22(a)(2)(iii) regarding a change in
academic content, while appreciating the intent of the language, and
asked the Department to amend the language to provide clarity. The
revised language discussed with and agreed to by the negotiators would
provide for a substantive change to include the addition of courses or
programs that represent a significant departure from the existing
offerings of educational programs, or methods of delivery, from those
that were offered when the agency last evaluated the institution. There
was further discussion about what constituted a ``significant
departure'' from existing offerings. Several non-Federal negotiators
raised examples such as changing individual courses within a program,
altering the syllabus from one year to the next, or changing text books
for a course or program, and asked the Department if those would
constitute a significant departure in existing offerings of educational
programs, or method of delivery. The

[[Page 39511]]

Department clarified that a significant departure from the existing
offerings of educational programs, while determined by the agency,
would not result from an individual course or text book change, or from
the change in some faculty members. However, an agency might consider
it significant if an entire department of faculty members left an
institution or, as one non-Federal negotiator pointed out as an
example, if an institution or program began delivering courses through
distance education that were not previously available at the
institution.

Teach-out Plans and Agreements (Sec.  602.24)

    Statute: Section 496(c)(3) of the HEA, added by the HEOA, specifies
that, among other requirements, to be recognized by the Secretary as a
reliable authority as to the quality of education or training offered
by an institution seeking to participate in title IV, HEA programs, an
accrediting agency must require an institution it accredits to submit a
teach-out plan for approval by the accrediting agency if any of three
events occurs: (1) The Department notifies the accrediting agency of an
action against the institution pursuant to section 487(f) of the HEA;
(2) the accrediting agency acts to withdraw, terminate or suspend the
accreditation of an institution; or (3) the institution notifies the
accrediting agency that the institution intends to cease operations.
    Section 487(f) of the HEA defines ``teach-out plan'' and adds an
institutional requirement that in the event the Secretary initiates a
limitation, suspension, or termination of the participation of an
institution of higher education in any program under title IV under the
authority of section 487(c)(1)(F) of the HEA, or initiates an emergency
action under the authority of section 487(c)(1)(G) of the HEA, and its
prescribed regulations, the institution is required to prepare a teach-
out plan for submission to the institution's accrediting agency in
compliance with section 496(c) of the HEA, the Secretary's regulations
on teach-out plans, and the standards of the institution's accrediting
agency.
    Current Regulations: The current regulations specify that if an
agency's accreditation enables an institution to obtain eligibility to
participate in the title IV, HEA programs, the agency must require the
institution to submit any teach-out agreement the institution enters
into with another institution for agency approval. ``Teach-out
agreement'' is defined in the current regulations in Sec.  602.3.
    Proposed Regulations: The proposed regulations would restructure
Sec.  602.24(c) of the current regulations to include teach-out plans
as well as teach-out agreements. The proposed regulations would expand
accrediting agency responsibilities by providing that agencies require
the institutions they accredit or preaccredit to submit a teach-out
plan to the agency for approval upon the occurrence of any of four
events: (1) The Secretary notifies the agency that the Secretary has
initiated an emergency action against an institution in accordance with
section 487(c)(1)(G) of the HEA, or has initiated a limitation,
suspension, or termination of the participation of an institution of
higher education in any title IV, HEA program, in accordance with
section 487(c)(1)(F) of the HEA, and that a teach-out plan is required;
(2) the agency acts to withdraw, terminate or suspend the accreditation
or preaccreditation of the institution; (3) the institution notifies
the agency that it intends to cease operations entirely or close a
location that provides one hundred percent of at least one program; or
(4) a State licensing or authorizing agency notifies the agency that an
institution's license or legal authorization to provide an educational
program has been or will be revoked.
    The proposed regulations would require an agency to evaluate each
teach-out plan to ensure it provides for the equitable treatment of
students under criteria established by the agency, specifies additional
charges, if any, and provides for notification to the students of any
additional charges. An agency that approves a teach-out plan that
includes a program that is accredited by another recognized accrediting
agency would be required to notify that accrediting agency of its
approval. The proposed regulations would also specify that an agency
may require an institution it accredits or preaccredits to enter into a
teach-out agreement with another institution of higher education as
part of its teach-out plan.
    The proposed regulations would also amend the current requirement
with respect to the submission of any teach-out agreement by an
institution to an agency to clarify that the agreement must be
submitted for agency approval whether it was entered into at the
institution's own volition or at the request of the agency.
    Current regulations would also be amended to add additional
specificity to the requirement that the agency approve a teach-out
agreement only if it provides for the equitable treatment of students.
Under the proposed regulations, the agency's obligation would pertain
to circumstances in which either an entire institution, or one of its
locations at which it provides one hundred percent of at least one
program offered, ceased operations, and would include requiring that
the teach-out institution have the necessary experience, resources, and
support services to remain stable, carry out its mission, and meet all
obligations to existing students. The proposed regulations would also
require that a teach-out institution provide students with information
about additional charges, if any.
    The proposed regulations would also amend paragraph (d) in the
current regulations in Sec.  602.24 to specify that if an institution
the agency accredits or preaccredits closes without a teach-out plan or
agreement, the agency must work with the Department and appropriate
State agency, to the extent feasible, to assist students in finding
reasonable opportunities to complete their education without additional
charges.
    Reasons: The Department proposes to specify that a teach-out plan
would be required in the three circumstances specified in the statute:
The Department initiates an emergency action or an action to limit,
suspend or terminate an institution's participation in the title IV,
HEA programs; the accrediting agency acts to withdraw, terminate or
suspend the institution; or the institution indicates it intends to
cease operations. The Department initially proposed referencing the
subpart of the Student Assistance General Provisions regulations that
contain the regulations governing limitation, suspension, termination,
and emergency actions. Some of the non-Federal negotiators stated that
requiring a teach-out plan if the Secretary initiates an emergency
action, or an action to limit, suspend, or terminate an institution in
accordance with subpart G of 34 CFR part 668, might result in confusion
and application of the teach-out requirements beyond the intent of the
statute, because subpart G is broad and refers to requirements such as
posting of surety. They stated that requiring teach-out plans when the
Department requires letters of credit or places an institution on
heightened cash monitoring is not mandated under the statute and should
be avoided. The Department agrees that a requirement that an
institution post a letter of credit, or be subject to heightened cash
monitoring, imposed outside of a subpart G proceeding, should not, on
its own, trigger a requirement that the institution submit a teach-out
plan to its accrediting agency for approval. The Department agreed to
modify the language it

[[Page 39512]]

originally proposed by adding a reference to the statutory provisions
governing emergency actions and actions to limit, suspend, or terminate
the participation of an institution in the title IV, HEA programs. In
addition, to reduce any confusion over when agency action is required,
the proposed regulation was further revised to specify that when the
Department notifies an institution and its accrediting agency that the
Department is initiating an emergency, limitation, suspension, or
termination action, it will also indicate in the notice that a teach-
out plan is required.
    The proposed regulations also provide that an accrediting agency
must require submission of a teach-out plan when a State licensing or
authorizing agency notifies the agency that an institution's license or
legal authorization to provide an educational program has been or will
be revoked. This provision was added because loss of State licensing
leads directly to the loss of accreditation and institutional
eligibility, and may well be followed by closure. There was support
from the non-Federal negotiators for including this provision.
    The addition of a provision in proposed Sec.  602.24(c)(3) that, if
an agency approves a teach-out plan that includes a program that is
accredited by another recognized accrediting agency, it must notify
that agency of its approval, was made to ensure appropriate sharing of
important information. The new provision in proposed Sec.  602.24(c)(4)
that an agency may require an institution to enter into a teach-out
agreement as part of its teach-out plan was added to reflect new
statutory language in section 487(f) of the HEA. In view of this new
language, the proposed regulations would also modify the requirement
for submission of teach-out agreements for agency approval (found in
proposed Sec.  602.24(c)(5) as restructured), to clarify that the
agreements must be submitted for approval regardless of whether the
institution enters into the agreement on its own, or at the request of
the agency.
    There was extensive discussion about what the statutory definition
of ``teach-out plan'' in section 487(f)(2) of the HEA means in
requiring a teach-out plan or agreement when an institution ceases to
operate before all students complete their ``program of study.''
Whereas ``program'' is defined in the regulations in Sec.  602.3 to
mean a postsecondary educational program that leads to an academic or
professional degree, certificate, or other recognized educational
credential, there is no definition of ``program of study.'' In order to
implement a teach-out plan or agreement, however, it is necessary to
understand the concept of a ``program of study.'' The Department
understands a program of study to be the specific area of study, or
major, within the context of a degree or certificate program. Thus, to
characterize an English major at a four-year institution, the student
would be enrolled in a baccalaureate program with English as the
program of study. What is important, and the reason for the distinction
between ``program'' and ``program of study'' with respect to teach-
outs, is that students need to be provided with the opportunity to
complete their specific program of study when an institution or
location offering 100 percent of at least one program ceases to
operate. Thus, a student in a baccalaureate degree program who is
preparing to become a teacher must be able to complete all the teacher
education courses needed for a degree in that major.
    The Department initially proposed that agencies evaluate a teach-
out plan to ensure it provides for the equitable treatment of students
under criteria established by the agency and does not result in
duplicative or increased costs. The Department was concerned that
students not be charged additional money for a program for which they
had already paid tuition and fees. Moreover, the concept of accrediting
agencies working with the Department and the State licensing agency, to
the extent feasible, to ensure that students whose institution has
closed have reasonable opportunities to complete their programs without
additional charges is included in the current regulations.
    Some of the non-Federal negotiators noted that institutions that
take on responsibility for teach-outs often lose substantial money to
ensure that students are taught out properly. Sometimes, the closing
institution did not provide its students with an adequate education,
and the students being taught out need additional education or training
to enable them to complete their program and be successful. Sometimes
this involves students re-taking a course. Hence, prohibiting
``duplicative charges'' through teach-out approval requirements cannot
be presumed to be in students' best interests. The institution
conducting a teach-out must have flexibility, and placing too many
prohibitions or prescriptions on the teach-out plan may preclude the
establishment of appropriate teach-out arrangements. The non-Federal
negotiators agreed that it would be better to require that the teach-
out plan ensure students are notified of any additional charges that
the teach-out will entail. The Department agreed with the non-Federal
negotiators. It should be noted that the Department's expectations are
that students will not incur additional or duplicative charges for
participating in a teach-out to complete their programs of study. If,
as the exception, and not the rule, an institution serving as a teach-
out institution must charge the students, it should ensure that any
charges are reasonable, taking into consideration the impact on the
student. Further, the Department believes it is important for a teach-
out plan to specify if there are additional charges. To be approved, a
teach-out plan must provide for notification to the students of any
additional charges.
    Several non-Federal negotiators raised a question about what
constitutes closure of an institution or location. They noted that
there have been situations in which an institution or location moved,
and did not close, but the Department deemed the institution to have
closed. During the discussion, the Department clarified that normally a
move of an institution or location across the street would be viewed as
a change of address, and would not constitute closure. However if, for
example, an institution or location moved 20 miles, there would have to
be an examination of the circumstances. A 20-mile move in a rural area
might not have a major impact on the majority of an institution's
students, whereas a 20-mile move in an urban area could disadvantage an
institution's students to the point where they could no longer attend
the institution. In ascertaining whether an institution or location has
closed or moved, key considerations are whether the institution's
faculty, staff and students move with the institution or location.
    Under the proposed regulations, the requirement that agencies work
with the Department regarding closed schools would apply to those
schools that close without a teach-out plan or agreement. The
Department proposed to require that students be given reasonable
opportunities to complete their education ``without duplicative or
increased charges.'' Several negotiators presented various points of
view on the proposal regarding closed institutions and locations when
there is no teach-out plan or agreement. Some non-Federal negotiators
suggested focusing on what was being done to protect the students and
noted that what is best for the students must be evaluated on a case-
by-case basis. Other non-Federal negotiators expressed concern that the
proposed language could be read to imply that the accrediting agency
would

[[Page 39513]]

be required to assume a financial obligation for teaching out the
students in such circumstances. However, a non-Federal negotiator
stated a belief that, while it is understandable that accrediting
agencies do not want the regulations to imply that they have any
liability for the educational expenses of students when an institution
or location closes without a teach-out plan or agreement in place, it
is likely that accrediting agencies will incur ordinary in-kind
expenses, such as some expenditure of staff time, in complying with the
recognition criteria pertaining to teach-outs and school closures.
    The Department agrees that it expects agencies to expend staff time
and make other ordinary and customary commitments of agency resources
in the course of assisting students in finding reasonable opportunities
to complete their programs of study, but that agencies are not expected
to pay for the educational expenses of students in this situation. In
addition, to avoid the appearance that the Department is creating any
new or unusual financial obligations for agencies, the Department
agreed to remove the references to ``ensuring'' that students do not
incur ``additional or duplicative charges'' in favor of language simply
requiring that agencies ``assist students'' in finding reasonable
opportunities to complete their programs ``without additional charge.''

Transfer of Credit (Sec.  602.24)

    Statute: As amended by the HEOA, section 496(c)(9) of the HEA
specifies, among other requirements, that to be recognized by the
Secretary as a reliable authority as to the quality of education or
training offered by an institution seeking to participate in title IV,
HEA programs, an accrediting agency must confirm, as part of the
agency's review for initial or renewal of accreditation, that an
institution has transfer of credit policies that are publicly disclosed
and that include a statement of the criteria established by the
institution regarding the transfer of credit earned at another
institution of higher education.
    Section 485(h) of the HEA contains a new HEOA requirement that
institutions publicly disclose their transfer of credit policies in a
readable and comprehensible manner. This section also specifies that
neither the Secretary nor the NACIQI is authorized to require
particular policies, procedures, or practices by institutions with
respect to transfer of credit.
    Current Regulations: There are no current regulations addressing
transfer of credit.
    Proposed Regulations: Proposed Sec.  602.24(e) would incorporate
the provisions of the HEA regarding the new requirement in the HEOA
that accrediting agencies confirm that institutions have transfer of
credit policies that are publicly disclosed and include a statement of
the criteria established by the institution regarding the transfer of
credit earned at another institution of higher education. The proposed
regulations include a cross-reference to the paragraph in 34 CFR 668.43
that the Department plans to include in a final rule to reflect the
HEOA's new institutional disclosure requirement regarding transfer of
credit policies. In the final regulations governing accrediting
agencies, the complete cross-reference will be inserted in Sec.
602.24.
    Reasons: The new paragraph would implement the new statutory
provisions contained in the HEOA. Some of the non-Federal negotiators
expressed concern about a perceived lack of clarity regarding
availability of information and were interested in having a definition
of ``publicly disclosed'' to make it clear that the information must be
readily available to students and their advisors. To address this
concern, the proposed regulations provide a reference to the new
institutional disclosure requirement that will require institutions to
disclose the information specified regarding transfer of credit in a
readable and comprehensible manner.
    Some non-Federal negotiators wanted to add language requiring that
the criteria established by the institution regarding the transfer of
credit earned at another institution of higher education be fair. These
negotiators stated that the issue of transfer of credit is a serious
one and that full disclosure of this kind of information is needed so
students can assess the fairness of an institution's policies and can
decide whether to apply to the institution. Other non-Federal
negotiators said there was a problem with expanding the statutory
language, noting the Rule of Construction in section 485 of the HEA
that constrains the Secretary from elaborating on the requirement. In
addition, the regulations governing accrediting agencies require only
that the agencies confirm that institutions being reviewed publicly
disclose their transfer of credit policies. The more specific
requirements on transfer of credit in section 485 of the HEA govern
institutions, not accrediting agencies. The proposed regulations
reflect the statutory language, but include a cross-reference to the
institutional transfer of credit provisions to address some of the non-
Federal negotiators' concerns.

Summary of Agency Actions (Sec.  602.26)

    Statute: Section 496(c)(7) of the HEA specifies that, among other
requirements, to be recognized by the Secretary as a reliable authority
as to the quality of education or training offered by an institution
seeking to participate in title IV, HEA programs, an accrediting agency
must make available to the public and the State licensing or
authorizing agency, and submit to the Secretary, a summary of agency
actions including the accreditation or renewal of accreditation of an
institution; the final denial, withdrawal, suspension, or termination
of accreditation of an institution; any findings made in connection
with the action taken, together with the official comments of the
affected institution; and any other adverse action taken with respect
to an institution or placement on probation of an institution.
    Current Regulations: Section 602.26(b) of the current regulations
requires an agency to provide written notice of (1) a final decision to
place an institution or program on probation or an equivalent status,
and (2) a final decision to deny, withdraw, suspend, revoke, or
terminate the accreditation or preaccreditation of an institution or
program. The notice must be provided to the Secretary, the appropriate
State licensing or authorizing agency, and appropriate accrediting
agencies at the same time the accrediting agency notifies the
institution, but no later than 30 days after the decision.
    Section 602.26(c) of the current regulations requires an
accrediting agency to provide written notice to the public of the
decisions identified in Sec.  602.26(b)(1) and (b)(2) within 24 hours
of its notice to the institution or program.
    Section 602.26(d) of the current regulations requires that with
respect to any decision listed in Sec.  602.26(b)(2), the agency must
make available to the Secretary, the appropriate State licensing or
authorizing agency, and the public upon request, no later than 60 days
after the decision, a brief statement summarizing the reasons for the
agency's decision and the comments, if any, that the affected
institution or program might wish to make with regard to that decision.
    Proposed Regulations: The proposed regulations regarding disclosure
of accrediting agency actions would require accrediting agencies to
provide written notice of a final decision to take any other adverse
action not listed in Sec.  602.26(b)(2), as defined by the agency, to
the Secretary and the State licensing or authorizing agency. The
proposed

[[Page 39514]]

regulations would also add a cross-reference to require agencies to
provide written notice to the public within 24 hours of their notice to
the institution or program of any other adverse action.
    Finally, the proposed regulations would specify in new paragraph
(d) that the accrediting agency, in addition to providing to the public
a brief statement summarizing the reasons for the agency's decision,
must provide the official comments of the affected institution or
program, or evidence that the institution or program was offered the
opportunity to provide official comments. The information must be
provided to the public whether or not the agency receives a request for
the information.
    Reasons: Many of the new provisions in the HEA are already
addressed by current regulations. During negotiated rulemaking, the
non-Federal negotiators requested that the accrediting agencies be
permitted to define the other adverse actions, not specified in the
regulations, about which the agencies would be required to provide
information. The non-Federal negotiators also requested that the
regulations clarify that agencies need provide only official comments
of an institution or program or, if there are no official comments,
evidence that the institution or program was offered an opportunity to
provide official comments. The Department agreed with the non-Federal
negotiators.

Recognition of Agencies by the Secretary (Subpart C)

    Statute: Section 496(o) of the HEA authorizes the Secretary to
develop regulations that provide procedures for the recognition of
accrediting agencies and for administrative appeals. Section
496(l)(1)(B) of the HEA specifies the 12-month timeframe by which
noncompliant agencies must take appropriate action to come into
compliance, absent an extension of the timeframe by the Secretary upon
good cause shown. Section 496(d) of the HEA stipulates that the period
of recognition not exceed five years. Section 114 of the HEA, as
amended by the HEOA, restructures the NACIQI and provides for the
establishment of the NACIQI meeting agenda by the Chairperson of
NACIQI; under the FACA, 5 U.S.C. Appdx. 1, approval of the meeting
agenda by the Secretary's designated Federal official is also required.
Section 496(q) of the HEA requires a review, at the next available
NACIQI meeting, of an agency that has included distance education or
correspondence education in its scope of recognition through written
notice to the Secretary, if the enrollment of an accredited institution
that offers distance education or correspondence education has
increased by 50 percent or more within any one institutional fiscal
year. Section 496(a) and (c) of the HEA describes various kinds of
institutional and agency information that must be made available to the
public, the Secretary or the State licensing or authorizing agency, as
applicable. Along with HEA requirements, the Department must comply
with requirements in the Freedom of Information Act, 5 U.S.C. Sec.
552; the Trade Secrets Act, 18 U.S.C. Sec.  1905; the Privacy Act of
1974, as amended, 5 U.S.C. Sec.  552a; the FACA, 5 U.S.C. Appdx. 1; and
all other applicable laws, in considering whether and when information
obtained from accrediting agencies may, or must, be disclosed to the
public.
    Current Regulations: There are two sets of recognition procedures
in the current regulations. Subpart C provides review procedures only
for an agency's application for initial or continued recognition, and
does not stipulate procedures for other types of Departmental review
pertaining to recognition proceedings. Subpart D provides procedures
for limitation, suspension, or termination of recognition. Under
subparts C and D, the Secretary has the authority to make a decision
regarding an accrediting agency's recognition, as well as for any
appeal the accrediting agency may bring related to that decision.
    Section 602.30(c) of the current regulations states that the
Secretary does not make available to the public any confidential agency
materials Department staff review during the evaluation of an agency's
application for recognition or compliance with the criteria for
recognition.
    Proposed Regulations: The proposed regulations would reflect
changes made by the HEOA regarding the review of distance education and
correspondence education, and the role of the Chairperson of the
Advisory Committee in establishing the meeting agenda. Under the FACA,
approval of the meeting agenda by the Secretary's designated Federal
official is also required; ``Designated Federal Official'' is defined
in proposed Sec.  602.3.
    The proposed regulations would combine subparts C and D, thereby
streamlining agency review and establishing procedures for the
following activities: Applications for an expansion of scope;
submission and review of compliance reports, as defined in proposed
Sec.  602.3; reviews of increases in headcount enrollment described in
proposed Sec.  602.19(e); and staff analyses based on reviews of
agencies during their period of recognition. The proposed regulations
would establish the senior Department official as the decision-maker on
recognition proceedings and the Secretary as the decision-maker on
appeals. Proposed subpart C would also make explicit the authority of
the senior Department official to make a decision in a recognition
proceeding in the event that the statutory authority or appropriations
for the Advisory Committee ends or that there are fewer duly appointed
Advisory Committee members than needed to constitute a quorum, and
under extraordinary circumstances when there are serious questions
about an agency's compliance that require prompt attention. Proposed
subpart C would clarify that an agency may be given no more than 12
months to address identified deficiencies, after which time a decision
on recognition would be made on the basis of a compliance report,
unless the senior Department official (or Secretary, on appeal), on
review of the report, determines good cause exists to extend that
timeframe.
    Proposed Sec.  602.31 would identify laws governing the Secretary's
processing and decision-making on requests for public disclosure of
information obtained during agency recognition proceedings. Proposed
Sec.  602.31 would also provide procedures that an agency may follow in
seeking to protect the confidentiality of trade secrets and commercial
or financial information that is privileged or confidential in
documents submitted to the Department in recognition proceedings.
Section 602.31(f)(1) of the proposed regulations would provide the
citations of the various laws to which the Secretary's release of
information is subject, including the Freedom of Information Act
(FOIA); the Trade Secrets Act; the Privacy Act of 1974, as amended; and
the Federal Advisory Committee Act.
    The proposed regulations would add a set of procedures an agency
may follow when submitting documents to the Department for recognition
proceedings in order to assist the Department in its efforts to avoid
disclosing those materials that are entitled to protection from
disclosure under applicable law. These procedures include: Allowing the
agency to redact information that would identify individuals or
institutions and is not essential to the Department's review of the
agency; specifying that the agency make a good faith effort to
designate all business information within the submission that the
agency believes would be exempt from disclosure under

[[Page 39515]]

exemption 4 of FOIA; identifying any other material the agency believes
would be exempt from public disclosure, the factual basis for the
request, and any legal basis the agency has identified for withholding
the document from disclosure; and ensuring that the documents submitted
are only those required for Department review or as specifically
requested by the Department. The proposed regulations would also make
clear that a blanket designation of material submitted as meeting the
exemptions in FOIA will not be considered to be in good faith and will
be disregarded. Finally, the proposed regulations would clarify that
the Secretary processes all FOIA requests in accordance with 34 CFR
part 5 and that all documents provided to the Advisory Committee are
available to the public.
    Reasons: The Department proposes to combine subparts C and D to
establish consistent procedures that govern the recognition process.
The intent behind current regulations in subpart D--which establishes a
separate process that involves subcommittees of the Advisory Committee
for all limitation, suspension and termination actions--was to expedite
these types of actions. However, in practice, scheduling and logistical
issues have made it cumbersome for Department staff and the Advisory
Committee to manage two processes.
    Proposed subpart C would make clear the parallel processes by which
the Department staff and the Advisory Committee make recommendations on
recognition that are forwarded, along with the complete record, to the
senior Department official for a decision. The Department clarified
during negotiated rulemaking that the NACIQI is, by definition, an
advisory committee that makes recommendations and is not a decision-
making body. Current regulations in Sec.  602.33 that provide
procedures for appealing NACIQI's recommendation are confusing given
that an appeal suggests that a decision has been made, whereas in fact,
NACIQI is only making a recommendation.
    In lieu of current Sec.  602.33, proposed Sec.  602.35 would
provide a process by which the agency and Department staff may respond
to the Advisory Committee's recommendation before the senior Department
official makes his or her recognition decision. Under the proposed
regulations, decision-making authority would reside with the senior
Department official, whose decisions would be appealable by the agency
to the Secretary under proposed Sec.  602.37. The proposed changes to
establish the senior Department official as the decision-maker on
recognition and the Secretary as the decision-maker on appeals would
strengthen due process by ensuring that the appeal is not adjudicated
by the initial decision-maker. Under the current regulations, the
decision-making authority on both recognition and appeals resides with
the Secretary.
    The proposed regulations in Sec. Sec.  602.32, 602.34, and 602.36
would increase transparency and efficiency, and implement HEOA
provisions regarding distance and correspondence education. These
proposed regulations would detail proceedings for staff and Advisory
Committee review of applications for recognition or renewal of
recognition, expansions of scope, compliance reports, and reviews of
increases in headcount enrollment described in proposed Sec.
602.19(e). Proposed Sec.  602.33 would provide procedures for reviews
of agencies during the period of recognition. Timeframes for various
stages of the review process would be specified to strengthen due
process for agencies.
    The Department's initial proposed language in subpart C
incorporated the concept that an agency's compliance with the criteria
for recognition includes the requirement that an agency ``is effective
in its performance with respect to those criteria.'' Some non-Federal
negotiators expressed concern regarding the word ``performance''
because they believed that term is difficult to define. They suggested
that the language be amended to incorporate the statutory concept of
``effective application'' of the criteria. The Department agreed to
replace the language regarding ``performance'' with the phrase
``effectively applies those criteria.'' While addressing non-Federal
negotiators' concerns regarding the word ``performance,'' the proposed
language would retain the statutory concept of ``effectiveness'' and
the judgment associated with how an agency applies its standards.
    During the discussions regarding proposed Sec.  602.37, which would
specify procedures for appealing the senior Department official's
decision to the Secretary, some non-Federal negotiators expressed
concerns regarding provisions for the consideration by the Secretary of
additional information not contained in the record. In response, the
Department added language specifying that the information be ``relevant
and material'' and ``pertaining to an agency's compliance with
recognition criteria.'' A parallel change was made to proposed Sec.
602.36 which outlines procedures for review and decision by the senior
Department official. Current regulations are silent about procedures in
instances when new and relevant information becomes available after the
NACIQI meeting but prior to the decision being made. In the interest of
transparency and due process, the Department decided to make explicit
in the proposed regulations the senior Department official's and the
Secretary's authority to review all relevant information prior to
making a decision on recognition. Proposed Sec. Sec.  602.36 and 602.37
would outline procedures by which the senior Department official and
the Secretary, respectively, may proceed in such cases.
    Proposed Sec.  602.33 would establish a procedure for review of
agencies during the period of recognition so that the Department may
ensure an agency's continued compliance with subpart B, and initiate
action as necessary. Some non-Federal negotiators expressed concern
that the Department not act arbitrarily and provide adequate notice to
and communication with the agency when conducting a review during an
agency's period of recognition. In response to concerns expressed by
non-Federal negotiators, the Department added language to reflect the
consultation between Department staff and the agency, and the provision
to the agency of the documentation concerning the inquiry.
    Proposed Sec.  602.36(b) would make explicit the senior Department
official's authority to make a decision in a recognition proceeding in
the event that statutory authority or appropriations for the Advisory
Committee ends, or there are fewer duly appointed Advisory Committee
members than needed to constitute a quorum. The intent behind proposed
Sec.  602.36(b) is to allow the Department to act expeditiously and
responsibly in the absence of an Advisory Committee when the Department
has concerns regarding an agency's continued compliance with subpart B.
Some non-Federal negotiators suggested that the senior Department
official only exercise this authority in extraordinary circumstances.
In response to non-Federal negotiators' concerns, the Department added
language to proposed Sec.  602.36(b), which would specify that the
senior Department official would make a decision in the absence of an
Advisory Committee only in extraordinary circumstances when the
Department has serious concerns regarding an agency's compliance with
subpart B that require prompt attention.
    One non-Federal negotiator expressed concern that the Secretary
could withhold appointments to NACIQI in order to prevent the
constitution of a

[[Page 39516]]

quorum so that the senior Department official could exercise the
authority to make a decision without NACIQI review of the matter. The
Department clarified that this was not the intent of the provision and
further stated that the withholding of appointments by the Secretary
alone would not prevent a quorum.
    The Secretary is obligated to comply with the HEA and other
applicable statutes, including FOIA and FACA. Current regulations do
not accurately reflect the Secretary's disclosure obligations under
FOIA and other statutes and must be revised to reflect the applicable
law. In revising the regulations, the Department is attempting to spell
out the options available to agencies when submitting material that the
agencies view as confidential to the Department for review in
recognition proceedings.
    There was extensive discussion among the negotiators about what
material is to be considered confidential. Several non-Federal
negotiators expressed concern about how to safeguard confidentiality,
ensure the integrity of the process, and preserve the relationship
between the agency and the institution. In particular, they expressed
concern that if the agency were unable to provide guarantees of
confidentiality to its institutions, this would undermine the
relationship between the agency and its accredited institutions or
programs and indeed the entire accreditation process.
    The Department acknowledged the importance of confidentiality for
agencies and institutions, but at the same time, wanted to make the
agencies and institutions fully aware of the requirements with which
the Secretary must comply in the event a request for disclosure is made
under FOIA or FACA. The Department also clarified that should the
Inspector General or any other Federal entity seek to review an agency
or an institution, proposed procedures under subpart C for redacting
information and marking documents confidential will not apply, as these
proposed regulations pertain only to the recognition process.
    Several non-Federal negotiators suggested that the Department could
review required documents on a secure Web site and thereby not take
possession of them. Others suggested the Department send staff to the
agency to review documents, but leave them in the agency's possession.
The Department explained that it needed to have a complete and accurate
record of the documents in its possession to substantiate the
Department's review, and would, therefore, not be able to utilize a
secure Web site or an on-site review of documents. The Department's
control of the documents reviewed further protects the integrity of the
review process. For example, if the Department needed to retrieve a
reviewed document in the future, and had to rely on obtaining the
document from a Web site, it would have no way to ensure that the
document on the Web site was the same document it had originally
reviewed.
    Another non-Federal negotiator raised concerns about complaints
being released to the public before they could be substantiated. The
Department clarified that FOIA pertains to all documents submitted to
the Department and other Federal Government agencies.
    Finally, some non-Federal negotiators expressed concerns about the
conduct of unannounced site visits by Department staff to an
institution or program as part of the review of an agency. This
provision exists in both current Sec.  602.31(b)(1) and proposed Sec.
602.31(e)(1). Some non-Federal negotiators stated that this was in
conflict with their responsibilities under the Health Insurance
Portability and Accountability Act (HIPAA). The Department reviewed
HIPAA materials and found nothing that precludes the Department from
performing unannounced site visits. Nevertheless, the Department will
cooperate with health care providers and their business associates with
respect to applicable procedures required by HIPAA.

Executive Order 12866

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the Office
of Management and Budget (OMB). Section 3(f) of Executive Order 12866
defines a ``significant regulatory action'' as an action likely to
result in a rule that may (1) have an annual effect on the economy of
$100 million or more, or adversely affect a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or Tribal governments or communities in a
material way (also referred to as an ``economically significant''
rule); (2) create serious inconsistency or otherwise interfere with an
action taken or planned by another agency; (3) materially alter the
budgetary impacts of entitlement grants, user fees, or loan programs or
the rights and obligations of recipients thereof; or (4) raise novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been
determined that this proposed regulatory action would not have an
annual effect on the economy of more than $100 million. Therefore, this
action is not ``economically significant'' and not subject to OMB
review under section 3(f)(1) of Executive Order 12866. Notwithstanding
this determination, the Secretary has assessed the potential costs and
benefits of this regulatory action and has determined that the benefits
justify the costs.

Need for Federal Regulatory Action

    As discussed in this NPRM, these proposed regulations are needed to
implement the provisions of the HEA, as amended. In particular, these
proposed regulations address the provisions related to the recognition
of accrediting agencies by the Secretary.
    In addition, these proposed regulations are needed to ensure that
the Department fulfills its fiduciary responsibility regarding the
appropriate use of Federal funds made available by the Department to
institutions of higher education under title IV of the HEA. The
Secretary grants recognition to accrediting agencies that are
considered by the Department to be reliable authorities regarding the
quality of education or training offered by the institutions or
programs they accredit. Congress requires that an institution of higher
education be accredited by an accrediting agency recognized by the
Secretary in order to receive Federal funds authorized under title IV,
HEA programs.
    Section 492 of the HEA requires the Secretary, before publishing
any proposed regulations for programs authorized by title IV of the
HEA, to obtain public involvement in the development of the proposed
regulations. After obtaining advice and recommendations from
individuals and representatives from relevant constituent groups, the
Secretary must subject the proposed regulations for the title IV, HEA
programs to a negotiated rulemaking process. All proposed regulations
that the Department publishes must conform to final agreements
resulting from that process unless the Secretary reopens the process or
provides a written explanation to the participants in that process
stating why the Secretary has decided to depart from the agreements.
The 2009 negotiated rulemaking committee for accreditation reached
consensus on the proposed regulatory language contained in this

[[Page 39517]]

NPRM. A summary of the proposed regulatory language agreed upon by
negotiators is available in the Significant Proposed Regulations
section.

Regulatory Alternatives Considered

    The following section addresses the alternatives that the
Department considered in implementing the discretionary portions of the
HEOA provisions. These alternatives are also discussed in more detail
in the Reasons sections of this NPRM related to the specific proposed
regulatory provisions.
    A broad range of alternatives to these proposed regulations was
considered as part of the negotiated rulemaking process. These
alternatives were reviewed in detail in the preamble to this NPRM under
both the Regulatory Impact Analysis and the Reasons sections
accompanying the discussion of each proposed regulatory provision.
However, the Department is interested in receiving comments related to
other alternatives to the proposed regulations. To send any comments
that concern alternatives to these proposed regulations, see the
instructions in the ADDRESSES section of this NPRM.

Benefit-Cost Analysis

Benefits
    The benefits of these proposed regulations would include: Ensuring
that accrediting agencies are reliable authorities as to the quality of
education or training offered by an institution or program they
accredit; ensuring that the Department fulfills its fiduciary
responsibility for institutional funding under title IV, HEA programs;
and establishing consistency between statutory language and regulatory
language. An additional benefit of the proposed regulations would be
providing accrediting agencies with greater clarity on regulations
regarding the following: Distance and correspondence education;
accreditation team members; transfer of credit; teach-out plan
approval; definition of recognition; demonstration of compliance;
recognition procedures, including procedures for NACIQI; direct
assessment programs; monitoring; substantive change; record keeping and
confidentiality; and due process and appeals. However, it is difficult
to quantify benefits related to the proposed regulations. The
Department is interested in receiving comments or data that would
support a more rigorous analysis of the benefits of these provisions.
Costs
    Many of the statutory provisions implemented through this NPRM
would not require accrediting agencies and institutions to develop new
disclosures, materials, or accompanying dissemination processes. Other
proposed regulations generally would require discrete changes in
specific parameters associated with existing guidance rather than
wholly new requirements. Accordingly, accrediting agencies wishing to
continue to be recognized by the Secretary and institutions wishing to
continue to participate in title IV, HEA programs are estimated to have
already absorbed most of the administrative costs related to
implementing these proposed regulations.
    In assessing the potential impact of these proposed regulations,
the Department recognizes that certain provisions are likely to
increase workload for some program participants. This additional
workload is discussed in more detail under the Paperwork Reduction Act
of 1995 section of this preamble. Additional workload would normally be
expected to result in estimated costs associated with either the hiring
of additional employees or opportunity costs related to the
reassignment of existing staff from other activities. Given the limited
data available, the Department is particularly interested in comments
and supporting information related to possible administrative burden to
accrediting agencies and institutions stemming from the proposed
regulations. Estimates included in this notice will be reevaluated
based on any information received during the public comment period.
    Two new statutory concepts reflected in proposed Sec.  602.25 do
not exist in current regulations: (1) An institution's or program's
right to appeal adverse accrediting agency actions to an appeals panel
that is subject to a conflict of interest policy and that does not
contain members of the underlying decision-making body; and (2) an
institution's or program's right to review of new financial
information, if the institution or agency meets certain conditions,
before the accrediting agency takes a final adverse action.
    Although accrediting agencies must be prepared to respond to
appeals and to requests for review of new financial information,
institutions or programs decide whether to undertake these appeals and
make these requests. We do not expect the new provisions to affect the
number of institutions or programs that appeal an accrediting agency
adverse action; therefore, there would be no additional costs to
institutions or programs. Based on the discussion on this issue at
negotiated rulemaking and historical data on appeals, it is likely that
no more than five institutions per year will be able to meet the
qualifications to be considered under the new provision for review of
new financial information and will seek such a review. The proposed
regulations would also require that an accrediting agency confirm, as
part of the agency's review for initial or renewal of accreditation,
that institutions that participate in title IV, HEA programs have
transfer of credit policies that are publicly disclosed and that
include statements of the criteria established by the institutions
regarding the transfer of credit earned at another institution of
higher education. As accrediting agencies are already required to
review various policies and procedures at the institutions they
accredit, we expect the addition of this provision will add a few
minutes to an accreditation review. We do not have the data to provide
a more refined estimate at this time. As indicated above, we will
adjust the estimate based on any comments received.
    In addition, the proposed regulations would require an agency that
has or seeks to include the evaluation of distance education or
correspondence education within its scope of recognition to require
participating institutions that offer distance education or
correspondence education to have processes in place through which the
institutions establish that the student who registers in a distance
education or correspondence education course or program is the same
student who participates in and completes the course or program and
receives the academic credit. It is standard practice for institutions
that offer distance or correspondence education to have processes that
verify the identity of students; therefore, this provision will not
have an impact on institutions. Some accrediting agencies that evaluate
distance education or correspondence already review those processes
when they conduct accreditation reviews. For those agencies that will
have to add a step to their evaluation process, the time added to the
review process is expected to minimal. We will refine our estimate if
we receive comments that would enable us calculate any additional costs
associated with this provision.
    Finally, the proposed regulations would require participating
institutions to submit a teach-out plan to their accrediting agency
upon the occurrence of any of the following: An emergency

[[Page 39518]]

action of the Secretary against an institution, or an action by the
Secretary to limit, suspend, or terminate an institution's
participation in any title IV, HEA program; an agency action to
withdraw, terminate, or suspend the accreditation or preaccreditation
of the institution; the institution notifies the accrediting agency
that it intends to cease operations entirely or close a location that
provides one hundred percent of at least one program; or a State
licensing or authorizing agency notifies the accrediting agency that an
institution's license or legal authorization to provide an educational
program has been or will be revoked. As indicated in the Paperwork
Reduction Act section, we expect the average time needed to develop a
teach-out plan is four hours. Based on historical data that show the
number of institutions that are subject to Department action, lose
institutional eligibility, or close, and an estimate of the number of
locations that offer one hundred percent of a program, we estimate that
approximately 70 institutions per year will be required to submit a
teach-out plan to their accrediting agency. Most of the institutions
and locations that close offer only one or two programs. For some
institutions, the plan will be very simple: the institution will teach
out its students. For other institutions, preparing a plan may involve
doing research to determine what nearby schools offer similar programs;
in most cases, the institution will already know, as the nearby schools
will have been their competitors. In a few cases, more work may be
needed to develop the teach-out plan. This is likely to occur when the
affected institution or location has offered several different
programs. Given the wide variety of situations, our best estimate is
that the average amount of time needed to complete a teach-out plan is
four hours. Using May 2009 Bureau of Labor information that the average
hourly wage for private, non-agricultural workers is $18.54, the total
estimated cost for carrying out this provision is $5,191 (70
institutions x 4 hours/institution x $18.54/hour).

Net Budget Impacts

    In general, these estimates should be considered preliminary; they
will be reevaluated in light of any comments or information received by
the Department prior to the publication of the final regulations. The
final regulations will incorporate this information in a revised
analysis.
    The net budget impact of these proposed regulations on accrediting
agencies and institutions of higher education is estimated to be
minimal. As previously mentioned, many of the statutory provisions
implemented through this NPRM will not require accrediting agencies and
institutions to develop new disclosures, materials, or accompanying
dissemination processes. In addition, the Department takes steps in
these proposed regulations to limit the administrative burden on
accrediting agencies and institutions. The Department believes that
most of the administrative costs related to implementing these proposed
regulations have already been absorbed by accrediting agencies and
institutions. As noted in the chart in the Paperwork Reduction Act
section of the preamble, the net effect on the work of accrediting
agencies and institutions is estimated to be 3,212 hours. Assuming that
the employee cost of implementing the new requirements is $18.54/hour
(based on average wage information from the Bureau of Labor
Statistics), the net budget impact of these proposed regulations is
estimated to be $59,550. The net budget impact of these proposed
regulations on the Department is also estimated to be minimal. Primary
additional costs would be incurred for administering these regulations
should NACIQI decide to convene more than two national meetings
annually. Because the HEOA provisions afford the NACIQI chair the
authority to set the agenda for NACIQI meetings with the approval of
the designated Federal official, it is conceivable that NACIQI may
choose to meet more often than twice a year. Should this occur, the
Department would incur additional administrative costs resulting from
convening one or more additional meetings. The estimated cost to the
Department of convening another NACIQI meeting is $55,300. No
additional costs to the Department resulting from these proposed
regulations are anticipated.
    In analyzing the net budget impacts of these proposed regulations,
feedback was received from non-Federal negotiators during negotiated
rulemaking and from Department staff. However, data on administrative
burden at participating accrediting agencies and institutions are
extremely limited; accordingly, as noted above, the Department is
particularly interested in comments in this area.
    Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and
explain burdens specifically associated with information collection
requirements. See the heading Paperwork Reduction Act of 1995.

Assumptions, Limitations, and Data Sources

    Because these proposed regulations would largely restate statutory
requirements that would be self-implementing in the absence of
regulatory action, impact estimates provided in the preceding section
reflect a pre-statutory baseline in which the HEOA changes implemented
in these proposed regulations do not exist. In general, these estimates
should be considered preliminary; they will be reevaluated in light of
any comments or information received by the Department prior to the
publication of the final regulations. The final regulations will
incorporate this information in a revised analysis.

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
     Are the requirements in the proposed regulations clearly
stated?
     Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
     Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec.  600.2.)
     Could the description of the proposed regulations in the
``Supplementary Information'' section of this preamble be more helpful
in making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations
easier to understand?
    To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section of this preamble.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. These proposed regulations would directly affect accrediting
agencies and institutions of higher education that

[[Page 39519]]

participate in title IV, HEA programs. The U.S. Small Business
Administration Size Standards define organizations as ``small
entities'' if they are for-profit or nonprofit organizations with total
annual revenue below $5,000,000 or if they are organizations controlled
by governmental entities with populations below 50,000.
    A significant percentage of the accrediting agencies and
institutions participating in title IV, HEA programs meet the
definition of ``small entities''. The Department estimates that
approximately 40 accrediting agencies and 2,310 postsecondary
institutions meet the definition of ``small entity''.
    The proposed regulatory action would not substantively change
regulations governing institutional eligibility and the Secretary's
recognition of accrediting agencies in a way that would result in a
material increase or decrease in the number of institutions
participating in title IV of the HEA or in the number of accrediting
agencies recognized by the Secretary. For these accrediting agencies
and institutions, the new requirements under the proposed regulations
are not expected to impose significant new costs. Although the proposed
regulations contain some new requirements, many agencies and
institutions have policies in place that are similar to the new
requirements. The Department estimates that costs attributable to
complying with the new requirements are likely to be small.
    As noted in the Paperwork Reduction Act section of this NPRM, the
net effect on the work of accrediting agencies and institutions is
estimated to be 3,212 hours. For the approximately 2,350 small entities
covered by the proposed regulations, the net budget impact is estimated
to be 1,851 hours. Using the May 2009 Bureau of Labor data for the
average hourly wage of private, non-agricultural workers, $18.54 per
hour, the estimated cost of the new provisions to small entities is
$34,318.
    The impact of the proposed regulations on individuals is not
subject to the Regulatory Flexibility Act.
    The Secretary invites comments from small accrediting agencies and
institutions as to whether they believe the proposed changes would have
a significant economic impact on them and, if so, requests evidence to
support that belief.

Paperwork Reduction Act of 1995

    Proposed Sec. Sec.  602.15, 602.19, 602.24, 602.25, 602.26, 602.27,
602.31, and 602.32 contain information collection requirements. Under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department
of Education has submitted a copy of these sections to OMB for its
review.

Section 602.15--Administrative and Fiscal Responsibilities

    Proposed Sec.  602.15 would require accrediting agencies to
demonstrate certain administrative responsibilities, including
maintenance of all accrediting documentation for each institution from
the last full accreditation or preaccreditation review. Under the
current regulations, agencies are required to maintain this
documentation for the previous two accreditation or preaccreditation
reviews. Accrediting agencies must maintain documents regarding
substantive change decisions under this requirement in the current
regulations. The proposed regulation would reduce the administrative
burden to maintenance of only one full accreditation or
preaccreditation review. Although this represents a reduction of the
burden on agencies under OMB Control Number 1840-0788, the reduced
hours for maintaining only one complete review cycle are negligible
because the agencies already collect the information.

Section 602.19--Monitoring and Reevaluation of Accredited Institutions
and Programs

    Proposed Sec.  602.19(b) would require agencies to collect data to
ensure that the institutions they accredit remain in compliance with
their regulations. This proposed regulation would clarify the language
in the current regulation regarding the data that agencies must collect
to ensure that institutions and programs remain in compliance with
their accrediting standards. Because the current regulation requires
agencies to collect this information, the proposed regulatory language
change would not represent any additional reporting burden under OMB
Control Number 1840-0788.
    Proposed Sec.  602.19(c) would require agencies to monitor the
enrollment growth of institutions or programs they accredit each year.
This proposed regulation would represent a change in the information
that accrediting agencies must collect currently. It would require that
agencies collect information to monitor enrollment growth for the
institutions or programs that they accredit. The Department believes
that institutions already collect enrollment data, but estimates that
this regulation would increase the burden to each of the 61 recognized
accrediting agencies by a total of 122 hours under OMB Control Number
1840-0788.
    Proposed Sec.  602.19(e) would require accrediting agencies that
expanded their scope to include distance education or correspondence
education by notice to the Secretary to monitor enrollment growth of
the institutions they accredit that offer distance education or
correspondence education. These agencies must report to the Department,
within 30 days, any institution that experiences enrollment growth of
50 percent or more during a fiscal year. The content of the report is
described in Sec.  602.31(d).
    Proposed Sec.  602.19(e) would represent a change in the
information that some accrediting agencies must collect. The proposed
regulation would only affect institutional accrediting agencies and
programmatic accrediting agencies that accredit freestanding
institutions that currently do not have distance education in their
scope of recognition. Department staff review of currently recognized
accrediting agencies shows that 27 agencies would not be affected by
this proposed regulation. However 15 of the remaining recognized
agencies may be affected if any decide to include distance education in
their scope of recognition in the future. The Department estimates that
the additional reporting requirement would increase the burden to
accrediting agencies by a total of 60 hours under OMB Control Number
1840-0788 if all 15 agencies decided to add distance education or
correspondence education to their scope of recognition.

Section 602.24--Additional Procedures Certain Institutional Accreditors
Must Have

    Proposed Sec.  602.24 would mandate that an accrediting agency
require an institution it accredits to submit a teach-out plan for
approval by the accrediting agency if any of following events occurs:
The Department initiates an emergency action against an institution, or
an action by the Secretary to limit, suspend, or terminate an
institution participating in any title IV, HEA program; the accrediting
agency acts to withdraw, terminate, or suspend the accreditation or
preaccreditation of the institution; the institution notifies the
agency that it intends to cease operations entirely or close a location
that provides one hundred percent of at least one program; or a State
licensing or authorizing agency notifies the agency that an
institution's license or legal authorization to provide an educational
program has been or will be revoked. If the teach-out plan requires a
teach-out agreement, proposed Sec.  602.24 would also identify the
components of the teach-out agreement. The

[[Page 39520]]

Department estimates that the proposed regulation would place an
additional burden on 70 institutions each year for a total of 280 hours
under OMB Control Number 1840-0788.

Section 602.25---Due Process

    Proposed Sec.  602.25 would include two new statutory concepts.
Proposed Sec.  602.25(f) would provide for an institution's or
program's right to appeal any adverse accrediting agency action before
an appeals panel that is subject to a conflict of interest policy and
does not contain members of the underlying decision-making body.
Proposed Sec.  602.25(h) would provide for an institution's or
program's right for the review of new financial information, if it
meets certain conditions, before the accrediting agency takes a final
adverse action.
    Although accrediting agencies must be prepared to respond to
appeals and to requests for review of new financial information, the
decision to undertake these actions is a voluntary one on the part of
an institution. The new provisions are not expected to have any effect
on the number of institutions that appeal an accrediting agency adverse
action, and therefore, there would be not additional costs to
institutions. Based on the discussion on this issue at negotiated
rulemaking, and historical data on appeals, it is likely that no more
than five institutions per year will be able to meet the qualifications
to be considered under the new provision for review of new financial
information and will seek such a review.
    Agencies are already required to have an appeal process; the burden
associated with revising existing procedures to conform with the new
requirements is estimated to be 610 hours, which is based on 61
accrediting agencies x 10 hours. The estimated burden is associated
primarily with implementing the regulation in the initial year as
agencies establish new procedures. The burden is estimated to be 2,440
hours, based on 61 accrediting agencies x 40 hours. The burden for
maintaining this process in subsequent years is expected to be minimal,
given that we expect no more than five agencies will meet the
requirements for such a review.

Section 602.26--Notification of Accrediting Decisions

    Proposed Sec.  602.26(b) would require agencies to provide a
written notice to the Secretary of any final decision that is
considered by the agency to be an adverse action and of final decisions
withdrawing, suspending, revoking, or terminating an institution's or
program's accreditation or preaccreditation. Proposed Sec.  602.26(d)
would require agencies to make available to the Secretary and the
public a statement regarding the reasons for withdrawing, suspending,
revoking, or terminating an institution's or program's accreditation or
preaccreditation. The statement must include either comments from the
affected institution or program regarding that decision or evidence
that the affected institution or program was offered the opportunity to
provide comments. The proposed change would clarify existing language
and would require that the statement provide evidence that the affected
institution or program was offered an opportunity to provide comments
if no comments were received. The proposed changes do not constitute
any new reporting requirements and, therefore, do not represent any
additional burden on accrediting agencies under OMB Control Number
1840-0788.

Section 602.27--Other Information an Agency Must Provide the Department

    Proposed Sec.  602.27(a) would require an accrediting agency to
provide to the Secretary a copy of any annual report it prepares, an
updated directory of its accredited institutions and programs, any
proposed changes to its policies, procedures, or accreditation
standards that might alter its scope of recognition or compliance with
the Criteria for Recognition, and a notification if it is changing its
scope of recognition to include distance education or correspondence
education. Further, if requested by the Secretary, an agency must
provide a summary of the major accrediting activities conducted during
the year. The proposed regulation also would require an accrediting
agency to provide to the Department, if the Secretary requests, any
information regarding an institution's compliance with its title IV,
HEA program responsibilities.
    Although the proposed changes would primarily clarify language in
the current regulations, the changes would also affect the reporting
requirement regarding adding distance education or correspondence
education to an agency's scope of recognition. The proposed regulation
would remove the requirement for institutional accrediting agencies,
and programmatic accrediting agencies that accredit freestanding
institutions, to submit an application to the Department if an agency
wished to add distance education or correspondence education to its
scope of recognition; the proposed changes would only require agencies
to notify the Department that its scope has been changed to include
distance education or correspondence education. Therefore, the proposed
changes to the regulation would not impose any new burden on
accrediting agencies and, in the case of adding distance education or
correspondence education to a scope of recognition, it would reduce the
burden on agencies. Department staff estimates the burden on the 15
agencies that would be affected by the proposed regulation would be
reduced by 300 hours under OMB Control Number 1840-0788 if all the
agencies decided to add distance education or correspondence education
to their scope of recognition.

Section 602.31--Agency Submissions to the Department

    Proposed Sec.  602.31(a) would require accrediting agencies to
submit an application for recognition or renewal of recognition at the
end of the period of recognition granted by the Secretary, generally
every five years. The application would be required to demonstrate that
the agency complies with the Department's Criteria for Recognition as
defined in CFR 34 part 602. The proposed regulation would clarify what
documents should be provided with an agency's application for
recognition. The language of the proposed regulation would not impose a
new reporting burden on agencies under OMB Control Number 1840-0788.
    Proposed Sec.  602.31(b) would require accrediting agencies that
wish to expand their scope of recognition to submit an application to
the Secretary. The proposed language would not place any additional
reporting burden on accrediting agencies because the current
regulations also require the submission of an application when an
agency seeks to expand its scope of recognition. The language of the
proposed regulation would not impose a new reporting burden on agencies
under OMB Control Number 1840-0788.
    Proposed Sec.  602.31(c) would require that agencies provide a
compliance report when it has been determined that they do not fully
comply with the criteria for recognition or are ineffective in applying
those criteria. In order for the Secretary to determine that agencies
are reliable authorities regarding the quality of education or training
offered by their accredited institutions or programs, agencies must
demonstrate that they fully comply with 34 part 602, subpart B.
Therefore, while no requirement to submit a compliance report exists in
the current regulations, the proposed language reflects the existing
practice of the Department. The proposed changes to the regulation

[[Page 39521]]

would not impose a new reporting burden on agencies under OMB Control
Number 1840-0788.
    Proposed Sec.  602.31(d) would require agencies that notify the
Department that they are changing their scope of recognition to include
distance education or correspondence education to annually monitor
enrollment growth of the institutions they accredit that offer distance
education. A report would be required to be sent to the Department for
each institution that reports a 50 percent or higher increase of
headcount enrollment during a fiscal year. The report must address the
capacity of each institution to accommodate significant growth in
enrollment and to maintain educational quality; the circumstances that
led to the growth; and any other applicable information affecting
compliance with the regulation. As noted in the discussion of proposed
Sec.  602.19(e), this section of the regulation would only affect the
15 institutional accrediting agencies and programmatic accrediting
agencies that accredit freestanding institutions that currently do not
have distance education in their scope of recognition. Based on the
Department's previous experience with institutions that have
experienced significant growth, this provision may affect no more than
3 institutions per year. Therefore, the proposed changes would increase
the burden to the 15 affected accrediting agencies by 60 hours under
OMB Control Number 1840-0788 if they all add distance education to
their scope of recognition.

Section 602.32--Procedures for Department Review of Applications for
Recognition or for Change in Scope, Compliance Reports, and Increases
in Enrollment

    Proposed Sec.  602.32(f) would require the Department to forward to
the agency a draft analysis of an agency's application for recognition
that includes any identified areas of non-compliance, the proposed
recognition recommendation, and a copy of all third-party comments that
the Department received. The agency could then provide a written
response to the draft staff analysis and the third-party comments. The
proposed change would simplify the language of the current regulation
in that it combines several paragraphs of the current regulation into a
single paragraph. The current regulations also require that the
Department invite accrediting agencies to provide a written response to
all draft analyses developed by Department staff as well as all third-
party comments received by the Department. Therefore, the proposed
changes would not impose a new reporting burden on agencies under OMB
Control Number 1840-0788.
    Consistent with the discussion above, the following chart describes
the sections of the proposed regulations involving information
collection, the information being collected, and the collection that
the Department will submit to the Office of Management and Budget for
approval and public comment under the Paperwork Reduction Act.

------------------------------------------------------------------------
      Regulatory section          Information section       Collection
------------------------------------------------------------------------
Sec.   602.15................  Accrediting agencies      OMB 1840-0788
                                must demonstrate          Although this
                                certain administrative    represents a
                                responsibilities,         reduction of
                                including maintenance     the burden on
                                of all accrediting        agencies under
                                documentation for each    OMB Control
                                institution from the      Number 1840-
                                last full accreditation   0788, since
                                or preaccreditation       the agencies
                                review. Previously,       already
                                agencies were required    collect the
                                to maintain this          information,
                                information covering      the reduced
                                the previous two          hours for
                                accreditation or          maintaining
                                preaccreditation          only one
                                reviews. Although the     complete
                                current regulation does   review cycle
                                not explicitly mention    is negligible.
                                documents relating to
                                substantive change
                                decisions, the
                                requirement for
                                agencies to maintain
                                these documents was
                                covered under the
                                current regulation's
                                requirement to maintain
                                all documents related
                                to accrediting
                                decisions and special
                                reports. A substantive
                                change request would be
                                considered a special
                                report that had to be
                                submitted to the agency
                                for a decision.
                                Further, an agency's
                                decision regarding the
                                substantive change
                                request was, in fact,
                                an accreditation
                                decision and was
                                reflected in a decision
                                letter that either
                                allowed the substantive
                                change to be covered
                                under the agency's
                                grant of accreditation
                                or denied the request
                                and did not allow the
                                change to be covered
                                under the agency's
                                grant of accreditation.
                                Section 496(c)(1)of the
                                HEA.
Sec.   602.19(b).............  Agencies must collect     OMB 1840-0788
                                data to ensure that the   There is no
                                institutions they         additional
                                accredit remain in        paperwork
                                compliance with their     burden
                                regulations. This         associated
                                proposed regulation       with this
                                would clarify the         section of the
                                language in the current   regulation.
                                regulation regarding
                                the data agencies
                                should collect to
                                ensure that
                                institutions and
                                programs remain in
                                compliance with their
                                accrediting standards.
                                Section 496(a)(4)(A) of
                                the HEA.
Sec.   602.19(c).............  Agencies must monitor     OMB 1840-0788
                                the enrollment growth     It is
                                of institutions each      estimated that
                                year. This proposed       this
                                regulation would          regulation
                                represent a change in     would increase
                                the information that      the burden to
                                accrediting agencies      the 61
                                must collect. It would    recognized
                                require that agencies     accrediting
                                collect information to    agencies by
                                monitor enrollment        122 hours.
                                growth for the
                                institutions or
                                programs that they
                                accredit. Section
                                496(c)(2) of the HEA.
Sec.   602.19(e).............  Accrediting agencies      OMB 1840-0788
                                that expand their scope   It is
                                to include distance       estimated that
                                education or              this
                                correspondence            regulation
                                education by notice to    would increase
                                the Secretary must        the burden for
                                monitor enrollment        15 of the
                                growth of institutions    remaining
                                that offer distance       recognized
                                education or              agencies by 60
                                correspondence            hours if all
                                education and report to   decided to
                                the Department, within    include
                                30 days, any              distance
                                institution that          education in
                                experiences enrollment    their scope of
                                growth of 50 percent or   recognition in
                                more during a fiscal      the future.
                                year. Section 496(q) of
                                the HEA.

[[Page 39522]]


Sec.   602.24................  Approximately 70          OMB 1840-0788
                                institutions per year     It is
                                will be required to       estimated that
                                submit a teach-out plan   this
                                to their accrediting      regulation
                                agency. Most of the       would increase
                                institutions and          the burden on
                                locations that close      70
                                offer only one or two     institutions
                                programs. For some        each year for
                                institutions, the plan    a total of 280
                                will be very simple:      hours.
                                The institution will
                                teach out its students.
                                For other institutions,
                                preparing a plan may
                                involve doing some
                                research to determine
                                what nearby schools
                                offer similar programs
                                but in most cases, the
                                institution will
                                already know, as the
                                nearby schools will
                                have been their
                                competitors. In a few
                                cases, more work may be
                                needed to develop a
                                plan. Given the wide
                                variety of situations,
                                our best estimate is
                                that the average amount
                                of time needed to
                                complete a plan is 4
                                hours. Therefore, the
                                total amount of time is
                                280 hours (70
                                institutions x 4
                                hours). Section
                                496(c)(3) of the HEA.
Sec.   602.25(f).............  Section 602.25(f)         OMB 1840-0788
                                includes the new          It is
                                statutory concept of an   estimated that
                                institution's or          this
                                program's right to        regulation
                                appeal any adverse        would increase
                                accrediting agency        the burden on
                                action before an          61 accrediting
                                appeals panel that is     agencies
                                subject to a conflict     primarily in
                                of interest policy and    the first year
                                does not contain          of
                                members of the            implementation
                                underlying decision-      for a total of
                                making body.              610 hours.
                               Agencies are already
                                required to have an
                                appeal process; the
                                negligible burden is
                                estimated to be 610
                                hours, which is based
                                on 61 accrediting
                                agencies x 10 hours.
                                Section 496(a)(6) of
                                the HEA.
Sec.   602.25(h).............  Section 602.25(h)         OMB 1840-0788
                                includes the new          It is
                                statutory concept of an   estimated that
                                institution's or          this
                                program's right to        regulation
                                review new financial      would increase
                                information, if it        the burden on
                                meets current             61 accrediting
                                provisions, before the    agencies
                                accrediting agency        primarily in
                                takes a final adverse     the first year
                                action.                   of
                                                          implementation
                                                          for a total of
                                                          2440 hours.
                               The estimated burden is
                                associated primarily
                                with implementing the
                                regulation in the
                                initial year as
                                agencies establish new
                                procedures. The time is
                                estimated to be 2440
                                hours, based on 61
                                accrediting agencies x
                                40 hours. Section
                                496(a)(6) of the HEA.
Sec.   602.26(b).............  Agencies must provide a   OMB 1840-0788
                                written notice to the     There is no
                                Secretary of any final    additional
                                decision that is          paperwork
                                considered by the         burden
                                agency to be an adverse   associated
                                action as well as final   with this
                                decisions withdrawing,    section of the
                                suspending, revoking,     regulation.
                                or terminating an
                                institution's or
                                program's accreditation
                                or preaccreditation.
                                Section 496(c)(7) of
                                the HEA.
Sec.   602.26(d).............  Requires agencies to      OMB 1840-0788
                                make available to the     There is no
                                Secretary and the         additional
                                public a statement        paperwork
                                regarding the reasons     burden
                                for withdrawing,          associated
                                suspending, revoking,     with this
                                or terminating an         section of the
                                institution's or          regulation.
                                program's accreditation
                                or preaccreditation.
                                The statement must
                                include any comments
                                that affected
                                institutions or
                                programs want to make
                                with regard to that
                                decision or evidence
                                that the institution or
                                program was offered the
                                opportunity to provide
                                comments. The proposed
                                changes provide
                                clarifying language and
                                add that the statement
                                must provide evidence
                                that an institution or
                                program was offered an
                                opportunity to provide
                                comments if no comments
                                were received. Section
                                496(c)(7) of the HEA.
Sec.   602.27(a).............  Requires agencies to      OMB 1840-0788
                                provide to the            It is
                                Secretary a copy of any   estimated that
                                annual report it          burden on the
                                prepares, an updated      15 agencies
                                directory of its          that would be
                                accredited institutions   affected by
                                and programs, any         the proposed
                                proposed changes in an    regulation
                                agency's policies         would be
                                procedures or             reduced by 300
                                accreditation standards   hours if all
                                that might alter its      the agencies
                                scope of recognition or   decided to add
                                compliance with the       distance
                                Criteria for              education or
                                Recognition, and a        correspondence
                                notification if it is     education to
                                changing its scope of     their scope of
                                recognition to include    recognition.
                                distance education or
                                correspondence
                                education. Further, if
                                requested by the
                                Secretary, agencies
                                must provide a summary
                                of the major
                                accrediting activities
                                conducted during the
                                year. It also would
                                require agencies to
                                provide to the
                                Department, if the
                                Secretary requests, any
                                information regarding
                                an institution's
                                compliance with its
                                title IV, HEA program
                                responsibilities.
                                Although the proposed
                                changes to the
                                regulation primarily
                                clarify language that
                                is in the current
                                regulation, the changes
                                would impact the
                                reporting requirement
                                regarding adding
                                distance education or
                                correspondence
                                education to an
                                agency's scope of
                                recognition. The
                                proposed regulation
                                would remove the
                                requirement for
                                institutional
                                accrediting agencies to
                                submit an application
                                to the Department if an
                                agency wished to add
                                distance education or
                                correspondence
                                education to its scope
                                of recognition and only
                                require agencies to
                                notify the Department
                                that its scope has been
                                changed to include
                                distance education or
                                correspondence
                                education. Sections
                                496(a)(4) and
                                487(a)(15) of the HEA.
Sec.   602.31(a).............  Requires accrediting      OMB 1840-0788
                                agencies to submit an     There is no
                                application for           additional
                                recognition or renewal    paperwork
                                of recognition at the     burden
                                end of the period of      associated
                                recognition granted by    with this
                                the Secretary,            section of the
                                generally every five      regulation.
                                years. The application
                                must demonstrate that
                                the agency complies
                                with the Department's
                                Criteria for
                                Recognition as defined
                                in CFR 34 Part 602. The
                                proposed regulation
                                clarifies what
                                documents should be
                                provided with an
                                agency's application
                                for recognition.
                                Section 496(d) of the
                                HEA.

[[Page 39523]]


Sec.   602.31(b).............  Requires accrediting      OMB 1840-0788
                                agencies that wish to     There is no
                                expand their scope of     additional
                                recognition to submit     paperwork
                                an application to the     burden
                                Secretary. The proposed   associated
                                language would not        with this
                                place any additional      section of the
                                reporting burden on       regulation.
                                accrediting agencies
                                since the current
                                regulations also
                                require the submission
                                of an application when
                                an agency seeks to
                                expand its scope of
                                recognition. Section
                                496(a)(4)(B) of the HEA.
Sec.   602.31(c).............  Requires agencies to      OMB 1840-0788
                                provide a compliance      There is no
                                report when it has been   additional
                                determined that they do   paperwork
                                not fully comply with     burden
                                the criteria for          associated
                                recognition or are        with this
                                ineffective in applying   section of the
                                those criteria. In        regulation.
                                order for the Secretary
                                to determine that
                                agencies are reliable
                                authorities regarding
                                the quality of
                                education or training
                                offered through their
                                accredited institutions
                                or programs, agencies
                                must demonstrate that
                                they fully comply with
                                34 part 602 subpart B.
                                Therefore, while the
                                requirement to submit a
                                compliance report is
                                not identified in the
                                current regulation, the
                                proposed language would
                                place in writing what
                                has been the practice
                                of the Department in
                                order to comply with
                                Higher Education Act,
                                as amended. Sections
                                496(a) and (c) of the
                                HEA.
Sec.   602.31(d).............  Requires agencies that    OMB 1840-0788
                                notify the Department     It is
                                that they are changing    estimated that
                                their scope of            this
                                recognition to include    regulation
                                distance education or     would increase
                                correspondence            the burden of
                                education to annually     15 of the
                                monitor enrollment        remaining
                                growth of the             recognized
                                institutions they         agencies by 60
                                accredit that offer       hours if all
                                distance education. A     decided to
                                report would be           include
                                required to be sent to    distance
                                the Department for each   education in
                                institution that          their scope of
                                reports a 50 percent or   recognition in
                                higher increase of        the future.
                                headcount enrollment      Based on prior
                                during a fiscal year.     experiences
                                The report must address   with
                                the capacity of each      institutions
                                institution to            experiencing
                                accommodate significant   significant
                                growth in enrollment      growth, the
                                and to maintain           burden is
                                educational quality;      estimated to
                                the circumstances that    apply to 3
                                led to the growth; and    institutions
                                any other applicable      per year.
                                information affecting
                                compliance with the
                                regulation. As noted in
                                the discussion of
                                proposed Sec.
                                602.19(e) this section
                                of the regulation would
                                only affect the 15
                                institutional
                                accrediting agencies
                                and programmatic
                                accrediting agencies
                                that accredit
                                freestanding
                                institutions that
                                currently do not have
                                distance education in
                                their scope of
                                recognition. Section
                                496(a)(4)(B) and (q) of
                                the HEA.
Sec.   602.32................  Requires the Department   OMB 1840-0788
                                to forward to the         There is no
                                agency a draft analysis   additional
                                of an agency's            paperwork
                                application for           burden
                                recognition that          associated
                                includes any identified   with this
                                areas of non-             section of the
                                compliance, the           regulation.
                                proposed recognition
                                recommendation, and a
                                copy of all third-party
                                comments that the
                                Department received.
                                The agency could then
                                provide a written
                                response to the draft
                                staff analysis and the
                                third-party comments.
                                The proposed change
                                would simplify the
                                language of the current
                                regulation in that it
                                combines several
                                paragraphs of the
                                current regulation into
                                a single paragraph. The
                                current regulations
                                also require that the
                                Department invite
                                accrediting agencies to
                                provide a written
                                response to all draft
                                analyses developed by
                                Department staff as
                                well as all third-party
                                comments received by
                                the Department. Section
                                496(o) of the HEA.
------------------------------------------------------------------------

    If you want to comment on the proposed information collection
requirements, please send your comments to the Office of Information
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S.
Department of Education. Send these comments by e-mail to OIRA_
DOCKET@omb.eop.gov or by fax to (202) 395-6974. You may also send a
copy of these comments to the Department contact named in the ADDRESSES
section of this preamble.
    We consider your comments on these proposed collections of
information in--
     Deciding whether the proposed collections are necessary
for the proper performance of our functions, including whether the
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of
the proposed collections, including the validity of our methodology and
assumptions;
     Enhancing the quality, usefulness, and clarity of the
information we collect; and
     Minimizing the burden on those who must respond. This
includes exploring the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology; e.g., permitting electronic submission of
responses.
    OMB is required to make a decision concerning the collections of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, to ensure that OMB gives your comments full consideration,
it is important that OMB receives the comments within 30 days of
publication. This does not affect the deadline for your comments to us
on the proposed regulations.

Intergovernmental Review

    This program is not subject to Executive Order 12372 and the
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In accordance with section 411 of the General Education Provisions
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on
whether these proposed regulations would require transmission of
information that any other agency or authority of the United States
gathers or makes available.

Electronic Access to This Document

    You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
www.ed.gov/news/fedregister.
    To use PDF you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC, area at (202) 512-1530.


[[Page 39524]]


    Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: www.gpoaccess.gov/nara/
index.html.

(Catalog of Federal Domestic Assistance Number does not apply.)

List of Subjects in 34 CFR 600 and 34 CFR 602

    Colleges and universities, Education, Reporting and recordkeeping
requirements.

    Dated: July 28, 2009.
Arne Duncan,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary proposes
to amend parts 600 and 602 of title 34 of the Code of Federal
Regulations as follows:

PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT
OF 1965, AS AMENDED.

    1. The authority citation for part 600 continues to read as
follows:

    Authority:  20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b,
and 1099c, unless otherwise noted.

    2. Section 600.2 is amended by:
    A. Revising the definition of Correspondence course.
    B. Adding in alphabetical order a new definition of Distance
education.
    C. Removing the definition of Telecommunications course.
    The addition and revision read as follows:


Sec.  600.2   Definitions.

* * * * *
    Correspondence course: (1) A course provided by an institution
under which the institution provides instructional materials, by mail
or electronic transmission, including examinations on the materials, to
students who are separated from the instructor. Interaction between the
instructor and student is limited, is not regular and substantive, and
is primarily initiated by the student. Correspondence courses are
typically self-paced.
    (2) If a course is part correspondence and part residential
training, the Secretary considers the course to be a correspondence
course.
    (3) A correspondence course is not distance education.
* * * * *
    Distance education means education that uses one or more of the
technologies listed in paragraphs (1) through (4) of this definition to
deliver instruction to students who are separated from the instructor
and to support regular and substantive interaction between the students
and the instructor, either synchronously or asynchronously. The
technologies may include--
    (1) The internet;
    (2) One-way and two-way transmissions through open broadcast,
closed circuit, cable, microwave, broadband lines, fiber optics,
satellite, or wireless communications devices;
    (3) Audio conferencing; or
    (4) Video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or
CD-ROMs are used in a course in conjunction with any of the
technologies listed in paragraphs (1) through (3) of this definition.
* * * * *

PART 602--THE SECRETARY'S RECOGNITION OF ACCREDITING AGENCIES

    3. The authority citation for part 602 continues to read as
follows:

    Authority:  20 U.S.C. 1099b, unless otherwise noted.

    4. Section 602.3 is amended by:
    A. Adding in alphabetical order a new definition of Compliance
report.
    B. Adding in alphabetical order a new definition of Correspondence
education.
    C. Adding in alphabetical order a new definition of Designated
Federal Official.
    D. Adding in alphabetical order a new definition of Direct
assessment program.
    E. Revising the definition of Distance education.
    F. Adding in alphabetical order a new definition of Recognition.
    G. Revising paragraph (5) of the definition of Scope of
recognition.
    H. Revising the definition of Teach-out agreement.
    I. Adding in alphabetical order a new definition of Teach-out plan.
    The additions and revisions read as follows:


Sec.  602.3   What definitions apply to this part?

* * * * *
    Compliance report means a written report that the Department
requires an agency to file to demonstrate that the agency has addressed
deficiencies specified in a decision letter from the senior Department
official or the Secretary.
    Correspondence education means:
    (1) Education provided through one or more courses by an
institution under which the institution provides instructional
materials, by mail or electronic transmission, including examinations
on the materials, to students who are separated from the instructor.
    (2) Interaction between the instructor and the student is limited,
is not regular and substantive, and is primarily initiated by the
student.
    (3) Correspondence courses are typically self-paced.
    (4) Correspondence education is not distance education.
    Designated Federal Official means the Federal officer designated
under section 10(f) of the Federal Advisory Committee Act, 5 U.S.C.
Appdx. 1.
    Direct assessment program means an instructional program that, in
lieu of credit hours or clock hours as a measure of student learning,
utilizes direct assessment of student learning, or recognizes the
direct assessment of student learning by others, and meets the
conditions of 34 CFR 668.10. For title IV, HEA purposes, the
institution must obtain approval for the direct assessment program from
the Secretary under 34 CFR 668.10(g) or (h) as applicable. As part of
that approval, the accrediting agency must--
    (1) Evaluate the program(s) and include them in the institution's
grant of accreditation or preaccreditation; and
    (2) Review and approve the institution's claim of each direct
assessment program's equivalence in terms of credit or clock hours.
    Distance education means education that uses one or more of the
technologies listed in paragraphs (1) through (4) of this definition to
deliver instruction to students who are separated from the instructor
and to support regular and substantive interaction between the students
and the instructor, either synchronously or asynchronously. The
technologies may include--
    (1) The internet;
    (2) One-way and two-way transmissions through open broadcast,
closed circuit, cable, microwave, broadband lines, fiber optics,
satellite, or wireless communications devices;
    (3) Audio conferencing; or
    (4) Video cassettes, DVDs, and CD-ROMs, if the cassettes, DVDs, or
CD-ROMs are used in a course in conjunction with any of the
technologies listed in paragraphs (1) through (3) of this definition.
* * * * *
    Recognition means an unappealed determination by the senior
Department official under Sec.  602.36, or a determination by the
Secretary on appeal under Sec.  602.37, that an accrediting agency
complies with the criteria for recognition listed in subpart B of this
part and that the agency is

[[Page 39525]]

effective in its application of those criteria. A grant of recognition
to an agency as a reliable authority regarding the quality of education
or training offered by institutions or programs it accredits remains in
effect for the term granted except upon a determination made in
accordance with subpart C of this part that the agency no longer
complies with the subpart B criteria or that it has become ineffective
in its application of those criteria.
* * * * *
    Scope of recognition or scope * * *
    (5) Coverage of accrediting activities related to distance
education or correspondence education.
* * * * *
    Teach-out agreement means a written agreement between institutions
that provides for the equitable treatment of students and a reasonable
opportunity for students to complete their program of study if an
institution, or an institutional location that provides one hundred
percent of at least one program offered, ceases to operate before all
enrolled students have completed their program of study.
    Teach-out plan means a written plan developed by an institution
that provides for the equitable treatment of students if an
institution, or an institutional location that provides one hundred
percent of at least one program, ceases to operate before all students
have completed their program of study, and may include, if required by
the institution's accrediting agency, a teach-out agreement between
institutions.
* * * * *
    5. Section 602.15 is amended by:
    A. Revising paragraph (a)(2).
    B. In paragraph (b)(1), removing the word ``two'' and removing the
letter ``s'' from the word ``reviews'' the first time it appears.
    C. Revising paragraph (b)(2).
    The revisions read as follows:


Sec.  602.15   Administrative and fiscal responsibilities.

* * * * *
    (a) * * *
    (2) Competent and knowledgeable individuals, qualified by education
and experience in their own right and trained by the agency on their
responsibilities, as appropriate for their roles, regarding the
agency's standards, policies, and procedures, to conduct its on-site
evaluations, apply or establish its policies, and make its accrediting
and preaccrediting decisions, including, if applicable to the agency's
scope, their responsibilities regarding distance education and
correspondence education;
* * * * *
    (b) * * *
    (2) All decisions made throughout an institution's or program's
affiliation with the agency regarding the accreditation and
preaccreditation of any institution or program and substantive changes,
including all correspondence that is significantly related to those
decisions.
* * * * *
    6. Section 602.16 by amended by:
    A. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e),
respectively.
    B. Revising paragraph (a)(1)(i).
    C. Adding new paragraphs (c) and (f).
    The additions and revision read as follows:


Sec.  602.16  Accreditation and preaccreditation standards.

    (a) * * *
    (1) * * *
    (i) Success with respect to student achievement in relation to the
institution's mission, which may include different standards for
different institutions or programs, as established by the institution,
including, as appropriate, consideration of State licensing
examinations, course completion, and job placement rates.
* * * * *
    (c) If the agency has or seeks to include within its scope of
recognition the evaluation of the quality of institutions or programs
offering distance education or correspondence education, the agency's
standards must effectively address the quality of an institution's
distance education or correspondence education in the areas identified
in paragraph (a)(1) of this section. The agency is not required to have
separate standards, procedures, or policies for the evaluation of
distance education or correspondence education.
* * * * *
    (f) Nothing in paragraph (a) of this section restricts--
    (1) An accrediting agency from setting, with the involvement of its
members, and applying accreditation standards for or to institutions or
programs that seek review by the agency; or
    (2) An institution from developing and using institutional
standards to show its success with respect to student achievement,
which achievement may be considered as part of any accreditation
review.
* * * * *
    7. Section 602.17 is amended by:
    A. In paragraph (e), removing the word ``and'' at the end of the
paragraph.
    B. In paragraph (f), removing the punctuation ``.'' and adding, in
its place, the words ``; and''.
    C. Adding a new paragraph (g).
    The addition reads as follows:


Sec.  602.17  Application of standards in reaching an accrediting
decision.

* * * * *
    (g) Requires institutions that offer distance education or
correspondence education to have processes in place through which the
institution establishes that the student who registers in a distance
education or correspondence education course or program is the same
student who participates in and completes the course or program and
receives the academic credit. The agency meets this requirement if it--
    (1) Requires institutions to verify the identity of a student who
participates in class or coursework by using, at the option of the
institution, methods such as--
    (i) A secure login and pass code;
    (ii) Proctored examinations; and
    (iii) New or other technologies and practices that are effective in
verifying student identification; and
    (2) Makes clear in writing that institutions must use processes
that protect student privacy and notify students of any projected
additional student charges associated with the verification of student
identity at the time of registration or enrollment.
* * * * *
    8. Section 602.18 is amended by:
    A. Revising the introductory text.
    B. Redesignating paragraphs (a), (b), and (c) as paragraphs (b),
(c), and (d), respectively.
    C. In newly redesignated paragraph (c), removing the word ``and''
at the end of the paragraph.
    D. In newly redesignated paragraph (d), removing the punctuation
``.'' and adding, in its place, the words ``; and''.
    E. Adding new paragraphs (a) and (e).
    The additions and revision read as follows:


Sec.  602.18  Ensuring consistency in decision-making.

    The agency must consistently apply and enforce standards that
respect the stated mission of the institution, including religious
mission, and that ensure that the education or training offered by an
institution or program, including any offered through distance
education or correspondence education, is of sufficient quality to
achieve its stated objective for the duration of any accreditation or
preaccreditation period granted by the agency. The agency meets this
requirement if the agency--
    (a) Has written specification of the requirements for accreditation
and preaccreditation that include clear

[[Page 39526]]

standards for an institution or program to be accredited;
* * * * *
    (e) Provides the institution or program with a detailed written
report that clearly identifies any deficiencies in the institution's or
program's compliance with the agency's standards.
* * * * *
    9. Section 602.19 is amended by:
    A. Revising paragraph (b).
    B. Adding new paragraphs (c), (d), and (e).
    The revision and additions read as follows:


Sec.  602.19  Monitoring and reevaluation of accredited institutions
and programs.

* * * * *
    (b) The agency must demonstrate it has, and effectively applies, a
set of monitoring and evaluation approaches that enables the agency to
identify problems with an institution's or program's continued
compliance with agency standards and that takes into account
institutional or program strengths and stability. These approaches must
include periodic reports, and collection and analysis of key data and
indicators, identified by the agency, including, but not limited to,
fiscal information and measures of student achievement, consistent with
the provisions of Sec.  602.16(f). This provision does not require
institutions or programs to provide annual reports on each specific
accreditation criterion.
    (c) Each agency must monitor overall growth of the institutions or
programs it accredits and, at least annually, collect headcount
enrollment data from those institutions or programs.
    (d) Institutional accrediting agencies must monitor the growth of
programs at institutions experiencing significant enrollment growth, as
reasonably defined by the agency.
    (e) Any agency that has notified the Secretary of a change in its
scope in accordance with Sec.  602.27(a)(5) must monitor the headcount
enrollment of each institution it has accredited that offers distance
education or correspondence education. If any such institution has
experienced an increase in headcount enrollment of 50 percent or more
within one institutional fiscal year, the agency must report that
information to the Secretary within 30 days of acquiring such data.
* * * * *
    10. Section 602.22 is amended by:
    A. In paragraph (a)(2)(iii), removing the words ``, in either
content'' and adding, in their place, the words ``from the existing
offerings of educational programs,''.
    B. In paragraph (a)(2)(iv), removing the words ``courses or'',
adding the words ``of study'' after the word ``programs'' the first
time it appears, and removing the word ``above'' and adding, in its
place, the words ``different from''.
    C. Revising paragraph (a)(2)(vii).
    D. Adding new paragraphs (a)(2)(viii), (a)(2)(ix), and (a)(2)(x).
    E. Adding a new paragraph (a)(3).
    F. Revising paragraph (b).
    G. Revising paragraph (c), introductory text.
    H. In paragraph (c)(2), adding the words ``a representative sample
of'' immediately after the words ``visits to''.
    The additions and revisions read as follows:


Sec.  602.22  Substantive change.

    (a) * * *
    (2) * * *
    (vii) If the agency's accreditation of an institution enables the
institution to seek eligibility to participate in title IV, HEA
programs, the entering into a contract under which an institution or
organization not certified to participate in the title IV, HEA programs
offers more than 25 percent of one or more of the accredited
institution's educational programs.
    (viii)(A) If the agency's accreditation of an institution enables
it to seek eligibility to participate in title IV, HEA programs, the
establishment of an additional location at which the institution offers
at least 50 percent of an educational program. The addition of such a
location must be approved by the agency in accordance with paragraph
(c) of this section unless the accrediting agency determines, and
issues a written determination stating that the institution has--
    (1) Successfully completed at least one cycle of accreditation of
maximum length offered by the agency and one renewal, or has been
accredited for at least ten years;
    (2) At least three additional locations that the agency has
approved; and
    (3) Met criteria established by the agency indicating sufficient
capacity to add additional locations without individual prior
approvals, including at a minimum satisfactory evidence of a system to
ensure quality across a distributed enterprise that includes--
    (i) Clearly identified academic control;
    (ii) Regular evaluation of the locations;
    (iii) Adequate faculty, facilities, resources, and academic and
student support systems;
    (iv) Financial stability; and
    (v) Long-range planning for expansion.
    (B) The agency's procedures for approval of an additional location,
pursuant to paragraph (a)(2)(viii)(A) of this section, must require
timely reporting to the agency of every additional location established
under this approval.
    (C) Each agency determination or redetermination to preapprove an
institution's addition of locations under paragraph (a)(2)(viii)(A) of
this section may not exceed five years.
    (D) The agency may not preapprove an institution's addition of
locations under paragraph (a)(2)(viii)(A) of this section after the
institution undergoes a change in ownership resulting in a change in
control as defined in 34 CFR 600.31 until the institution demonstrates
that it meets the conditions for the agency to preapprove additional
locations described in this paragraph.
    (E) The agency must have an effective mechanism for conducting, at
reasonable intervals, visits to a representative sample of additional
locations approved under paragraph (a)(2)(viii)(A) of this section.
    (ix) The acquisition of any other institution or any program or
location of another institution.
    (x) The addition of a permanent location at a site at which the
institution is conducting a teach-out for students of another
institution that has ceased operating before all students have
completed their program of study.
    (3) The agency's substantive change policy must define when the
changes made or proposed by an institution are or would be sufficiently
extensive to require the agency to conduct a new comprehensive
evaluation of that institution.
    (b) The agency may determine the procedures it uses to grant prior
approval of the substantive change. However, these procedures must
specify an effective date, which is not retroactive, on which the
change is included in the program's or institution's accreditation. An
agency may designate the date of a change in ownership as the effective
date of its approval of that substantive change if the accreditation
decision is made within 30 days of the change in ownership. Except as
provided in paragraph (c) of this section, these procedures may, but
need not, require a visit by the agency.
    (c) Except as provided in paragraph (a)(2)(viii)(A) of this
section, if the agency's accreditation of an institution enables the
institution to seek eligibility to participate in title IV, HEA
programs, the agency's procedures for the approval of an additional
location where at least

[[Page 39527]]

50 percent of an educational program is offered must provide for a
determination of the institution's fiscal and administrative capacity
to operate the additional location. In addition, the agency's
procedures must include--
* * * * *
    11. Section 602.23 is amended by:
    A. Revising paragraph (a) introductory text.
    B. Revising paragraph (c)(1).
    The revisions read as follows:


Sec.  602.23  Operating procedures all agencies must have.

    (a) The agency must maintain and make available to the public
written materials describing--
* * * * *
    (c) * * *
    (1) Review in a timely, fair, and equitable manner any complaint it
receives against an accredited institution or program that is related
to the agency's standards or procedures. The agency may not complete
its review and make a decision regarding a complaint unless, in
accordance with published procedures, it ensures that the institution
or program has sufficient opportunity to provide a response to the
complaint;
* * * * *
    12. Section 602.24 is amended by:
    A. Revising paragraph (c).
    B. Adding new paragraphs (d) and (e).
    The addition and revision read as follows:


Sec.  602.24  Additional procedures certain institutional accreditors
must have.

* * * * *
    (c) Teach-out plans and agreements. (1) The agency must require an
institution it accredits or preaccredits to submit a teach-out plan to
the agency for approval upon the occurrence of any of the following
events:
    (i) The Secretary notifies the agency that the Secretary has
initiated an emergency action against an institution, in accordance
with section 487(c)(1)(G) of the HEA, or an action to limit, suspend,
or terminate an institution participating in any title IV, HEA program,
in accordance with section 487(c)(1)(F) of the HEA, and that a teach-
out plan is required.
    (ii) The agency acts to withdraw, terminate, or suspend the
accreditation or preaccreditation of the institution.
    (iii) The institution notifies the agency that it intends to cease
operations entirely or close a location that provides one hundred
percent of at least one program.
    (iv) A State licensing or authorizing agency notifies the agency
that an institution's license or legal authorization to provide an
educational program has been or will be revoked.
    (2) The agency must evaluate the teach-out plan to ensure it
provides for the equitable treatment of students under criteria
established by the agency, specifies additional charges, if any, and
provides for notification to the students of any additional charges.
    (3) If the agency approves a teach-out plan that includes a program
that is accredited by another recognized accrediting agency, it must
notify that accrediting agency of its approval.
    (4) The agency may require an institution it accredits or
preaccredits to enter into a teach-out agreement as part of its teach-
out plan.
    (5) The agency must require an institution it accredits or
preaccredits that enters into a teach-out agreement, either on its own
or at the request of the agency, to submit that teach-out agreement for
approval. The agency may approve the teach-out agreement only if the
agreement is between institutions that are accredited or preaccredited
by a nationally recognized accrediting agency, is consistent with
applicable standards and regulations, and provides for the equitable
treatment of students by ensuring that--
    (i) The teach-out institution has the necessary experience,
resources, and support services to--
    (A) Provide an educational program that is of acceptable quality
and reasonably similar in content, structure, and scheduling to that
provided by the institution that is ceasing operations either entirely
or at one of its locations; and
    (B) Remain stable, carry out its mission, and meet all obligations
to existing students; and
    (ii) The teach-out institution demonstrates that it can provide
students access to the program and services without requiring them to
move or travel substantial distances and that it will provide students
with information about additional charges, if any.
    (d) Closed institution. If an institution the agency accredits or
preaccredits closes without a teach-out plan or agreement, the agency
must work with the Department and the appropriate State agency, to the
extent feasible, to assist students in finding reasonable opportunities
to complete their education without additional charges.
    (e) Transfer of credit policies. The accrediting agency must
confirm, as part of its review for initial accreditation or
preaccreditation, or renewal of accreditation, that the institution has
transfer of credit policies that--
    (1) Are publicly disclosed in accordance with Sec.  668.43(x); and
    (2) Include a statement of the criteria established by the
institution regarding the transfer of credit earned at another
institution of higher education.
* * * * *
    13. Section 602.25 is revised to read as follows:


Sec.  602.25  Due process.

    The agency must demonstrate that the procedures it uses throughout
the accrediting process satisfy due process. The agency meets this
requirement if the agency does the following:
    (a) Provides adequate written specification of its requirements,
including clear standards, for an institution or program to be
accredited or preaccredited.
    (b) Uses procedures that afford an institution or program a
reasonable period of time to comply with the agency's requests for
information and documents.
    (c) Provides written specification of any deficiencies identified
at the institution or program examined.
    (d) Provides sufficient opportunity for a written response by an
institution or program regarding any deficiencies identified by the
agency, to be considered by the agency within a timeframe determined by
the agency, and before any adverse action is taken.
    (e) Notifies the institution or program in writing of any adverse
accrediting action or an action to place the institution or program on
probation or show cause. The notice describes the basis for the action.
    (f) Provides an opportunity, upon written request of an institution
or program, for the institution or program to appeal any adverse action
prior to the action becoming final.
    (1) The appeal must take place at a hearing before an appeals panel
that--
    (i) May not include current members of the agency's decision-making
body that took the initial adverse action;
    (ii) Is subject to a conflict of interest policy; and
    (iii) Affirms, amends, or reverses the adverse action, which will
be implemented by the appeals panel or by the original decision-making
body, at the agency's option. If the original decision-making body is
responsible for implementing the appeals panel's decision, that body
must act regarding the institution's or program's accreditation status
in a manner consistent with the appeals panel's decision.
    (2) The agency must recognize the right of the institution or
program to employ counsel to represent the

[[Page 39528]]

institution or program during its appeal, including to make any
presentation that the agency permits the institution or program to make
on its own during the appeal.
    (g) The agency notifies the institution or program in writing of
the result of its appeal and the basis for that result.
    (h)(1) The agency must provide for a process, in accordance with
written procedures, through which an institution or program may, before
the agency reaches a final adverse action decision, seek review of new
financial information if all of the following conditions are met:
    (i) The financial information was unavailable to the institution or
program until after the decision subject to appeal was made.
    (ii) The financial information is significant and bears materially
on the financial deficiencies identified by the agency. The criteria of
significance and materiality are determined by the agency.
    (iii) The only remaining deficiency cited by the agency in support
of a final adverse action decision is the institution's or program's
failure to meet an agency standard pertaining to finances.
    (2) An institution or program may seek the review of new financial
information described in paragraph (h)(1) of this section only once and
any determination by the agency made with respect to that review does
not provide a basis for an appeal.

(Authority: 20 U.S.C. 1099b)


    14. Section 602.26 is amended by:
    A. In paragraph (b)(2), removing the punctuation ``;'' and adding,
in its place, the punctuation ``.''.
    B. Adding a new paragraph (b)(3).
    C. In paragraph (c), removing the words ``(b)(1) and (b)(2)'' and
adding, in their place, the words ``(b)(1), (b)(2), and (b)(3)''.
    D. Revising paragraph (d).
    The addition and revision read as follows:


Sec.  602.26  Notification of accrediting decisions.

* * * * *
    (b) * * *
    (3) A final decision to take any other adverse action, as defined
by the agency, not listed in paragraph (b)(2) of this section;
* * * * *
    (d) For any decision listed in paragraph (b)(2) of this section,
makes available to the Secretary, the appropriate State licensing or
authorizing agency, and the public, no later than 60 days after the
decision, a brief statement summarizing the reasons for the agency's
decision and the official comments that the affected institution or
program may wish to make with regard to that decision, or evidence that
the affected institution has been offered the opportunity to provide
official comment;
* * * * *
    15. Section 602.27 is revised to read as follows:


Sec.  602.27  Other information an agency must provide the Department.

    (a) The agency must submit to the Department--
    (1) A copy of any annual report it prepares;
    (2) A copy, updated annually, of its directory of accredited and
preaccredited institutions and programs;
    (3) A summary of the agency's major accrediting activities during
the previous year (an annual data summary), if requested by the
Secretary to carry out the Secretary's responsibilities related to this
part;
    (4) Any proposed change in the agency's policies, procedures, or
accreditation or preaccreditation standards that might alter its--
    (i) Scope of recognition, except as provided in paragraph (a)(5) of
this section; or
    (ii) Compliance with the criteria for recognition;
    (5) Notification that the agency has expanded its scope of
recognition to include distance education or correspondence education
as provided in section 496(a)(4)(B)(i)(I) of the HEA. Such an expansion
of scope is effective on the date the Department receives the
notification;
    (6) The name of any institution or program it accredits that the
agency has reason to believe is failing to meet its title IV, HEA
program responsibilities or is engaged in fraud or abuse, along with
the agency's reasons for concern about the institution or program; and
    (7) If the Secretary requests, information that may bear upon an
accredited or preaccredited institution's compliance with its title IV,
HEA program responsibilities, including the eligibility of the
institution or program to participate in title IV, HEA programs.
    (b) If an agency has a policy regarding notification to an
institution or program of contact with the Department in accordance
with paragraph (a)(6) or (a)(7) of this section, it must provide for a
case-by-case review of the circumstances surrounding the contact, and
the need for the confidentiality of that contact. Upon a specific
request by the Department, the agency must consider that contact
confidential.

(Authority: 20 U.S.C. 1099b)


    16. Subpart C is revised to read as follows:
Subpart C--The Recognition Process

Application and Review by Department Staff

Sec.
602.30 Activities covered by recognition procedures.
602.31 Agency submissions to the Department.
602.32 Procedures for Department review of applications for
recognition or for change in scope, compliance reports, and
increases in enrollment.
602.33 Procedures for review of agencies during the period of
recognition.

Review by the National Advisory Committee on Institutional Quality and
Integrity

602.34 Advisory Committee meetings.
602.35 Responding to the Advisory Committee's recommendation.

Review and Decision by the Senior Department Official

602.36 Senior Department official's decision.

Appeal Rights and Procedures

602.37 Appealing the senior Department official's decision to the
Secretary.
602.38 Contesting the Secretary's final decision to deny, limit,
suspend, or terminate an agency's recognition.

Subpart C--The Recognition Process

Application and Review by Department Staff


Sec.  602.30  Activities covered by recognition procedures.

    Recognition proceedings are administrative actions taken on any of
the following matters:
    (a) Applications for initial or continued recognition submitted
under Sec.  602.31(a).
    (b) Applications for an expansion of scope submitted under Sec.
602.31(b).
    (c) Compliance reports submitted under Sec.  602.31(c).
    (d) Reviews of agencies that have expanded their scope of
recognition by notice, following receipt by the Department of
information of an increase in headcount enrollment described in Sec.
602.19(e).
    (e) Staff analyses identifying areas of non-compliance based on a
review conducted under Sec.  602.33. (Authority: 20 U.S.C. 1099b)


Sec.  602.31  Agency submissions to the Department.

    (a) Applications for recognition or renewal of recognition. An
accrediting agency seeking initial or continued recognition must submit
a written application to the Secretary. Each accrediting agency must
submit an application for continued recognition at

[[Page 39529]]

least once every five years, or within a shorter time period specified
in the final recognition decision. The application must consist of--
    (1) A statement of the agency's requested scope of recognition;
    (2) Evidence, including documentation, that the agency complies
with the criteria for recognition listed in subpart B of this part and
effectively applies those criteria; and
    (3) Evidence, including documentation, of how an agency that
includes or seeks to include distance education or correspondence
education in its scope of recognition applies its standards in
evaluating programs and institutions it accredits that offer distance
education or correspondence education.
    (b) Applications for expansions of scope. An agency seeking an
expansion of scope by application must submit a written application to
the Secretary. The application must--
    (1) Specify the scope requested;
    (2) Include documentation of experience in accordance with Sec.
602.12(b); and
    (3) Provide copies of any relevant standards, policies, or
procedures developed and applied by the agency and documentation of the
application of these standards, policies, or procedures.
    (c) Compliance reports. If an agency is required to submit a
compliance report, it must do so within 30 days following the end of
the period for achieving compliance as specified in the decision of the
senior Department official or Secretary, as applicable.
    (d) Review following an increase in headcount enrollment. If an
agency that has notified the Secretary in writing of its change in
scope to include distance education or correspondence education in
accordance with Sec.  602.27(a)(5) reports an increase in headcount
enrollment in accordance with Sec.  602.19(e) for an institution it
accredits, or if the Department notifies the agency of such an increase
at one of the agency's accredited institutions, the agency must, within
45 days of reporting the increase or receiving notice of the increase
from the Department, as applicable, submit a report explaining--
    (1) How the agency evaluates the capacity of the institutions or
programs it accredits to accommodate significant growth in enrollment
and to maintain educational quality;
    (2) The specific circumstances regarding the growth at the
institution(s) or programs(s) that triggered the review and the results
of any evaluation conducted by the agency; and
    (3) Any other information that the agency deems appropriate to
demonstrate the effective application of the criteria for recognition
or that the Department may require.
    (e) Consent to sharing of information. By submitting an application
for recognition, the agency authorizes Department staff throughout the
application process and during any period of recognition--
    (1) To observe its site visits to one or more of the institutions
or programs it accredits or preaccredits, on an announced or
unannounced basis;
    (2) To visit locations where agency activities such as training,
review and evaluation panel meetings, and decision meetings take place,
on an announced or unannounced basis;
    (3) To obtain copies of all documents the staff deems necessary to
complete its review of the agency; and
    (4) To gain access to agency records, personnel, and facilities.
    (f) Public availability of agency records obtained by the
Department. (1) The Secretary's processing and decision making on
requests for public disclosure of agency materials reviewed under this
part are governed by the Freedom of Information Act, 5 U.S.C. 552; the
Trade Secrets Act, 18 U.S.C. 1905; the Privacy Act of 1974, as amended,
5 U.S.C 552a; the Federal Advisory Committee Act, 5 U.S.C. Appdx. 1;
and all other applicable laws. In recognition proceedings, agencies
may--
    (i) Redact information that would identify individuals or
institutions that is not essential to the Department's review of the
agency;
    (ii) Make a good faith effort to designate all business information
within agency submissions that the agency believes would be exempt from
disclosure under exemption 4 of the Freedom of Information Act (FOIA),
5 U.S.C. Sec.  552(b)(4). A blanket designation of all information
contained within a submission, or of a category of documents, as
meeting this exemption will not be considered a good faith effort and
will be disregarded;
    (iii) Identify any other material the agency believes would be
exempt from public disclosure under FOIA, the factual basis for the
request, and any legal basis the agency has identified for withholding
the document from disclosure; and
    (iv) Ensure documents submitted are only those required for
Department review or as requested by Department officials.
    (2) The Secretary processes FOIA requests in accordance with 34 CFR
part 5 and makes all documents provided to the Advisory Committee
available to the public.

(Authority: 20 U.S.C. 1099b)

Sec.  602.32   Procedures for Department review of applications for
recognition or for change in scope, compliance reports, and increases
in enrollment.

    (a) After receipt of an agency's application for initial or
continued recognition, or change in scope, or an agency's compliance
report, or an agency's report submitted under Sec.  602.31(d),
Department staff publishes a notice of the agency's application or
report in the Federal Register inviting the public to comment on the
agency's compliance with the criteria for recognition and establishing
a deadline for receipt of public comment.
    (b) The Department staff analyzes the agency's application for
initial or renewal of recognition, compliance report, or report
submitted under Sec.  602.31(d) to determine whether the agency
satisfies the criteria for recognition, taking into account all
available relevant information concerning the compliance of the agency
with those criteria and in the agency's effectiveness in applying the
criteria. The analysis of an application for recognition and, as
appropriate, of a compliance report, or of a report required under
Sec.  602.31(d), includes--
    (1) Observations from site visit(s), on an announced or unannounced
basis, to the agency or to a location where agency activities such as
training, review and evaluation panel meetings, and decision meetings
take place and to one or more of the institutions or programs it
accredits or preaccredits;
    (2) Review of the public comments and other third-party information
the Department staff receives by the established deadline, and the
agency's responses to the third-party comments, as appropriate, as well
as any other information Department staff assembles for purposes of
evaluating the agency under this part; and
    (3) Review of complaints or legal actions involving the agency.
    (c) The Department staff analyzes the materials submitted in
support of an application for expansion of scope to ensure that the
agency has the requisite experience, policies that comply with subpart
B of this part, capacity, and performance record to support the
request.
    (d) Department staff's evaluation of an agency may also include a
review of information directly related to institutions or programs
accredited or preaccredited by the agency relative to their compliance
with the agency's standards, the effectiveness of the

[[Page 39530]]

standards, and the agency's application of those standards.
    (e) If, at any point in its evaluation of an agency seeking initial
recognition, Department staff determines that the agency fails to
demonstrate compliance with the basic eligibility requirements in
Sec. Sec.  602.10 through 602.13, the staff--
    (1) Returns the agency's application and provides the agency with
an explanation of the deficiencies that caused staff to take that
action; and
    (2) Recommends that the agency withdraw its application and reapply
when the agency can demonstrate compliance.
    (f) Except with respect to an application that has been returned or
is withdrawn under paragraph (e) of this section, when Department staff
completes its evaluation of the agency, the staff--
    (1) Prepares a written draft analysis of the agency;
    (2) Sends the draft analysis including any identified areas of non-
compliance and a proposed recognition recommendation, and all
supporting documentation, including all third-party comments the
Department received by the established deadline, to the agency;
    (3) Invites the agency to provide a written response to the draft
analysis and proposed recognition recommendation and third-party
comments, specifying a deadline that provides at least 30 days for the
agency's response;
    (4) Reviews the response to the draft analysis the agency submits,
if any, and prepares the written final analysis. The final analysis
includes a recognition recommendation to the senior Department
official, as the Department staff deems appropriate, including, but not
limited to, a recommendation to approve, deny, limit, suspend, or
terminate recognition, require the submission of a compliance report
and continue recognition pending a final decision on compliance,
approve or deny a request for expansion of scope, or revise or affirm
the scope of the agency; and
    (5) Provides to the agency, no later than seven days before the
Advisory Committee meeting, the final staff analysis and any other
available information provided to the Advisory Committee under Sec.
602.34(c).
    (g) The agency may request that the Advisory Committee defer acting
on an application at that Advisory Committee meeting if Department
staff fails to provide the agency with the materials described, and
within the timeframes provided, in paragraphs (f)(3) and (f)(5) of this
section. If the Department staff's failure to send the materials in
accordance with the timeframe described in paragraph (f)(3) or (f)(5)
of this section is due to the failure of the agency to submit reports
to the Department, other information the Secretary requested, or its
response to the draft analysis, by the deadline established by the
Secretary, the agency forfeits its right to request a deferral of its
application.

(Authority: 20 U.S.C. 1099b)

Sec.  602.33   Procedures for review of agencies during the period of
recognition.

    (a) Department staff may review the compliance of a recognized
agency with the criteria for recognition at any time--
    (1) At the request of the Advisory Committee; or
    (2) Based on any information that, as determined by Department
staff, appears credible and raises issues relevant to recognition.
    (b) The review may include, but need not be limited to, any of the
activities described in Sec.  602.32(b) and (d).
    (c) If, in the course of the review, and after provision to the
agency of the documentation concerning the inquiry and consultation
with the agency, Department staff notes that one or more deficiencies
may exist in the agency's compliance with the criteria for recognition
or in the agency's effective application of those criteria, it--
    (1) Prepares a written draft analysis of the agency's compliance
with the criteria of concern. The draft analysis reflects the results
of the review, and includes a recommendation regarding what action to
take with respect to recognition. Possible recommendations include, but
are not limited to, a recommendation to limit, suspend, or terminate
recognition, or require the submission of a compliance report and to
continue recognition pending a final decision on compliance;
    (2) Sends the draft analysis including any identified areas of non-
compliance, and a proposed recognition recommendation, and all
supporting documentation to the agency; and
    (3) Invites the agency to provide a written response to the draft
analysis and proposed recognition recommendation, specifying a deadline
that provides at least 30 days for the agency's response.
    (d) If, after review of the agency's response to the draft
analysis, Department staff concludes that the agency has demonstrated
compliance with the criteria for recognition, the staff notifies the
agency in writing of the results of the review. If the review was
requested by the Advisory Committee, staff also provides the Advisory
Committee with the results of the review.
    (e) If, after review of the agency's response to the draft
analysis, Department staff concludes that the agency has not
demonstrated compliance, the staff--
    (1) Notifies the agency that the draft analysis will be finalized
for presentation to the Advisory Committee;
    (2) Publishes a notice in the Federal Register including, if
practicable, an invitation to the public to comment on the agency's
compliance with the criteria in question and establishing a deadline
for receipt of public comment;
    (3) Provides the agency with a copy of all public comments received
and, if practicable, invites a written response from the agency;
    (4) Finalizes the staff analysis as necessary to reflect its review
of any agency response and any public comment received; and
    (5) Provides to the agency, no later than seven days before the
Advisory Committee meeting, the final staff analysis and a recognition
recommendation and any other information provided to the Advisory
Committee under Sec.  602.34(c).
    (f) The Advisory Committee reviews the matter in accordance with
Sec.  602.34.

(Authority: 20 U.S.C. 1099b)

Review by the National Advisory Committee on Institutional Quality and
Integrity


Sec.  602.34   Advisory Committee meetings.

    (a) Department staff submits a proposed schedule to the Chairperson
of the Advisory Committee based on anticipated completion of staff
analyses.
    (b) The Chairperson of the Advisory Committee establishes an agenda
for the next meeting and, in accordance with the Federal Advisory
Committee Act, presents it to the Designated Federal Official for
approval.
    (c) Before the Advisory Committee meeting, Department staff
provides the Advisory Committee with--
    (1) The agency's application for recognition or for expansion of
scope, the agency's compliance report, or the agency's report submitted
under Sec.  602.31(d), and supporting documentation;
    (2) The final Department staff analysis of the agency developed in
accordance with Sec.  602.32 or Sec.  602.33, and any supporting
documentation;
    (3) At the request of the agency, the agency's response to the
draft analysis;
    (4) Any written third-party comments the Department received about
the agency on or before the established deadline;

[[Page 39531]]

    (5) Any agency response to third-party comments; and
    (6) Any other information Department staff relied upon in
developing its analysis.
    (d) At least 30 days before the Advisory Committee meeting, the
Department publishes a notice of the meeting in the Federal Register
inviting interested parties, including those who submitted third-party
comments concerning the agency's compliance with the criteria for
recognition, to make oral presentations before the Advisory Committee.
    (e) The Advisory Committee considers the materials provided under
paragraph (c) of this section in a public meeting and invites
Department staff, the agency, and other interested parties to make oral
presentations during the meeting. A transcript is made of all Advisory
Committee meetings.
    (f) The written motion adopted by the Advisory Committee regarding
each agency's recognition will be made available during the Advisory
Committee meeting. The Department will provide each agency, upon
request, with a copy of the motion on recognition at the meeting. Each
agency that was reviewed will be sent an electronic copy of the motion
relative to that agency as soon as practicable after the meeting.
    (g) After each meeting of the Advisory Committee at which a review
of agencies occurs, the Advisory Committee forwards to the senior
Department official its recommendation with respect to each agency,
which may include, but is not limited to, a recommendation to approve,
deny, limit, suspend, or terminate recognition, to grant or deny a
request for expansion of scope, to revise or affirm the scope of the
agency, or to require the agency to submit a compliance report and to
continue recognition pending a final decision on compliance.

(Authority: 20 U.S.C. 1099b)

Sec.  602.35   Responding to the Advisory Committee's recommendation.

    (a) Within ten days following the Advisory Committee meeting, the
agency and Department staff may submit written comments to the senior
Department official on the Advisory Committee's recommendation. The
agency must simultaneously submit a copy of its written comments, if
any, to Department staff. Department staff must simultaneously submit a
copy of its written comments, if any, to the agency.
    (b) Comments must be limited to--
    (1) Any Advisory Committee recommendation that the agency or
Department staff believes is not supported by the record;
    (2) Any incomplete Advisory Committee recommendation based on the
agency's application; and
    (3) The inclusion of any recommendation or draft proposed decision
for the senior Department official's consideration.
    (c)(1) Neither the Department staff nor the agency may submit
additional documentary evidence with its comments unless the Advisory
Committee's recognition recommendation proposes finding the agency
noncompliant with, or ineffective in its application of, a criterion or
criteria for recognition not identified in the final Department staff
analysis provided to the Advisory Committee.
    (2) Within ten days of receipt by the Department staff of an
agency's comments or new evidence, if applicable, or of receipt by the
agency of the Department staff's comments, Department staff, the
agency, or both, as applicable, may submit a response to the senior
Department official. Simultaneously with submission, the agency must
provide a copy of any response to the Department staff. Simultaneously
with submission, Department staff must provide a copy of any response
to the agency.

(Authority: 20 U.S.C. 1099b)

Review and Decision by the Senior Department Official


Sec.  602.36  Senior Department official's decision.

    (a) The senior Department official makes a decision regarding
recognition of an agency based on the record compiled under Sec. Sec.
602.32, 602.33, 602.34, and 602.35 including, as applicable, the
following:
    (1) The materials provided to the Advisory Committee under Sec.
602.34(c).
    (2) The transcript of the Advisory Committee meeting.
    (3) The recommendation of the Advisory Committee.
    (4) Written comments and responses submitted under Sec.  602.35.
    (5) New evidence submitted in accordance with Sec.  602.35(c)(1).
    (6) A communication from the Secretary referring an issue to the
senior Department official's consideration under Sec.  602.37(e).
    (b) In the event that statutory authority or appropriations for the
Advisory Committee ends, or there are fewer duly appointed Advisory
Committee members than needed to constitute a quorum, and under
extraordinary circumstances when there are serious concerns about an
agency's compliance with subpart B of this part that require prompt
attention, the senior Department official may make a decision in a
recognition proceeding based on the record compiled under Sec.  602.32
or Sec.  602.33 after providing the agency with an opportunity to
respond to the final staff analysis. Any decision made by the senior
Department official absent a recommendation from the Advisory Committee
may be appealed to the Secretary as provided in Sec.  602.37.
    (c) Following consideration of an agency's recognition under this
section, the senior Department official issues a recognition decision.
    (d) Except with respect to decisions made under paragraph (f) or
(g) of this section and matters referred to the senior Department
official under Sec.  602.37(e) or (f), the senior Department official
notifies the agency in writing of the senior Department official's
decision regarding the agency's recognition within 90 days of the
Advisory Committee meeting or conclusion of the review under paragraph
(b) of this section.
    (e) The senior Department official's decision may include, but is
not limited to, approving, denying, limiting, suspending, or
terminating recognition, granting or denying an application for an
expansion of scope, revising or affirming the scope of the agency, or
continuing recognition pending submission and review of a compliance
report under Sec. Sec.  602.32 and 602.34 and review of the report by
the senior Department official under this section.
    (1)(i) The senior Department official approves recognition if the
agency complies with the criteria for recognition listed in subpart B
of this part and if the agency effectively applies those criteria.
    (ii) If the senior Department official approves recognition, the
recognition decision defines the scope of recognition and the
recognition period. The recognition period does not exceed five years,
including any time during which recognition was continued to permit
submission and review of a compliance report.
    (iii) If the scope or period of recognition is less than that
requested by the agency, the senior Department official explains the
reasons for approving a lesser scope or recognition period.
    (2)(i) Except as provided in paragraph (e)(3) of this section, if
the agency either fails to comply with the criteria for recognition
listed in subpart B of this part, or to apply those criteria
effectively, the senior Department

[[Page 39532]]

official denies, limits, suspends, or terminates recognition.
    (ii) If the senior Department official denies, limits, suspends, or
terminates recognition, the senior Department official specifies the
reasons for this decision, including all criteria the agency fails to
meet and all criteria the agency has failed to apply effectively.
    (3)(i) Except as provided in paragraph (e)(3)(ii) of this section,
if a recognized agency fails to demonstrate compliance with or
effective application of a criterion or criteria, but the senior
Department official concludes that the agency will demonstrate or
achieve compliance with the criteria for recognition and effective
application of those criteria within 12 months or less, the senior
Department official may continue the agency's recognition, pending
submission by the agency of a compliance report, review of the report
under Sec. Sec.  602.32 and 602.34, and review of the report by the
senior Department official under this section. In such a case, the
senior Department official specifies the criteria the compliance report
must address, and a time period, not longer than 12 months, during
which the agency must achieve compliance and effectively apply the
criteria. The compliance report documenting compliance and effective
application of criteria is due not later than 30 days after the end of
the period specified in the senior Department official's decision.
    (ii) If the record includes a compliance report, and the senior
Department official determines that an agency has not complied with the
criteria for recognition, or has not effectively applied those
criteria, during the time period specified by the senior Department
official in accordance with paragraph (e)(3)(i) of this section, the
senior Department official denies, limits, suspends, or terminates
recognition, except, in extraordinary circumstances, upon a showing of
good cause for an extension of time as determined by the senior
Department official and detailed in the senior Department official's
decision. If the senior Department official determines good cause for
an extension has been shown, the senior Department official specifies
the length of the extension and what the agency must do during it to
merit a renewal of recognition.
    (f) If the senior Department official determines, based on the
record, that a decision to deny, limit, suspend, or terminate an
agency's recognition may be warranted based on a finding that the
agency is noncompliant with, or ineffective in its application of, a
criterion or criteria of recognition not identified earlier in the
proceedings as an area of noncompliance, the senior Department official
provides--
    (1) The agency with an opportunity to submit a written response and
documentary evidence addressing the finding; and
    (2) The staff with an opportunity to present its analysis in
writing.
    (g) If relevant and material information pertaining to an agency's
compliance with recognition criteria, but not contained in the record,
comes to the senior Department official's attention while a decision
regarding the agency's recognition is pending before the senior
Department official, and if the senior Department official concludes
the recognition decision should not be made without consideration of
the information, the senior Department official either--
    (1)(i) Does not make a decision regarding recognition of the
agency; and
    (ii) Refers the matter to Department staff for review and analysis
under Sec.  602.32 or Sec.  602.33, as appropriate, and consideration
by the Advisory Committee under Sec.  602.34; or
    (2)(i) Provides the information to the agency and Department staff;
    (ii) Permits the agency to respond to the senior Department
official and the Department staff in writing, and to include additional
evidence relevant to the issue, and specifies a deadline;
    (iii) Provides Department staff with an opportunity to respond in
writing to the agency's submission under paragraph (g)(2)(ii) of this
section, specifying a deadline; and
    (iv) Issues a recognition decision based on the record described in
paragraph (a) of this section, as supplemented by the information
provided under this paragraph.
    (h) No agency may submit information to the senior Department
official, or ask others to submit information on its behalf, for
purposes of invoking paragraph (g) of this section. Before invoking
paragraph (g) of this section, the senior Department official will take
into account whether the information, if submitted by a third party,
could have been submitted in accordance with Sec.  602.32(a) or Sec.
602.33(e)(2).
    (i) If the senior Department official does not reach a final
decision to approve, deny, limit, suspend, or terminate an agency's
recognition before the expiration of its recognition period, the senior
Department official automatically extends the recognition period until
a final decision is reached.
    (j) Unless appealed in accordance with Sec.  602.37, the senior
Department official's decision is the final decision of the Secretary.

(Authority: 20 U.S.C. 1099b)

Appeal Rights and Procedures


Sec.  602.37  Appealing the senior Department official's decision to
the Secretary.

    (a) The agency may appeal the senior Department official's decision
to the Secretary. Such appeal stays the decision of the senior
Department official until final disposition of the appeal. If an agency
wishes to appeal, the agency must--
    (1) Notify the Secretary and the senior Department official in
writing of its intent to appeal the decision of the senior Department
official, no later than ten days after receipt of the decision;
    (2) Submit its appeal to the Secretary in writing no later than 30
days after receipt of the decision; and
    (3) Provide the senior Department official with a copy of the
appeal at the same time it submits the appeal to the Secretary.
    (b) The senior Department official may file a written response to
the appeal. To do so, the senior Department official must--
    (1) Submit a response to the Secretary no later than 30 days after
receipt of a copy of the appeal; and
    (2) Provide the agency with a copy of the senior Department
official's response at the same time it is submitted to the Secretary.
    (c) Neither the agency nor the senior Department official may
include in its submission any new evidence it did not submit previously
in the proceeding.
    (d) On appeal, the Secretary makes a recognition decision, as
described in Sec.  602.36(e). If the decision requires a compliance
report, the report is due within 30 days after the end of the period
specified in the Secretary's decision. The Secretary renders a final
decision after taking into account the senior Department official's
decision, the agency's written submissions on appeal, the senior
Department official's response to the appeal, if any, and the entire
record before the senior Department official. The Secretary notifies
the agency in writing of the Secretary's decision regarding the
agency's recognition.
    (e) The Secretary may determine, based on the record, that a
decision to deny, limit, suspend, or terminate an agency's recognition
may be warranted based on a finding that the agency is noncompliant
with, or ineffective in its application with respect to, a criterion or
criteria for recognition not identified as an area of noncompliance
earlier in the proceedings. In that case, the

[[Page 39533]]

Secretary, without further consideration of the appeal, refers the
matter to the senior Department official for consideration of the issue
under Sec.  602.36(f). After the senior Department official makes a
decision, the agency may, if desired, appeal that decision to the
Secretary.
    (f) If relevant and material information pertaining to an agency's
compliance with recognition criteria, but not contained in the record,
comes to the Secretary's attention while a decision regarding the
agency's recognition is pending before the Secretary, and if the
Secretary concludes the recognition decision should not be made without
consideration of the information, the Secretary either--
    (1)(i) Does not make a decision regarding recognition of the
agency; and
    (ii) Refers the matter to Department staff for review and analysis
under Sec.  602.32 or Sec.  602.33, as appropriate, and review by the
Advisory Committee under Sec.  602.34; and consideration by the senior
Department official under Sec.  602.36; or
    (2)(i) Provides the information to the agency and the senior
Department official;
    (ii) Permits the agency to respond to the Secretary and the senior
Department official in writing, and to include additional evidence
relevant to the issue, and specifies a deadline;
    (iii) Provides the senior Department official with an opportunity
to respond in writing to the agency's submission under paragraph
(f)(2)(ii) of this section, specifying a deadline; and
    (iv) Issues a recognition decision based on all the materials
described in paragraphs (d) and (f) of this section.
    (g) No agency may submit information to the Secretary, or ask
others to submit information on its behalf, for purposes of invoking
paragraph (f) of this section. Before invoking paragraph (f) of this
section, the Secretary will take into account whether the information,
if submitted by a third party, could have been submitted in accordance
with Sec.  602.32(a) or Sec.  602.33(e)(2).
    (h) If the Secretary does not reach a final decision on appeal to
approve, deny, limit, suspend, or terminate an agency's recognition
before the expiration of its recognition period, the Secretary
automatically extends the recognition period until a final decision is
reached.

(Authority: 20 U.S.C. 1099b)

Sec.  602.38  Contesting the Secretary's final decision to deny, limit,
suspend, or terminate an agency's recognition.

    An agency may contest the Secretary's decision under this part in
the Federal courts as a final decision in accordance with applicable
Federal law. Unless otherwise directed by the court, a decision of the
Secretary to deny, limit, suspend, or terminate the agency's
recognition is not stayed during an appeal in the Federal courts.

(Authority: 20 U.S.C. 1099b)

    17. Subpart D is removed in its entirety.
    18. Subpart E is redesignated as subpart D.

[FR Doc. E9-18368 Filed 8-5-09; 8:45 am]

BILLING CODE 4000-01-P

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