Final Program Integrity Rules: Initial Overview

Final regulations were published on October 29, 2010, based on a Notice of Proposed Rulemaking (NPRM) published on June 18, 2010. This article is the first in a series highlighting details of the changes and additional information contained in the preamble to the final rules in response to comments submitted on the proposed rules. Most provisions are effective July 1, 2011 (verification being the notable exception, with an effective date of July 1, 2012). Unlike previous final rule packages in recent years, early implementation at an institution's option has not been approved for any provision.

The U.S. Department of Education published in the Federal Register final rules aimed at ensuring program integrity in federal student financial aid programs, based on proposed rules issued in mid-June. Most of the new regulations go into effect on July 1, 2011. Notable exceptions are changes to verification rules, which go into effect July 1, 2012, to allow the Department to make necessary system changes. Certain new rules concerning state authorization are effective July 1, 2011, but allow for two separate one-year extensions at the request of institutions in states that need the extra time to provide authorizations that comply with the new rules. None of the new regulations have been designated for early implementation.

As announced recently by the Department, controversial rules defining "gainful employment" for career-based training programs have been delayed until early next year. However, the final rules published today include reporting and disclosure requirements that lay the groundwork for future gainful employment final rules. In addition, a separate package published today contains final rules, effective July 1, 2011, setting out conditions under which new educational programs that prepare students for gainful employment in a recognized occupation may be subject to approval by the Department. These rules apply to all institutions, regardless of sector, that offer certificate or other nondegree programs.

In fact, in response to comments to the proposed rules, the Department notes that they "do not believe it is necessary to specifically indicate in each section which institutions are covered by a particular regulation because all provisions of these regulations apply to all postsecondary institutions, unless otherwise specified." According to the Department’s press release, over 1200 comments led to more than 80 changes to the proposed rules. NASFAA will be examining these final rules and publishing detailed analyses over the next few weeks.

Besides gainful employment, the new regulations address the following 13 issues with the goal of improving the efficiency and effectiveness of the Title IV programs, protecting students, and providing consumers with better information:

  • Verification
  • Satisfactory academic progress
  • Repeated coursework in enrollment status
  • Return of Title IV funds in term-based program with modules
  • Taking attendance under return of Title IV funds rules
  • Disbursement: timeliness and method of delivering book money
  • Credit hour definition
  • High school diploma
  • Ability to benefit (equivalents and testing procedures)
  • Written arrangements between institutions
  • Misrepresentation of institutional information
  • Incentive compensation
  • State authorization
  • This articles gives a brief preview of some of the issues.

Verification of FAFSA Information

The new rules institute a more targeted verification system. Rather than require verification of a pre-defined set of elements regardless of what triggered the need for review, ED will specify on each selected ISIR which data elements need to be documented. Under these regulations, only one or two elements might need to be reviewed. However, items subject to a verification requirement could be expanded beyond the current data set, depending on what application items ED finds are error-prone. ED will publish annually, well in advance of the start of the processing cycle, the data elements subject to selection.

Institutions may continue to select additional items or additional applications to verify. Regardless of how an application is chosen, verification must be completed before professional judgment adjustments of data elements maybe made. Despite critical comments, the current 30% cap on verifications and current tolerances will be eliminated, except for a $25 tolerance on a single dollar item.

Many of the revisions and clarifications made to the proposed rules are in the area of verification. For example, the Department clarified that corrections obtained through the IRS data import process may be considered adequate documentation for verification. The proposed rule permitting updating due to changes in marital status was modified; such updates continue to be generally prohibited, but an institution will be permitted to make exceptions to that rule. The final rule more explicitly describes the treatment of overawards due to corrections and as a result of interim disbursements.

NASFAA will conduct a fee-based webinar describing other changes and concentrating on implementing verification in December.

Satisfactory Academic Progress (SAP)

The rules move SAP regulations from administrative capability to student eligibility, consolidating the various pieces currently found in different areas of regulation. Although the maximum interval between assessments will continue to be one year, more flexibility is given to school that assess progress after each payment period. The regulations impose limits on how long a student could continue to receive Title IV aid in order to make up deficiencies in meeting SAP standards. The regulations distinguish between warning periods (when the school's policy can allow a student to continue to receive Title IV aid automatically), and probationary periods (when the student can continue to receive Title IV aid only as the result of a successful appeal). Only schools that assess SAP at the end of every payment period can apply warning periods. Schools that assess SAP less frequently must require a successful appeal to let any student continue to receive Title IV aid despite failing SAP standards.

Other areas of flexibility within the current SAP regulations have been retained.

Although several clarifications are given in the preamble to the final rule based on numerous comments, only one change was made to the proposed rule: For programs longer than an academic year in length, satisfactory academic progress is measured at the end of each payment period or at least annually to correspond to the end of a payment period. This change is meant to ensure that evaluations are performed at the completion of a payment period rather than at any point within it.

NASFAA plans to offer a fee-based webinar on implementing SAP early next year.

Retaking Coursework

Although the final rule adds language to the definition of "full-time student" to allow repeated courses to count towards a student's enrollment status for a term-based program, as proposed, caveats have been added. Title IV funds may be paid for only one repeat of a course.

Under the new rules, an institution may pay a student one time for retaking previously passed coursework (for example, the student is repeating it because he or she needs to meet an academic standard for that particular course, such as a minimum grade). An institution may not pay a student for retaking previously passed courses if the student is required to retake those courses because the student failed a different course in a prior term. The preamble gives the following example of this prohibition: If a student enrolls in four classes in the fall semester and passes three of them, the institution could require the student to retake the failed class and also require the student to retake the other three classes because of failing the one class; if the student retakes the four classes in the spring semester, the failed class would be included in the student’s enrollment status, but the three classes passed in the fall would not, for Title IV purposes.

Return of Title IV Funds (R2T4)

The final rules make changes to the treatment of modular programs for all types of program formats: term-based credit hour programs, nonterm programs, nonstandard term programs, and clock hour programs. The final rules state that "a program is 'offered in module' if a course or courses in the program do not span the entire length of the payment period or period of enrollment."

The final rule replaces current policy, which states that a student who completes at least one module or compressed course within a term is not considered to have withdrawn, with more stringent rules. A student is considered to have withdrawn if the student does not attend all days, for a credit hour program, or complete all clock hours he or she was scheduled to attend. A student in a nonterm or nonstandard-term program is considered withdrawn if his or her next class does not begin within a certain length of time. The final rule adds additional detail to what had been proposed, and makes some exceptions for students who return within a defined period of time to the same payment period, or who indicate the intent to return within a certain time period. Under certain circumstances, schools may have to "undo" a withdrawal calculation and reinstate returned aid funds.

The final rules also revamp the section of regulations that identity schools as being required to take attendance, encompassing schools that take attendance for just a limited period of time (other than a single day) at the beginning of a term or payment period. Any institution that voluntarily requires its faculty to take attendance is, under the new rules, subject to the same rules for institutions that are required by outside entities to take attendance, such as an accrediting or state agency. If the institution or an outside entity has a condition that can only be fulfilled by taking attendance or a comparable process, the institution is subject to rules for institutions that take attendance.

Current regulation states that "an 'academically-related activity' includes, but is not limited to, an exam, a tutorial, computer-assisted instruction, academic counseling, academic advisement, turning in a class assignment or attending a study group that is assigned by the institution." The new regulation tightens the meaning of "academically related" by excluding academic counseling or advisement. It generally excludes any activity at which a student is present "but not academically engaged." Logging into an online class without active participation is given as another example of an excluded activity.

Disbursements of Title IV Funds

The final rules endeavors to ensure students with estimated Title IV credit balances are able to obtain books and supplies at the beginning of a payment period. Under the new rules, schools still have the ability to disburse remaining funds at the times and in amounts that are in the students' best interest.

The rules limit required early payment of anticipated credit balances to Pell Grant-eligible students; stipulate that the student has met all disbursement requirements no later than 10 days before the start of the payment period; and apply only if the student will have a Title IV credit balance. The regulations do not change existing institutional liability if the student never begins attendance in any classes, and give institutions the flexibility to determine the method by which it provides funds to students, which can include a book voucher or crediting books to the student's institutional account.

Under this rule, the institution must assure that students can acquire necessary books and supplies by the seventh day of the payment period. The final rule adds a proviso that, within that same time period, institutions must allow students to opt out of the institution’s method of paying book money. The final rule also clarifies that if the student uses the institution’s method for obtaining books, he or she is considered to have authorized that use of Title IV funds, and no written authorization will be necessary.


Publication Date: 10/29/2010

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