ED Releases Final Regulations Aimed at Restructuring Regulations Related to Distance Education, R2T4 Module Provisions

By Hugh T. Ferguson, NASFAA Staff Reporter 

The Department of Education (ED) on Wednesday released final regulations for distance education and Return of Title IV Funds (R2T4) requirements for modules, which comes as the novel coronavirus continues to force a number of institutions of higher education to administer their programming through remote learning.

The final regulations are one of several topics discussed during a negotiated rulemaking session last year, which ended in consensus. ED published a proposed rule in May that reflected the agreed upon language from the negotiated rulemaking committee. The final rule, though largely the same, made a few adjustments based on public comment submitted after the proposed rule was published. 

“The COVID-19 pandemic has shown that a video call is not enough, and our outdated rules did not comport with 21st-century realities,” said Education Secretary Betsy DeVos in a press release. “These regulations are a true ‘rethink’ of what is possible for students so that they can learn in the ways and places that work best for them.”

Negotiations to rewrite the distance education regulations — as well as regulations for state authorization, accreditation, faith-based entities, and the Teacher Education Assistance for College and Higher Education (TEACH) Grant program — formally kicked off in January 2019. Final rules for TEACH Grant and faith-based entities were released earlier this month, effective July 1, 2021, and the state authorization and accreditation final rules were released November 2019 and were effective July 1, 2020.

Back in May of this year NASFAA submitted comments on ED’s proposed rules on distance education and innovation. Many of the proposed changes fell in line with NASFAA's Modernizing Title IV Aid task force recommendations.

Key provisions in the final rule include:

R2T4 Modules

In the final rules, ED is revising its approach to the treatment of students who complete some, but not all, of the coursework they were scheduled to attend during a payment period to ensure more equitable treatment of such students while maintaining program integrity. Although negotiated rulemaking was conducted under the umbrella topic of “distance education,” the R2T4 rules apply to all modular programs, whether offered via distance or not.

Currently, a student who ceased to attend or failed to begin attendance in a course he or she was scheduled to attend, was not attending other courses, and did not provide notification of planned attendance in a course beginning later in the period is considered a withdrawal. This is the case even if the student completed one or more courses in earlier modules.

To account for minor differences in the calendar that may occur, the final rules state that a student who withdraws from a program offered in modules is not considered to have withdrawn for R2T4 purposes if the student completes:

  • One module that includes 49% or more of the number of days in the payment period; or

  • A combination of modules that when combined contain 49% or more of the number of days in the payment period

Scheduled breaks of five or more consecutive days and all days between modules are excluded from the number of days in the payment period used to calculate whether the module(s) completed by the student comprise 49% of the payment period.

In a change to the April Notice of Proposed Rulemaking (NPRM), ED updated § 668.22(l)(6) to account for subscription-based programs, clarifying that a program is “offered in modules” if the program uses a standard term or nonstandard-term academic calendar, is not a subscription-based program, and a course or courses in the program do not span the entire length of the payment period or period of enrollment.

Direct Assessment Programs

Presently, ED requires an institution to obtain approval for every direct assessment (DA) program it offers. The finale rule requires approval only for an institution's first DA program and then for subsequent DA programs at higher credential levels, based on the assumption that an institution's demonstrated capacity and expertise to offer a DA program translates to all DA programs at that credential level and at lower credential levels, but not necessarily to higher credential levels.

Subscription-Based Programs

In a change to the April 2020 NPRM for distance education, the new rule expands the use of subscription-based models to all types of programs, not just direct assessment programs. The previous rule related to distance education did not address subscription-based programs, which are newly defined in the final rule as a standard or non-standard term program in which students enroll in subscription periods for a set number of credits, to be earned at the student's pace. Charging students on a subscription basis is a relatively rare practice and primarily used by programs with a competency-based model.

This new definition sparked the necessity for new disbursement rules for this program type. The new rule now allows students to be eligible for their next disbursement of federal aid funds when the student has passed a specified portion of their enrolled competencies, regardless of the amount of time elapsed. While the new rule allows institutions to use a subscription-based distribution model for this program type, they are not required to, and are still permitted to use the existing framework for disbursing funds in a non-term program. 

The new definition also prompted updates to the withdrawal and Satisfactory Academic Progress (SAP) rules surrounding subscription-based programs. The rule clarifies that a student in a subscription-based program is not considered to have withdrawn if the student completes all the requirements for graduation, if the student completes one or more modules that comprise 50 percent or more of the number of days in the payment period, or if the institution obtains written confirmation that the student will resume attendance in a subscription-based program.

The current rule regarding SAP applies to only credit hour programs using standard or nonstandard-terms that are not subscription-based programs and requires that an institution’s SAP policy specifies the pace at which a student must progress through his or her educational program to ensure that the student will complete the program within the maximum time frame. The new rule allows institutions with subscription-based programs to also have the option of calculating pace by determining the number of hours that the student should have completed at the evaluation point in order to complete the program within the maximum time frame. 

Satisfactory Academic Progress

With respect to SAP, the new language specifies that the pace requirement does not apply to non-term and subscription-based programs, on the justification that students in these programs must complete 100% of their attempted credits to receive their next disbursement already, so there is no need for a separate pace calculation. 

The final rule also adds language that would allow credit hour programs using standard or nonstandard terms to base the maximum time frame pace calculation on calendar time in place of dividing earned credits into attempted credits to arrive at a percentage. Institutions have the option of setting a minimum number of credits the student has to have earned by a specific point in the student's academic program to assess pace instead.

Foreign Institutions

Similar to the rule proposed in April of this year, the final rule also includes the regulation allowing students enrolled at a foreign institution to complete up to 25% of a program at a U.S. institution. A commenter on the proposed rules asked ED to consider increasing this percentage to 50% in light of the COVID pandemic, but ED declined to make those changes. 

ED in its comments made sure to make clear that although the CARES Act currently authorizes the use of distance education by eligible foreign institutions, and that it does “believe that students benefit from having access to distance learning opportunities,” that the current authority is temporary and tied to the national emergency declared on March 13, 2020.

The rule also clarifies the conditions under which foreign institutions can enter into written arrangements with title IV ineligible institutions. The conditions allow for a written arrangement between a foreign institution and a Title IV ineligible entity, as long as the ineligible entity provides for no more than 25% of a student's program provided and that the ineligible entity satisfies the definition of “foreign institution.”

Institutional Certification

The new rule would codify current ED practice that the Secretary may deny an institution's application for certification or recertification for Title IV eligibility if the institution is not financially responsible, or does not submit its audits in a timely manner. An institution may be found to be not financially responsible if the person who has substantial control over the institution had previous control over an institution that closed without executing a viable teach-out plan or agreement.

The language in the rule also enforces that if the ED does not make a decision to grant or deny an institution’s request for certification within 12 months of an institution’s expiration date of its current period of participation, the institution will be granted an automatic, though provisional, recertification. 

In response to complaints that application reviews are not completed by ED in a timely manner, the final rules require “prompt” action by ED on materially complete applications to participate, or continue to participate, as an eligible institution in the Title IV programs. 

New Additions Not Included in the NPRM

According to ED, the department received 237 comments from the public, most of which it says were supportive of the proposed rule. The new rule is slated to incorporate a number of suggestions, including:

  • Allowing asynchronous delivery of some courses or portions of courses delivered as part of clock hour programs as long as licensing bodies permit the use of asynchronous learning and will include clock hours earned through asynchronous learning toward the clock hour instruction requirements; 

  • Eliminating proposed changes to financial responsibility regulations, pending a future negotiated rulemaking on the topic;

  • Incorporating asynchronous coursework into the definitions of a clock hour and week of instructional time;

  • Modifying the definition of distance education from requiring substantive interactions on a “predictable and regular” basis to a “predictable and scheduled” basis; and

  • Clarifying that subscription-based programs are not limited to direct assessment programs by removing the “prior experience” requirement from written arrangements.

The regulations will officially take effect July 1, 2021, but have been authorized for voluntary early implementation immediately. Schools should weigh the pros and cons of early implementation in light of the current COVID-19 environment. In some circumstances, such as student withdrawals from a program with a modular format, the COVID-19 statutory flexibilities may provide a greater benefit to students than the final rules. ED has historically required early implementation, if elected by the school, to apply across-the-board to all affected students.


Publication Date: 9/2/2020

Jessica H | 1/21/2021 3:31:35 PM

For the R2T4 modules portion, do we apply this rule to students whose are is not modular, but the student is opting to take some gen ed courses in a modular manner instead? It seems that we would use the 49% only if the program is designed to be modular, but the description implies we are to look at their actual enrollment.

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