Several Issues Prevent Consensus at Program Integrity Negotiations

The program integrity negotiated rulemaking (negreg) meetings concluded on Friday with negotiators unable to reach consensus on five of the 14 issues identified by the Department. Negotiators began the day needing to reach consensus on six of the 14 issues, but were unable to agree to draft regulatory language proposed by the Department to address incentive compensation, gainful employment, state authorization, or the two return of Title IV funds (R2T4) issues.

Because the negotiators were unable to reach consensus, the Department is not obligated to use any of the language agreed to by negotiators on the nine other issues. However, Department officials assured negotiators that they would not simply throw out language that had been developed during the negreg sessions.



Definition of High School Diploma  YES 
Ability to Benefit  YES 
Misrepresentation of Information  YES 
Incentive Compensation  NO 
State Authorization as a Component of Institutional Eligibility  NO 
Gainful Employment in a Recognized Occupation  NO 
Definition of a Credit Hour  YES 
Agreements Between Institutions of Higher Education  YES 
Verification of Information Included on Student Aid Applications  YES 
Satisfactory Academic Progress  YES 
Retaking Coursework  YES 
R2T4: Term-based Programs with Modules or Compressed Courses  NO 
R2T4: Taking Attendance  NO 
Disbursements of Title IV Funds  YES 

Definition of a High School Diploma 

The negotiating team reached agreement on confirming the validity of a high school diploma. Although this topic was originally posed in the context of defining a high school diploma, the final proposal instead seeks to ensure that a claimed high school diploma is from a valid high school. In the second round of meetings in December, the Department had proposed that schools be required to maintain several listings of secondary schools after determining the acceptability of their credential for Title IV purposes. Based on comments from negotiators, the Department replaced the previous proposal, which contained a prescribed regulatory process for schools to follow, with an operational solution.

Beginning with the 2011-12 award year, a student completing the Free Application for Federal Student Aid (FAFSA) will be required to list the name of the secondary school or entity that provides a secondary school program of study and the state that awarded his or her high school diploma. If the secondary school or entity the student provides does not match the list of secondary schools maintained by the Department or if the student does not provide the name of the secondary school or entity or the state that issued the diploma, ED may flag the student's FAFSA for further review by the institution to determine if the student has a valid high school diploma before the student can receive any Title IV aid.

In addition, the Department will provide guidance, most likely in the FSA Handbook, to help schools evaluate the validity of a high school diploma for purposes of awarding Title IV aid.

There was some discussion on the operational details of this process (e.g., how the Department will select applications for further review and communicate that to schools, what list of schools the Department will use, etc.), much of which is still to be determined. However, the proposed regulatory language does not contain operational details, so it's not necessary that those details be finalized now. The proposed regulatory language consists only of an addition to the standards of administrative capability, whereby a school must "develop and follow procedures to evaluate the validity of a student's high school completion if the institution or the Secretary has reason to believe that the high school diploma is not valid or was not obtained from an entity that provides secondary school education." Several non-federal negotiators expressed their support of the placement of this requirement in the administrative capability regulations, since that indicates an institution-wide requirement.

Ability to Benefit  

The statutory provision allowing completion of 6 credits to demonstrate an ability to benefit is incorporated into the draft regulation, with a proposed equivalence given to 225 clock hours. The credits or clock hours would have to be applicable toward a degree or certificate offered by the institution.

ED proposes revising the ability to benefit (ATB) regulations in response to recent findings by the Government Accountability Office (GAO). ED's suggested language would subject states with an approved process to the same requirements as test publishers.

The new language also includes strengthened language around the certification and decertification of test administrators. In their agreement with ED, test publishers would also have to take responsibility for verifying the integrity of certified test administrators. New language also includes a requirement for a test publishers to notify institutions and students if it determines that a test administrator improperly administered a test. ED will assist publishers with the language in such letters. The team also discussed language regarding secure locations for test storage.

The proposed language also updates regulations regarding administering tests to individuals with disabilities to reflect current terms and changes to other statutes. Nonfederal negotiators raised concerns regarding who is the appropriate party to determine if a student needs accommodations. Some believed that the test administrator was not the appropriate party to make such a determination. The test publisher would be required to maintain information on the development of tests for individuals with disabilities.

The team also discussed the data that test publishers must provide to the Department.


The Department drafted language to establish the types of activities that constitute substantial misrepresentation by an institution, including Title IV eligible institutions that have contracts or agreements with non-eligible institutions. Institutions that make substantial misrepresentations could lose Title IV eligibility or face limitations on its participation. Definitions of misrepresentation and substantial misrepresentation would be clarified.

One aspect of the draft language proposed by the Department deals with misrepresentation of the cost of college and financial aid that is available to students. The Department proposed to include in misrepresentation any false, erroneous or misleading statements concerning:

  • Offers of scholarships to pay all or part of a course charge;
  • Whether a particular charge is the customary charge at the institution for a course;
  • The cost of the program and the institution's refund policy if the student does not complete the program;
  • The availability or nature of any financial assistance offered to students, including a student's responsibility to repay any loans, regardless of whether the student is successful in completing the program and obtaining employment; or
  • The student's right to reject any particular type of financial aid or other assistance or the borrower must apply for a particular type of financial aid, such as financing offered by the institution.

Some non-federal negotiators expressed concern about the broad scope of the draft language and the possibility that this language would make institutions vulnerable to class action lawsuits. Department officials noted that the intent of the draft language was to provide the Department with the means to address misrepresentation, not for individuals to develop lawsuits. Negotiators countered that it didn't matter what the intent was because the outcome would be the same. Non-federal negotiators also argued that there should be some leniency for institutions that make an honest error and are not trying to purposefully deceive students and parents.

Nonfederal negotiators suggested amending the language regarding institutions which have written arrangements with ineligible institutions to ensure that substantial misrepresentation on the part of the ineligible institution is tied to the eligible institution.

ED stated that it would include a discussion in the preamble about the need for institutions to disclose which of its programs are not accredited. ED also agreed to include language in the preamble to address institutions' reasonable knowledge of employment conditions in industries for which its programs prepare students.

Incentive Compensation  

Early in the negreg process, the Department proposed simply eliminating the 12 safe-harbors that gave institutions ways to provide incentive compensation to admissions officers and financial aid administrators for securing student enrollments or financial aid awards. However, negotiators urged the Department to provide additional guidance and, prompted by a proposal from a subcommittee of nonfederal negotiators, the Department drafted regulatory language that most negotiators agreed to, with the exception of negotiators representing the private, for-profit sector.

The Department's final proposed language stipulated that institutions "will not provide any commission, bonus, or other incentive payment based directly or indirectly upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of student financial aid." This text closely approximates the language in the law.

Further, ED's draft proposed rule stated that, "Eligible institutions, organizations that are contractors to eligible institutions and other entities may make merit-based adjustments to employee compensation provided that such adjustments are not based on success in securing student enrollments or the award of financial aid."

Negotiators from the for-profit sector urged the Department to allow institutions to use the number of students enrolled or awarded financial aid to be one factor, but not the primary factor, used to determine merit-based raises and bonuses. They argued that eliminating enrollment numbers and financial awards as an assessment tool for compensation could prevent some institutions from being able to provide any merit-based raises or bonuses. They noted that many institutions set enrollment goals as part of their institutional goals. Under the draft language, institutions would not be able to provide incentive compensation to administrators for meeting institutional goals because enrollment and financial aid benchmarks are part of those goals.

Department officials countered that most institutions consider many factors when deciding whether to provide merit-based awards or bonuses and the draft language simply eliminates one factor.

The negotiator representing the community college sector noted that the Department's proposal would be difficult especially concerning institutional goals, but it was language community colleges could live with.

State Authorization  

The issue of state authorization questions whether institutions in a state that does not meet ED expectations for state oversight should remain eligible to participate in the Title IV programs.

ED circulated another draft of the state authorization proposed language Friday morning. Much of the discussion centered on appropriate word selection in a clause addressing a State's process for addressing complaints.

One nonfederal negotiator expressed concern regarding language that appeared in an earlier proposal but which had been deleted in recent drafts. The language addressed states delegating certain functions to accrediting agencies. In the end, this is the concern that blocked consensus.

Nonfederal negotiators also recommended that ED allow enough time to implement any changes.

Gainful Employment  

The draft language would set up additional requirements that affect the Title IV eligibility of certain educational programs. Institutions of higher education would be subject to these requirements for their non-degree programs. For-profit and postsecondary vocational institutions would be subject to the criteria for essentially all of their programs. Such programs are eligible in part if they provide training leading to gainful employment in recognized occupations. Generally, the Department proposed using a student loan debt-to-income ratio as a primary indicator of "gainful employment," where debt includes all forms of student loans (federal and institutional and, if the institution knows about them, private education loans). Institutional payment plans were initially included as well, but dropped as negotiations progressed. The draft language also provided several alternative methods institutions could use to demonstrate eligibility for programs that do not meet the student loan debt-to-income measure. The alternatives were also modified during negotiations, and one, which would have used 70% completion and placement rates, was dropped.

The Department proposed establishing as the basis of its determination the principle that graduates should be able to repay their student debt in ten years without taking more than 8 percent of the expected earnings in the occupation.

The final proposal would have required institutions to report, for each student who completes or graduates from the program, the Classification of Instructional Program (CIP) code for the program, the date the student completed or graduated, and the amounts the student received from institutional and private educational loans. ED would use that data, along with data it already has on the student's Title IV loans, to calculate the debt to earnings ratio for the school's program based on median loan debt and Bureau of Labor Statistics (BLS) earnings data. This calculation would use all of a student's Title IV loan debt, as no distinction is made regarding the schools or programs for which loans were borrowed. The ratio would be calculated every three years.

If a program did not meet the 8 percent measure, the institution could still qualify the program by using actual earnings data rather than BLS statistics, or demonstrating a 90% repayment rate on Title IV loans among the program's graduates.

There was also considerable discussion of the Department's proposed treatment of new programs under the gainful employment requirement

In the end, most nonfederal negotiators could not accept the Department's proposals, and no agreement was reached on this issue.

Credit Hours  

The Department revised the draft regulatory language to address the concerns expressed by non-federal negotiators at the previous negreg session, but many negotiators remained unsatisfied with the Department's proposal.

The Department removed the references to a Carnegie unit, and clarified the measurement of credit hours in terms of work completed by a student. The language was also revised to clarify the alternative measurements that may be established by an institution to determine equivalencies in cases where the credit hour definition is not appropriate, and that such equivalencies were to be based upon learning outcomes. The proposed language was also revised to clarify the responsibilities of accrediting agencies to review an institution's policies and procedures for the assignment of credit hours to its programs and courses as well as for the basis for establishing equivalencies when appropriate.

In response to the concerns expressed by the non-federal negotiators during earlier meetings, the Department added language to the clock-to-credit hour conversion portion of the regulations to clarify the requirement to use clock hours when a limited portion of the program was offered in clock hours due to State or accrediting agency requirements and to require treatment as a clock-hour program if an institution's designated accrediting agency determines that an institution's policies and procedures, or their application, is deficient. Additional language was also added to allow institutions to use an equivalency in determining the clock-to-credit hour conversion if an institution's designated accrediting agency has not identified deficiencies in an institution's policies and procedures, or their application, for determining credit hours for coursework.

Some negotiators voiced strong opposition to any regulations designed to define credit hours because it impeded on institutions' ability to create innovative courses and teaching methods.

In the most recent drafts of the credit hour language, the Department deleted the definition of a credit hour. It also modified language regarding the actions an accrediting agency must take if it finds deficiencies in an institution's policies and procedures. While accrediting agencies must still notify ED of systemic noncompliance, the proposed language no longer includes a time frame for reporting.

Nonfederal negotiators still had concerns on Friday regarding the language addressing when a program must be treated as a clock hour program. The Department modified its proposal to clarify that a program must be treated as a clock hour program if clock hours are an underlying requirement for authorization. Programs that are merely required to report clock hours can continue to be treated as credit-hour programs.

Agreements Between Institutions of Higher Education  

The changes ED proposed to rules governing agreements by which an institution arranges for another institution or organization to provide a portion of its educational program affect for-profit schools. A new disclosure requirement regarding such arrangements would affect all schools.

The final agreement would require that in an arrangement between for-profit schools with common ownership or control, the institution granting the educational credential would have to provide more than 50% of the program.

Verification of Information Included on Student Aid Applications  

The Department's proposed verification language reflects its intention to move towards a targeted verification system. Rather than require verification of a pre-defined set of elements regardless of what triggered the need for review, ED would specify on each selected ISIR which data elements need to be documented. Under this scheme, only one or two elements might need to be reviewed. There would be no change to the institution's authority to select additional items or additional applications to verify, however, the current 30% cap on verifications would be eliminated.

ED would publish annually, well in advance of the start of the processing cycle, the data elements subject to selection.

The draft the team discussed this week reflects input from previous sessions. ED's proposal includes in regulation current guidance that an institution must complete verification before exercising professional judgment to adjust the value of data elements used to calculate the expected family contribution (EFC) or the cost of attendance (COA).

Initially, the Department proposed deleting language which allows schools to collect a tax return with preparer information in lieu of a signed returned. Many nonfederal negotiators objected to this deletion, stating it would cause undue burden on both institutions and students. After further consideration, ED agreed to reinstate the provision.

The Department's proposal also includes language which will require schools to submit all corrections for processing. It believes this is necessary to ensure it has the most accurate data possible.

Satisfactory Academic Progress  

In general, negotiators were receptive to the Department's proposed changes to satisfactory academic progress (SAP) regulations. ED's draft moves SAP regulations from administrative capability to student eligibility. The revised rules would 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 proposal distinguishes between warning periods (when the school's policy could allow a student to continue to receive Title IV aid automatically), and probationary periods (when the student could 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 could apply warning periods. Schools that assess SAP less frequently would have to require a successful appeal to let any student continue to receive Title IV aid despite failing SAP standards. The maximum interval between assessments would continue to be one year.

The new language continues to give institutions flexibility in establishing its policies. Negotiators raised concerns about undergraduate students who may need to go beyond the 150 percent maximum time frame and the treatment of second appeals. ED responded that these issues can be addressed in the school's policy.

The team also discussed the treatment of students placed on financial aid probation. ED clarified that the probation applied to the next payment period in which the student enrolls, which may not be the next scheduled payment period (this issue was raised in reference to term-based schools where a student may not attend optional terms such as summer).

Retaking Coursework  

This issue was the first to be agreed upon. After listening to discussion during the first session, the Department offered to add language to the definition of "full-time student" under section 668.2, allowing, for a term-based program, repeated courses to count towards a student's enrollment status. Credits would not have to be awarded for all repetitions, as is currently the policy. Current policy for non-term programs would continue unchanged.


The Department identified two R2T4 issues it hoped to address during this negreg:

  1. Requiring schools that have attendance records to use them, regardless of the length of time attendance is actually taken, rather than allowing institutions otherwise not required to take attendance to use the midpoint of the payment period when determining a student's withdrawal date for R2T4 purposes.
  2. Changing the Department's current policy for term-based programs with modules or compressed courses that equates the completion of one course or module to the completion of one course taken over an entire term in a "traditional" term program where courses are taken concurrently over the span of the term.

R2T4 -- Modules and Mini-Sessions  

This issue unfortunately received the least amount of discussion because of time constraints. Negotiators did not disagree that problems exist with current policy, but could not come up with an alternative that seemed to do anything more than substitute one set of inequities for another.

One of the problems ED has seen with modules is that some schools have established extremely short modules, only a few days long, as the first module of the payment period. A student can complete that short module and even if he or she attends no other days in the payment period, the student is not considered to have withdrawn.

The Department's draft language proposed to have institutions consider a student to have withdrawn from a term constructed of modules or containing mini-sessions or compressed courses if the student does not complete all the days (for credit-hour programs) or clock hours (for programs measured in clock hours) in the payment period or period of enrollment that the student was scheduled to complete prior to withdrawing.

"We considered the concerns of the nonfederal negotiators expressed during the last meeting, however no significant policy changes were made," the Department stated in its summary of the issue. The Department did simplify the draft language and clarified that all programs are to be treated the same when determining whether a student has withdrawn.

"What we're after here is a level playing field," a negotiator from the Department said.

However, nonfederal negotiators argued that the proposal could have the opposite effect in some cases. Negotiators highlighted multiple scenarios where the approach proposed by the Department would be just as inconsistent and unfair to students as current policy may be.

Some nonfederal negotiators also contended that the proposal would make R2T4 more technically difficult. One negotiator noted that R2T4 is already one of the most common findings in audits and program reviews and making it more complex is the last thing institutions need. Another negotiator noted that modular approaches are becoming more prevalent and the proposal would make it worse. He said that if his institution instituted the proposal today it would increase R2T4 calculations by nearly 40 percent.

After the caucus convened by nonfederal negotiators to discuss the issue, they seemed to agree that no matter what option is used to deal with modules and mini-sessions, there are inconsistencies and unfairness. They said that the negreg committee needed to figure out the way with the least inconsistencies.

During the caucus on Friday morning, negotiators agreed that the proposed language creates new inequities among students, illustrating their concerns with examples. The nonfederal negotiators suggested some possible ways of mitigating the inequalities, such as not requiring a R2T4 calculation if a student completed the courses at the enrollment level for which he or she was packaged. The caucus reported to the whole committee that negotiators would need to have more time to resolve this complex issue.

R2T4 -- Attendance  

To address the first issue, the Department drafted language that states if "an institution is required to take attendance, or requires that attendance be taken for a limited period, the institution must use its attendance records to determine a withdrawal date ... for that limited period." An exception would be allowed if the limited period is one day only for purposes of meeting a census reporting requirement, and a student in attendance at the end of the limited period who subsequently stops attending during the payment period would be treated as a student for whom the institution was not required to take attendance.

Currently, a school is considered required to take attendance only "if an outside entity (such as the institution's accrediting agency or a State agency) has a requirement, as determined by the entity, that the institution take attendance." If the requirement by the outside agency extends only to certain students, the institution must use its attendance records for those students. An institution that voluntarily takes attendance does not currently fall under that definition.

The Department's proposal seeks to encompass any attendance records kept by the institution under the rules applicable to an institution that is required to take attendance, including attendance taken only during short census periods. The Department proposes adding the following two conditions to the definition of a school that is required to take attendance:

  • The institution itself has a requirement that its instructors take attendance; or
  • The institution or an outside entity has a requirement that can only be met by taking attendance or a comparable process, including but not limited to, requiring that students in a program demonstrate attendance in the classes of that program, or a portion of that program.

The first bullet above has been proposed but not accepted in past negotiations. The second bullet would take away the caveat in current regulations that the outside entity itself specify whether its requirements constitute a need to take attendance.

Nonfederal negotiators expressed strong opposition to the Department's proposal because it was confusing and further complicated the already complex R2T4 process. It would make the institution subject to rules applicable to institutions that take attendance for students who are absent at the end of the limited period, and subject to rules applicable to institutions not required to take attendance for those same students if they are shown to have attended after the limited period. An institution required to take attendance may use only the last date of attendance as the withdrawal date; an institution not required to take attendance may use the date the student officially withdraws, or, for students who do not at least begin the institution's formal withdrawal process, the midpoint of the payment period or some other date based on documented participation in an academically-related activity.

"This doesn't really work," said one negotiator. "This is mixing and matching sets of requirements that don't mix and match very well."

Nonfederal negotiators argued that what the Department considers "taking attendance" during a limited period at the beginning of the payment period does not constitute a reliable attendance record. Instructors might take attendance only insofar as necessary to establish a class roster, or to establish an enrollment status by a census date, or to document who has begun attendance. Even later checks on attendance might be performed only sporadically for intervention counseling.

Nonfederal negotiators convened a caucus during the week to talk through their concerns, and proposed a different approach that would concede institutions that take attendance voluntarily through at least the 60% point in time (after which Title IV funds are considered fully earned by the student) should be subject to last date of attendance rules. However, taking attendance during a more limited period would not constitute a requirement to take attendance. It would also have restored the right to decide whether an outside entity has a requirement that can only be fulfilled by taking attendance to that entity. "Taking attendance" would have been defined as confirming the student's presence at every class meeting. Many of the nonfederal negotiators endorsed this approach, but some still disagreed that an institution that voluntarily takes attendance for any period at all should be considered an institution that "is required" to take attendance.

A subgroup of negotiators met with ED representatives on Friday morning. The nonfederal negotiators explained their position that certain types of attendance records, such as those taken on a census date or during an add/drop period at the beginning of a term, are not accurate and should not be used to determine a student's withdrawal date. ED held that any attendance records an institution has should be used for R2T4 purposes to ensure the best date is used for withdrawals. After discussion, the Department did not appear willing to accept the nonfederal caucus proposal, but ultimately the negotiators ran out of time to consider the issue further.

Disbursements of Title IV Funds  

A caucus discussed disbursement of Title IV funds Friday morning. This issue centers around ensuring students with estimated Title IV credit balances are able to obtain books and supplies at the beginning of a payment period. Schools would still have the ability to disburse funds at the times and amounts that are in the students' best interest.

Several proposals were considered. School-based nonfederal negotiators were concerned about increased uncollectible debt if schools had to assume liability for cash disbursements before they could confirm student enrollment. ED at one point agreed that such liability should be the student's for cash disbursements, but not for book vouchers. Negotiators representing students and student consumer advocates feared that shifting liability from schools to students for cash disbursement would also cause a shift away from book vouchers or credits to cash disbursements in order to avoid liability.

The proposal ultimately accepted by the team limits required early payment of anticipated credit balances to Pell Grant-eligible students, stipulates that the student has met all disbursement requirements no later than 10 days before the start of the payment period, and applies only if the student will have a Title IV credit balance. The suggested language does not change existing liability if the student never begins attendance in any classes (under section 668.21), and gives 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 provision, the institution would have to assure that students can acquire necessary books and supplies by the seventh day of the payment period.

The amount made available to the student would be the lesser of the amount the institution determines the student needs for books and supplies or the student's Title IV credit balance. The Department agreed to include in the preamble that schools may use the value of the books and supplies component in the student's cost of attendance as the amount for such a disbursement. Credit balances not subject to payment under this provision would remain subject to current regulation under section 668.164(e) requiring payment within two weeks of the disbursement that created the Title IV credit balance.


Publication Date: 2/2/2010

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