ED Releases Final Rule Package on Ability to Benefit, Administrative Capability & Certification Procedures and Financial Responsibility

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The Department of Education (ED) on Tuesday released final rules on a number of topics that the department says will “raise the bar” on institutional accountability and better protect students and taxpayers.

The rules released Tuesday are the remaining accountability topics considered during the Institutional and Programmatic Eligibility Committee: Ability to Benefit, Administrative Capability, Certification Procedures, and Financial Responsibility. The final rules will be published in the Federal Register, though ED has published an unofficial copy.

In a press call, Education Secretary Miguel Cardona stressed that the department’s actions underscore the Biden administration’s commitment to be equally as aggressive on student loan debt relief and accountability in higher education programs.

ED negotiated these regulations in a rulemaking session held in early 2022, where it also discussed institutional and programmatic eligibility topics including the 90/10 rule and the recently released gainful employment regulations.

“These rules give the department greater tools to protect taxpayers from losses created by school misconduct and closures, they allow the department to more quickly and effectively place conditions on some worrisome schools,” said Under Secretary of Education James Kvaal. “They ensure that when students take out loans for programs that lead to licensure they will be able to achieve their educational dreams.”

According to ED, Tuesday’s rules package will specifically help the department “better protect taxpayers from the negative effects of sudden college closures, will restrict colleges from withholding course credits paid for with federal money from students’ transcripts, and require colleges to clearly communicate to students how much financial aid they will receive.”

The first rule as a part of Tuesday’s announcement included standards of financial responsibility for postsecondary institutions, which outline certain mandatory triggering events that will result in requests for a letter of credit or other forms of financial protection.

Examples of those triggers would include when an institution is showing financial risk due to failure to  meet debt obligations, certain lawsuits by federal or state actors, being in danger of losing access to federal student aid due to having a high cohort default rate, failing the 90/10 revenue requirement, or receiving at least 50% of the institution’s   Title IV aid for failing gainful employment programs.

The rule also includes discretionary triggers that could result in a requirement to provide financial protection based upon a case-by-case determination. Those triggers include institutions: subject to adverse accreditor actions; experiencing significant fluctuations in federal student aid volume; closing programs or locations that enroll significant shares of students; subject to adverse actions by states and other federal agencies.

The package also concerned establishing Title IV student aid eligibility for individuals who lack a high school diploma or equivalent, commonly referred to as the ability to benefit (ATB) regulations.

According to ED, the final rule generally follows the proposed rule unveiled in May of this year. The final rule defines an eligible career pathway program (ECPP) and sets clear standards for institutions to demonstrate compliance. One significant change in the final rule is that ED “simplified” the process for approving ECPPs by focusing on approving at least one ECPP per institution.

Finally Tuesday’s announcement also included administrative capability and certification procedures, which add several requirements for colleges, including: more detailed information to be included in financial aid communications; prohibition of transcript withholding for courses paid for using federal funds; and adequate career services.

The rules would also enable ED to lay out additional conditions the department can place on institutions exhibiting financial warning signs by requiring a teach-out plan or agreement, or limit the addition of new programs and locations. Additionally, the rule would ensure that student aid is only made available for career-training programs that are no longer than state requirements for certification or licensure. The rule also touches on institutions operating through distance education and requires those schools to abide by state laws related to postsecondary closures including rules for teach-outs, record retention, and tuition recovery or surety bonds.

Since these final rules will be published in the Federal Register on October 31, 2023, they will go into effect July 1, 2024.

Stay tuned to Today’s News for a forthcoming deep dive article on these topics.



Publication Date: 10/25/2023

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