Deep Dive: Final Rules on Administrative Capability, Certification Procedures, Financial Responsibility, and Ability to Benefit

By Jill Desjean, Senior Policy Analyst

On Tuesday, the Department of Education (ED) released final rules on the four remaining topics from its 2020-21 Institutional and Programmatic Eligibility negotiated rulemaking session. The rules become effective July 1, 2024.

Administrative Capability and Certification Procedures

Final rules are largely similar to what ED proposed in May, with a few notable exceptions.

ED had initially proposed to prohibit the practice of transcript withholding for past-due balances only in limited circumstances, which included instances where the balance due was the result of institutional errors in administering Title IV aid, institutional fraud or misconduct, or a return to Title IV funds (R2T4) calculation. In the final rule, ED retained the transcript withholding prohibition for balances arising from institutional errors and fraud or misconduct, but removed the R2T4 provision. 

NASFAA had noted in comments submitted in June that it is inconsistent for ED to prevent students from receiving Title IV aid when they owe an overpayment from an R2T4 calculation, but that if the institution assumes the student’s overpayment liability arising from an R2T4 calculation they cannot employ equally strict practices to ensure the balance is paid.

ED added a new prohibition on transcript withholding from what was proposed earlier this year. Institutions must now release transcripts for any payment period in which the student received Title IV aid and had paid, or made arrangements to pay, all institutional charges (whether with Title IV aid or through any other payment source). Institutions could continue to withhold transcripts for payment periods in which the student did not receive Title IV funds at all, as well as for payment periods in which students did receive Title IV funds, but owed the institution a balance for that payment period.

ED noted in the preamble that they had considered prohibiting withholding transcripts for all courses covered by Title IV aid, but ultimately decided this would be too difficult for institutions to administer given the fungible nature of funding that would make it impossible to determine which specific courses were paid for with Title IV aid.

In the certification procedures rules, ED also removed a provision it had proposed in its draft rule that would have permitted the department to use the debt-to-earnings (D/E) and earnings premium (EP) metrics from the gainful employment regulations as supplementary performance measures it could use in certifying or recertifying an institution’s eligibility to participate in the Title IV programs. NASFAA noted in comments on the proposed rules that, because the D/E and EP metrics will be calculated for all programs at all institutions under the Financial Value Transparency Framework, using those metrics to certify or recertify institutional eligibility would effectively condition institutional eligibility on GE metrics for both GE and non-GE programs, which ED has consistently stated is not within their authority. 

Several changes are made in the final rules with respect to programs that prepare students for licensure in a recognized occupation. ED added clarity from rules that initially proposed to limit a program’s length to the required minimum established by the state. In the final rule, ED adds that this program length limitation will not apply for occupations where state entry level requirements include completion of an Associate degree or higher, or where the program is delivered entirely through distance education or correspondence courses.

ED also added a provision that allows an institution to offer a program to students who live in a state even if the program does not meet their state’s requirements for licensure or certification. If an institution chose to offer a program to such students, each student would have to attest that they intend to move to a state where the program does satisfy the educational requirements for licensure. ED notes in the preamble to the rules that if student loan borrowers who provide this attestation later file borrower defense to repayment applications, the presence of such an attestation alone would not necessarily be proof the claim cannot be approved.

New requirements related to financial aid counseling and communications are added as well, although with no changes from the proposed rule. ED adds to its existing list of elements required to be considered adequate financial aid counseling: cost of attendance based on enrollment status, broken down by individual elements and direct and indirect costs; an indication of whether aid must be earned or repaid; net price; and deadlines for accepting, declining, or adjusting aid offered. While these regulations do not apply exclusively to financial aid offers, it is worth noting institutions are already in compliance with the updated regulations if their aid offers align with NASFAA’s code of conduct or College Cost Transparency Initiative.

ED retained language from the proposed rule requiring institutions to advise students and families to accept the most beneficial types of financial assistance available to them. While NASFAA agrees in spirit that the role of the financial aid office is to provide this type of advice, we noted in our comments that this advice is difficult to give broadly since the most beneficial type of aid may depend on individual circumstances. ED addresses this concern in its preamble language, noting its intent is to identify patterns and practices where institutions repeatedly advise students to accept one type of aid over another, better choice, such as encouraging students to accept loans instead of grants.

Financial Responsibility

The final rule is largely the same as the proposed financial responsibility regulations with the exception of several changes to mandatory and discretionary triggering events and deadlines for institutions to report to ED when such events take place. ED uses triggering events, first introduced in 2016, as a supplement to the composite score to monitor an institution’s financial well-being to account for the fact that the composite score represents only a snapshot of circumstances at the end of the institution’s fiscal year. ED requires institutions to report certain mid-year actions or events as they occur so the department can assess their immediate impact on the institution’s financial health.

In the final rule, ED has shifted several triggering events from one category to the other, added or eliminated some triggering events altogether, and fine-tuned language for clarity. Changes to triggering events from the proposed rule are detailed below.

Mandatory triggers

Mandatory triggers result in an automatic determination that an institution is not financially responsible, and requires institutions experiencing these triggering events to post financial protection. In the final rule, ED adds an exemption to the financial protection requirement for institutions experiencing a mandatory triggering event, excluding situations where the triggering event has been resolved or where losses associated with the event are covered by insurance.

The final rule splits teach-out plans into different categories, one of which is considered a mandatory trigger and the other discretionary. When a state, ED, another federal agency, accreditor, or other oversight body requires an institution to submit a teach-out plan for reasons related to financial concerns, it is classified as a mandatory trigger. Teach-outs for other reasons are now classified as discretionary.

State licensing or authorizing agency citations for failure to meet agency requirements are reclassified from mandatory to discretionary. ED cited in its rationale its agreement with commenters who noted that different states issue such citations for different reasons. As such, not only could relatively minor infractions result in a mandatory trigger, but institutions operating in different states would be held to different standards.

Also moved from mandatory to discretionary is an institution’s loss of eligibility to participate in another Federal educational assistance program due to an administrative action against the school. ED chose to reclassify this trigger as discretionary in acknowledgment of the fact that some losses of eligibility for other Federal programs could be from programs that represent a small amount of revenue or that only persist for a short time.

Discretionary triggers

As a reminder, discretionary triggers differ from mandatory triggers in that they do not result in an immediate requirement for institutions to post financial protection. Rather, they represent a set of circumstances under which ED ​​may determine an institution is not able to meet its financial or administrative obligations due to the event having a potential significant adverse effect on the institution’s financial health.

ED narrowed its discretionary trigger related to program discontinuation or closure where those programs enroll more than 25%of enrolled students, making these two distinct triggers apply only when the discontinued or closed programs enrolled more than 25% of Title IV aid recipients.

Reporting requirements

The department also extends — from 10 days in the proposed rule to 21 days in the final — most deadlines for institutions to report mandatory triggering actions or events. The reporting deadline for failure to comply with the 90/10 rule, however, remains at 45 days from the end of the institution’s fiscal year.

Ability to Benefit

ED made only one significant change from the proposed ability to benefit regulations, with the addition of section 668.157(c), which establishes an approval process for eligible career pathways programs (ECPPs). ED notes in the preamble to the regulations that they felt it necessary to create an approval process to ensure program quality. Department approval would be limited to the first ECPP offered by the institution for students enrolling under the ability to benefit rules. This would also apply to institutions already offering ECPPs, in which case institutions would apply to seek affirmative verification that their program(s) meet the new rules.

All rules from ED’s 2020-21 negotiated rulemaking agenda are now final with the publication of this last set of regulations. ED is already underway with its 2023-24 rulemaking, with the second week of negotiations on student loan debt relief scheduled for next week and plans underway to hold a separate session on Institutional Quality and Accountability.


Publication Date: 11/1/2023

Charles M | 11/1/2023 1:53:44 PM

Has anyone investigated the concept for issuing a partial transcript, one that only shows grades for specified terms?

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