ED Publishes Final Rules on R2T4, Distance Education
By Jill Desjean, Director of Policy Analysis
On Friday, the Department of Education (ED) finalized rules for two topics it negotiated as part of its Program Integrity and Institutional Quality rulemaking committee from 2023-24. While it missed the November 1 deadline that would have made the rules for Return of Title IV Funds (R2T4) and distance education effective this upcoming July, ED opted for early implementation of several provisions, with the rest becoming effective July 1, 2026.
ED chose not to finalize the TRIO rules it proposed earlier this year, including only minor technical changes to the TRIO program rules in Friday's package.
The final rules are significantly pared down from what ED initially proposed in July, with the deapartment acknowledging throughout the preamble that it was persuaded to make changes in response to public comments.
Return to Title IV Funds
In the final rule, ED abandons its proposal to require institutions to take attendance for every course offered by distance education, which NASFAA opposed in its public comments. ED had argued in support of this proposal during negotiations that institutions offering distance education courses could potentially game the system under the current rules that allow non-attendance-taking schools to use the payment period midpoint as the last date of attendance (LDA) when the student does not officially withdraw.
ED’s primary reason for dropping this requirement is rooted in concerns about the accuracy of tools designed to track online student engagement. However, despite removing this provision from the final rules, ED expressed that it continues to have concerns that institutions may not be accurately tracking withdrawals in a fully online environment, and indicates that their decision to remove the provision is to “provide more time to evaluate technological changes that can better track student engagement,” and that it may revisit this issue at a later date.
ED also dropped its proposal to permit students who received a student loan credit balance refund, but who never began attendance, to repay the loan according to the terms of the promissory note. ED noted several commenters expressed fear that such a change would lead to fraud and abuse. While ED argued that abuse occurs overwhelmingly in the grant programs versus the student loan programs, it decided to abandon the proposal to avoid any perception that it had created a regulatory loophole for bad actors. As such, students who receive refunds and never begin postsecondary attendance will remain obligated to repay the loan immediately upon demand.
ED retained other provisions it proposed, including an optional exemption from performing an R2T4 calculation for institutions with generous tuition refund policies, defined as treating withdrawn students as though they had never begun attendance; returning all Title IV aid and refunding all institution charges for the payment period or period of enrollment; and writing off any balance due for the payment period or period of enrollment (changed from the proposed rule where ED required writing off balances for the “current year”) in which the withdrawal occurred. ED clarified in the final rule that institutions may implement this withdrawal exemption on a case-by-case basis in accordance with their own policies. ED exercised its authority to set this provision for early implementation, meaning institutions interested in taking advantage of the exemption could do so as early as February 3, 2025.
ED acknowledged that these changes could impact how schools report enrollments for withdrawn students, especially in cases where a withdrawal takes place well into a period of enrollment when the student had already been reported as enrolled. ED states that it will issue guidance in the future on reporting requirements, reporting statuses, and applicable dates.
ED also chose to retain in the final rule its proposal to codify longstanding guidance that, for institutions required to take attendance, the date of determination of withdrawal must be documented within 14 days after the student’s last date of attendance.
Also preserved in the final rule is a change to R2T4 rules for students enrolled in Prison Education Programs (PEP) to allow them to use a leave of absence (LOA) and return at a different point in their program than where they left off in cases where their studies are interrupted for circumstances beyond their control, such as a carceral facility lockdown or involuntary transfer. ED acknowledged that this option would likely not be available to all PEP students given the limitations they face by nature of their incarceration, but that this option still provides flexibility where none previously existed. ED reiterated that fully exempting PEP students from the R2T4 rules — while a potentially better solution than the LOA option — falls outside of ED’s statutory authority. This provision is also slated for early implementation so, as with the withdrawal exemption for generous refund policies, institutions can choose to use and implement this policy as early as February 3, 2025.
Other R2T4 changes retained from the proposed rule include removing the option for clock-hour programs to use the so-called cumulative method, which considers the number of hours a student would have completed cumulatively across multiple payment periods in calculating the percentage of Title IV aid earned. Schools would be limited to the payment period option, which only considers the scheduled hours that have elapsed during a payment period since the student began attendance in that payment period.
ED also keeps in the final rules a change to how the R2T4 calculation is performed for programs offered in modules, specifically with respect to establishing a “freeze date” to determine the number of days in a payment period for these programs. In place of the freeze date, the rules will now consider a module part of the payment period for R2T4 calculation purposes only if the student began attendance in that module.
Distance Education
In response to comments received, ED removed proposed changes to the distance education regulations that would have limited asynchronous coursework that can count toward an institution's definition of an academic year, only to coursework offered in credit-hour programs. ED appears to have made the decision reluctantly, noting it still intends to conduct oversight on how institutions offer asynchronous clock hour programs, and reserving the right to address the issue in future rulemaking.
Also dropped from the final rules in response to public comments is ED’s proposal to require institutions to report distance education programs as “additional virtual locations.” ED’s justification for requiring institutions to report their programs that offer education fully via distance learning was to enable the department to better distinguish between in-person and distance education programs for purposes of evaluating student outcomes.
ED was persuaded by commenters to collect this information only through the National Student Loan Data System (NSLDS,) which was included in another section of the proposed rule and retained in the final rule. Students would be reported to NSLDS as enrolled either in-person, distance, or hybrid, and the reporting deadline for distance education enrollment would be July 1, 2027 (a one-year delay from the proposed rule.) ED noted it expects to distinguish between distance education and correspondence education for this reporting, which ED will clarify in future guidance. ED also indicated in the rule’s preamble that they expect to incorporate the reporting into an existing data stream, meaning no additional portal or interface between schools and the department would be needed.
In the final rule, ED retains a new definition for “distance education course,” with slight changes from the proposal.
TRIO programs
ED chose not to finalize any of the TRIO rule changes proposed in July, which would have expanded eligibility for the Talent Search, Upward Bound, and Educational Opportunity Center to noncitizen students enrolled or seeking to enroll in a high school in the U.S., its territories, or the Freely Associated States. The rulemaking committee reached consensus on these changes. However, public commenters argued that the changes were too narrow in scope, and ED responded by not finalizing the proposed changes, partly to avoid confusion and administrative burden created by establishing different eligibility criteria for different programs that are often administered by the same individuals. In lieu of finalizing, ED left the door open to broader changes through future rulemaking.
Instead, ED made only technical changes to reflect the current status of the Republic of Palau as a member of the Freely Associated States and to remove references to the Trust Territory of the Pacific Islands.
Publication Date: 1/6/2025
Jeff A | 1/6/2025 10:35:01 AM
A student whose LDA is 14 days prior must be withdrawn is quite problematic and will create incredible burden and inhibit student success. There are no provisions for military duty interruptions, health issues, etc. No attendance recorded in 14 days = W/D and R2T4 calc.
Again, ED has failed students who attend courses in modules during a during a fixed term (think summer terms, but for some schools that excellent delivery method is used year-round).
Since a WD must be done regardless of the situation, even if the student resumed attendance, if you are fixed term, I don’ think resuming attendance in the current module, or even semester, would be an option as it would trigger a non-standard term behavior.
Pretty poorly thought out and negotiated rule as it applies to modules, and really any term structure, but especially problematic for modules in student-based semesters.
I don’t know if the new admin will put this topic on the table to apply some common-sense, but they would have to include this in a neg reg and publish a proposed rule by this summer to keep it from going into effect a year from July 1 I would think.
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