Program Integrity and Institutional Quality: State Authorization, Cash Management, Accreditation and Related Issues

DEPARTMENT OF EDUCATION <CFR>34 CFR Parts 600, 602, and 668</CFR> <DEPDOC>[Docket ID ED-2022-OPE-0050]</DEPDOC> <RIN>RIN 1840-AD82, 1840-AD83, 1840-AD86</RIN> <SUBJECT>Program Integrity and Institutional Quality: State Authorization, Cash Management, Accreditation and Related Issues</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Postsecondary Education, Department of Education. <HD SOURCE="HED">ACTION:</HD> Termination of negotiated rulemaking process for State Authorization, Cash Management, Accreditation and Related Issues. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The U.S. Department of Education (Department) announces the termination of the negotiated rulemaking process for three Program Integrity and Institutional Quality issues that were undertaken as part of a larger negotiated rulemaking process for Federal programs authorized under title IV of the Higher Education Act of 1965, as amended (HEA): State Authorization, Cash Management, Accreditation and Related Issues (Accreditation). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> The negotiated rulemaking process for State Authorization, Cash Management, and Accreditation and Related Issues is terminated as of December 20, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Scott Prince, U.S. Department of Education, Office of Postsecondary Education, 400 Maryland Avenue SW, 5th Floor, Washington, DC 20202. Telephone: (202)453-5568. Email: <E T="03">NegRegNPRMHelp@ed.gov.</E> If you are deaf, hard of hearing, or have a speech disability and wish to access telecommunications relay services, please dial 7-1-1. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> On March 24, 2023, the Department published a notification in the <E T="04">Federal Register</E> announcing our intent to establish a negotiated rulemaking committee to prepare proposed regulations for the Federal Student Aid programs authorized under title IV of the HEA. <E T="03">See</E> 88 FR 17777. On April 11-13, 2023, the Department held a virtual public hearing at which individuals and representatives of interested organizations provided advice and recommendations relating to the issues identified in the March 24 notification. We also took written public comments from March 24, 2023, through April 24, 2023. On November 29, 2023, the Department published a negotiated rulemaking in the <E T="04">Federal Register</E> announcing its intent to establish a negotiated rulemaking committee and soliciting nominations for individual negotiators to represent key stakeholder constituencies for the issues to be negotiated to serve on the rulemaking committee. <E T="03">See</E> 88 FR 83365. The document covered six issues: (1) The Federal TRIO programs, including improvements to programmatic eligibility and operations under 34 CFR parts 642 through 647; (2) The Secretary's recognition of accrediting agencies in 34 CFR part 602 and related parts; (3) Institutional eligibility under 34 CFR 600.2, including State authorization as a component of such eligibility under 34 CFR 600.9; (4) Return of title IV funds, to address requirements for participating institutions to return unearned title IV funds in a manner that protects students and taxpayers while easing administrative burden for institutions of higher education under 34 CFR 668.22; (5) Cash management, to address timely student access to disbursements of title IV, HEA Federal student financial assistance and provisions related to credit balances, escheatment, or loss of such funds under 34 CFR part 668, subpart K; and (6) The definition of “distance education” under 34 CFR 600.2 as it pertains to clock hour programs and reporting for students who enroll primarily online. The Department held three negotiated rulemaking sessions of four days each. During each daily negotiated rulemaking session, we provided an opportunity for public comment and expanded that time to one hour for the second and third sessions. Additionally, non-Federal negotiators shared feedback from their stakeholders with the negotiating committee. On July 24, 2024, the Department published in the <E T="04">Federal Register</E> a Notice of Proposed Rulemaking (NPRM) proposing to amend the Student Assistance General Provisions regulations to promote program integrity and institutional quality in three of the six negotiated rulemaking issues: (1) distance education; (2) the return of title IV, HEA funds; and (3) the Federal TRIO programs. <E T="03">See</E> 89 FR 60256. This document does not apply to the issues covered in the July 24, 2024, NPRM, which will be addressed through that separate rulemaking. This document pertains to the three remaining issues included in the November 29, 2023, notification establishing the negotiated rulemaking committee: accreditation, state authorization, and cash management. For the reasons discussed below, the Department is terminating the negotiated rulemaking process for these issues. <HD SOURCE="HD1">Termination of the Negotiated Rulemaking Process for State Authorization, Cash Management, Accreditation and Related Issues</HD> The Department began the rulemaking efforts described above to amend 34 CFR parts 600, 602, and 668 to create more student-friendly policies relating to the use and receipt of Federal student financial aid and to hold institutions accountable for providing high-quality educational opportunities. However, the Department has decided not to make any regulatory changes on the issues of accreditation, state authorization, and cash management at this time, to allow for additional evaluation of recent changes in other regulations and industry practices. This decision reflects the Department's commitment to deliberative policymaking and consideration of feedback received during the negotiated rulemaking process, which highlighted the need for additional time and further study. Terminating the negotiated rulemaking process at this time will allow the agency to gather additional data, assess evolving industry practices, and evaluate whether existing regulations remain necessary or require modification. The Department considered several factors in reaching the decision to terminate the negotiated rulemaking process on these remaining three identified issues. We considered that two of the areas—state authorization and accreditation—have recently undergone significant changes, as explained below, that continue to affect the field even after the conclusion of negotiated rulemaking, and we decided it is preferable to wait and see the effectiveness of those changes before issuing further regulations. Waiting to assess the effects of these changes will allow the Department to better identify any needed future alterations and improve the evidentiary base for future rulemaking. Regarding state authorization, the Department decided to terminate the negotiated rulemaking process so we could observe the effects of two recent policy changes. One is a change to § 668.14(b)(32)(iii) that went into effect on July 1, 2024. <E T="03">See</E> 88 FR 74568. The new regulation requires institutions to certify to the Department that they are in compliance with all State laws related to closure of postsecondary institutions, including record retention, teach-out plans or agreements, and tuition recovery funds or surety bonds. That change addressed one of the major concerns the Department had related to state authorization—ensuring that States were not limited in their ability to manage the effects of closure on students living within their borders, even if the college is located in a different state. Given that the change to § 668.14(b)(32)(iii) only took effect a few months ago, evaluating its effect as closures occur will help the Department understand whether further modifications may be necessary. The Department also believes it is worth evaluating how State-led efforts at improving state authorization proceed before making further regulatory changes. This particularly involves the policy modification process adopted by the National Council for State Authorization Reciprocity Agreements (NC-SARA), an organization formed in partnership with four regional compacts in which almost all states across the country participate for purposes of providing state authorization and reciprocity. NC-SARA first started using a policy modification process in January 2023 to create a formal mechanism for addressing issues with state authorization and reciprocity. <SU>1</SU> <FTREF/> That process continues to be refined. As many commenters noted during the public hearings and negotiated rulemaking sessions on state authorization, allowing this policy modification process to continue is one way to address the Department's goals. <FTNT> <SU>1</SU>   <E T="03">https://www.nc-sara.org/sara-policy-modification-process.</E> </FTNT> Regarding accreditation, the Department adopted a series of final regulations in this area that went into effect on July 1, 2020. <E T="03">See</E> 84 FR 58834. These regulations made significant changes to the Department's process for reviewing and recognizing accrediting agencies. Although these regulations went into effect four years ago, the Department is still in the midst of the first cycle of implementing these changes across all accrediting agencies. That is a result of the five-year timeframe on renewal of recognition for accrediting agencies, as well as the requirements that agencies submit applications for renewal two years before their deadline for renewal and the additional periods institutions have for submitting compliance or monitoring reports. Allowing a full 5-year review cycle under the 2020 regulations for all accrediting agencies provides a greater opportunity to demonstrate the effectiveness of the existing rules and ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 14k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━