This analysis was prepared by Venable, LLP, on behalf of AACOM.

On November 29, 2023, the Department of Education (Department) published in the Federal Register a notice announcing its intention to establish a negotiated rulemaking (neg-reg) committee to rewrite six areas of higher education regulations that address Title IV program integrity and institutional quality under the Higher Education Act (HEA). This process started with public virtual hearings and a request for public comments in April 2023. Negotiators selected by the Department will meet virtually on January 8–11, February 5–8, and March 4–7, 2024 to discuss amending the regulations. The notice also requests nominations for individual negotiators who represent key stakeholder constituencies for the selected topics. Nominations to serve on the neg-reg committee must be received by December 13, 2023.

The neg-reg committee will address the following topics:

1. The Secretary’s recognition of accrediting agencies under 34 CFR part 602 and related parts;
2. Institutional eligibility under 34 CFR 600.2, including state authorization as a component of such eligibility under 34 CFR 600.9;
3. The requirements for distance education under 34 CFR 600.2 that pertain to clock hour programs and reporting for students who enroll primarily online;
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 the administrative burden for institutions of higher education under 34 CFR 668.22; and
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, and loss of such funds under 34 CFR part 668, subpart K.

The Department also announced a subcommittee to address the eligibility requirements for participants in the Federal TRIO Programs. The subcommittee will meet separately on January 12 and February 9, 2024.

Notably, the topic of third-party servicers is not included. In the notice, the Department suggested third-party servicers could be addressed in a future rulemaking and indicated that it is planning to issue updated guidance in early 2024. 

Recognition of Accrediting Agencies

Although the federal government does not set specific standards for accrediting agencies, generally, the HEA requires institutions of higher education to be accredited or, if applicable, pre-accredited by a recognized accreditor to be eligible to participate in the Title IV programs. The Department’s primary role in accreditation is to recognize an accrediting agency as a “reliable authority regarding the quality of education or training offered” at institutions through the processes and condition set forth in the HEA and corresponding regulations.

For Department recognition, Section 496 of the HEA requires that an accreditor be a state, regional, or national agency that shows they consistently apply and enforce standards that ensure the education programs, training, or courses of study offered by an institution are of sufficient quality to meet the stated objectives for which the programs, training, or courses are offered. The standards used by the accrediting agencies must assess student achievement in relation to the institution’s mission; this may include course completion, job placement rates, and passage rates of state licensing exams. Agencies must also consider curricula, faculty, facilities, fiscal and administrative capacity, student support services, and admissions practices. Accrediting agencies must also meet requirements that focus on the review of an institution’s operating procedures, including reviewing newly established branch campuses and requiring institutions to submit a teach-out plan in certain circumstances. They must also perform regular onsite visits that focus on the quality of education and program effectiveness.

Institutional Eligibility, Including State Authorization

Title IV of the HEA establishes the program integrity triad, which comprises three requirements to ensure program integrity in postsecondary education. The three requirements are state authorization, accreditation by an accrediting agency recognized by the Department, and certification by the Department. 

For Title IV purposes, consumer protection is accomplished by states providing the legal authority for an institution to operate a postsecondary educational program in the state in which it is physically located. 

There are two basic requirements for an institution to be considered legally authorized by a state:

1. The state must authorize the institution by name to operate postsecondary educational programs, and
2. The state must have in place a process to review and address complaints concerning institutions physically located within the state, including enforcing applicable state law.

Institutions that offer distance or correspondence education to out-of-state students must also meet the state authorization requirements in the states in which their students are located. An institution may meet this requirement if it participates in a state authorization reciprocity agreement. 

Distance Education

Generally, distance education refers to educational instruction with a separation in time, place, or both between the student and instructor. The HEA and its regulations define distance education as education that uses one or more of several enumerated technologies, including the internet and audio conferences, to deliver instruction to students separated from the instructor and to support “regular and substantive interaction between the students and the instructor.”

The neg-reg committee will examine the definition of “clock hour,” which currently is defined as 50 to 60 minutes in a 60-minute period of attendance in:

• A synchronous or asynchronous class, lecture, or recitation where there is an opportunity for direct interaction between instructors and students; or
• An asynchronous learning activity involving academic engagement in which a student interacts with technology that can monitor and document the amount of time that the student participates in the activity.

A clock hour in a distance education program does not meet the requirements of this definition if it does not meet all accrediting agency and state requirements or if it exceeds an agency’s or state’s restrictions on the number of clock hours in a program that may be offered through distance education. Also, an institution must be capable of monitoring a student’s attendance in 50 out of 60 minutes for each clock hour under this definition.

Return of Title IV Funds

The HEA specifies that when a Title IV aid recipient withdraws from an institution before the end of the payment or enrollment period for which the funds were disbursed, the institution and/or the student must return Title IV funds to the Department according to a statutorily prescribed schedule. 

In general, when a student withdraws from an institution, an institution first determines the portion of Title IV aid considered to be earned by the student while enrolled and the portion considered to be unearned. Unearned aid must be returned to Department. Through the 60% point of a payment or enrollment period, unearned funds must be returned on a pro rata schedule. After the 60% point of a payment or enrollment period, the total amount of funds awarded is considered to have been earned by the student and no funds are required to be returned. Whether an institution and/or the student is required to return the funds to Department depends on a variety of circumstances, including whether Title IV funds have been applied directly to a student’s institutional charges. Unearned funds must be returned to their respective programs in a specified order, with loans being returned first, followed by Pell Grants, and then other Title IV aid. In some instances, a student may have earned more aid than has been disbursed, and the difference is disbursed to the student after the student withdraws.

Cash Management

Cash management regulations establish rules and procedures that a school must follow in requesting, maintaining, disbursing, and otherwise managing Title IV funds. There are currently two types of arrangements. The department defines Tier One (T1) arrangements as those between an institution and a third-party servicer where the servicer “performs one or more of the functions associated with processing direct payments of Title IV funds on behalf of the institution” and offers one or more financial accounts under the arrangement, or markets an account to students itself or through another entity.

Tier Two (T2) arrangements are defined as those between an institution and a bank under which accounts are offered and marketed directly to students. The Department has added new thresholds for determining which parts of the regulations apply, depending on the number of students at the institution who receive Title IV credit balance refunds. 

For each tier, the regulations prescribe complicated and lengthy rules related to student choice, account access, personally identifiable information, terms and conditions of financial accounts, convenient access to funds and extension of credit, and disclosures, among several other topics.

Federal TRIO Programs

Subpart 2 of Part A of Title IV authorizes six separate discretionary grant programs—collectively known as the TRIO programs—designed to assist qualified individuals from disadvantaged backgrounds with preparing for and completing postsecondary education. While the TRIO programs primarily serve individuals who are or would be low-income, first-generation college students, they also serve students with disabilities, students at risk of academic failure, veterans, homeless youth, foster youth, and individuals underrepresented in graduate education. Typically, depending on the TRIO program, eligible grantees may include institutions of higher education; public and private agencies and organizations with experience in serving disadvantaged youth; secondary schools; and combinations of such institutions, agencies, and organizations.

The TRIO programs include:

1. Talent Search, which is intended to encourage students to complete their high school diplomas and enroll in postsecondary education;
2. Upward Bound, which is intended to prepare and encourage secondary students and veterans toward success in postsecondary education;
3. Student Support Services, which is intended to provide support services to college students to improve the retention, graduation rates, financial and economic literacy, and transfer rates of students from two-year to four-year schools; 
4. Ronald E. McNair Postbaccalaureate Achievement (McNair) Program, which is intended to prepare disadvantaged undergraduate students for subsequent doctoral study by providing research opportunities, internships, counseling, tutoring, and other preparatory activities;
5. Educational Opportunity Centers, which is intended to support high school completion and postsecondary enrollment by providing information on financial and academic assistance available to individuals wishing to pursue a postsecondary education and assisting them in applying for college admission and financial aid; and
6. Staff Development, which is intended to improve TRIO project administration, operation, outcomes, and outreach by providing training to existing and potential TRIO program staff.

*          *          *          *          *