Proposed Regulations on “Distance Education and Innovation” Issued by Department of Education

On April 2, 2020, the Department of Education (ED or the Department) published in the Federal Register proposed regulations (the Proposed Rule), which although described as involving “distance education and innovation,” actually encompass a much broader range of important topics for institutions that participate in the federal student aid programs authorized by Title IV of the Higher Education Act (Title IV). The Proposed Rule follows a negotiated rulemaking process that occurred in early 2019, when federal and nonfederal negotiators achieved consensus on a package of regulatory changes. The same negotiated rulemaking process resulted in proposed and final regulations on accreditation and state authorization matters (which we summarized here) and proposed regulations concerning both TEACH grants and faith-based institution matters.

The following summary reflects our initial review of the key aspects of the Proposed Rule, for which public comments must be submitted to the Department no later than May 4, 2020. ¹

General Definitions

• Academic Engagement: The Proposed Rule would add a specific definition of academic engagement, which has particular relevance to determining returns of Title IV program funds when a student withdraws from an online educational program. Among other things, the proposed definition requires “active participation” by a student in at least one of certain specified activities related to the student’s course of study. The proposed definition would exclude various passive, noninteractive, or nonacademic activities, including participating in housing or meal plans, utilizing academic advising or counseling, or merely “logging in” to online forums, including classes or tutorials, without further participation.
• Clock Hour: The Proposed Rule would define a clock hour for purposes of a distance education program as 50 to 60 minutes in a 60-minute period of attendance in a synchronous class, lecture or recitation where there is an opportunity for direct interaction between the instructor and students. The Proposed Rule would further specify that a clock hour in a distance education program must meet all accrediting agency and State agency requirements, and that it does not meet the conditions of the Department’s definition if it exceeds an accrediting or State agency’s restrictions on the number of clock hours that may be offered through distance education.
• Correspondence Courses: Current regulations define correspondence courses as courses where interaction between the instructor and the student in such a course is limited, is not regular and substantive, and is primarily initiated by the student. The current definition also notes that a correspondence course is typically designed so that a student proceeds through the course at the student’s own pace. However, in its commentary accompanying the Proposed Rule, the Department explains that it does not consider whether a course is self-paced when distinguishing a correspondence course from a course offered using distance education. Instead, the Department evaluates the level of interaction between students and instructors in such courses, with “regular and substantive interaction” characterizing as distance education course. The Proposed Rule thus would strike the reference to “self-pacing” from the definition of a correspondence course. Additionally, for purposes of institutional eligibility regulations that limit the number of students that a Title IV-participating institution may enroll in correspondence courses, the Proposed Rule would consider a student to be “enrolled in correspondence courses” if correspondence courses constitute more than 50% of the courses in which the student enrolled during an award year.
• Credit Hour: The Department proposes to largely retain its current definition of “credit hour,” including time-based requirements relative to classroom instruction and other academic activities. The Proposed Rule would require that an institution’s accrediting agency or State authorizing agency approve the amount of work determined by the institution as appropriate in meeting the requirement for a credit hour. Additionally, current language defining a credit hour, in part, as “an amount of work represented by intended learning outcomes and verified by evidence of student achievement” would be modified to reference work defined by an institution that is consistent with commonly accepted practice in postsecondary education. Consistent with previous sub-regulatory guidance provided in Dear Colleague Letter GEN-11-06 (March 18, 2011), the Proposed Rule would further incorporate language clarifying that, in determining the amount of work associated with a credit hour, an institution may take into account a variety of delivery methods, measurements of student work, academic calendars, disciplines and degree levels.
• Full-Time Student: Unlike traditional term-based programs, subscription-based programs do not allow students to progress from course-to-course until demonstrating competency in a given skill or subject area. The Department therefore proposes to exclude subscription-based programs from the types of term-based programs in which a student’s workload may include no more than one repetition of a previously passed course. The Proposed Rule also would assess full-time enrollment status in a subscription-based program based on whether its requirements are commensurate with a full-time course load as defined by the Department’s requirements for traditional term-based programs.

General Program Eligibility Matters

• Clock-to-Credit Hour Conversion: The Proposed Rule would revert the formula for calculating a clock-to-credit hour conversion to the regulatory methodology that was in effect from 1993 until 2011. Specifically, the minimum number of clock hours that must be included in a semester or trimester credit hour would be reduced from 37.5 to 30, and the minimum number of clock hours that must be included in a quarter credit hour would be reduced from 25 to 20. All references to work outside of class would be removed and would have no bearing on the conversion formula.
• Direct Assessment Programs: The Proposed Rule would simplify and clarify numerous aspects of the regulations for direct assessment programs. Among other things, the Department proposes to (1) revise the definition of “direct assessment” to state that it is a measure of a student’s knowledge, skills and abilities designed to provide evidence of the student’s proficiency in the relevant subject area, (2) require an institution to establish a methodology to reasonably equate each module in the direct assessment program to either credit hours or clock hours, which further must be consistent with the requirements of the institution’s accrediting agency or State authorizing agency, and (3) clearly state that a direct assessment program that is not consistent with the requirements of an institution’s accrediting agency or State authorizing agency is not an eligible program, and in order for direct assessment programs to be considered eligible programs, the agency must have evaluated the programs based on the agency’s accreditation standards and criteria. Also, current regulations require that an institution obtain the Department’s approval every time the institution seeks to add a direct assessment program to its scope of Title IV participation. The Proposed Rule would instead require an institution to obtain the Department’s approval of a direct assessment program when the institution adds such a program for the first time, and when the institution offers its first direct assessment program at each new level of offering (e.g., a first direct assessment master’s degree program or bachelor’s degree program) than what the Department had previously approved. The Proposed Rule would then require institutions only to notify the Department regarding the second or subsequent direct assessment program at the same credential level.
• Subscription-Based Programs: Building upon its experimental sites initiative for competency-based education programs, the Department proposes to define “subscription-based program” as a standard or nonstandard-term direct assessment program in which the institution charges a student for each term on a subscription basis with the expectation that the student will complete a specified number of credit hours during that term. The Proposed Rule would further clarify that coursework in a subscription-based program is not required to begin or end within a specific timeframe in each term, and that students in subscription-based programs must complete a cumulative number of credit hours (or the equivalent) during or following the end of each term before receiving subsequent disbursements of Title IV funds. The Department also proposes to require that an institution must establish a single enrollment status that applies to a student throughout the student’s enrollment in a subscription-based program, except that a student may change his or her enrollment status no more often than once per academic year. Also, the Proposed Rule sets forth a method for determining the number of credit hours (or the equivalent) that a student in a subscription-based program must complete before receiving subsequent disbursements of Title IV funds. Separately, the Proposed Rule would exclude subscription-based programs from certain existing requirements regarding the timing for disbursements of Title IV program funds, and instead provide that an institution may disburse Title IV funds to students in subscription-based programs no earlier than the later of (a) 10 days before the first day of classes in the payment period, or (b) the date that the student completed the cumulative number of credit hours associated with the student’s enrollment status in all prior terms attended.
• Gainful Employment Program Length (“Reasonable Relationship” Test): The Proposed Rule would align the Department’s “eligible program” regulations (34 CFR 668.8) with existing limitations in its program participation agreement regulations (34 CFR 668.14) concerning the length of programs that are “gainful employment” programs under the Higher Education Act. Such programs include all nondegree and short-term programs at public and private nonprofit institutions, and – except for a very narrow carve-out – all programs at for-profit institutions. Under existing regulations, gainful employment must provide training necessary for graduates to obtain employment in a recognized field, and must also demonstrate a “reasonable relationship” between the program’s length and the minimum entry level requirements for that field. The Proposed Rule would cause the Department’s eligible program regulations to mirror the existing program participation agreement regulations’ “reasonable relationship” standard to be: (1) 150% of the minimum clock hours required for the occupation by the State in which the institution is located, or through federal agency requirements, or (2) the minimum number of clock hours required by a State adjacent to the institution’s location.
• Approval of New Programs: The Department’s current regulations require institutions to seek its prior approval of new educational programs, in specified circumstances, before disbursing Title IV funds to students enrolled in such programs. An institution that submits the required application information regarding a new program at least 90 days prior to the intended start date of the program is not required to wait for ED approval unless ED alerts the institution at least 30 days before the first day of class that the program must be approved for Title IV purposes. The Proposed Rule would remove those specific timeframes, which the Department describes as creating an unnecessarily prolonged approval process, and instead would require the Department to take “prompt action” in response to institutional applications that are materially complete. Additionally, in circumstances where a program requires prior Department approval for Title IV eligibility and the Department denies such approval, the Proposed Rule would require the denial to be based on existing enumerated regulatory factors (such as if the new program is inconsistent with the institution’s historic program offerings, growth and operations, or, in the case of a gainful employment program, if the institution has failed to sufficiently demonstrate that the program leads to gainful employment in a recognized occupation).

Distance Education Courses

• Regular and Substantive Interaction: As noted above, perhaps the most critical distinction between correspondence courses and distance education courses under longstanding Department regulations is that distance education courses involve “regular and substantive interaction.” That key characteristic, however, has never been specifically defined. The Proposed Rule thus would define “regular interaction” as that which, prior to the student’s completion of a course or competency: (1) provides the opportunity for substantive interactions between instructors and students on a predictable and regular basis commensurate with the length of time and the amount of content in the course or competency, and (2) monitors the student’s academic engagement and success and ensuring that an instructor is responsible for proactively engaging in substantive interaction with the student when needed, on the basis of such monitoring, or upon request by the student. Further, the Proposed Rule would define “substantive interaction” as that which engages students in teaching, learning and assessment, consistent with the content under discussion, and includes at least two of the following: providing direct instruction, assessing or providing feedback on a student’s coursework, providing information or responding to questions about the content of a course or competency, facilitating a group discussion regarding the content of a course or competency, or other instructional activities approved by the institution’s or program’s accrediting agency.
• Permitted Technologies and Media: The Proposed Rule would eliminate references to certain specific and largely outdated media forms (including videocassettes, CD-ROMs and the like), and instead more generically permit “other media” when used, as required under current regulations, in conjunction with the internet or certain enumerated one-way and two-way video and audio communications methods.

Written Arrangements to Provide Educational Programs

• Eligible Foreign Institutions: The Department’s current regulations governing foreign institutions’ eligibility for Title IV participation, with very limited exceptions for certain clinical training and independent research activities, prohibit such institutions from having written arrangements with any institutions or organizations within the United States for their students to take courses from such institutions or organizations. Additionally, a foreign institution may not permit students to enroll in any course offered by the foreign institution in the United States, including research, work, internship, externship or special studies. The Proposed Rule would allow an eligible foreign institution to enter into written arrangements with eligible institutions within the United States to provide no more than 25% of the courses required for a student’s program. The Proposed Rule would further permit students enrolled in a program at an eligible foreign institution to complete up to 25% of their program through coursework, research, work, internship, externship or special studies offered by an eligible institution in the United States.
• Agreements Between Eligible Institutions: The Proposed Rule would revise the existing regulatory language pertinent to written arrangements between two or more eligible institutions that are owned or controlled by the same individual, partnership or corporation. In such circumstances, the Department currently requires that the institution granting the degree or certificate must provide more than 50% of the program in order for the program to be Title IV eligible. The Proposed Rule would remove this requirement.
• Agreements With Ineligible Institutions or Organizations: Under current Department regulations for written arrangements between an eligible institution and an ineligible institution or organization, the ineligible entity generally can provide no more than 25% of a program offered by the eligible institution. Current regulations further permit an ineligible entity to provide between 25 and 50% (but always less than 50%) of an eligible institution’s program if (1) the eligible institution’s accrediting agency has approved the arrangement, and (2) the eligible institution and the ineligible entity are not owned or controlled by the same individual, partnership or corporation. The Proposed Rule would formally specify how these percentage limitations are to be calculated, and would require institutions to notify the Department within 10 days of entering into any written arrangement with an ineligible entity to provide more than 25% of a program. Additionally, the Proposed Rule would add to existing standards for entry into such a written arrangement that an ineligible institution or organization demonstrate both (1) experience in the delivery and assessment of the program or portion of the program they will be contracted to deliver under the provisions of the written arrangement, and (2) that the program has been effective in meeting the stated learning objectives.
• Aligning Programs With Workforce Needs: The Proposed Rule would clarify that institutions utilizing written arrangements may align or modify their curriculum in order to meet the recommendations or requirements of industry advisory boards or industry-recognized credentialing bodies. This flexibility to account for established industry standards in designing programs would extend to institutional governance or decision-making changes where an institution looks to such standards as an alternative to allowing or requiring faculty control or approval.

Academic Year Requirements

• Week of Instructional Time: As pertains to an institution’s definition of its “academic year,” the proposed Rule would revise the definition of a “week of instructional time” into two parts: one that applies to traditional postsecondary programs, and one that applies to programs using asynchronous coursework through distance education or correspondence courses. The definition for traditional programs would remain unchanged. For purposes of a program using asynchronous coursework through distance education or correspondence courses, a week of instructional time would be defined as a week in which the institution makes available the instructional materials, other resources, and instructor support necessary for academic engagement and completion of course objectives.
• Required Academic Engagement: Additionally, the Proposed Rule would require students in a program using asynchronous coursework through distance education (not a correspondence course) to perform educational activities demonstrating academic engagement during each week of instructional time. The revised definition also would remove current regulatory references to vacation periods and homework, and instead refer to scheduled breaks and activities not included in the separate definition of “academic engagement.”

Satisfactory Academic Progress

• Maximum Timeframe – Assessing Student Pace of Completion: The Proposed Rule would revise a current requirement for an institution’s Satisfactory Academic Progress (SAP) policy to specify the pace at which a student must progress through his or her educational program to ensure that the student will complete the program within the maximum timeframe, such that this requirement applies only to credit hour programs using standard or nonstandard-terms that are not subscription-based programs. For those programs, institutions would, in addition to dividing the cumulative number of hours the student has successfully completed by the cumulative number of hours the student has attempted, have the option of calculating pace by determining the number of hours that the student should have completed at the evaluation point in order to complete the program within the maximum timeframe.
• Maximum Timeframe – Calendar Time Option for Undergraduate Credit Hour Programs: The Proposed Rule would continue to require that an institution’s SAP policy specify, for all programs, a maximum timeframe within which students must complete the educational program in order to be eligible to receive Title IV funds. However, the Proposed Rule would permit the maximum timeframe for an undergraduate program measured in credit hours to be a period expressed in calendar time, as well as measured in credit hours (which is the only current option) that is no longer than 150% of the published length of the educational program.

Institutional Certification and Program Participation Agreements

• Review of Certification Applications: The Department proposes to add regulatory provisions stating that if it does not make a determination to grant or deny institutional certification within 12 months of the expiration date of an institution’s current period of Title IV participation, the institution will automatically be granted renewal of certification, which may be provisional for cause, but not automatically provisional because the Department failed to make an affirmative decision within the 12-month timeframe.
• Graduation and Employment Statistics: The Proposed Rule would clarify the Department’s program participation agreement (PPA) regulations by specifying that institutions must make available to prospective students the most recent data available concerning employment statistics, graduation statistics, and any other information to substantiate the truthfulness of its advertisements that used job placement rates as a means of attracting students. Additionally, the Department proposes to remove the requirement to provide the source of such statistics and any associated timeframes and methodology.
• Teach-Out Plans: The Proposed Rule would revise current PPA language regarding teach-out plans and explicitly require an institution to update its existing teach-out plan if the Department initiates a limitation, suspension or termination of the institution’s participation in the Title IV programs; the institution’s accrediting agency acts to withdraw, terminate, or suspend the accreditation or pre-accreditation of the institution; the institution’s State licensing or authorizing agency revokes the institution’s license; or the institution otherwise intends to cease operations.

Financial Responsibility

• General: The Proposed Rule would codify existing Department policy that it may deny an institution’s application for certification or recertification to participate in the Title IV programs if it determines that an institution is not financially responsible under the standards set forth in 34 CFR Part 668 Subpart L, or if the institution does not submit its financial and compliance audits by the date permitted and in the manner required under 34 CFR 668.23.
• Past Performance: The Department’s current financial responsibility regulations generally provide, subject to certain limited exceptions, that an institution is not financially responsible if a person who exercises substantial control over the institution, or any member of that person’s family, (1) owes a liability for a violation of a Title IV program requirement that is not being repaid, or (2) exercises or exercised control over another institution with an outstanding liability that is not being repaid. The current regulations also define the term “ownership interest” as a share of the legal or beneficial ownership or control of, or a right to share in the proceeds of, the operation of an institution, an institution’s parent corporation, a third-party servicer or a third-party servicer’s parent corporation. The current definition also indicates that a person is considered to exercise substantial control over an institution or third-party servicer if the person directly or indirectly holds at least a 25% ownership interest in the institution or servicer, holds at least a 25% ownership interest in the institution or servicer, represents at least a 25% ownership in the institution or servicer, or is a member of the board of directors, a general partner, the chief executive officer or other executive officer as designated by the institution, or an entity that holds at least a 25% ownership interest in the institution. Among other things, the Proposed Rule would (a) replace the term “substantial control” in these regulations with “substantial ownership or control;” (b) revise the regulations to clarify that these past performance concerns extend not only to individual persons but also to any legal entity with substantial ownership or control; and (c) consider an institution to not be financially responsible if a person or entity who exercises substantial ownership or control over the institution, or any member or members of that person’s family, alone or together exercised substantial ownership or control over another institution that closed without a viable teach-out plan or agreement that was both approved by the institution’s accrediting agency and faithfully executed by the institution.
• Changes in Ownership or Control: Although the Department substantially revised its requirements for institutional financial responsibility in 1998, and adopted a series of new standards – including the composite score ratio test – at 34 CFR 668.171-176, it never formally rescinded its previous financial responsibility requirements as set forth at 34 CFR 668.15. In fact, the Department’s continued practice has been to apply certain aspects of 34 CFR 668.15 when determining the financial responsibility of an institution after a change in ownership or control. The Proposed Rule would codify this practice by retitling 34 CFR 668.15 as “Factors of financial responsibility for changes in ownership or control,” and also revising language within 34 CFR 668.15 to make clear that an institution must satisfy the requirements of that section “to begin and continue to participate in any Title IV program after a change in ownership or control.”

Student Withdrawals and Leaves of Absence

• Standard Term Programs Offered in Modules: The Department proposes to add standard term programs (except for subscription-based programs) to the types of programs in which students must be considered withdrawn if they have ceased attendance and are not scheduled to begin another course within a payment period for more than 45 calendar days after the end of the module they ceased attending.
• Non-Term and Subscription-Based Programs: The Proposed Rule would clarify that a student in a non-term program or a subscription-based program is considered withdrawn if the student is unable to resume attendance within a payment period or period of enrollment for more than 60 calendar days after ceasing attendance.
• Determining a Student Withdrawal: Among numerous revisions to existing regulations regarding student withdrawals prior to program completion, the Proposed Rule would add to the existing exceptions to requirements for determining a student has withdrawn, specify additional circumstances in which a student must be considered withdrawn even if the institution has written confirmation of future attendance, and prescribe that students enrolled in subscription-based programs may only avoid withdrawal through a written confirmation of future attendance if they indicate that they plan to resume attendance during the same payment period or period of enrollment.
• Leaves of Absence: The Proposed Rule would add subscription-based programs to the types of programs that do not require the institution to permit the student to complete coursework he or she began prior to the leave of absence to grant an approved leave of absence.

Final Audit Determinations and Final Program Review Determinations

• Deference to Triad Agencies for Distance Education Classifications and Assignment of Credit Hours: The Proposed Rule would clarify that if a final audit determination or final program review determination includes liabilities resulting from the institution’s classification of a course or program as distance education, or the institution’s assignment of credit hours, the Department must rely on the requirements of the institution’s accrediting agency or State authorizing agency regarding qualifications for instruction and whether the work associated with the institution’s credit hours is consistent with commonly accepted practice in higher education. The Department further explains this proposal as requiring that a final audit determination or final program review determination, to the extent it involves such topics, to specifically reference the accrediting agency or State authorizing agency requirements that are the basis for the Department’s finding of noncompliance.

In addition to the above key provisions, the Proposed Rule contains a number of other less significant and technical regulatory revisions. This summary of the Proposed Rule’s most significant provisions should not be construed to constitute legal advice with respect to the Department’s Proposed Rule, nor with respect to any other education regulatory matters. Please do not hesitate to contact the authors if you have any questions regarding these or other education regulatory matters.