Regulatory Update – Program Integrity Presented by: Betsy Mayotte Presented to: ANZFAA Conference via Skype Date: September, 2010

2 The Legal Bits Please note this PowerPoint presentation is an educational tool that is speculative in nature. It is not intended to be an exhaustive review of the Department of Education’s laws and regulations and it not intended to provide legal advice. Materials presented in this presentation should not be considered a substitute for actual statutory or regulatory language. Always refer to the current edition of a referenced statute, or regulation for precise language and consult with your own attorney for legal advice.

3 Agenda Background Negotiated Rulemaking Overview Regulations effective July 1, 2011 in most cases Speculation on Gainful Employment

4 Background Student debt level big discussion topic Consumer protections It’s all about the oversight Unique atmosphere at neg reg No consensus

5 Program Integrity - Topics Definition of High School Diploma Ability to Benefit Misrepresentation of Information Incentive Compensation State Authorization Gainful Employment Definition of Credit Hour Return of Title IV Funds: Institutions Taking Attendance Verification* Satisfactory Academic Progress Retaking Coursework Return of Title IV Funds: Term-based Module Program Credit Balances Agreements Between Institutions of Higher Education *Foreign Schools Exempt

6 High School Diploma Currently not defined Proposal would require school to verify validity if school or ED had reason to believe was not valid School must develop procedures to do so –ED will provide further guidance in Handbook Questions will be added to FAFSA to validate HS ED will maintain list of “approved” schools

7 Ability to Benefit Students considered to have the ATB if: –High school diploma or equivalent –Pass an approved ATB test –Satisfactorily complete 6 semester hours, 6 trimester hours, 6 quarter hours, or 225 clock hours that are applicable toward a degree or certificate offered by the institution. –Does not have to be same program, but should be “rigorous” Defines “independent test administrator”

8 Incentive Compensation Eliminates all 12 safe harbors Is it cash or has value? + Is it based on enrollment or financial aid? It’s Illegal

9 Incentive Compensation Allows for enrollment in non-Title IV eligible programs Allows 3 annual raises as long as not solely based on enrollment Profit sharing and bonuses ok as long as are of same percentage Can be based on student who successfully complete program\ Does not apply to foreign students recruited to foreign schools if student not eligible to receive aid

10 Credit Hours Seeks to define credit hour in terms of work completed by a student –Consists of one hour of classroom or direct faculty instruction and –a minimum of two hours of out of class student work for approximately fifteen weeks for one semester or trimester hour of credit, or –ten to twelve weeks for one quarter hour of credit, or the equivalent amount of work over a different amount of time Alternative would be based on learning outcomes Responsibility for review of institutional policies would rest with accrediting agencies Clock hours may be used if credit hour definition for a program is deficient

11 Definition of a Credit Hour 1 hour of direct faculty instruction + at least two hours of student work outside classroom over set period of time For 15 weeks – Credit Hour

12 Return of Title IV – Mini Sessions and Modules Attempt to resolve inequities –Current rules allow a student in a few day long module to be seen as attending the entire semester Proposal would require the student to attend entire semester to receive Title IV credit for entire semester No resolution

13 Disbursements – Credit Balances Anticipated credit balances can be made available to students prior to disbursement if: –The student is Pell-eligible (shows on SAR) –All disbursement requirements have been met no later than 10 days prior to the payment period –The student will have a Title IV credit balance Liability remains on the student if they do not attend Amount is lesser of: –COA of books and supplies –Amount of credit balance School must ensure that students can obtain books/supplies by 7 th day of loan period Method of disbursement up to school (book voucher etc)

14 Taking Attendance Proposal would add following requirements to definition of schools required to take attendance: –The institution itself has a requirement that its instructors take attendance; or –The institution or an outside entity has a requirement that can only be met by taking attendance or a comparable process, including but not limited to, requiring that students in a program demonstrate attendance in the classes of that program, or a portion of that program Exception would be one day attendance for census purposes

15 Taking Attendance – Impact of Proposal An institution required to take attendance may use only the last date of attendance as the withdrawal date; An institution not required to take attendance may use: – the date the student officially withdraws, or, – for students who do not at least begin the institution's formal withdrawal process, the midpoint of the payment period or – some other date based on documented participation in an academically-related activity.

16 Misrepresentation by an Institution “When the institution itself, one of its representatives, or any ineligible institution, organization, or person with whom the eligible institution has an agreement, makes a substantial misrepresentation regarding the eligible institution, including about the nature of its educational program, its financial charges, or the employability of its graduates.”

17 Substantial Misrepresentation Any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment. Possible results: –Revoke program participation agreement; –limitations on participation in the Title IV programs –Deny participation applications made on behalf of the institution; or –Fines and penalties

18 Misrepresentation by an Institution Types of activities (if not accurate) that constitute substantial misrepresentation by an institution would include: –Offers of scholarships to pay all or part of a course charge; –Whether a particular charge is the customary charge at the institution for a course; –The cost of the program and the institution's refund policy if the student does not complete the program; –The availability or nature of any financial assistance offered to students, including a student's responsibility to repay any loans, regardless of whether the student is successful in completing the program and obtaining employment; or –The student's right to reject any particular type of financial aid or other assistance or the borrower must apply for a particular type of financial aid, such as financing offered by the institution.

19 Misrepresentation by an Institution Includes institutions which have written arrangements with ineligible institutions to ensure that substantial misrepresentation on the part of the ineligible institution is tied to the eligible institution. Preamble includes the need for institutions to disclose which of its programs are not accredited. Violations could result in loss of Title IV eligibility

20 Repeating Coursework Repeated courses count towards enrollment status regardless of credits earned for term-based program only –Non-term based programs remain unchanged; credits must be earned in addition to those previously earned.

21 Satisfactory Academic Progress Financial aid warning – students may still get aid for one additional payment period –Only allowed if school measures SAP every payment period Financial aid probation – student failed SAP and has appealed successfully and is receiving aid –School allowed to impose conditions such as reduced course loads

22 Satisfactory Academic Progress Schools must specify pace that student must matriculate to complete in maximum timeframe Policy must include: –How pace measured –How transfers affect SAP Transfer credits count towards completed and attempted credits in calculations

23 Satisfactory Academic Progress - Appeals Must have written policy Student must explain why they did not meet SAP and what has changed to allow them to do so now Student must meet one of two elements for successful appeal –The institution has determined that the student should be able to meet satisfactory progress standards after the subsequent payment period, or –The institution develops an academic plan with the student that, if followed, will ensure that the student is able to meet the institution’s satisfactory academic progress standards by a specific point in time.

24 Written Arrangements Between Institutions Foreign schools not allowed to have written agreements with US schools to allow students to take portion of program there –Exceptions for clinical portions of medical, nursing, vet schools

25 Gainful Employment – most recent proposal Non-degree programs: –One academic year in length or more –Non-degree recognized educational credential and –prepares a student for gainful employment in a recognized occupation Schools meets standard if: –The program’s annual loan repayment rate is at least 35 percent; –over three years, the program’s annual loan payment is 30 percent or less of –discretionary income or 12 percent or less of average annual earnings; or –Using the prior three year period, the program’s annual loan payment is less than 20 –percent of discretionary income or less than 8 percent of average annual earnings.

26 Gainful Employment – Restricted Status ED places a program on a restricted status under the following conditions— –The program has an annual loan repayment rate of less than 45 percent; and –The program has an annual loan payment that is more than 20 percent of discretionary income and more than 8 percent of average annual income using 3 year period

27 Gainful Employment Annual loan repayment rate test : –the percentage of borrowers who are successfully reducing the principal of their FFEL and Direct loans. –Includes all students who attend program – even if they don’t complete –Includes all loans used for program, not just the ones from that schools. Debt to Income Test: –All Federal and private loans from that institution –Only includes “completers”

28 Don’t Forget About…

29 Cohort Default Rates FY 2007FY 2008FY 2009FY 2010FY 2011FY 2012FY 2013FY 2014 ◄ In Repay ► Default By ► FY 2007 Published ◄ In Repay ► Default By ► FY 2008 Published ◄ In Repay ► Default By ► 2-Year FY 2009 Published ◄ In Repay ► Default By ► 2-Year FY 2010 Published ◄ In Repay ► Default By ► 2-Year FY 2011 Published ◄ In Repay ► Default By ► 3-Year FY 2009 Published ◄ In Repay ► Default By ► 3-Year FY 2010 Published ◄ In Repay ► Default By ► 3-Year FY 2011 Published * Chart created by NCHELP

30 Cohort Default Rates Date of default: –360 days for FFELP PUT loans –Date guarantor pays claim for FFELP loans –360 days for Direct Loans Rehabilitated Loans removed from CDR –Longer time period

31 Cohort Default Rates Low default rate exceptions: –Threshold increase from 10% to 15% 10/1/2011 School may use 2 or 3 year rates to qualify –Includes: Multiple disbursements for single term loans Delayed disbursements for 1 st time 1 st year borrowers (undergrad)

32 Cohort Default Rates High Default Rate Consequences: –Loss of participation if One year at 40% –Stafford and PLUS only Three years at 30% or more –Stafford, PLUS and Pell –Effective FY 2011 (to be published September, 2014) –Provisional Certification if Two of last three rates are 30% or more

33 Cohort Default Rates Default Prevention Plans if CDR over 30% for one year Default Prevention Plans include: –Establishment of Institutional Task Force –Submit default reduction plan to ED –Applies to 3 year rates so begins in 2012 If CDR over 30% in year two, school must: –Revise plan and submit to ED –Soonest applicable is 2013 for 2010 rate

34 Resources Textbook DCL –GEN Published June 8 th, 2010 Negotiated Rulemaking – grity.htmlhttp://www2.ed.gov/policy/highered/reg/hearulemaking/2009/inte grity.html

Divider Page Title (Arial Italic 24 pt.)