83 FR 24250 - Program Integrity and Improvement

DEPARTMENT OF EDUCATION

Federal Register Volume 83, Issue 102 (May 25, 2018)

The Secretary proposes to delay, until July 1, 2020, the effective date of the final regulations entitled Program Integrity and Improvement published in the Federal Register on December 19, 2016 (the final regulations). The current effective date of the final regulations is July 1, 2018. The Secretary proposes the delay based on concerns recently raised by regulated parties and to ensure that there is adequate time to conduct negotiated rulemaking to reconsider the final regulations, and as necessary, develop revised regulations. The provisions for which the effective date is being delayed are listed in the SUPPLEMENTARY INFORMATION section of this document.

[Federal Register Volume 83, Number 102 (Friday, May 25, 2018)]
[Proposed Rules]
[Pages 24250-24255]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-11262]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 668

[Docket ID ED-2018-OPE-0041]
RIN 1840-AD39


Program Integrity and Improvement

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to delay, until July 1, 2020, the 
effective date of the final regulations entitled Program Integrity and 
Improvement published in the Federal Register on December 19, 2016 (the 
final regulations). The current effective date of the final regulations 
is July 1, 2018. The Secretary proposes the delay based on concerns 
recently raised by regulated parties and to ensure that there is 
adequate time to conduct negotiated rulemaking to reconsider the final 
regulations, and as necessary, develop revised regulations. The 
provisions for which the effective date is being delayed are listed in 
the SUPPLEMENTARY INFORMATION section of this document.

DATES: We must receive your comments on or before June 11, 2018. As 
previously indicated, we are establishing a 15-day public comment 
period for the proposed delay in effective date. We are doing so 
because the 2016 rule is scheduled to take effect on July 1, 2018, and 
a final rule delaying the effective date must be published prior to 
that date. A longer comment period would not allow sufficient time for 
the Department to review and respond to comments, and publish a final 
rule.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Help.''
     Postal Mail, Commercial Delivery, or Hand Delivery: The 
Department strongly encourages commenters to submit their comments 
electronically. However, if you mail or deliver your comments about the 
notice of proposed rulemaking, address them to Jean-Didier Gaina, U.S. 
Department of Education, 400 Maryland Ave. SW, Mail Stop 294-20, 
Washington, DC 20202.
    Privacy Note: The Department's policy is to make all comments 
received from members of the public available for public viewing on the 
Federal eRulemaking Portal at www.regulations.gov. Therefore, 
commenters should be careful to include in their comments only 
information that they wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: Sophia McArdle, Ph.D., U.S. Department 
of Education, 400 Maryland Ave. SW, Mail Stop 290-44, Washington, DC 
20202. Telephone: (202) 453-6318. Email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: 
    Invitation to Comment: We invite you to submit comments regarding 
this notice of proposed rulemaking. See ADDRESSES for instructions on 
how to submit comments.
    During and after the comment period, you may inspect all public 
comments about this notice of proposed rulemaking by accessing 
Regulations.gov. You may also inspect the comments in person at 400 
Maryland Avenue SW, Washington, DC, between 8:30 a.m. and 4:00 p.m. 
Washington, DC time, Monday through Friday of each week, except Federal 
holidays. If you want to schedule time to inspect comments, please 
contact the person listed under FOR FURTHER INFORMATION CONTACT.
    Assistance to Individuals with Disabilities in Reviewing the

[[Page 24251]]

Rulemaking Record: On request, we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public-rulemaking record for this notice of proposed rulemaking. If you 
want to schedule an appointment for this type of accommodation or 
auxiliary aid, please contact the person listed under FOR FURTHER 
INFORMATION CONTACT.
    Based on additional concerns recently raised by regulated parties 
related to implementation of the final regulations, the Secretary 
proposes to delay, until July 1, 2020, the effective date of the final 
regulations. The Department proposes this delay to hear from the 
regulated community and students about these concerns and to consider, 
through negotiated rulemaking, possible revisions to the final 
regulations.
    Two letters in particular prompted this proposed delay. The 
Department received a letter dated February 6, 2018 (February 6 
letter), from the American Council on Education (http://www.acenet.edu/news-room/Documents/ACE-Letter-on-State-Authorization-Concern.pdf), 
which represents nearly 1,800 college university presidents from all 
types of U.S. accredited, degree-granting institutions and the 
executives at related associations. That letter expressed concerns 
that, ''students who are residents of certain states may be ineligible 
for federal financial aid if they are studying online at institutions 
located outside their states. This is related to the requirement 
imposed by the state authorization regulations that mandates 
institutions disclose to students the appropriate state complaint 
process for their state of residence. A number of states, including 
California, do not currently have complaint processes for all out-of-
state institutions.'' On February 7, 2018, the Department also received 
a letter from the Western Interstate Commission for Higher Education 
(WICHE) Cooperative for Educational Technologies, the National Council 
for State Authorization Reciprocity, and the Distance Education 
Accrediting Commission, all of which represent regulated parties 
(February 7 letter). In the letter, these entities stated that there is 
widespread concern and confusion in the higher education community 
regarding the implementation of the final regulations, particularly 
with respect to State authorization of distance education and related 
disclosures. The authors of the February 7 letter argued that the new 
regulations will be costly and burdensome for most colleges and 
universities that offer distance education and that some States have 
not implemented the necessary policies and procedures to conform to the 
student complaint procedures required by the regulations. The authors 
also expressed that institutions need additional information from the 
Department to better understand how to comply with the new regulations. 
They stated, for instance, that the way the term ``residence'' is 
described in the preamble of the 2016 rule may conflict with State laws 
and common practice among students for establishing residency. These 
issues are more complex than we understood when we considered them in 
2016. Therefore, we believe that a more precise definition of 
``residence''--which can be defined by States in different ways for 
different purposes--should be established through rulemaking to ensure 
institutions have the clarity needed to determine a student's residence 
(81 FR 92236). The Department does not believe guidance would be 
sufficient to address the complexities institutions have encountered, 
even prior to the rule's effective date. Specifically, we believe that 
we will need significant detail to properly operationalize this term 
and will need to work with impacted stakeholders to determine how best 
to address a concern that is complex and potentially costly to 
institutions and students.
    The authors of the two letters also asked the Department to clarify 
the format in which they should make public and individualized 
disclosures of the State authorization status for every State, the 
complaint resolution processes for every State, and details on State 
licensure eligibility for every discipline that requires a license to 
enter a profession. The authors suggested that the Department should 
delay the rules and submit the issues to additional negotiated 
rulemaking or, alternatively, clarify the final regulations through 
guidance. We believe that these disclosure issues, particularly those 
regarding individualized student disclosures, also require further 
review and the consideration of whether more detailed requirements are 
necessary for proper implementation. For instance, what disclosures 
would need to be made to a student when the student changes his or her 
residence? How would an institution know that a student has changed his 
or her residence so that individualized disclosures could be made? For 
how long must a student reside at the new address to be considered a 
resident of that State for the purposes of State authorization 
disclosures (and how will this answer vary State by State and be 
further complicated by the fact that each State's definition may have 
been originally developed for a variety of purposes)? What if a student 
enrolls in a program that meets the licensure requirements of the State 
in which the student was living at the time, but then the student 
relocates to a new State where the program does not fulfill the 
requirements for licensure? What is the obligation of the university if 
the program no longer meets the licensure requirements, due to a 
student's move, not a change in the program?
    Finally, to add further complexity, students may not always notify 
their institution if they change addresses, or if they relocate 
temporarily to another State. While the preamble of the 2016 regulation 
did state that institutions may rely on the student's self-
determination of residency unless it has information to the contrary, 
there may need to be additional clarification or safeguards for 
institutions in the event that a student does not notify the 
institution of a change in residency.
    For both of the residency and disclosure issues, guidance is not 
the appropriate vehicle to provide the clarifications needed. Guidance 
is inherently non-binding and, therefore, could not be used to 
establish any new requirements. More importantly, due to the complexity 
of these issues, we are not confident that we could develop a workable 
solution through guidance and without the input of negotiators who have 
been engaged in meeting these requirements. Additionally, the necessary 
changes may impose a greater burden on some regulated parties, or could 
significantly minimize burden to institutions, which would require an 
updated estimate of regulatory impact. In sum, the Department believes 
that the clarifications requested are so substantive that they would 
require further rulemaking including negotiated rulemaking under the 
Higher Education Act of 1965, as amended (HEA).
    We believe that delaying the final regulations would benefit 
students and that many students will still receive sufficient 
disclosures regarding distance education programs during the period of 
the delay due to steps institutions have already taken in this area.
    Since the final regulations are currently scheduled to go into 
effect in July, we believe the delay will benefit those students who 
are planning to take coursework via online programs during the summer 
months, or who may be making plans to do internships in other States. 
Many institutions and students

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ordinarily not heavily engaged in distance education do provide and 
take online courses in the summer. If the final regulations were to go 
into effect on July 1, 2018, an institution may be hesitant to offer 
these courses outside the State in which the institution is located, 
because the uncertainty of how to determine students' residency, and 
the associated requirements, may make a State unwilling to pursue State 
authorization in all of the possible locations its students may reside 
during the summer. Students will also depend on their institution 
taking the necessary and involved steps to come into compliance in each 
State. Some institutions, especially those with limited resources, 
could simply determine that the cost of obtaining State authorization, 
of ensuring the relevant states have complaint procedures, and 
assessing licensure requirements, is simply not worth the benefit of 
eligibility for title IV aid if only a small number of students enroll 
online from a particular State, which would mean that some students 
could not continue their education during the summer if during those 
months they return to their parents' home to save money or because 
dormitory facilities on campus are closed. Thus, students would lose 
the opportunity to use title IV aid for these courses. By contrast, 
institutions that routinely provide distance education to large numbers 
of students from all 50 States may have already taken the initiative to 
obtain State authorization and assess the complaint systems and 
licensure requirements since the cost-benefit ratio favors such an 
action. As a result, the delay will not adversely affect students 
attending those institutions.
    In addition, DCL GEN-12-13 provides guidance regarding student 
complaints and student consumer disclosures as related to distance 
education, ensuring that during the delay institutions will be aware of 
their existing obligations and that students will receive these 
protections. Under 34 CFR 668.43(b), an institution is required to 
provide to students its State approval or licensing and the contact 
information for filing complaints. DCL GEN-12-13 clarifies this 
requirement with respect to distance education.
    The negotiated rulemaking process could not be completed with final 
regulations that would go into effect before July 1, 2020. To comply 
with section 482 of the HEA (20 U.S.C. 1089), also known as the 
``master calendar requirement,'' a regulatory change that has been 
published in final form on or before November 1 prior to the start of 
an award year--which begins on July 1 of any given year--may take 
effect only at the beginning of the next award year, or in other words, 
on July 1 of the next year. Because November 1 has already passed, 
there is no way for the Department to publish a final rule that would 
be effective by July 1 of this year. Moreover, for the reasons 
explained below, any negotiated rulemaking process would not be 
finished until sometime in 2019, so regulations resulting from that 
process could not be effective before July 1, 2020 at the earliest. It 
would be confusing and counterproductive for the final regulations to 
go into effect before the conclusion of this reconsideration process. 
We thus propose delaying the current effective date--July 1, 2018--
until July 1, 2020.
    The Department has not had sufficient time to effectuate this delay 
through negotiated rulemaking. Negotiated rulemaking requires a number 
of steps that typically takes the Department well over 12 months to 
complete. The HEA requires the Department to hold public hearings 
before commencing any negotiations. Based upon the feedback the 
Department receives during the hearings, the Department then identifies 
those issues on which it will conduct negotiated rulemaking, announces 
those, and solicits nominations for non-Federal negotiators. 
Negotiations themselves are typically held over a 3-month period. 
Following the negotiations, the Department prepares a notice of 
proposed rulemaking and submits the proposed rule to the Office of 
Management and Budget (OMB) for review. The proposed rules are then 
open for public comment for 30-60 days. Following the receipt of public 
comments, the Department considers those comments and prepares a final 
regulation that is reviewed by OMB before publication.
    In this instance, the catalysts for the delay are the February 6 
and February 7 letters. The Department could not have completed the 
well-over 12-month negotiated rulemaking process, described in the 
previous paragraph, between February 6, 2018, and the July 1, 2018, 
effective date. Thus, the Department has good cause to waive the 
negotiated rulemaking requirement with regard to its proposal to delay 
the effective date of the final regulations to July 1, 2020, in order 
to complete a new negotiated rulemaking proceeding to address the 
concerns identified by some of the regulated parties in the higher 
education community.
    Based on the above considerations, the Department is proposing to 
delay until July 1, 2020, the effective date of the following 
provisions of the final regulations in title 34 of the Code of Federal 
Regulations (CFR):
     Sec.  600.2 Definitions (definition of State authorization 
reciprocity agreement).
     Sec.  600.9(c) (State authorization distance education 
regulations).
     Sec.  600.9(d) (State authorization of foreign locations 
of domestic institution regulations).
     Sec.  668.2 (addition of ``Distance education'' to the 
list of definitions).
     Sec.  668.50 (institutional disclosures for distance or 
correspondence programs regulations).
    Waiver of Negotiated Rulemaking: Under section 492 of the HEA (20 
U.S.C. 1098a), all regulations proposed by the Department for programs 
authorized under title IV of the HEA are subject to negotiated 
rulemaking requirements. However, section 492(b)(2) of the HEA provides 
that negotiated rulemaking may be waived for good cause when doing so 
would be ``impracticable, unnecessary, or contrary to the public 
interest.'' Section 492(b)(2) of the HEA requires the Secretary to 
publish the basis for waiving negotiations in the Federal Register at 
the same time as the proposed regulations in question are first 
published.
    For the reasons stated above, it would not be practicable, before 
the July 1, 2018 effective date specified in the final regulations 
published December 19, 2016 (81 FR 92232), to engage in negotiated 
rulemaking and publish a notice of final regulations to delay the 
effective date. The Department also believes it will be in the public 
interest to delay the effective date of these regulations so that these 
issues can be resolved before the regulations go into effect. The 
approach may also benefit from input from States that are in the 
process of changing requirements for distance education programs. There 
is, therefore, good cause to waive negotiated rulemaking pertaining to 
this delay. Note, we are only waiving negotiated rulemaking and are 
providing this notice and opportunity to comment on the proposed delay.

Executive Orders 12866, 13563, and 13771

Regulatory Impact Analysis

    Under Executive Order 12866, it must be determined whether this 
regulatory action is ``significant'' and, therefore, subject to the 
requirements of the Executive Order and subject to review by OMB. 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or

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adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
Tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This proposed regulatory action is a significant regulatory action 
subject to review by OMB under section 3(f) of Executive Order 12866. 
The quantified economic effects and net budget impact associated with 
the delayed effective date are not expected to be economically 
significant. Institutions will be relieved of an expected Paperwork 
Reduction Act burden of approximately $364,801 in annualized cost 
savings or $5.2 million in present value terms for the delay period, 
though it is possible some States have already incurred these costs 
preparing for the current effective date. The Department is interested 
in comments on whether costs have already been expended in this area 
and estimates of costs still needed to be incurred.
    We have also reviewed this proposed delay under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency:
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing this proposed delay only on a reasoned determination 
that its benefits would justify its costs. In choosing among 
alternative regulatory approaches, we selected the approach that would 
maximize net benefits. In particular, the Department believes avoiding 
the compliance costs for institutions and the potential unintended harm 
to students if institutions decide not to offer distance education 
courses to students who switch locations for a semester or do not allow 
students to receive title IV aid for such courses because the 
definition of residency needs additional clarification outweighs any 
negative effect of the delayed disclosures. Based on the analysis that 
follows, the Department believes that this proposed delay of the final 
regulations is consistent with the principles in Executive Order 13563.
    Consistent with Executive Order 13771 (82 FR 9339, February 3, 
2017), we have estimated that this proposed rule has a potential upper 
bound effect of estimated annualized cost savings of $705,737, or 
$10,081,963 in present value terms, using a 7 percent discount rate 
over a perpetual time horizon, in administrative and information 
disclosure costs. This is an upper bound estimate of these cost 
savings, since some institutions may have begun development of 
disclosures to meet the proposed regulatory requirements. As a central 
estimate, the Department estimates institutions will be relieved of an 
expected Paperwork Reduction Act burden of approximately $364,801 in 
annualized cost savings or $5.2 million in present value terms for the 
delay period; though it is possible some States have already incurred 
these costs preparing for the current effective date.
    Because of these savings, this proposed rule, if finalized, would 
be considered an Executive Order 13771 deregulatory action. The 
Department explicitly requests comments on whether these administrative 
cost savings and foregone benefits calculations and discussions are 
accurate and fully capture the impacts of this rule delay.

Effects of Delay

    The Regulatory Impact Analysis of the final regulations stated that 
the regulations would have the following primary benefits: (1) Updated 
and clarified requirements for State authorization of distance 
education and foreign additional locations, (2) a process for students 
to access complaint resolution in either the State in which the 
institution is authorized or the State in which they reside, and (3) 
increased transparency and access to institutional and program 
information.
    As a result of the proposed delay, students might not receive 
disclosures of adverse actions taken against a particular institution 
or program. Students also may not receive other information about an 
institution, such as information about refund policies or whether a 
program meets certain State licensure requirements. Increased access to 
such information could help students identify programs that offer 
credentials that potential employers recognize and value, so delaying 
the requirement to provide these disclosures may require students to 
obtain this information from another source or may lead students to 
choose sub-optimal programs for their preferred courses of study. On 
the other hand, students who attend on-ground campuses may find that, 
while the program they completed meets licensure requirements in that 
State, it does not meet licensure requirements in other States. The 
Department has never required ground-based campuses to provide this 
information to students, including campuses that enroll large numbers 
of students from other States.
    Additionally, the delay of the disclosures related to the 
complaints resolution process could make it harder for students to 
access available consumer protections. Some students may be aware of 
Federal Student Aid's Ombudsman Group, State Attorneys General offices, 
or other resources for potential assistance, but the disclosure would 
help affected students be aware of these options.
    The Department also recognizes a potential unintended effect of the 
final regulation on students from institutions reacting to uncertainty 
in the definition of residency and other aspects of the 2016 final 
regulation by refusing enrollment or title IV aid to distance education 
students as a safeguard against unintentional non-compliance. A variety 
of other possible scenarios

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described herein, resulting from confusion about the rule or an 
institution's inability or unwillingness to comply, could also result 
in loss of title IV aid to students. For example, if a student pursues 
a summer internship and relocates to another State for the summer 
semester, institutions may choose not to allow them to take courses 
online because their residency is unclear. The Department believes the 
possibility of this outcome and the disruption it could have to 
students' education plans counts in favor of delaying the rule to 
prevent institutions from taking such actions while negotiated 
rulemaking clears up lingering and widespread uncertainty. A student 
who is unable to take classes during the summer months may be unable to 
complete his or her program on time, especially if the student is 
working or raising children and cannot manage a 15 credit course load 
during the regular academic terms.
    Delay may, however, better allow institutions to address the costs 
of complying with the final regulations. In promulgating those 
regulations, the Department recognized that institutions could face 
compliance costs associated with obtaining State authorization for 
distance education programs or operating foreign locations. But the 
Department did not ascribe specific costs to the State authorization 
regulations and associated definitions because it presumed that 
institutions were already complying with applicable State authorization 
requirements and because nothing in the final regulations requires 
institutions to have distance education programs.
    Although the Department did not ascribe specific costs to this 
aspect of the regulation, it provided examples of costs ranging from 
$5,000 to $16,000 depending on institution size, for a total estimated 
annual cost for all institutions of $19.3 million. Several commenters 
stated that the Department underestimated the costs of compliance with 
the regulations, noting that extensive research may be required for 
each program in each State. One institution reported that it costs 
$23,520 to obtain authorization for a program with an internship in all 
50 States and $3,650 to obtain authorization for a new 100 percent 
online program in all 50 States. To renew the authorization for its 
existing programs, this institution estimated a cost of $75,000 
annually including fees, costs for surety bonds, and accounting 
services, and noted these costs have been increasing in recent years. 
The Department believes this institution's estimate is credible; 
however, we request comment on whether this example provides a typical 
or accurate level of expected compliance costs across a representative 
population, and the extent to which institutions have already incurred 
these costs. In practice, actual costs to institutions vary based on a 
number of factors including an institution's size, the extent to which 
an institution provides distance education, and whether it participates 
in a State authorization reciprocity agreement or chooses to obtain 
authorization in specific States.
    Delay may also allow institutions to postpone incurring costs 
associated with the disclosure requirements. As indicated in the 
Paperwork Reduction Act of 1995 section of the final regulations, those 
costs were estimated to be 152,565 hours and $5,576,251 annually.
    Net Budget Impact: As noted in the final regulations, in the 
absence of evidence that the regulations would significantly change the 
size and nature of the student loan borrower population, the Department 
estimated no significant net budget impact from these regulations. 
While the updated requirements for State authorization and the option 
to use State authorization reciprocity agreements may expand the 
availability of distance education, student loan volume will not 
necessarily expand greatly. Additional distance education could provide 
convenient options for students to pursue their educations and loan 
funding may shift from physical to online campuses. Distance education 
has expanded significantly already and the final regulations are only 
one factor in institutions' plans within this field. The distribution 
of title IV, HEA program funding could continue to evolve, but the 
overall volume is also driven by demographic and economic conditions 
that are not affected by these regulations and State authorization 
requirements were not expected to change loan volumes in a way that 
would result in a significant net budget impact. Likewise, the 
availability of options to study abroad at foreign locations of 
domestic institutions offers students flexibility and potentially 
rewarding experiences, but was not expected to significantly change the 
amount or type of loans students use to finance their education. 
Therefore, the Department did not estimate that the foreign location 
requirements in 34 CFR 600.9(d) would have a significant budget impact 
on title IV, HEA programs. As the final regulations were not expected 
to have a significant budget impact, delaying them to allow for 
reconsideration and renegotiation of the final rule is not expected to 
have a significant budget impact. This analysis is limited to the 
effect of delaying the effective date of the final regulations to July 
1, 2020, and does not account for any potential future substantive 
changes in the final regulations.

Regulatory Flexibility Analysis

    The final regulations would affect institutions that participate in 
the title IV, HEA programs, many of which are considered small 
entities. The U.S. Small Business Administration (SBA) Size Standards 
define ``for-profit institutions'' as ``small businesses'' if they are 
independently owned and operated and not dominant in their field of 
operation with total annual revenue below $7 million. The SBA Size 
Standards define ``not-for-profit institutions'' as ``small 
organizations'' if they are independently owned and operated and not 
dominant in their field of operation, or as ``small entities'' if they 
are institutions controlled by governmental entities with populations 
below 50,000. Under these definitions, approximately 4,267 of the IHEs 
that would be subject to the paperwork compliance provisions of the 
final regulations are small entities. Accordingly, we have reviewed the 
estimates from the 2016 final rule and prepared this regulatory 
flexibility analysis to present an estimate of the effect on small 
entities of the delay in the final regulations.
    In the Regulatory Flexibility Analysis for the final regulations, 
the Department estimated that 4,267 of the 6,890 IHEs participating in 
the title IV, HEA programs were considered small entities-- 1,878 are 
not-for-profit institutions, 2,099 are for-profit institutions with 
programs of two years or less, and 290 are for-profit institutions with 
four-year programs. Using the definition described above, approximately 
60 percent of IHEs qualify as small entities, even if the range of 
revenues at the not-for-profit institutions varies greatly. Many small 
institutions may focus on local provision of specific programs and 
would not be significantly affected by the delay in the 2016 
regulations because they do not offer distance education. As described 
in the analysis of the 2016 final rule, distance education is a growing 
area with potentially significant effects on the postsecondary 
education market and the small entities that participated in it, 
including an opportunity to expand and serve more students than their 
physical locations can accommodate but also increased competitive 
pressure from online options. Overall, as of Fall 2016,

[[Page 24255]]

approximately 15 percent of students receive their education 
exclusively through distance education while 68.3 percent took no 
distance education courses. However, at proprietary institutions almost 
59.2 percent of students were exclusively distance education students 
and 30.4 percent had not enrolled in any distance education courses.\1\ 
The delay in a clear State authorization rule for distance education 
may slow the reshuffling of the postsecondary education market or the 
increased participation of small entities in distance education, but 
that is not necessarily the case. Distance education has expanded over 
recent years even in the absence of a clear State authorization regime.
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    \1\ 2017 Digest of Education Statistics Table 311.15: Number and 
percentage of students enrolled in degree-granting postsecondary 
institutions, by distance education participation, location of 
student, level of enrollment, and control and level of institution: 
Fall 2015 and fall 2016. Available at https://nces.ed.gov/programs/digest/d17/tables/dt17_311.15.asp?current=yes.
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    In the analysis of the 2016 final rule, we noted that the 
Department estimated total State Authorization Reciprocity Agreement 
(SARA) fees and additional State fees of approximately $7 million 
annually for small entities, but acknowledged that costs could vary 
significantly by type of institution and institutions' resources and 
that these considerations may influence the extent to which small 
entities operate distance education programs. Small entities that do 
participate in the distance education sector may benefit from avoiding 
these fees during the delay period. If 50 percent of small entities 
offer distance education, the average annual cost savings per small 
entity during the delay would be approximately $3,280, but that would 
increase to $6,560 if distance education was only offered by 25 percent 
of small entities. This estimate assumes small entities have not 
already taken steps to comply with the State authorization requirements 
in the 2016 final rule. The Department welcomes comments on the 
distribution of small entities offering distance education, the 
estimated costs to obtain State authorization for their programs, and 
the extent to which small entities have already incurred costs to 
comply with the 2016 final rule.
    The Department also estimated that small entities would incur 
13,981 hours of burden in connection with information collection 
requirements with an estimated cost of $510,991 annually. Small 
entities may be able to avoid some of the anticipated burden during the 
delay. To the extent small entities would need to spend funds to comply 
with State authorization requirements for distance education, the 
proposed delay would allow them to postpone incurring those costs. And 
although institutions may have incurred some of the $510,991 annual 
costs to prepare for the information collection requirements, it is 
possible that institutions could avoid up to that amount during the 
period of the delay.

Paperwork Reduction Act of 1995

    As indicated in the Paperwork Reduction Act section published in 
the 2016 final regulations, the assessed estimated burden was 152,565 
hours affecting institutions with an estimated cost of $5,576,251.
    The table below identifies the regulatory sections, OMB Control 
Numbers, estimated burden hours, and estimated costs of those final 
regulations.

----------------------------------------------------------------------------------------------------------------
                                                                                    Estimated cost
                Regulatory section                    OMB control    Burden hours     $36.55/hour
                                                          No.                         institution
--------------------------------------------------------------------------------------------------
600.9.............................................       1845-0144             160           5,848
668.50(b).........................................       1845-0145         151,715        5,545183
668.50(c).........................................       1845-0145             690          25,220
                                                   -------------------------------------------------------------
    Total.........................................  ..............         152,565       5,576,251
                                                   -------------------------------------------------------------
    Cost savings due to delayed effective date....  ..............         152,565       5,576,251
----------------------------------------------------------------------------------------------------------------

    This notice proposes to delay the effective date of the all of the 
cited regulations.
    Accessible Format: Individuals with disabilities may obtain this 
document in an accessible format (e.g., Braille, large print, 
audiotape, or compact disc) on request to the contact person listed 
under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to this Document: The official version of this 
document is the document published in the Federal Register. Free 
internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.thefederalregister.org/fdsys. At this site, you can view this document, as 
well as all other documents of this Department published in the Federal 
Register, in text or PDF. To use PDF, you must have Adobe Acrobat 
Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

List of Subjects

34 CFR Part 600

    Colleges and universities, Foreign relations, Grant programs--
education, Loan programs--education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

34 CFR Part 668

    Administrative practice and procedure, Colleges and universities, 
Consumer protection, Grant programs--education, Loan programs--
education, Reporting and recordkeeping requirements, Selective Service 
System, Student aid, Vocational education.

    Dated: May 22, 2018.
Betsy DeVos,
Secretary of Education.
[FR Doc. 2018-11262 Filed 5-24-18; 8:45 am]
 BILLING CODE 4000-01-P