83_FR_31424 83 FR 31296 - Program Integrity and Improvement

83 FR 31296 - Program Integrity and Improvement

DEPARTMENT OF EDUCATION

Federal Register Volume 83, Issue 128 (July 3, 2018)

Page Range31296-31303
FR Document2018-14373

The Secretary delays, until July 1, 2020, the effective date of selected provisions of the final regulations entitled Program Integrity and Improvement published in the Federal Register on December 19, 2016 (the 2016 final regulations). The Secretary is delaying the effective date of selected provisions of the 2016 final regulations based on concerns recently raised by regulated parties and to ensure that there is adequate time to conduct negotiated rulemaking to reconsider selected provisions of 2016 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 Issue 128 (Tuesday, July 3, 2018)
[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Rules and Regulations]
[Pages 31296-31303]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-14373]



[[Page 31295]]

Vol. 83

Tuesday,

No. 128

July 3, 2018

Part III





 Department of Education





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34 CFR Parts 600 and 668





 Program Integrity and Improvement; Final Rule

Federal Register / Vol. 83 , No. 128 / Tuesday, July 3, 2018 / Rules 
and Regulations

[[Page 31296]]


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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: Final rule; delay of effective date.

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SUMMARY: The Secretary delays, until July 1, 2020, the effective date 
of selected provisions of the final regulations entitled Program 
Integrity and Improvement published in the Federal Register on December 
19, 2016 (the 2016 final regulations). The Secretary is delaying the 
effective date of selected provisions of the 2016 final regulations 
based on concerns recently raised by regulated parties and to ensure 
that there is adequate time to conduct negotiated rulemaking to 
reconsider selected provisions of 2016 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: Effective June 29, 2018, the effective date for the amendments 
to 34 CFR 600.2, 600.9(c), 668.2, and the addition of 34 CFR 668.50, 
published December 19, 2016, at 81 FR 92236, is delayed until July 1, 
2020.

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: Based on concerns recently raised by 
regulated parties related to implementation of the 2016 final 
regulations, the Secretary delays, until July 1, 2020, the effective 
date of selected provisions of the 2016 final regulations (81 FR 
92236). The Department is implementing this delay to hear from the 
regulated community and students about these concerns and to consider, 
through negotiated rulemaking, possible revisions to selected 
provisions of the 2016 final regulations.
    Two letters in particular prompted this delay. The Department 
received a letter dated February 6, 2018 (February 6 letter), from the 
American Council on Education (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. The February 6 letter stated 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 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 2016 final regulations, particularly with respect 
to State authorization of distance education and related disclosures. 
The authors of the February 7 letter argued that the 2016 final 
regulations would be costly and burdensome for most colleges and 
universities that offer distance education and that some States have 
not implemented the student complaint policies and 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 2016 final regulations. They stated, for instance, that 
the definition of ``residence'' in the preamble of the 2016 final 
regulations may conflict with State laws and common practice among 
students for establishing residency.
    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 effective date of the 2016 final regulations 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. Issues that need further consideration and 
clarification include the disclosures that may need to be made to a 
student when the student changes his or her residence, what factors 
would allow an institution to become aware that a student has changed 
his or her residence so that individualized disclosures could be made, 
and the length of time a student must reside at the new address to be 
considered a resident of that State for the purposes of State 
authorization disclosures. These clarifications are necessary because 
the handling of these situations may vary State by State and be further 
complicated by the fact that each State's definition of ``residence'' 
may have been originally developed for other purposes. Other issues in 
need of further clarification include what happens in the case of a 
student who enrolls in a program that meets the licensure requirements 
of the State in which the student was living at the time, but then 
relocates to a new State where the program does not fulfill the 
requirements for licensure as well as the obligation of the university 
if the program no longer meets the licensure requirements, due to the 
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 final 
regulations stated that an institution may rely on a 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.
    The rule, as currently drafted, does not account for these 
complexities. Therefore, we believe that, among other things, 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. We believe that we will need to provide 
institutions with significantly more detail to properly operationalize 
this term and will need to work with impacted stakeholders to determine

[[Page 31297]]

how best to address a concern that is complex and potentially costly to 
institutions and students.
    For both of the residency and disclosure issues, guidance is not 
the appropriate vehicle to provide the clarifications needed. Due to 
the complexity of these issues, we believe that it is important to 
solicit the input of stakeholders who have been engaged in meeting 
these requirements in developing workable solutions. Further, guidance 
is non-binding and, therefore, could not be used to establish any new 
requirements. Lastly, the necessary changes may affect the burden on 
some regulated parties, which would require an updated estimate of 
regulatory impact. The Department therefore 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 effective date of selected provisions 
of the 2016 final regulations will benefit students.
    The 2016 final regulations are currently scheduled to go into 
effect in July. Many institutions and students ordinarily not 
significantly involved in distance education provide and take online 
courses in the summer. We believe the delay will especially benefit 
those students who are planning to take coursework via online programs 
during the summer months, or who may be making plans to participate in 
internships in other States. If the selected provisions of 2016 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.
    If selected provisions of 2016 final regulations were to go into 
effect on July 1, 2018, some institutions, especially those with 
limited resources, could determine that the costs of obtaining State 
authorization, ensuring the relevant States have complaint procedures, 
and assessing licensure requirements, are not worth the benefit of 
eligibility for title IV aid if only a small number of students enroll 
online from a particular State, and therefore may not obtain State 
authorization for all applicable States. Thus, some students might not 
be able to continue their education during the summer if during those 
months they must relocate to a State in which the institution does not 
have the required State authorization. Thus, if we did not delay 
selected provisions of the 2016 final regulations, students would 
potentially lose the opportunity to use title IV aid for these courses. 
Institutions that routinely provide distance education to large numbers 
of students from all 50 States may have already obtained State 
authorization and assessed the complaint systems and licensure 
requirements since the cost-benefit ratio favors such an action. As a 
result, the delay will not have any significant effect on students 
attending those institutions.
    Further, the Department has provided guidance regarding student 
complaints and student consumer disclosures as related to distance 
education in a Dear Colleague letter issued on July 27, 2012 (DCL GEN-
12-13),\1\ ensuring that during this delay of selected provisions of 
the final regulations 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. In DCL GEN-12-13, in Questions and Answers (Q&A) 9 through 
13, we provide guidance on how institutions may meet this requirement 
with respect to distance education. In Q&A 9, we clarify that an 
institution offering distance education in multiple States can satisfy 
the provisions of 34 CFR 668.43(b) requiring that it provide State 
contact information for filing complaints by providing a link to a 
noninstitutional website that identifies the contact information for 
multiple States so long as the link is accessible from the 
institution's website and the link is prominently displayed and 
accurately described. Q&A 9 also states that the institution should 
ensure the website link is functioning and accurate. Q&A 10 clarifies 
that, if an institution offering distance education in a State has only 
one student in that State, the institution must still provide contact 
information for that State. In Q&A 12, we make clear that if a student 
taking a program by distance education moves to another State, and the 
institution is aware of the move, the institution must ensure that the 
student has access to the State contact information or filing 
complaints in that State. Finally, in Q&A 13, we note that for a 
student who is taking distance education and is in the military, the 
contact information for the institution's main location is considered 
sufficient contact information when the student is given an assignment 
outside of the United States.
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    \1\ Available at: https://ifap.ed.gov/dpcletters/GEN1213.html.
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    Based on the above considerations, the Department delays until July 
1, 2020, the effective date of selected 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.  668.2 (definition of ``Distance education'').
     Sec.  668.50 (institutional disclosures for distance or 
correspondence programs regulations).
    Public Comment: In response to our invitation in the notice of 
proposed rulemaking published in the Federal Register on May 25, 2018 
(83 FR 24250) (NPRM), 39 parties submitted comments on the delay of the 
effective date. We do not discuss comments or recommendations that are 
beyond the scope of this regulatory action or that would require 
statutory change.

Analysis of Comments and Changes

    An analysis of the comments and of any changes since publication of 
the NPRM follows.
    Comment: Many commenters supported the proposed rule to delay the 
effective date of the 2016 final regulations until July 1, 2020, 
because they believed that non-regulatory guidance from the Department 
is unlikely to address the current gap between institutional 
understanding of the final regulations and the Department's 
expectations for compliance. Commenters supported the Department's plan 
to refer the 2016 final regulations to the review and consideration 
afforded by the negotiated rulemaking process. Commenters also stated 
that the delay is prudent given the potential impact on institutions, 
learners, and the State authorization process, and will make it 
possible to resolve any confusion for students, institutions, States, 
and accreditors about the requirements of the 2016 final regulations. 
One commenter noted that some parts of the 2016 final regulations are 
very onerous and expensive for institutions to implement and a delay 
would give institutions more time to plan and budget for the changes.
    Discussion: We appreciate the commenters' support.
    Changes: None.
    Comment: Many commenters opposed delaying the effective date of the 
2016 final regulations because of the potential

[[Page 31298]]

harm to students, as well as on procedural grounds.

Harm to Students

    Comment: Commenters stated that delaying the effective date of the 
2016 final regulations would negatively impact students because the 
consumer protections and disclosures that would have been available to 
students under the 2016 final regulations will not be available to 
students. A few commenters expressed concern that students' ability to 
file complaints against institutions would be impeded by delaying the 
effective date of the provisions in the 2016 final regulations related 
to the State complaint process.
    Discussion: While we do not have specific data with regard to how 
many schools and States have come into compliance with the 2016 final 
regulations, based on the information we do have, we expect that many 
students will still receive disclosures regarding distance education 
programs during the period of the delay due to steps institutions have 
already taken. In addition, as also previously noted, 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 the contact information needed in order to file a 
complaint against the institution. 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 as 
discussed above. We believe that these requirements will offer students 
protection during the delay.
    With respect to other disclosures, we acknowledged in the NPRM 
that, as a result of the proposed delay, it is possible that 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. This information could help students identify programs 
that offer credentials that potential employers recognize and value; 
delaying the requirement to provide these disclosures may require 
students that desire this information to obtain it from another source 
or may lead students to choose sub-optimal programs for their preferred 
courses of study. We note, however, that 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. Thus, for students who attend on-ground campuses, the program 
they completed may meet licensure requirements in the State in which 
the campus is located but not licensure requirements in other States.
    Changes: None.
    Comment: Commenters also noted that the 2016 final regulations 
require State and Federal oversight of American institutions receiving 
Federal financial aid but operating in foreign locations, thereby 
ensuring core protections for students enrolled in campuses abroad, but 
that the Department offers no rationale for delaying the effective date 
of this component of the rule. Thus, the commenters believed that the 
effective date of these final regulations should not be delayed.
    Discussion: We are persuaded by the commenters and, for the reasons 
they specify, are not delaying Sec.  600.9(d) (State authorization of 
foreign locations of domestic institution regulations).
    Changes: We are not delaying Sec.  600.9(d) (State authorization of 
foreign locations of domestic institution regulations). These 
regulations will go into effect July 1, 2018.
    Comment: Commenters also noted that the 2016 final regulations 
strengthen States' oversight capacity by ensuring that States that 
sought to regulate distance education would be able to identify and 
regulate schools offering distance education in their State. These 
commenters argued that delaying the effective date of the 2016 final 
regulations would undermine this State oversight of distance education 
programs and permit schools to use Federal funds for programs that 
operate outside of the oversight of State regulators. Some commenters 
noted that State approval boards and regulatory schemes vary from State 
to State and that States should be able to reject institutions that do 
not meet a State's higher standards. Some commenters also stated that a 
delay of the effective date of the 2016 final regulations would impede 
States from ensuring that distance education students have the same 
State-level protections as students enrolled at brick-and-mortar 
institutions, and limit States' ability to bring enforcement actions 
against schools offering online programs in their States.
    Discussion: We believe that concerns about undermining State 
regulatory and enforcement efforts may be overstated. A State already 
has the authority to administer legal authorization to operate in the 
State as the State sees fit, whether it be to approve an institution to 
operate in-State, regardless of the physical location of the 
institution, or require an institution that is operating without 
approval in the State to cease such operations regardless of the 
physical location of the institution. There is also no requirement that 
a State join a reciprocity agreement, whether it is a State-to-State 
reciprocity agreement or a reciprocity agreement that is administered 
by a non-State entity. A State can also decide to leave any reciprocity 
agreement it had previously joined. States do not need additional 
Federal regulations in order to enforce their own laws if they choose 
to do so.
    Changes: None.
    Comment: Some commenters stated that the definition of ``State 
authorization reciprocity agreement'' in the 2016 final regulations is 
confusing, and noted particular concern about the part of the 
definition that says that such an agreement ``does not prohibit any 
State in the agreement from enforcing its own statutes and regulations, 
whether general or specifically directed at all or a subgroup of 
educational institutions.'' They stated that some entities are 
interpreting this text to mean that a State authorization reciprocity 
agreement that is acceptable to the Department must allow a State that 
is a member of the agreement to enforce its own statutes and 
regulations even if those statutes and regulations conflict with the 
provisions of an agreement into which the State entered. The commenters 
contended that delaying the effective date of the 2016 final 
regulations would undermine the ability of States to protect their 
residents because the States would no longer be able to enforce their 
own statutes and regulations if doing so were prohibited by a State 
authorization reciprocity agreement. Other commenters indicated that it 
was unclear whether this part of the definition allows enforcement of 
State regulations that conflict with the provisions of a reciprocity 
agreement.
    Discussion: We view the confusion and concern about what 
constitutes a State authorization reciprocity agreement under the 2016 
final regulations and how that current definition is meant to be 
operationalized to be additional reasons to delay the effective date of 
selected provisions of the 2016 final regulations so that this issue 
can be clarified.
    Changes: None.

Procedural Concerns

    Comment: Some commenters expressed concerns about procedural issues 
surrounding the proposed delay,

[[Page 31299]]

contending that the 15-day comment period does not allow enough time 
for meaningful comments. Commenters further stated that the Department 
did not provide adequate justification for delaying the effective date 
of the 2016 final regulations and that the Department could issue 
guidance, rather than delay the effective date. Some commenters also 
asserted that the Department must conduct negotiated rulemaking under 
the HEA to implement the proposed delay. They argued that the 
Department did not meet the criteria for an exemption from such 
rulemaking under the Administrative Procedure Act (APA), believing that 
the Department did not establish ``good cause'' to waive negotiated 
rulemaking. Commenters also opined that institutions have worked over 
the past 18 months to implement the 2016 final regulations, and their 
investments should not be wasted now by an unnecessary delay of the 
consumer protections and disclosures. Some commenters also stated that 
the proposed delay is overly broad and that since the Department 
justifies the delay based on only three issues, the Department should 
have proposed to delay only those three parts of the 2016 final 
regulations.
    Discussion: The APA, 5 U.S.C. 553(c), requires an agency to provide 
interested parties an opportunity to comment on proposed regulations, 
but does not stipulate the length of the comment period. A 15-day 
comment period was necessary because the selected provisions of the 
2016 rule are 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 have allowed sufficient time for the 
Department to review and respond to comments, and publish a final rule.
    We believe that we have adequately justified our decision to delay 
the effective date of selected provisions of the 2016 final regulations 
and that it would be inappropriate to issue guidance, rather than 
implement the delay. Guidance is not the appropriate vehicle to provide 
the clarifications needed related to the residency and disclosure 
issues. Guidance is non-binding and, therefore, could not be used to 
establish any new requirements. More importantly, due to the complexity 
of the issues and the substantive nature of the necessary 
clarifications, we believe that, in developing workable solutions, it 
is important to conduct negotiated rulemaking under the HEA in order to 
solicit the input of stakeholders who have been engaged in meeting 
these requirements. Additionally, the necessary changes may affect the 
burden on regulated parties, which would require an updated estimate of 
regulatory impact.
    With regard to waiver of negotiated rulemaking, section 492(b)(2) 
of the HEA provides that the Secretary may waive negotiated rulemaking 
if she determines that there is good cause to do so, and publishes the 
basis for such determination in the Federal Register at the same time 
as the proposed regulations are first published. Negotiated rulemaking 
requires a number of steps that typically take the Department well over 
12 months to complete. The Department could not have completed the 
negotiated rulemaking process between February 6, 2018 (the date the 
Department received the first of the two letters that were the catalyst 
for the delay) and the July 1, 2018, effective date . Thus, the 
Department has good cause to waive the negotiated rulemaking 
requirement with regard to this delay the effective date of the final 
regulations to July 1, 2020.
    As stated, negotiated rulemaking requires a number of steps that 
typically take the Department well over 12 months to complete. First, 
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 three-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 rule is then open for public comment for 
30 to 60 days. Following the receipt of public comments, the Department 
considers those comments and prepares final regulations that are 
reviewed by OMB before publication. Accordingly, we would not be able 
to complete the negotiated rulemaking process until 2019, so 
regulations resulting from that process will not be effective before 
July 1, 2020 per section 482 of the HEA (20 U.S.C. 1089), also known as 
the ``master calendar requirement.'' The master calendar requirement 
specifies provides that 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.
    In this instance, the catalysts for the delay are the February 6 
and February 7 letters. While some commenters stated that the 
Department was aware of the same issues raised in these letters during 
the 2016 rulemaking and heard about these same issues in August and 
October 2017, we only more recently determined that further 
consultation in the form of negotiated rulemaking was the appropriate 
vehicle by which to clarify the 2016 final regulations, and it was the 
cited letters that changed our understanding of the extent of 
stakeholder concerns. Thus, based on this further understanding, we 
believe that negotiated rulemaking is necessary in order to make 
important, substantive clarifications, and that it is in the interests 
of institutions, States, and students for the effective date of the 
selected provisions of the final regulations to be delayed and the 
regulations reconsidered. The Department could not have completed the 
12-month negotiated rulemaking process 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 selected provisions 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. It 
would be confusing and counterproductive for the selected provisions of 
the 2016 final regulations to go into effect before the conclusion of 
this reconsideration process.
    We do not believe the proposed delay is overly broad and that 
because the delay discussion only addressed three issues, the 
Department should only delay the effective date of those three parts of 
the 2016 final regulations. We have agreed with the commenters that 
Sec.  600.9(d) (State authorization of foreign locations of domestic 
institution regulations) should not be delayed. Otherwise, it is 
unclear what parts of the regulations will be impacted by negotiated 
rulemaking and how these provisions could impact other parts of the 
regulations.
    With respect to the comments that institutions have worked over the 
past 18 months to implement the 2016 final regulations, and their 
investments should not be wasted now by an unnecessary delay of the 
consumer protections and disclosures, we do not believe that these 
investments were a waste, as the results of these efforts will be 
helpful to students and information

[[Page 31300]]

from institutions that made those changes can inform the upcoming 
negotiated rulemaking process.
    Changes: None.

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 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 regulatory action is a significant regulatory action subject 
to review by OMB under section 3(f)(4) 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 $364,419 in annualized cost savings or $5.2 
million in present value terms for the delay period; though it is 
possible some institutions have already incurred these costs preparing 
for the current effective date.
    We have also reviewed this final rule 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.''
    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 clarification 
outweighs any negative effect of the delayed disclosures. Based on the 
analysis that follows, the Department believes that this delay of the 
effective date of selected provisions of the 2016 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 final 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 requirements of the 2016 final regulations. As 
a central estimate, the Department estimates institutions will be 
relieved of an expected Paperwork Reduction Act burden of approximately 
$364,419 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 final rule is considered an 
Executive Order 13771 deregulatory action. In the NPRM published May 
25, 2018, the Department explicitly requested comments on whether these 
administrative cost savings and foregone benefits calculations and 
discussions are accurate and fully capture the impacts of this final 
rule. Some commenters disagreed with the Department's estimates, 
especially of the costs to borrowers of not receiving certain 
disclosures and protections, and those comments are summarized in the 
Effects of Delay section.

Effects of Delay

    The Regulatory Impact Analysis of the 2016 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. In the NPRM, we acknowledged that the delay would result 
in students not receiving certain disclosures about licensure and 
adverse actions against programs, as well as information about a 
process for submitting complaints in their State. The Department also 
estimated that institutions would benefit from the delay by having more 
time before incurring the costs of compliance and an opportunity to get 
more clarity on the details of the State authorization requirements and 
how they fit their programs.
    Several commenters responded to the Department's analysis, both 
from an institutional and a borrower and consumer advocate perspective. 
Several commenters representing various institutions, many of which 
supported the delay, appreciated the Department's willingness to reopen 
the issue and clarify requirements that institutions find unclear. They 
also reiterated that the December 2016 final regulations underestimated 
the costs of obtaining State authorization and complying with that 
rule, but did not specify what additional costs there would be or what

[[Page 31301]]

assumptions the Department should change to more accurately capture 
institutional costs. Therefore, we are not changing our estimates of 
institutional costs in the NPRM analysis, but reiterate our 
acknowledgement that these are representative cost estimates and the 
specific costs to individual institutions will vary based on the extent 
of their participation in distance education, their systems and 
staffing, and the way they pursue State authorization.
    Another set of comments focused on the potential harms to students 
from the delay, noting that online education is the fastest growing 
segment of the postsecondary market and that most of the largest 
providers are proprietary institutions, several with recent or ongoing 
investigations. Several commenters offered a variety of statistics 
consistent with the Department's own information that proprietary 
institutions are key players in the distance education market. For 
example, one commenter noted that proprietary schools in the top 12 
providers in 2016 accounted for approximately 40 percent of distance 
education students. Several commenters pointed to the higher cost of 
distance-education-only programs at proprietary institutions, citing a 
cumulative average Federal student loan debt for graduates of 
proprietary institutions of $31,298.60 compared to $28,482.20 across 
all sectors and $21,525.60 for those in programs that are not entirely 
online. Commenters also pointed out that 770,000 of the 2.1 million 
students enrolled online in 2015 attended programs outside their State 
of residence and deserve the same protections as students at campus-
based programs. Several commenters noted that proprietary institutions 
have a greater share of their students who are low-income, minority, or 
first-generation students, something the Department has recognized, so 
delaying the disclosures would have a detrimental impact on students 
with potentially less resources to seek out information from other 
sources.
    The Department appreciates the comments and analysis submitted. We 
recognize that the burden of the delay does fall on students and 
believe that the description of the effects of the delay reflects this. 
However, as noted in the Analysis of Comments section in this preamble, 
many students will still receive sufficient disclosures regarding 
distance education programs during the period of the delay due to steps 
institutions have already taken to comply with the 2016 final 
regulations. In addition, as also previously noted, 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. The Department maintains its 
position that, in allowing reconsideration of the 2016 final 
regulations to provide institutions greater clarity on key issues, the 
benefits of the delay of the selected provisions are greater than the 
potential costs to students of the delayed disclosures and complaint 
processes that could already be accessible from other sources. The 
Department has modified its decision to delay the effective date of the 
2018 final regulations and has decided not to delay Sec.  600.9(d) 
(State authorization of foreign locations of domestic institution 
regulations).The analysis of the effects of the delay for the selected 
provisions has not changed substantially and is included below.
    As a result of the 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 effective date of 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.
    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 believes that, as a result of uncertainty as to 
the definition of ``residency'' and other aspects of the 2016 final 
regulations, institutions may refuse enrollment or title IV aid to 
distance education students as a safeguard against unintentional non-
compliance--an unintended potential effect. 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. 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. The Department believes the 
possibility of this outcome and the disruption it could have to 
students' education plans supports delaying the effective date of the 
2016 final regulations to prevent institutions from taking such actions 
while the Department conducts negotiated rulemaking to develop clearer 
regulations.
    Delay may, however, better allow institutions to address the costs 
of complying with the 2016 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 the 2016 final regulations do not require 
institutions to have distance education programs.
    Although the Department did not ascribe specific costs to the State 
authorization regulations, 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 requested 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. As discussed previously, several 
commenters mentioned that the 2016 final regulations underestimated the 
cost for institutions but did not include

[[Page 31302]]

specific numbers with which to update the estimate or discuss whether 
the $75,000 cost provided by the earlier commenter was in line with 
other institutions' 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 2016 final regulations, 
those costs were estimated to be 152,405 hours and $5,570,403 annually.

Net Budget Impact

    As noted in the 2016 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 the 2016 final 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 2016 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 the 2016 final regulations and State authorization 
requirements were not expected to change loan volumes in a way that 
would result in a significant net budget impact. This analysis is 
limited to the effect of delaying the effective date of the selected 
provisions of the 2016 final regulations to July 1, 2020, and does not 
account for any potential future substantive changes in the upcoming 
regulations.

Regulatory Flexibility Analysis

    This final rule 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 
institutions of higher education (IHEs) that would be subject to the 
paperwork compliance provisions of the 2016 final regulations are small 
entities. Accordingly, we have reviewed the estimates from the 2016 
final regulations and prepared this regulatory flexibility analysis to 
present an estimate of the effect on small entities of the delay of the 
effective date of the 2016 final regulations.
    In the Regulatory Flexibility Analysis for the 2016 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 
of the effective date of the 2016 final regulations because they do not 
offer distance education. As described in the analysis of the 2016 
final regulations, distance education is a growing area with 
potentially significant effects on the postsecondary education market 
and the small entities that participated in it, providing an 
opportunity to expand and serve more students than their physical 
locations can accommodate but also increasing competitive pressure from 
online options. Overall, as of Fall 2016, 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.\2\ The delay of selected 
provisions of the effective date of the 2016 final regulations, and the 
resulting uncertainty regarding State authorization requirements 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.
---------------------------------------------------------------------------

    \2\ 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.
---------------------------------------------------------------------------

    In the analysis of the 2016 final regulations, 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 regulations. In the NPRM, the Department welcomed 
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 regulations. One comment indicated 
that of the 1,800 institutions that participate in SARA (and thus are 
likely to offer distance education programs), 45 percent (810) enroll 
less than 2,500 students. That enrollment figure does not correspond to 
the Department's definition of a ``small entity,'' but it does indicate 
that many smaller institutions are participating in distance education 
programs, even if a significant share of students are enrolled in 
programs offered by large institutions.
    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

[[Page 31303]]

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 for 
Sections 600.9 and 668.50. This final rule delays the effective date of 
selected provisions of the cited regulations.
    Section 600.9(d) will go into effect on July 1, 2018, with an 
assessed burden of 160 hours and $5,848 in institutional costs. The 
maximum potential reduction in burden hours and costs from the delay 
are the 152,405 hours and $5,570,403 associated with sections 668.50(b) 
and (c).
    The table below identifies the regulatory sections, OMB Control 
Numbers, estimated burden hours, and estimated costs of those final 
regulations that have not been delayed.

----------------------------------------------------------------------------------------------------------------
                                                                                                  Estimated cost
                       Regulatory section                           OMB Control    Burden hours     $36.55/hour
                                                                        No.                         institution
----------------------------------------------------------------------------------------------------------------
668.50(b).......................................................       1845-0145         151,715        5,545183
668.50(c).......................................................       1845-0145             690          25,220
                                                                 -----------------------------------------------
    Total.......................................................  ..............         152,405       5,570,403
----------------------------------------------------------------------------------------------------------------
Cost savings due to delayed effective date...............................152,405       5,570,403
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

    This final rule delays the effective date of selected provisions 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 Portable Document Format (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.

0
Accordingly, the effective date for the amendments to 34 CFR 600.2, 
600.9, 668.2, and the addition of 34 CFR 668.50, published December 19, 
2016, at 81 FR 92236, is delayed until July 1, 2020.

    Dated: June 28, 2018.
Betsy DeVos,
Secretary of Education.
[FR Doc. 2018-14373 Filed 6-29-18; 4:15 pm]
 BILLING CODE 4000-01-P



                                               31296                Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations

                                               DEPARTMENT OF EDUCATION                                  6 letter), from the American Council on               additional negotiated rulemaking or,
                                                                                                        Education (www.acenet.edu/news-room/                  alternatively, clarify the final
                                               34 CFR Parts 600 and 668                                 Documents/ACE-Letter-on-State-                        regulations through guidance. We
                                                                                                        Authorization-Concern.pdf), which                     believe that these disclosure issues,
                                               [Docket ID ED–2018–OPE–0041]
                                                                                                        represents nearly 1,800 college                       particularly those regarding
                                               RIN 1840–AD39                                            university presidents from all types of               individualized student disclosures, also
                                                                                                        U.S. accredited, degree-granting                      require further review and the
                                               Program Integrity and Improvement                        institutions and the executives at related            consideration of whether more detailed
                                                                                                        associations. The February 6 letter                   requirements are necessary for proper
                                               AGENCY:  Office of Postsecondary                         stated that, ‘‘students who are residents             implementation. Issues that need further
                                               Education, Department of Education.                      of certain states may be ineligible for               consideration and clarification include
                                               ACTION: Final rule; delay of effective                   federal financial aid if they are studying            the disclosures that may need to be
                                               date.                                                    online at institutions located outside                made to a student when the student
                                                                                                        their states. This is related to the                  changes his or her residence, what
                                               SUMMARY:   The Secretary delays, until
                                                                                                        requirement imposed by the state                      factors would allow an institution to
                                               July 1, 2020, the effective date of                      authorization regulations that mandates               become aware that a student has
                                               selected provisions of the final                         institutions disclose to students the                 changed his or her residence so that
                                               regulations entitled Program Integrity                   appropriate state complaint process for               individualized disclosures could be
                                               and Improvement published in the                         their state of residence. A number of                 made, and the length of time a student
                                               Federal Register on December 19, 2016                    states, including California, do not                  must reside at the new address to be
                                               (the 2016 final regulations). The                        currently have complaint processes for                considered a resident of that State for
                                               Secretary is delaying the effective date                 all out-of-state institutions.’’                      the purposes of State authorization
                                               of selected provisions of the 2016 final                    On February 7, 2018, the Department                disclosures. These clarifications are
                                               regulations based on concerns recently                   received a letter from the Western                    necessary because the handling of these
                                               raised by regulated parties and to ensure                Interstate Commission for Higher                      situations may vary State by State and
                                               that there is adequate time to conduct                   Education (WICHE) Cooperative for                     be further complicated by the fact that
                                               negotiated rulemaking to reconsider                      Educational Technologies, the National                each State’s definition of ‘‘residence’’
                                               selected provisions of 2016 final                        Council for State Authorization                       may have been originally developed for
                                               regulations and, as necessary, develop                   Reciprocity, and the Distance Education               other purposes. Other issues in need of
                                               revised regulations. The provisions for                  Accrediting Commission, all of which                  further clarification include what
                                               which the effective date is being                        represent regulated parties (February 7               happens in the case of a student who
                                               delayed are listed in the SUPPLEMENTARY                  letter). In the letter, these entities stated         enrolls in a program that meets the
                                               INFORMATION section of this document.                    that there is widespread concern and                  licensure requirements of the State in
                                               DATES: Effective June 29, 2018, the                      confusion in the higher education                     which the student was living at the
                                               effective date for the amendments to 34                  community regarding the                               time, but then relocates to a new State
                                               CFR 600.2, 600.9(c), 668.2, and the                      implementation of the 2016 final                      where the program does not fulfill the
                                               addition of 34 CFR 668.50, published                     regulations, particularly with respect to             requirements for licensure as well as the
                                               December 19, 2016, at 81 FR 92236, is                    State authorization of distance                       obligation of the university if the
                                               delayed until July 1, 2020.                              education and related disclosures. The                program no longer meets the licensure
                                               FOR FURTHER INFORMATION CONTACT:                         authors of the February 7 letter argued               requirements, due to the student’s
                                               Sophia McArdle, Ph.D., U.S.                              that the 2016 final regulations would be              move, not a change in the program.
                                               Department of Education, 400 Maryland                    costly and burdensome for most colleges                  Finally, to add further complexity,
                                               Ave. SW, Mail Stop 290–44,                               and universities that offer distance                  students may not always notify their
                                               Washington, DC 20202. Telephone:                         education and that some States have not               institution if they change addresses, or
                                               (202) 453–6318. Email:                                   implemented the student complaint                     if they relocate temporarily to another
                                               sophia.mcardle@ed.gov.                                   policies and procedures required by the               State. While the preamble of the 2016
                                                  If you use a telecommunications                       regulations. The authors also expressed               final regulations stated that an
                                               device for the deaf (TDD) or a text                      that institutions need additional                     institution may rely on a student’s self-
                                               telephone (TTY), call the Federal Relay                  information from the Department to                    determination of residency unless it has
                                               Service (FRS), toll free, at 1–800–877–                  better understand how to comply with                  information to the contrary, there may
                                               8339.                                                    the 2016 final regulations. They stated,              need to be additional clarification or
                                                                                                        for instance, that the definition of                  safeguards for institutions in the event
                                               SUPPLEMENTARY INFORMATION:      Based on                 ‘‘residence’’ in the preamble of the 2016             that a student does not notify the
                                               concerns recently raised by regulated                    final regulations may conflict with State             institution of a change in residency.
                                               parties related to implementation of the                 laws and common practice among                           The rule, as currently drafted, does
                                               2016 final regulations, the Secretary                    students for establishing residency.                  not account for these complexities.
                                               delays, until July 1, 2020, the effective                   The authors of the two letters also                Therefore, we believe that, among other
                                               date of selected provisions of the 2016                  asked the Department to clarify the                   things, a more precise definition of
                                               final regulations (81 FR 92236). The                     format in which they should make                      ‘‘residence’’—which can be defined by
                                               Department is implementing this delay                    public and individualized disclosures of              States in different ways for different
                                               to hear from the regulated community                     the State authorization status for every              purposes—should be established
                                               and students about these concerns and                    State, the complaint resolution                       through rulemaking to ensure
sradovich on DSK3GMQ082PROD with RULES3




                                               to consider, through negotiated                          processes for every State, and details on             institutions have the clarity needed to
                                               rulemaking, possible revisions to                        State licensure eligibility for every                 determine a student’s residence. We
                                               selected provisions of the 2016 final                    discipline that requires a license to                 believe that we will need to provide
                                               regulations.                                             enter a profession. The authors                       institutions with significantly more
                                                  Two letters in particular prompted                    suggested that the Department should                  detail to properly operationalize this
                                               this delay. The Department received a                    delay the effective date of the 2016 final            term and will need to work with
                                               letter dated February 6, 2018 (February                  regulations and submit the issues to                  impacted stakeholders to determine


                                          VerDate Sep<11>2014   18:14 Jul 02, 2018   Jkt 244001   PO 00000   Frm 00002   Fmt 4701   Sfmt 4700   E:\FR\FM\03JYR3.SGM   03JYR3


                                                                    Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations                                         31297

                                               how best to address a concern that is                    to a State in which the institution does              contact information when the student is
                                               complex and potentially costly to                        not have the required State                           given an assignment outside of the
                                               institutions and students.                               authorization. Thus, if we did not delay              United States.
                                                  For both of the residency and                         selected provisions of the 2016 final                    Based on the above considerations,
                                               disclosure issues, guidance is not the                   regulations, students would potentially               the Department delays until July 1,
                                               appropriate vehicle to provide the                       lose the opportunity to use title IV aid              2020, the effective date of selected
                                               clarifications needed. Due to the                        for these courses. Institutions that                  provisions of the final regulations in
                                               complexity of these issues, we believe                   routinely provide distance education to               title 34 of the Code of Federal
                                               that it is important to solicit the input                large numbers of students from all 50                 Regulations (CFR):
                                               of stakeholders who have been engaged                    States may have already obtained State                   • § 600.2 Definitions (definition of
                                               in meeting these requirements in                         authorization and assessed the                        ‘‘State authorization reciprocity
                                               developing workable solutions. Further,                  complaint systems and licensure                       agreement’’).
                                               guidance is non-binding and, therefore,                  requirements since the cost-benefit ratio                • § 600.9(c) (State authorization
                                               could not be used to establish any new                   favors such an action. As a result, the               distance education regulations).
                                               requirements. Lastly, the necessary                      delay will not have any significant effect               • § 668.2 (definition of ‘‘Distance
                                               changes may affect the burden on some                    on students attending those institutions.             education’’).
                                               regulated parties, which would require                     Further, the Department has provided                   • § 668.50 (institutional disclosures
                                               an updated estimate of regulatory                        guidance regarding student complaints                 for distance or correspondence
                                               impact. The Department therefore                         and student consumer disclosures as                   programs regulations).
                                               believes that the clarifications requested               related to distance education in a Dear                  Public Comment: In response to our
                                               are so substantive that they would                       Colleague letter issued on July 27, 2012              invitation in the notice of proposed
                                               require further rulemaking including                     (DCL GEN–12–13),1 ensuring that
                                                                                                                                                              rulemaking published in the Federal
                                               negotiated rulemaking under the Higher                   during this delay of selected provisions
                                                                                                                                                              Register on May 25, 2018 (83 FR 24250)
                                               Education Act of 1965, as amended                        of the final regulations institutions will
                                                                                                                                                              (NPRM), 39 parties submitted comments
                                               (HEA).                                                   be aware of their existing obligations
                                                  We believe that delaying the effective                                                                      on the delay of the effective date. We do
                                                                                                        and that students will receive these
                                               date of selected provisions of the 2016                                                                        not discuss comments or
                                                                                                        protections. Under 34 CFR 668.43(b), an
                                               final regulations will benefit students.                                                                       recommendations that are beyond the
                                                                                                        institution is required to provide to
                                                  The 2016 final regulations are                                                                              scope of this regulatory action or that
                                                                                                        students its State approval or licensing
                                               currently scheduled to go into effect in                                                                       would require statutory change.
                                                                                                        and the contact information for filing
                                               July. Many institutions and students                     complaints. In DCL GEN–12–13, in                      Analysis of Comments and Changes
                                               ordinarily not significantly involved in                 Questions and Answers (Q&A) 9
                                               distance education provide and take                                                                               An analysis of the comments and of
                                                                                                        through 13, we provide guidance on
                                               online courses in the summer. We                                                                               any changes since publication of the
                                                                                                        how institutions may meet this
                                               believe the delay will especially benefit                                                                      NPRM follows.
                                                                                                        requirement with respect to distance
                                               those students who are planning to take                  education. In Q&A 9, we clarify that an                  Comment: Many commenters
                                               coursework via online programs during                    institution offering distance education               supported the proposed rule to delay
                                               the summer months, or who may be                         in multiple States can satisfy the                    the effective date of the 2016 final
                                               making plans to participate in                           provisions of 34 CFR 668.43(b) requiring              regulations until July 1, 2020, because
                                               internships in other States. If the                      that it provide State contact information             they believed that non-regulatory
                                               selected provisions of 2016 final                        for filing complaints by providing a link             guidance from the Department is
                                               regulations were to go into effect on July               to a noninstitutional website that                    unlikely to address the current gap
                                               1, 2018, an institution may be hesitant                  identifies the contact information for                between institutional understanding of
                                               to offer these courses outside the State                 multiple States so long as the link is                the final regulations and the
                                               in which the institution is located,                     accessible from the institution’s website             Department’s expectations for
                                               because the uncertainty of how to                        and the link is prominently displayed                 compliance. Commenters supported the
                                               determine students’ residency, and the                   and accurately described. Q&A 9 also                  Department’s plan to refer the 2016 final
                                               associated requirements, may make a                      states that the institution should ensure             regulations to the review and
                                               State unwilling to pursue State                          the website link is functioning and                   consideration afforded by the negotiated
                                               authorization in all of the possible                     accurate. Q&A 10 clarifies that, if an                rulemaking process. Commenters also
                                               locations its students may reside during                 institution offering distance education               stated that the delay is prudent given
                                               the summer.                                              in a State has only one student in that               the potential impact on institutions,
                                                  If selected provisions of 2016 final                  State, the institution must still provide             learners, and the State authorization
                                               regulations were to go into effect on July               contact information for that State. In                process, and will make it possible to
                                               1, 2018, some institutions, especially                   Q&A 12, we make clear that if a student               resolve any confusion for students,
                                               those with limited resources, could                      taking a program by distance education                institutions, States, and accreditors
                                               determine that the costs of obtaining                    moves to another State, and the                       about the requirements of the 2016 final
                                               State authorization, ensuring the                        institution is aware of the move, the                 regulations. One commenter noted that
                                               relevant States have complaint                           institution must ensure that the student              some parts of the 2016 final regulations
                                               procedures, and assessing licensure                      has access to the State contact                       are very onerous and expensive for
                                               requirements, are not worth the benefit                  information or filing complaints in that              institutions to implement and a delay
                                               of eligibility for title IV aid if only a                State. Finally, in Q&A 13, we note that               would give institutions more time to
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                                               small number of students enroll online                   for a student who is taking distance                  plan and budget for the changes.
                                               from a particular State, and therefore                   education and is in the military, the                    Discussion: We appreciate the
                                               may not obtain State authorization for                   contact information for the institution’s             commenters’ support.
                                               all applicable States. Thus, some                        main location is considered sufficient                   Changes: None.
                                               students might not be able to continue                                                                            Comment: Many commenters opposed
                                               their education during the summer if                      1 Available at: https://ifap.ed.gov/dpcletters/      delaying the effective date of the 2016
                                               during those months they must relocate                   GEN1213.html.                                         final regulations because of the potential


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                                               31298                Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations

                                               harm to students, as well as on                          based campuses to provide this                        in the State as the State sees fit, whether
                                               procedural grounds.                                      information to students, including                    it be to approve an institution to operate
                                                                                                        campuses that enroll large numbers of                 in-State, regardless of the physical
                                               Harm to Students
                                                                                                        students from other States. Thus, for                 location of the institution, or require an
                                                  Comment: Commenters stated that                       students who attend on-ground                         institution that is operating without
                                               delaying the effective date of the 2016                  campuses, the program they completed                  approval in the State to cease such
                                               final regulations would negatively                       may meet licensure requirements in the                operations regardless of the physical
                                               impact students because the consumer                     State in which the campus is located but              location of the institution. There is also
                                               protections and disclosures that would                   not licensure requirements in other                   no requirement that a State join a
                                               have been available to students under                    States.                                               reciprocity agreement, whether it is a
                                               the 2016 final regulations will not be                      Changes: None.                                     State-to-State reciprocity agreement or a
                                               available to students. A few commenters                     Comment: Commenters also noted                     reciprocity agreement that is
                                               expressed concern that students’ ability                 that the 2016 final regulations require               administered by a non-State entity. A
                                               to file complaints against institutions                  State and Federal oversight of American               State can also decide to leave any
                                               would be impeded by delaying the                         institutions receiving Federal financial              reciprocity agreement it had previously
                                               effective date of the provisions in the                  aid but operating in foreign locations,               joined. States do not need additional
                                               2016 final regulations related to the                    thereby ensuring core protections for                 Federal regulations in order to enforce
                                               State complaint process.                                 students enrolled in campuses abroad,                 their own laws if they choose to do so.
                                                  Discussion: While we do not have                      but that the Department offers no                        Changes: None.
                                               specific data with regard to how many                    rationale for delaying the effective date                Comment: Some commenters stated
                                               schools and States have come into                        of this component of the rule. Thus, the              that the definition of ‘‘State
                                               compliance with the 2016 final                           commenters believed that the effective                authorization reciprocity agreement’’ in
                                               regulations, based on the information                    date of these final regulations should                the 2016 final regulations is confusing,
                                               we do have, we expect that many                          not be delayed.                                       and noted particular concern about the
                                               students will still receive disclosures                     Discussion: We are persuaded by the                part of the definition that says that such
                                               regarding distance education programs                    commenters and, for the reasons they                  an agreement ‘‘does not prohibit any
                                               during the period of the delay due to                    specify, are not delaying § 600.9(d)                  State in the agreement from enforcing its
                                               steps institutions have already taken. In                (State authorization of foreign locations             own statutes and regulations, whether
                                               addition, as also previously noted, DCL                  of domestic institution regulations).                 general or specifically directed at all or
                                               GEN–12–13 provides guidance                                 Changes: We are not delaying                       a subgroup of educational institutions.’’
                                               regarding student complaints and                         § 600.9(d) (State authorization of foreign            They stated that some entities are
                                               student consumer disclosures as related                  locations of domestic institution                     interpreting this text to mean that a
                                               to distance education, ensuring that                     regulations). These regulations will go               State authorization reciprocity
                                               during the delay institutions will be                    into effect July 1, 2018.                             agreement that is acceptable to the
                                               aware of their existing obligations and                     Comment: Commenters also noted                     Department must allow a State that is a
                                               that students will receive the contact                   that the 2016 final regulations                       member of the agreement to enforce its
                                               information needed in order to file a                    strengthen States’ oversight capacity by              own statutes and regulations even if
                                               complaint against the institution. Under                 ensuring that States that sought to                   those statutes and regulations conflict
                                               34 CFR 668.43(b), an institution is                      regulate distance education would be                  with the provisions of an agreement into
                                               required to provide to students its State                able to identify and regulate schools                 which the State entered. The
                                               approval or licensing and the contact                    offering distance education in their                  commenters contended that delaying
                                               information for filing complaints. DCL                   State. These commenters argued that                   the effective date of the 2016 final
                                               GEN–12–13 clarifies this requirement                     delaying the effective date of the 2016               regulations would undermine the ability
                                               with respect to distance education as                    final regulations would undermine this                of States to protect their residents
                                               discussed above. We believe that these                   State oversight of distance education                 because the States would no longer be
                                               requirements will offer students                         programs and permit schools to use                    able to enforce their own statutes and
                                               protection during the delay.                             Federal funds for programs that operate               regulations if doing so were prohibited
                                                  With respect to other disclosures, we                 outside of the oversight of State                     by a State authorization reciprocity
                                               acknowledged in the NPRM that, as a                      regulators. Some commenters noted that                agreement. Other commenters indicated
                                               result of the proposed delay, it is                      State approval boards and regulatory                  that it was unclear whether this part of
                                               possible that students might not receive                 schemes vary from State to State and                  the definition allows enforcement of
                                               disclosures of adverse actions taken                     that States should be able to reject                  State regulations that conflict with the
                                               against a particular institution or                      institutions that do not meet a State’s               provisions of a reciprocity agreement.
                                               program. Students also may not receive                   higher standards. Some commenters                        Discussion: We view the confusion
                                               other information about an institution,                  also stated that a delay of the effective             and concern about what constitutes a
                                               such as information about refund                         date of the 2016 final regulations would              State authorization reciprocity
                                               policies or whether a program meets                      impede States from ensuring that                      agreement under the 2016 final
                                               certain State licensure requirements.                    distance education students have the                  regulations and how that current
                                               This information could help students                     same State-level protections as students              definition is meant to be operationalized
                                               identify programs that offer credentials                 enrolled at brick-and-mortar                          to be additional reasons to delay the
                                               that potential employers recognize and                   institutions, and limit States’ ability to            effective date of selected provisions of
                                               value; delaying the requirement to                       bring enforcement actions against                     the 2016 final regulations so that this
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                                               provide these disclosures may require                    schools offering online programs in                   issue can be clarified.
                                               students that desire this information to                 their States.                                            Changes: None.
                                               obtain it from another source or may                        Discussion: We believe that concerns
                                               lead students to choose sub-optimal                      about undermining State regulatory and                Procedural Concerns
                                               programs for their preferred courses of                  enforcement efforts may be overstated.                   Comment: Some commenters
                                               study. We note, however, that the                        A State already has the authority to                  expressed concerns about procedural
                                               Department has never required ground-                    administer legal authorization to operate             issues surrounding the proposed delay,


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                                                                    Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations                                          31299

                                               contending that the 15-day comment                       requirements. Additionally, the                       in other words, on July 1 of the next
                                               period does not allow enough time for                    necessary changes may affect the burden               year.
                                               meaningful comments. Commenters                          on regulated parties, which would                        In this instance, the catalysts for the
                                               further stated that the Department did                   require an updated estimate of                        delay are the February 6 and February
                                               not provide adequate justification for                   regulatory impact.                                    7 letters. While some commenters stated
                                               delaying the effective date of the 2016                     With regard to waiver of negotiated                that the Department was aware of the
                                               final regulations and that the                           rulemaking, section 492(b)(2) of the                  same issues raised in these letters
                                               Department could issue guidance, rather                  HEA provides that the Secretary may                   during the 2016 rulemaking and heard
                                               than delay the effective date. Some                      waive negotiated rulemaking if she                    about these same issues in August and
                                               commenters also asserted that the                        determines that there is good cause to                October 2017, we only more recently
                                               Department must conduct negotiated                       do so, and publishes the basis for such               determined that further consultation in
                                               rulemaking under the HEA to                              determination in the Federal Register at              the form of negotiated rulemaking was
                                               implement the proposed delay. They                       the same time as the proposed                         the appropriate vehicle by which to
                                               argued that the Department did not meet                  regulations are first published.                      clarify the 2016 final regulations, and it
                                               the criteria for an exemption from such                  Negotiated rulemaking requires a                      was the cited letters that changed our
                                               rulemaking under the Administrative                      number of steps that typically take the               understanding of the extent of
                                               Procedure Act (APA), believing that the                  Department well over 12 months to                     stakeholder concerns. Thus, based on
                                               Department did not establish ‘‘good                      complete. The Department could not                    this further understanding, we believe
                                               cause’’ to waive negotiated rulemaking.                  have completed the negotiated                         that negotiated rulemaking is necessary
                                               Commenters also opined that                              rulemaking process between February 6,                in order to make important, substantive
                                               institutions have worked over the past                   2018 (the date the Department received                clarifications, and that it is in the
                                               18 months to implement the 2016 final                    the first of the two letters that were the            interests of institutions, States, and
                                               regulations, and their investments                       catalyst for the delay) and the July 1,               students for the effective date of the
                                               should not be wasted now by an                           2018, effective date . Thus, the                      selected provisions of the final
                                               unnecessary delay of the consumer                        Department has good cause to waive the                regulations to be delayed and the
                                               protections and disclosures. Some                        negotiated rulemaking requirement with                regulations reconsidered. The
                                               commenters also stated that the                          regard to this delay the effective date of            Department could not have completed
                                               proposed delay is overly broad and that                  the final regulations to July 1, 2020.                the 12-month negotiated rulemaking
                                               since the Department justifies the delay                                                                       process between February 6, 2018, and
                                                                                                           As stated, negotiated rulemaking                   the July 1, 2018, effective date. Thus,
                                               based on only three issues, the
                                                                                                        requires a number of steps that typically             the Department has good cause to waive
                                               Department should have proposed to
                                                                                                        take the Department well over 12                      the negotiated rulemaking requirement
                                               delay only those three parts of the 2016
                                                                                                        months to complete. First, the HEA                    with regard to its proposal to delay the
                                               final regulations.
                                                  Discussion: The APA, 5 U.S.C. 553(c),                 requires the Department to hold public                effective date of selected provisions of
                                               requires an agency to provide interested                 hearings before commencing any                        the final regulations to July 1, 2020, in
                                               parties an opportunity to comment on                     negotiations. Based upon the feedback                 order to complete a new negotiated
                                               proposed regulations, but does not                       the Department receives during the                    rulemaking proceeding to address the
                                               stipulate the length of the comment                      hearings, the Department then identifies              concerns identified by some of the
                                               period. A 15-day comment period was                      those issues on which it will conduct                 regulated parties in the higher education
                                               necessary because the selected                           negotiated rulemaking, announces                      community. It would be confusing and
                                               provisions of the 2016 rule are                          those, and solicits nominations for non-              counterproductive for the selected
                                               scheduled to take effect on July 1, 2018,                Federal negotiators. Negotiations                     provisions of the 2016 final regulations
                                               and a final rule delaying the effective                  themselves are typically held over a                  to go into effect before the conclusion of
                                               date must be published prior to that                     three-month period. Following the                     this reconsideration process.
                                               date. A longer comment period would                      negotiations, the Department prepares a                  We do not believe the proposed delay
                                               not have allowed sufficient time for the                 notice of proposed rulemaking and                     is overly broad and that because the
                                               Department to review and respond to                      submits the proposed rule to the Office               delay discussion only addressed three
                                               comments, and publish a final rule.                      of Management and Budget (OMB) for                    issues, the Department should only
                                                  We believe that we have adequately                    review. The proposed rule is then open                delay the effective date of those three
                                               justified our decision to delay the                      for public comment for 30 to 60 days.                 parts of the 2016 final regulations. We
                                               effective date of selected provisions of                 Following the receipt of public                       have agreed with the commenters that
                                               the 2016 final regulations and that it                   comments, the Department considers                    § 600.9(d) (State authorization of foreign
                                               would be inappropriate to issue                          those comments and prepares final                     locations of domestic institution
                                               guidance, rather than implement the                      regulations that are reviewed by OMB                  regulations) should not be delayed.
                                               delay. Guidance is not the appropriate                   before publication. Accordingly, we                   Otherwise, it is unclear what parts of
                                               vehicle to provide the clarifications                    would not be able to complete the                     the regulations will be impacted by
                                               needed related to the residency and                      negotiated rulemaking process until                   negotiated rulemaking and how these
                                               disclosure issues. Guidance is non-                      2019, so regulations resulting from that              provisions could impact other parts of
                                               binding and, therefore, could not be                     process will not be effective before July             the regulations.
                                               used to establish any new requirements.                  1, 2020 per section 482 of the HEA (20                   With respect to the comments that
                                               More importantly, due to the                             U.S.C. 1089), also known as the ‘‘master              institutions have worked over the past
                                               complexity of the issues and the                         calendar requirement.’’ The master                    18 months to implement the 2016 final
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                                               substantive nature of the necessary                      calendar requirement specifies provides               regulations, and their investments
                                               clarifications, we believe that, in                      that a regulatory change that has been                should not be wasted now by an
                                               developing workable solutions, it is                     published in final form on or before                  unnecessary delay of the consumer
                                               important to conduct negotiated                          November 1 prior to the start of an                   protections and disclosures, we do not
                                               rulemaking under the HEA in order to                     award year—which begins on July 1 of                  believe that these investments were a
                                               solicit the input of stakeholders who                    any given year—may take effect only at                waste, as the results of these efforts will
                                               have been engaged in meeting these                       the beginning of the next award year, or,             be helpful to students and information


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                                               31300                Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations

                                               from institutions that made those                        obtaining regulatory objectives and                   Department estimates institutions will
                                               changes can inform the upcoming                          taking into account—among other things                be relieved of an expected Paperwork
                                               negotiated rulemaking process.                           and to the extent practicable—the costs               Reduction Act burden of approximately
                                                  Changes: None.                                        of cumulative regulations;                            $364,419 in annualized cost savings or
                                                                                                           (3) In choosing among alternative                  $5.2 million in present value terms for
                                               Executive Orders 12866, 13563, and                       regulatory approaches, select those                   the delay period; though it is possible
                                               13771                                                    approaches that maximize net benefits                 some States have already incurred these
                                               Regulatory Impact Analysis                               (including potential economic,                        costs preparing for the current effective
                                                                                                        environmental, public health and safety,              date.
                                                  Under Executive Order 12866, it must
                                                                                                        and other advantages; distributive                      Because of these savings, this final
                                               be determined whether this regulatory
                                                                                                        impacts; and equity);                                 rule is considered an Executive Order
                                               action is ‘‘significant’’ and, therefore,                   (4) To the extent feasible, specify                13771 deregulatory action. In the NPRM
                                               subject to the requirements of the                       performance objectives, rather than the               published May 25, 2018, the
                                               Executive order and subject to review by                 behavior or manner of compliance a                    Department explicitly requested
                                               OMB. Section 3(f) of Executive Order                     regulated entity must adopt; and                      comments on whether these
                                               12866 defines a ‘‘significant regulatory                    (5) Identify and assess available                  administrative cost savings and foregone
                                               action’’ as an action likely to result in                alternatives to direct regulation,                    benefits calculations and discussions
                                               a rule that may—                                         including economic incentives—such as                 are accurate and fully capture the
                                                  (1) Have an annual effect on the                      user fees or marketable permits—to                    impacts of this final rule. Some
                                               economy of $100 million or more, or                      encourage the desired behavior, or                    commenters disagreed with the
                                               adversely affect a sector of the economy,                provide information that enables the                  Department’s estimates, especially of
                                               productivity, competition, jobs, the                     public to make choices.                               the costs to borrowers of not receiving
                                               environment, public health or safety, or                    Executive Order 13563 also requires                certain disclosures and protections, and
                                               State, local, or Tribal governments or                   an agency ‘‘to use the best available                 those comments are summarized in the
                                               communities in a material way (also                      techniques to quantify anticipated                    Effects of Delay section.
                                               referred to as an ‘‘economically                         present and future benefits and costs as
                                               significant’’ rule);                                     accurately as possible.’’ The Office of               Effects of Delay
                                                  (2) Create serious inconsistency or                   Information and Regulatory Affairs of                    The Regulatory Impact Analysis of the
                                               otherwise interfere with an action taken                 OMB has emphasized that these                         2016 final regulations stated that the
                                               or planned by another agency;                            techniques may include ‘‘identifying                  regulations would have the following
                                                  (3) Materially alter the budgetary                    changing future compliance costs that                 primary benefits: (1) Updated and
                                               impacts of entitlement grants, user fees,                might result from technological                       clarified requirements for State
                                               or loan programs or the rights and                       innovation or anticipated behavioral                  authorization of distance education and
                                               obligations of recipients thereof; or                    changes.’’                                            foreign additional locations, (2) a
                                                  (4) Raise novel legal or policy issues                   In choosing among alternative                      process for students to access complaint
                                               arising out of legal mandates, the                       regulatory approaches, we selected the                resolution in either the State in which
                                               President’s priorities, or the principles                approach that would maximize net                      the institution is authorized or the State
                                               stated in the Executive order.                           benefits. In particular, the Department               in which they reside, and (3) increased
                                                  This regulatory action is a significant               believes avoiding the compliance costs                transparency and access to institutional
                                               regulatory action subject to review by                   for institutions and the potential                    and program information. In the NPRM,
                                               OMB under section 3(f)(4) of Executive                   unintended harm to students if                        we acknowledged that the delay would
                                               Order 12866. The quantified economic                     institutions decide not to offer distance             result in students not receiving certain
                                               effects and net budget impact associated                 education courses to students who                     disclosures about licensure and adverse
                                               with the delayed effective date are not                  switch locations for a semester or do not             actions against programs, as well as
                                               expected to be economically significant.                 allow students to receive title IV aid for            information about a process for
                                               Institutions will be relieved of an                      such courses because the definition of                submitting complaints in their State.
                                               expected Paperwork Reduction Act                         ‘‘residency’’ needs clarification                     The Department also estimated that
                                               burden of approximately $364,419 in                      outweighs any negative effect of the                  institutions would benefit from the
                                               annualized cost savings or $5.2 million                  delayed disclosures. Based on the                     delay by having more time before
                                               in present value terms for the delay                     analysis that follows, the Department                 incurring the costs of compliance and
                                               period; though it is possible some                       believes that this delay of the effective             an opportunity to get more clarity on the
                                               institutions have already incurred these                 date of selected provisions of the 2016               details of the State authorization
                                               costs preparing for the current effective                final regulations is consistent with the              requirements and how they fit their
                                               date.                                                    principles in Executive Order 13563.                  programs.
                                                  We have also reviewed this final rule                    Consistent with Executive Order                       Several commenters responded to the
                                               under Executive Order 13563, which                       13771 (82 FR 9339, February 3, 2017),                 Department’s analysis, both from an
                                               supplements and explicitly reaffirms the                 we have estimated that this final rule                institutional and a borrower and
                                               principles, structures, and definitions                  has a potential upper bound effect of                 consumer advocate perspective. Several
                                               governing regulatory review established                  estimated annualized cost savings of                  commenters representing various
                                               in Executive Order 12866. To the extent                  $705,737, or $10,081,963 in present                   institutions, many of which supported
                                               permitted by law, Executive Order                        value terms, using a 7 percent discount               the delay, appreciated the Department’s
                                               13563 requires that an agency:                           rate over a perpetual time horizon, in                willingness to reopen the issue and
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                                                  (1) Propose or adopt regulations only                 administrative and information                        clarify requirements that institutions
                                               upon a reasoned determination that                       disclosure costs. This is an upper bound              find unclear. They also reiterated that
                                               their benefits justify their costs                       estimate of these cost savings, since                 the December 2016 final regulations
                                               (recognizing that some benefits and                      some institutions may have begun                      underestimated the costs of obtaining
                                               costs are difficult to quantify);                        development of disclosures to meet the                State authorization and complying with
                                                  (2) Tailor its regulations to impose the              requirements of the 2016 final                        that rule, but did not specify what
                                               least burden on society, consistent with                 regulations. As a central estimate, the               additional costs there would be or what


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                                                                    Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations                                          31301

                                               assumptions the Department should                        regarding student complaints and                      is unclear. A student who is unable to
                                               change to more accurately capture                        student consumer disclosures as related               take classes during the summer months
                                               institutional costs. Therefore, we are not               to distance education, ensuring that                  may be unable to complete his or her
                                               changing our estimates of institutional                  during the delay institutions will be                 program on time, especially if the
                                               costs in the NPRM analysis, but reiterate                aware of their existing obligations and               student is working or raising children
                                               our acknowledgement that these are                       that students will receive these                      and cannot manage a 15-credit course
                                               representative cost estimates and the                    protections. The Department maintains                 load during the regular academic terms.
                                               specific costs to individual institutions                its position that, in allowing                        The Department believes the possibility
                                               will vary based on the extent of their                   reconsideration of the 2016 final                     of this outcome and the disruption it
                                               participation in distance education,                     regulations to provide institutions                   could have to students’ education plans
                                               their systems and staffing, and the way                  greater clarity on key issues, the benefits           supports delaying the effective date of
                                               they pursue State authorization.                         of the delay of the selected provisions               the 2016 final regulations to prevent
                                                 Another set of comments focused on                     are greater than the potential costs to               institutions from taking such actions
                                               the potential harms to students from the                 students of the delayed disclosures and               while the Department conducts
                                               delay, noting that online education is                   complaint processes that could already                negotiated rulemaking to develop
                                               the fastest growing segment of the                       be accessible from other sources. The                 clearer regulations.
                                               postsecondary market and that most of                    Department has modified its decision to                  Delay may, however, better allow
                                               the largest providers are proprietary                    delay the effective date of the 2018 final            institutions to address the costs of
                                               institutions, several with recent or                     regulations and has decided not to delay              complying with the 2016 final
                                               ongoing investigations. Several                          § 600.9(d) (State authorization of foreign            regulations. In promulgating those
                                               commenters offered a variety of                          locations of domestic institution                     regulations, the Department recognized
                                               statistics consistent with the                           regulations).The analysis of the effects              that institutions could face compliance
                                               Department’s own information that                        of the delay for the selected provisions              costs associated with obtaining State
                                               proprietary institutions are key players                 has not changed substantially and is                  authorization for distance education
                                               in the distance education market. For                    included below.                                       programs or operating foreign locations.
                                               example, one commenter noted that                           As a result of the delay, students                 But the Department did not ascribe
                                               proprietary schools in the top 12                        might not receive disclosures of adverse              specific costs to the State authorization
                                               providers in 2016 accounted for                          actions taken against a particular                    regulations and associated definitions
                                               approximately 40 percent of distance                     institution or program. Students also                 because it presumed that institutions
                                               education students. Several commenters                   may not receive other information about               were already complying with applicable
                                               pointed to the higher cost of distance-                  an institution, such as information                   State authorization requirements and
                                               education-only programs at proprietary                   about refund policies or whether a                    because the 2016 final regulations do
                                               institutions, citing a cumulative average                program meets certain State licensure                 not require institutions to have distance
                                               Federal student loan debt for graduates                  requirements. Increased access to such                education programs.
                                               of proprietary institutions of $31,298.60                information could help students                          Although the Department did not
                                               compared to $28,482.20 across all                        identify programs that offer credentials              ascribe specific costs to the State
                                               sectors and $21,525.60 for those in                      that potential employers recognize and                authorization regulations, it provided
                                               programs that are not entirely online.                   value, so delaying the effective date of              examples of costs ranging from $5,000
                                               Commenters also pointed out that                         the requirement to provide these                      to $16,000 depending on institution
                                               770,000 of the 2.1 million students                      disclosures may require students to                   size, for a total estimated annual cost for
                                               enrolled online in 2015 attended                         obtain this information from another                  all institutions of $19.3 million. Several
                                               programs outside their State of                          source or may lead students to choose                 commenters stated that the Department
                                               residence and deserve the same                           sub-optimal programs for their preferred              underestimated the costs of compliance
                                               protections as students at campus-based                  courses of study.                                     with the regulations, noting that
                                               programs. Several commenters noted                          Additionally, the delay of the                     extensive research may be required for
                                               that proprietary institutions have a                     disclosures related to the complaints                 each program in each State. One
                                               greater share of their students who are                  resolution process could make it harder               institution reported that it costs $23,520
                                               low-income, minority, or first-                          for students to access available                      to obtain authorization for a program
                                               generation students, something the                       consumer protections. Some students                   with an internship in all 50 States and
                                               Department has recognized, so delaying                   may be aware of Federal Student Aid’s                 $3,650 to obtain authorization for a new
                                               the disclosures would have a                             Ombudsman Group, State Attorneys                      100 percent online program in all 50
                                               detrimental impact on students with                      General offices, or other resources for               States. To renew the authorization for
                                               potentially less resources to seek out                   potential assistance, but the disclosure              its existing programs, this institution
                                               information from other sources.                          would help affected students be aware                 estimated a cost of $75,000 annually,
                                                 The Department appreciates the                         of these options.                                     including fees, costs for surety bonds,
                                               comments and analysis submitted. We                         The Department also believes that, as              and accounting services, and noted
                                               recognize that the burden of the delay                   a result of uncertainty as to the                     these costs have been increasing in
                                               does fall on students and believe that                   definition of ‘‘residency’’ and other                 recent years. The Department believes
                                               the description of the effects of the                    aspects of the 2016 final regulations,                this institution’s estimate is credible;
                                               delay reflects this. However, as noted in                institutions may refuse enrollment or                 however, we requested comment on
                                               the Analysis of Comments section in                      title IV aid to distance education                    whether this example provides a typical
                                               this preamble, many students will still                  students as a safeguard against                       or accurate level of expected
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                                               receive sufficient disclosures regarding                 unintentional non-compliance—an                       compliance costs across a representative
                                               distance education programs during the                   unintended potential effect. For                      population, and the extent to which
                                               period of the delay due to steps                         example, if a student pursues a summer                institutions have already incurred these
                                               institutions have already taken to                       internship and relocates to another State             costs. As discussed previously, several
                                               comply with the 2016 final regulations.                  for the summer semester, institutions                 commenters mentioned that the 2016
                                               In addition, as also previously noted,                   may choose not to allow them to take                  final regulations underestimated the
                                               DCL GEN–12–13 provides guidance                          courses online because their residency                cost for institutions but did not include


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                                               31302                Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations

                                               specific numbers with which to update                    they are independently owned and                        provisions of the effective date of the
                                               the estimate or discuss whether the                      operated and not dominant in their field                2016 final regulations, and the resulting
                                               $75,000 cost provided by the earlier                     of operation with total annual revenue                  uncertainty regarding State
                                               commenter was in line with other                         below $7 million. The SBA Size                          authorization requirements for distance
                                               institutions’ costs. In practice, actual                 Standards define ‘‘not-for-profit                       education, may slow the reshuffling of
                                               costs to institutions vary based on a                    institutions’’ as ‘‘small organizations’’ if            the postsecondary education market or
                                               number of factors including an                           they are independently owned and                        the increased participation of small
                                               institution’s size, the extent to which an               operated and not dominant in their field                entities in distance education, but that
                                               institution provides distance education,                 of operation, or as ‘‘small entities’’ if               is not necessarily the case. Distance
                                               and whether it participates in a State                   they are institutions controlled by                     education has expanded over recent
                                               authorization reciprocity agreement or                   governmental entities with populations                  years even in the absence of a clear State
                                               chooses to obtain authorization in                       below 50,000. Under these definitions,                  authorization regime.
                                               specific States.                                         approximately 4,267 of the institutions                    In the analysis of the 2016 final
                                                 Delay may also allow institutions to                   of higher education (IHEs) that would be                regulations, we noted that the
                                               postpone incurring costs associated                      subject to the paperwork compliance                     Department estimated total State
                                               with the disclosure requirements. As                     provisions of the 2016 final regulations                Authorization Reciprocity Agreement
                                               indicated in the Paperwork Reduction                     are small entities. Accordingly, we have                (SARA) fees and additional State fees of
                                               Act of 1995 section of the 2016 final                    reviewed the estimates from the 2016                    approximately $7 million annually for
                                               regulations, those costs were estimated                  final regulations and prepared this                     small entities, but acknowledged that
                                               to be 152,405 hours and $5,570,403                       regulatory flexibility analysis to present              costs could vary significantly by type of
                                               annually.                                                an estimate of the effect on small                      institution and institutions’ resources
                                                                                                        entities of the delay of the effective date             and that these considerations may
                                               Net Budget Impact
                                                                                                        of the 2016 final regulations.                          influence the extent to which small
                                                  As noted in the 2016 final regulations,                  In the Regulatory Flexibility Analysis               entities operate distance education
                                               in the absence of evidence that the                      for the 2016 final regulations, the                     programs. Small entities that do
                                               regulations would significantly change                   Department estimated that 4,267 of the                  participate in the distance education
                                               the size and nature of the student loan                  6,890 IHEs participating in the title IV,               sector may benefit from avoiding these
                                               borrower population, the Department                      HEA programs were considered small                      fees during the delay period. If 50
                                               estimated no significant net budget                      entities—1,878 are not-for-profit                       percent of small entities offer distance
                                               impact from the 2016 final regulations.                  institutions, 2,099 are for-profit                      education, the average annual cost
                                               While the updated requirements for                       institutions with programs of two years                 savings per small entity during the
                                               State authorization and the option to                    or less, and 290 are for-profit                         delay would be approximately $3,280,
                                               use State authorization reciprocity                      institutions with four-year programs.                   but that would increase to $6,560 if
                                               agreements may expand the availability                   Using the definition described above,                   distance education was only offered by
                                               of distance education, student loan                      approximately 60 percent of IHEs                        25 percent of small entities. This
                                               volume will not necessarily expand                       qualify as small entities, even if the                  estimate assumes small entities have not
                                               greatly. Additional distance education                   range of revenues at the not-for-profit                 already taken steps to comply with the
                                               could provide convenient options for                     institutions varies greatly. Many small                 State authorization requirements in the
                                               students to pursue their educations and                  institutions may focus on local                         2016 final regulations. In the NPRM, the
                                               loan funding may shift from physical to                  provision of specific programs and                      Department welcomed comments on the
                                               online campuses. Distance education                      would not be significantly affected by                  distribution of small entities offering
                                               has expanded significantly already and                   the delay of the effective date of the                  distance education, the estimated costs
                                               the 2016 final regulations are only one                  2016 final regulations because they do                  to obtain State authorization for their
                                               factor in institutions’ plans within this                not offer distance education. As                        programs, and the extent to which small
                                               field. The distribution of title IV, HEA                 described in the analysis of the 2016                   entities have already incurred costs to
                                               program funding could continue to                        final regulations, distance education is a              comply with the 2016 final regulations.
                                               evolve, but the overall volume is also                   growing area with potentially significant               One comment indicated that of the
                                               driven by demographic and economic                       effects on the postsecondary education                  1,800 institutions that participate in
                                               conditions that are not affected by the                  market and the small entities that                      SARA (and thus are likely to offer
                                               2016 final regulations and State                         participated in it, providing an                        distance education programs), 45
                                               authorization requirements were not                      opportunity to expand and serve more                    percent (810) enroll less than 2,500
                                               expected to change loan volumes in a                     students than their physical locations                  students. That enrollment figure does
                                               way that would result in a significant                   can accommodate but also increasing                     not correspond to the Department’s
                                               net budget impact. This analysis is                      competitive pressure from online                        definition of a ‘‘small entity,’’ but it
                                               limited to the effect of delaying the                    options. Overall, as of Fall 2016,                      does indicate that many smaller
                                               effective date of the selected provisions                approximately 15 percent of students                    institutions are participating in distance
                                               of the 2016 final regulations to July 1,                 receive their education exclusively                     education programs, even if a significant
                                               2020, and does not account for any                       through distance education while 68.3                   share of students are enrolled in
                                               potential future substantive changes in                  percent took no distance education                      programs offered by large institutions.
                                               the upcoming regulations.                                courses. However, at proprietary                           The Department also estimated that
                                                                                                        institutions almost 59.2 percent of                     small entities would incur 13,981 hours
                                               Regulatory Flexibility Analysis                                                                                  of burden in connection with
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                                                                                                        students were exclusively distance
                                                 This final rule would affect                                                                                   information collection requirements
                                                                                                        education students and 30.4 percent had
                                               institutions that participate in the title                                                                       with an estimated cost of $510,991
                                                                                                        not enrolled in any distance education
                                               IV, HEA programs, many of which are
                                                                                                        courses.2 The delay of selected
                                               considered small entities. The U.S.                                                                              distance education participation, location of
                                               Small Business Administration (SBA)                                                                              student, level of enrollment, and control and level
                                                                                                          2 2017 Digest of Education Statistics Table 311.15:   of institution: Fall 2015 and Fall 2016. Available at
                                               Size Standards define ‘‘for-profit                       Number and percentage of students enrolled in           https://nces.ed.gov/programs/digest/d17/tables/
                                               institutions’’ as ‘‘small businesses’’ if                degree-granting postsecondary institutions, by          dt17_311.15.asp?current=yes.



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                                                                            Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Rules and Regulations                                                                                     31303

                                               annually. Small entities may be able to                                     institutions could avoid up to that                                            Section 600.9(d) will go into effect on
                                               avoid some of the anticipated burden                                        amount during the period of the delay.                                       July 1, 2018, with an assessed burden of
                                               during the delay. To the extent small                                                                                                                    160 hours and $5,848 in institutional
                                                                                                                           Paperwork Reduction Act of 1995
                                               entities would need to spend funds to                                                                                                                    costs. The maximum potential reduction
                                               comply with State authorization                                                As indicated in the Paperwork                                             in burden hours and costs from the
                                               requirements for distance education, the                                    Reduction Act section published in the                                       delay are the 152,405 hours and
                                               proposed delay would allow them to                                          2016 final regulations, the assessed                                         $5,570,403 associated with sections
                                               postpone incurring those costs. And                                         estimated burden was 152,565 hours                                           668.50(b) and (c).
                                               although institutions may have incurred                                     affecting institutions with an estimated                                       The table below identifies the
                                               some of the $510,991 annual costs to                                        cost of $5,576,251 for Sections 600.9                                        regulatory sections, OMB Control
                                               prepare for the information collection                                      and 668.50. This final rule delays the                                       Numbers, estimated burden hours, and
                                               requirements, it is possible that                                           effective date of selected provisions of                                     estimated costs of those final regulations
                                                                                                                           the cited regulations.                                                       that have not been delayed.

                                                                                                                                                                                                                                              Estimated cost
                                                                                                                                                                                                     OMB Control
                                                                                                        Regulatory section                                                                                                     Burden hours    $36.55/hour
                                                                                                                                                                                                        No.                                     institution

                                               668.50(b) ......................................................................................................................................          1845–0145                  151,715        5,545183
                                               668.50(c) ......................................................................................................................................          1845–0145                      690           25,220

                                                     Total ......................................................................................................................................   ........................        152,405       5,570,403

                                               Cost savings due to delayed effective date.




                                                  This final rule delays the effective                                     text or Portable Document Format                                             34 CFR Part 668
                                               date of selected provisions of the cited                                    (PDF). To use PDF, you must have                                               Administrative practice and
                                               regulations.                                                                Adobe Acrobat Reader, which is                                               procedure, Colleges and universities,
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                                               disabilities may obtain this document in                                      You may also access documents of the                                       education, Loan programs-education,
                                               an accessible format (e.g., braille, large                                  Department published in the Federal                                          Reporting and recordkeeping
                                               print, audiotape, or compact disc) on                                       Register by using the article search                                         requirements, Selective Service System,
                                               request to the contact person listed                                        feature at: www.federalregister.gov.                                         Student aid, Vocational education.
                                               under FOR FURTHER INFORMATION                                               Specifically, through the advanced
                                                                                                                                                                                                        ■ Accordingly, the effective date for the
                                               CONTACT.                                                                    search feature at this site, you can limit
                                                  Electronic Access to this Document:                                      your search to documents published by                                        amendments to 34 CFR 600.2, 600.9,
                                               The official version of this document is                                    the Department.                                                              668.2, and the addition of 34 CFR
                                               the document published in the Federal                                                                                                                    668.50, published December 19, 2016, at
                                                                                                                           List of Subjects                                                             81 FR 92236, is delayed until July 1,
                                               Register. Free internet access to the
                                               official edition of the Federal Register                                    34 CFR Part 600                                                              2020.
                                               and the Code of Federal Regulations is                                        Colleges and universities, Foreign
                                                                                                                                                                                                          Dated: June 28, 2018.
                                               available via the Federal Digital System                                    relations, Grant programs—education,                                         Betsy DeVos,
                                               at: www.gpo.gov/fdsys. At this site, you                                    Loan programs—education, Reporting                                           Secretary of Education.
                                               can view this document, as well as all                                      and recordkeeping requirements,                                              [FR Doc. 2018–14373 Filed 6–29–18; 4:15 pm]
                                               other documents of this Department                                          Student aid, Vocational education.                                           BILLING CODE 4000–01–P
                                               published in the Federal Register, in
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Document Created: 2018-07-02 23:55:20
Document Modified: 2018-07-02 23:55:20
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule; delay of effective date.
DatesEffective June 29, 2018, the effective date for the amendments to 34 CFR 600.2, 600.9(c), 668.2, and the addition of 34 CFR 668.50, published December 19, 2016, at 81 FR 92236, is delayed until July 1, 2020.
ContactSophia 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]
FR Citation83 FR 31296 
RIN Number1840-AD39
CFR Citation34 CFR 600
34 CFR 668
CFR AssociatedColleges and Universities; Foreign Relations; Grant Programs-Education; Loan Programs-Education; Reporting and Recordkeeping Requirements; Student Aid; Vocational Education; Administrative Practice and Procedure; Consumer Protection and Selective Service System

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