83 FR 31296 - Program Integrity and Improvement

DEPARTMENT OF EDUCATION

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

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, 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 
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well as all other documents of this Department published in the Federal 
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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