[Federal Register Volume 59, Number 15 (Monday, January 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1460]
[[Page Unknown]]
[Federal Register: January 24, 1994]
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Part III
Department of Education
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34 CFR Part 667
State Postsecondary Review Program; Proposed Rule
DEPARTMENT OF EDUCATION
34 CFR Part 667
RIN: 1840-AB89
State Postsecondary Review Program
AGENCY: Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary proposes regulations to implement the State
Postsecondary Review Program (SPRP) authorized under title IV, part H,
subpart 1 of the Higher Education Act of 1965, as amended (HEA). Under
the SPRP, the Secretary enters into an agreement with a State in which
the State designates a postsecondary review entity (SPRE) that is
responsible for conducting or coordinating reviews of institutions of
higher education referred to the State by the Secretary under specific
statutory provisions. The purpose of the reviews is to determine
whether those institutions should continue to participate in the Title
IV, HEA programs. The SPRE reviews institutions on the basis of
standards developed in consultation with institutions located in the
State. The Secretary reimburses SPREs for costs they incur under the
SPRP.
DATES: Comments must be received on or before March 21, 1994.
ADDRESSES: All comments concerning these proposed regulations should be
addressed to John Kolotos, U.S. Department of Education, 400 Maryland
Avenue, SW., room 4318, ROB-3, Washington, DC 20202-5244.
A copy of any comments that concern information collection
requirements should also be sent to the Office of Management and Budget
at the address listed in the Paperwork Reduction Act section of this
preamble.
FOR FURTHER INFORMATION CONTACT: John Kolotos. Telephone: (202) 708-
7888. Individuals who use a telecommunications device for the deaf
(TDD) may call the Federal Information Relay Service (FIRS) at 1-800-
877-8339 between 8 a.m. and 8 p.m., Eastern time, Monday through
Friday.
SUPPLEMENTARY INFORMATION: In order to approve a postsecondary
education institution to participate in the student financial
assistance programs authorized under Title IV of the HEA (Title IV, HEA
programs) and many other Federal programs, the Secretary must
determine, in part, that the institution satisfies the statutory
definition of an ``institution of higher education.'' Under the HEA and
other Federal statutes, one element of that definition requires an
eligible institution of higher education to be accredited or
preaccredited by an accrediting agency recognized by the Secretary as a
reliable authority as to the quality of the education or training
provided by the institution. Another element requires an eligible
institution to be legally authorized to provide an educational program
beyond the secondary level in the State in which it is located. Thus,
the statutory definition of an institution of higher education provides
the framework for a shared responsibility among accrediting agencies,
States, and the Federal government to ensure that the ``gate'' to the
Title IV, HEA programs is opened to only those institutions that
provide students with quality education or training worth the time,
energy, and money they invest in it. The three ``gatekeepers'' sharing
this responsibility have traditionally been referred to as ``the
triad.'' While the concept of a triad of entities responsible for
gatekeeping has had a long history, the triad has not always worked as
effectively as it should to ensure educational quality, nor has it
served as an effective deterrent to abuse by institutions participating
in the Title IV, HEA programs. For several years, certain institutions
participating in the Title IV, HEA programs have failed to provide
students with education or training of an acceptable level of quality;
they have also failed to treat students fairly. In addition, they have
failed to meet acceptable standards of financial responsibility and
administrative capability and to adequately protect Title IV, HEA
program funds entrusted to them. The institutions that have engaged in
these abusive practices are not restricted to a particular sector of
higher education. Rather, the abuses have been found in all types of
institutions participating in the Title IV, HEA programs, including
those in the private non-profit and public sectors of higher education
as well as those in the proprietary sector.
At the same time, gatekeeping functions have not been carried out
effectively. For example, some accrediting agencies have not taken
sufficient care to ensure the quality of the education or training
provided by the institutions or programs they accredit or to protect
student interests when they accredit particular institutions or
programs. Moreover, some States have also not taken sufficient care to
ensure the quality of the education or training provided by the
institutions they authorize or license to operate in the State or to
protect student interests. Finally, the Federal government's management
of its responsibilities to determine eligibility and to certify
institutions to participate in the Title IV, HEA programs has not
always been adequate to prevent abusive practices at institutions that
participate in those programs.
Consequently, in the Higher Education Amendments of 1992, Public
Law 102-325, Congress amended the HEA to provide for a new part H of
Title IV entitled ``Program Integrity Triad.'' Under that part, States
and accrediting agencies are required to assume major new oversight
responsibilities, and States, accrediting associations, and the
Secretary are linked to create a stronger and more coordinated
evaluation of institutions that participate or wish to participate in
the Title IV, HEA programs. The Secretary believes that the most
appropriate approach to this coordinated evaluation of institutions by
the three components of the triad is a complementary one with each
component focusing its evaluation on its obligations within the context
of the HEA. Thus, the focus for accrediting agencies is the quality of
education or training provided by the institutions or programs they
accredit. For States, which already had responsibility for determining
that institutions have the legal authority to operate within the State,
the HEA added a new focus: reviewing institutions that trigger certain
statutory review criteria. The focus of the Secretary's evaluation of
institutions is the administrative and financial capacity of those
institutions to participate in the Title IV, HEA programs.
The statute allocates legal responsibility among the entities that
compose the program integrity triad. While specific statutory
responsibilities for the three triad entities may overlap, when viewed
as a whole the triad brings together in a coordinated fashion three
different but very important aspects of institutional review. Within
this statutory scheme, the Secretary has sought to assure that the
gatekeeping system operates as efficiently as possible, with maximum
integration among the three triad entities and without unnecessary
burden on postsecondary institutions. In order to assist the Secretary
in designing a final regulation that achieve these goals, the Secretary
specifically requests comment on the following questions:
(1) In several areas, the statute specifically requires each triad
entity to evaluate an institution under the same or similar standards.
For example, a SPRE and an accrediting agency may establish different
standards for evaluating the financial responsibility of an institution
or for evaluating the success of an institution's educational program.
Thus, a reviewed institution would need to satisfy the SPRE's and the
accrediting agency's standards even though those standards address the
same areas. How should final regulations be structured to both reduce
the burden on institutions and enable the triad entities to carry out
effectively their statutory functions?
(2) Should the final regulations be more explicit in identifying
levels, characteristics, or definitions for any of the assessment or
review criteria that a triad entity is expected to consider in its
evaluation of an institution?
Subpart 1 of part H creates a new program, the State Postsecondary
Review Program, or SPRP, under which State oversight of institutions
participating in the Title IV, HEA programs is strengthened. Subpart 2
of part H establishes procedures and criteria under which the Secretary
recognizes an accrediting agency as a reliable authority as to the
quality of the education or training offered by institutions that the
agency accredits. Lastly, Subpart 3 specifies the procedures the
Secretary uses to determine whether an institution meets the
eligibility requirements and has the administrative capacity and
financial responsibility to administer the Title IV, HEA programs.
Along with this Notice of Proposed Rulemaking, the Secretary
publishes in the Federal Register the NPRM to implement the accrediting
agency provisions in Subpart 2 of part H of the HEA. This provides
interested parties the opportunity to comment on the SPRP and
accreditation NPRMs in a coordinated way. The Secretary also intends to
publish in the Federal Register a NPRM implementing subpart 3 of part H
of the HEA before the date the proposed regulations for Subparts 1 and
2 of part H of the HEA become final regulations.
Under the SPRP, each State designates a single SPRE that reviews
institutions participating in the Title IV, HEA programs that are
referred to the State for review by the Secretary under specific
statutory provisions.
The SPRE reviews referred institutions using standards that it must
develop in consultation with institutions located in the State. Areas
that those standards must cover are also set forth in specific
statutory provisions. Before a SPRE may review an institution under
those standards, the standards must be evaluated by the Secretary and
not disapproved by the Secretary.
If a SPRE finds that an institution it reviews does not satisfy the
State's review standards, the SPRE may require the institution to take
prompt actions to bring itself into compliance with the State's
standards, or the SPRE may determine that the institution should no
longer participate in the Title IV, HEA programs. The Secretary
recognizes that, in the former case, an institution may have cause for
not meeting the State's review standards. Therefore, the Secretary
proposes that SPREs provide the institution the opportunity to present
compelling evidence that demonstrates that its failure to meet the
State's review standards does not warrant any further action by the
SPRE.
Where the SPRE determines that an institution should no longer
participate in the Title IV, HEA programs, the SPRE notifies the
Secretary of that determination; and, as required under section 494C(h)
of the HEA, the Secretary immediately terminates the institution's
participation in the Title IV, HEA programs.
In implementing their role under the State Postsecondary Review
Program, the Secretary expects States to develop rigorous educational,
administrative, and financial review standards and to conduct thorough,
impartial reviews of referred institutions under those standards.
Therefore, the Secretary anticipates that SPRE reviews will lead to
increases in the quality of education and training provided by
institutions that comply with or ascribe to the State's review
standards. The Secretary also anticipates that, through reviews of
referred institutions, SPREs will help to reduce fraud, waste, and
abuse in the Title IV, HEA programs by taking actions to effect the
termination of institutions that (1) fail substantially to meet the
State's review standards, and are recalcitrant in taking actions to
come into compliance with those standards, or (2) are involved in
fraudulent practices.
These proposed regulations were subject to the negotiated
rulemaking process in accordance with section 492 of the HEA. Under the
negotiated rulemaking process, the Secretary convened four regional
meetings in September 1992 to obtain public involvement in the
development of these proposed regulations. The meetings were held in
San Francisco, Atlanta, New York, and Kansas City. Before convening the
meetings, the Secretary held a meeting in Washington, DC in August 1992
to invite comments from interested parties as to the key issues that
should be addressed at the regional meetings. At the four regional
meetings, the Secretary provided attendees with a list of issues that
needed to be addressed in these proposed regulations. A summary of the
responses of the attendees is contained in Appendix A to these proposed
regulations.
Individuals and groups who attended the regional meetings nominated
individuals to participate in the negotiated rulemaking process. The
Secretary selected negotiators from the list of nominees to reflect all
the groups that are involved in the Title IV, HEA programs. With regard
to these proposed regulations, the Secretary chose negotiators who
reflected the diversity of State higher education authorities, the
interests of accrediting bodies, national organizations of student
financial aid administrators, institutions of higher education, and
students.
In accordance with section 492(b) of the HEA, the Secretary
prepared draft proposed regulations and negotiated provisions of the
draft with the negotiators. Two negotiating sessions were held: one in
April 1993 and one in June 1993. During the second session, the
negotiators elected not to reach consensus on any of the provisions
included in this notice of proposed rulemaking until they had an
opportunity to review all the proposed regulations implementing the
Program Integrity Triad. On September 20, 1993, the Secretary convened
a meeting and distributed to the negotiators the proposed regulations
for each part of the Program Integrity Triad. The negotiators who
attended this meeting could not reach consensus on the provisions
included in this proposed regulation. However, several negotiators
submitted written comments on the draft regulations, and many of those
comments were incorporated in this notice of proposed rulemaking.
Provisions Proposed by the Regulations
The following discussion reflects the proposed provisions governing
the State Postsecondary Review Program. The provisions are discussed in
the order in which they appear in the proposed regulations. If a
provision applies to more than one section or is included in more than
one section, it is discussed the first time it appears with an
appropriate cross-reference to its other appearances. In addition, each
section of the proposed provisions references or contains a description
of the applicable statutory requirements.
In developing these provisions, the Secretary has regulated
narrowly to the statute, except where the Secretary was required by the
statute to promulgate specific regulations or where the Secretary
determined that regulations were required to implement the statute. In
this regard, the Secretary requests respondents to comment only on
provisions where the Secretary has made a regulatory proposal that
interprets or implements the statute, rather than on provisions that
are statutorily required and cannot be changed by the Secretary.
Section 667.1 Scope and Purpose.
The purpose of the State Postsecondary Review Program is to
strengthen State oversight of institutions participating in the title
IV, HEA programs through the development of State standards for those
institutions, and State review of referred institutions using those
standards. States will be reimbursed by the Secretary for developing
these standards and conducting these reviews. However, a State will not
be required to incur any cost or carry out any activity if the State
will not be reimbursed for that cost or activity.
Several negotiators were concerned that SPREs had the authority
under the SPRP to select any institution for review. Reviews by a SPRE
are limited to those institutions that currently participate in the
title IV, HEA programs that the Secretary or a State identify as
meeting one or more of the review criteria in section 494C(b) of the
HEA, and those institutions a State has reason to believe are engaged
in fraudulent practices. As provided in section 494C(a) of the HEA, a
State must request approval from the Secretary before it may conduct a
review of an institution the State determines either meets a statutory
referral criterion or is engaged in fraudulent practices. If the
Secretary approves the State's request or does not disapprove that
request within 21 days, the SPRE may conduct a review of that
institution under this part.
Although the standards that a State develops will be used for the
purpose of reviewing referred institutions under this program, nothing
in this part or in the statute authorizing the SPRP, title IV, part H,
subpart 1 of the HEA, precludes a State from using these developed
standards for determining whether to grant a license to or otherwise
authorize an institution to provide postsecondary education in the
State. However, if a State reviews nonreferred institutions under the
standards developed for the SPRP, reviews of those institutions will
not be reimbursed. Moreover, the State may not take an action against
nonreferred institutions under the SPRP.
Section 667.2 Definitions.
Education and general expenditures. The proposed definition of this
term was copied from the statutory definition set forth in section
312(a) of part A of title III of the HEA. Part A of title III
authorizes the Strengthening Institutions Program.
Professional program. The definition of a professional program
applies directly to the review standards described in sections
494C(d)(8)(A) and (14)(C) of the HEA and Secs. 667.21(11)(1) and
(18)(iii), respectively. The Secretary proposed to define a
``professional program'' as an undergraduate or graduate educational
program that prepares individuals for an occupation, if that
occupation--
(1) Is listed in a Federal educational program classification
manual;
(2) Requires at least an associate degree to qualify for entry;
(3) Involves the independent practice or application of a defined
or organized body of competencies that is unique to the occupation; and
(4) Is formally recognized and regulated under a national or State
licensure, accreditation, or permit system.
Several negotiators argued that many educational programs that
would satisfy this proposed definition of a ``professional program''
would also satisfy the proposed definition of a ``vocational program''.
Those negotiators believed that, for purposes of developing standards
under the SPRP, there should be a clear distinction between the
classification of these programs.
Vocational program. The definition of ``vocational program''
applies directly to two review standards a State must develop under
section 494C(d) of the HEA and Sec. 667.21 of these regulations. Under
the first standard, described in section 494C(d)(7) of the HEA and
repeated in Sec. 667.21(a)(10), if an institution offers a program that
is designed to prepare students for gainful employment, the State must
develop a standard to determine whether the tuition and fees charged
for that program by the institution are reasonable given the amount of
money that a student who successfully completes that program may
reasonably be expected to earn. Under the second review standard,
described in section 494C(d)(14)(C) of the HEA and repeated in
Sec. 667.21(a)(18)(iii), if an institution offers vocational or
professional programs, the State must develop standards to determine if
those programs are successful as measured, in part, by the placement
rate of the graduates of those programs.
During negotiated rulemaking, the Secretary proposed to define the
term ``vocational program'' based on the statutory provision included
in the definition of various types of eligible institutions of higher
education. Thus, the Secretary proposed to define a vocational program
as an ``undergraduate educational program that prepares students for
gainful employment in a recognized occupation.'' (See, for example,
section 481(b)(1) of the HEA for a ``proprietary institution of higher
education''; section 481(c)(1) for a ``postsecondary vocational
institution''; and the second sentence of section 1201(a) of the HEA
for a ``public and private nonprofit institution of higher
education.'')
Several negotiators believed this proposed definition was too vague
and were concerned that it could be interpreted to include all
postsecondary undergraduate programs. Those negotiators contended that
such a broad interpretation, if applied to the review standards
discussed above, would cause unnecessary burden on all institutions,
and argued for a more narrow definition of a vocational program.
Some negotiators proposed that the term ``vocational program''
encompass only those educational programs below the baccalaureate
degree level that are not classified as ``professional programs''.
Other negotiators suggested that the term ``vocational program'' be
limited further to apply only to nondegree vocational educational
programs offered by institutions whose primary purpose is to prepare
students for employment.
The Secretary agrees that the proposed definition is too broad and
thus, in Sec. 667.2, proposes to define the term ``vocational program''
as ``an educational program below the baccalaureate degree level, that
is not classified as a professional program, that prepares students for
gainful employment in a recognized occupation.''
The Secretary acknowledges that the definition of ``vocational
program'' in these proposed regulations differs from the definition of
``vocational education'' as that term is defined in the proposed
regulations for the Secretary's Procedures and Criteria for the
Recognition or Accrediting Agencies (``education or training that
prepares students for gainful employment in a recognized occupation'').
The Secretary requests specific comment on whether the same definition
should be used in both regulations and, if so, which definition should
be used.
The Secretary particularly invites public comments on the
definitions of professional and vocational programs.
Section 667.3 State agreement
Section 494 of the HEA authorizes the Secretary to enter into an
agreement with each State to carry out the purposes of this part. As
provided in sections 494A(b) and 494C of the HEA, the agreement between
each State and the Secretary must contain the following elements--
(1) A designation of a single SPRE which represents all entities in
the State that are responsible for--
(A) granting State authorization to each institution of higher
education in the State for the purposes of this title; and
(B) ensuring that each institution of higher education in the State
remains in compliance with the standards developed pursuant to section
494C of the HEA (these provisions are discussed below in greater
detail);
(2) Assurances that the SPRE has the authority under State law to
make agreements between the State and the Federal Government;
(3) Assurances that the SPRE will review institutions reported to
the State by the Secretary under section 494C(a) of the HEA (referred
institutions) for the purpose of determining whether those institutions
should participate in the Title IV, HEA programs on a schedule to
coincide with the dates set by the Secretary to certify or recertify
those institutions as provided in sections 481 and 498 of the HEA;
(4) Assurances that the SPRE will perform the functions authorized
under this part and keep such records and provide such information as
may be requested for financial and compliance audits and program
evaluation, consistent with the responsibilities of the Secretary;
(5) A description of the relationship between the SPRE and the
State approving agency for Veterans Affairs, the State guaranty agency
under the FFEL programs, and the State agency responsible for
administering the SSIG program;
(6) Provisions for SPRE contracts. The agreement must provide for
the contracts the SPRE enters into with nationally recognized
accrediting agencies or peer review systems as required under section
494C(d)(15) of the HEA, and the contracts the SPRE enters into with
private agencies, accrediting agencies, or peer review systems for
assistance in performing SPRE review activities as provided in section
494C(f) of the HEA; and
(7) A plan for performing the functions described in section 494C
of the HEA.
With regard to element (1) paragraph (A), the SPRE must represent
any State entity that provides a license to postsecondary institutions
to operate in the State or otherwise legally authorizes institutions to
provide postsecondary education in the State. The Secretary wishes to
make clear that the statute does not provide the SPRE the authority
under the SPRP to provide licenses to or legally authorize institutions
to operate in a State; the SPRE merely represents State entities that
perform those functions. Similarly, under element (1), paragraph (B),
the SPRE must represent any State entity that is responsible for
ensuring that all institutions in the State remain in compliance with
the State's review standards. Again, the Secretary wishes to make clear
that the statute does not provide the SPRE the authority under the SPRP
to ensure that all institutions in the State remain in compliance with
the State's review standards; rather the SPRE must merely represent any
State entity that has that responsibility. Moreover, a State is not
required, for the purposes of this part, to create an entity
responsible for ensuring that all institutions in the State remain in
compliance with the State's review standards if such an entity does not
currently exist. These statutory provisions are repeated in Sec. 667.4.
In addition to the entities listed in the statute under element
(5), in Sec. 667.3(b)(4), the Secretary proposes to require the SPRE to
describe its relationship with any State licensing body, any State-
level entity that approves service providers under the Job Training
Partnership Act, and any State-level entity that certifies vocational
education. The Secretary proposes this requirement to ensure that all
entities in the State involved with postsecondary institutions or
postsecondary educational programs coordinate with the SPRE actions
taken regarding those institutions or programs. The agreements the
Secretary signed with States to implement the SPRP in fiscal year 1993
did not provide for a description of the SPRE's relationship with these
additional entities. Thus, if any changes are required to be made to
the agreement as a result of this proposal or other proposals in these
regulations or as a result of public comment, States will be provided
sufficient opportunity to execute new agreements. Any new terms will
have a prospective effect.
Except for the proposed requirement under element (5), that the
agreement describe additional relationships between the SPRE and other
State authorities, the requirements contained in section 494A(b) of the
HEA described above are repeated in Sec. 667.3(a) and (b) and therefore
cannot be changed by the Secretary.
Section 494(c) of the HEA requires the Secretary to impose the
following sanctions on a State if the State does not enter into an
agreement with the Secretary or fails to comply with the terms of the
agreement--
(1) The Secretary may not designate as eligible for participation
in a Title IV, HEA program any institution seeking initial
participation in that program, any branch campus for which an
institution seeks an initial designation of eligibility, or any
institution that has undergone a change in ownership that results in a
change in control, pursuant to section 481 of the HEA and subpart 3 of
part H of the HEA;
(2) The Secretary may grant only provisional certification to any
institution in that State pursuant to subpart 3 of part H of the HEA;
and,
(3) The State is ineligible to receive any funds appropriated to
carry out the SPRP, its allotment under the SSIG Program, and any funds
appropriated to carry out the National Early Intervention Scholarship
and Partnership Program (NEISP).
The statutory sanctions described above are repeated in
Sec. 667.3(e). The Secretary, also, proposes to impose the statutory
sanctions on a State if the State ends its participation in the SPRP or
fails to establish review standards within two years.
First, in Sec. 667.3(d)(3), the Secretary proposes to impose the
sanctions on a State that ends its participation in the SPRP by
terminating its agreement with the Secretary. The only exception for
not participating in the SPRP is provided in section 494A(c) of the
HEA. That section specifies that ``no State shall be required to enter
into an agreement with the Secretary under this subpart for performing
review functions required by the agreement unless the Congress
appropriates funds for this subpart''. (The Congress made $5.3 million
of fiscal year 1993 funds available to initiate the SPRP and has
appropriated $21.25 million for fiscal year 1994.)
Secondly, in Sec. 667.3(d)(4), the Secretary proposes to impose the
sanctions on a State that does not establish review standards under
Sec. 667.21 that are not disapproved by the Secretary within two years
from the time the State received Federal funds under this part. The
Secretary believes that two years is a reasonable time for a State to
establish review standards. Moreover, because a State must establish
review standards before reviews of institutions can take place, the
Secretary believes strongly that a State should not unreasonably delay
the conduct of reviews and continue to receive Federal funds under this
part.
Finally, section 494(b) of the HEA provides that if a State
declines to enter into an agreement with the Secretary to carry out the
purposes of this part, the provisions of this part that refer to the
State refer instead to the Secretary who may make appropriate
arrangements with agencies or organizations of demonstrated competence
in reviewing institutions to carry out the provisions of this part. The
Secretary proposes to implement this section of the statute in
Sec. 667.3(e)(2)(iii)(A) and (B). Thus, in paragraph (A) the Secretary
may establish review standards for any State that declines to enter
into an agreement with the Secretary, and in paragraph (B) the
Secretary may carry out, or arrange to carry out, the State's other
responsibilities under this part.
Section 667.4 State Postsecondary Review Entity
Section 667.4 repeats the statutory provisions contained in section
494A(b)(1) of the HEA. These provisions have previously been discussed.
Section 667.5 Criteria the Secretary Uses To Refer Institutions to a
SPRE for Review
Section 494C(a) of the HEA requires the Secretary to review all
institutions in a State that participate in a Title IV, HEA program to
determine if those institutions meet one or more of the review criteria
contained in section 494C(b) of the HEA. If an institution meets one or
more of the review criteria, the Secretary must refer the institution
to a SPRE for review. The review criteria set forth in section 494C(b)
are as follows--
(1) A cohort default rate (as defined in section 435(m) of the HEA)
equal to or greater than 25 percent;
(2) A cohort default rate equal to or greater than 20 percent and
either--
(A) More than two-thirds of the institution's total undergraduates
who are enrolled on at least a half-time basis receive assistance under
the Title IV, HEA programs, excluding assistance received under the
SSIG, NEISP, and Federal PLUS programs; or
(B) Two-thirds or more of the institution's education and general
expenditures are derived from funds provided to students enrolled at
the institution from the Title IV, HEA programs, except funds provided
from the SSIG, NEISP, and Federal PLUS programs;
(3) Two-thirds or more of the institution's education and general
expenditures are derived from funds provided to students enrolled at
the institution from the Federal Pell Grant Program;
(4) A limitation, suspension, or termination action by the
Secretary against the institution pursuant to section 487 of the HEA
during the preceding 5 years;
(5) An audit finding during the 2 most recent audits of an
institution's conduct of the Title IV, HEA programs that resulted in
the repayment by the institution of amounts greater than 5 percent of
the funds the institution received from the Title IV, HEA programs for
any one year;
(6) A citation of an institution by the Secretary for failure to
submit audits required under Title IV of the HEA in a timely fashion;
(7) A year-to-year fluctuation of more than 25 percent in the
amounts received by students enrolled at the institution from either
the Federal Pell Grant, Federal Stafford Loan, or Federal Supplemental
Loans to Students programs, that are not accounted for by changes in
those programs;
(8) Failure to meet financial responsibility standards pursuant to
Title IV, Part H, Subpart 3 of the HEA;
(9) A change of ownership of the institution that results in a
change of control which includes (but is not limited to)--
(A) The sale of the institution or the majority of its assets;
(B) The division of 1 or more institutions into 2 or more
institutions;
(C) The transfer of the controlling interest in stock of the
institution or its parent corporation;
(D) The transfer of the controlling interest of stock of the
institution to its parent corporation; or
(E) The transfer of the liabilities of the institution to its
parent corporation;
(10) Except with regard to any public institution that is
affiliated with a State system of higher education, participation in
the Federal Pell Grant, FFEL, FSEOG, FWS, or Federal Perkins Loan
programs for less than 5 years;
(11) A pattern of student complaints pursuant to section 494C(j) of
the HEA related to the management or conduct of the Title IV, HEA
programs or relating to misleading or inappropriate advertising and
promotion of the institution's programs, that in the judgement of the
Secretary are sufficient to justify review of the institution.
The statutory review criteria described above are repeated in
Sec. 667.5(b).
The Secretary anticipates making referrals at least annually.
Section 494C(a) as amended by the Higher Education Technical
Amendments of 1993 (Pub. L. 103-208) further provides that the
Secretary may determine not to refer to a SPRE for review an
institution that meets only criterion (10) described above, if the SPRE
previously reviewed that institution under this part and found no
violations of the State's review standards. This provision is repeated
in Sec. 667.5(d).
Under a literal reading of review criteria (6) and (9), the
Secretary would have to refer an institution to a SPRE in perpetuity
for an event that happened once. However, the Secretary believes that
it is wasteful to require a SPRE to continually review an institution
for the same reason if the SPRE had previously reviewed that
institution and found no violations of its standards. Therefore, in
Sec. 667.5(c), the Secretary proposes to reserve whether to refer an
institution to a SPRE for review under these two criteria if on the
basis of an earlier referral, the SPRE conducted a review of the
institution and found no significant violations of its standards as a
result of that review.
Section 494C(c) of the HEA provides that an institution may request
confirmation of the data used by the Secretary to determine that the
institution met one or more of the statutory review criteria. In
Sec. 667.5(e), the Secretary proposes to rescind a referral if the
Secretary confirms that the data used to make the referral were
inaccurate and that a referral would not be made under accurate data.
When confirming the accuracy of data, the Secretary will presume
that records maintained in the ordinary course of business by the U.S.
Department of Education, a guaranty agency under the FFEL programs, the
SPRE, the State licensing agency, or another State agency are accurate
unless the institution proves to the Secretary's satisfaction that the
records are not properly maintained or are inaccurate.
Section 667.6 SPRE Selection of Institutions for Review
In addition to those institutions referred to a State by the
Secretary for review as a result of meeting one or more of the criteria
set forth in section 494C(b), section 494C(a) of the HEA provides that
a State may, subject to approval by the Secretary, review additional
institutions that--
(1) Meet one or more of the statutory review criteria based on more
recent data available to the State; or
(2) The State has reason to believe are engaged in fraudulent
practices.
The statute further provides that if the Secretary fails to approve
or disapprove a State's request to review additional institutions
within 21 days, the State may proceed to review those additional
institutions as if approved by the Secretary.
These statutory provisions are repeated in Sec. 667.6.
Section 667.7 Notice to SPRE of Federal Actions
Section 494C(h)(2) of the HEA requires the Secretary to prescribe
in regulations a time period within which the Secretary notifies a SPRE
of any actions taken by the Secretary or another Federal agency against
an institution located in the SPRE's State. Accordingly, in Sec. 667.7,
the Secretary proposes to notify a SPRE within 10 days of taking or
learning of an action against an institution.
Section 667.8 Institutions With Locations in More Than One State
Section 667.8 deals with the situation when a referred institution
has locations in more than one State. In proposing procedures for
dealing with that situation, the Secretary had to decide which State
standards would apply, which State would conduct the review, and, if
more than one State had to conduct a review, how those reviews should
be coordinated.
In Sec. 667.8, the Secretary proposes the following. If an
institution is referred for review, the Secretary will refer the
institution to the SPRE in each State in which the institution is
located. With the referral, the Secretary informs each SPRE of the
other States in which the institution is located. The main campus of
the institution or any branch campus or additional location of that
institution is subject to the review standards of the State in which it
is located.
The proposed procedures place the principal responsibility for
reviewing the institution on the SPRE of the State in which the main
campus of the institution is located. The SPRE of a State in which a
branch campus or additional location of the institution is located may
choose among three options to determine when to review that branch
campus or additional location or to determine if review of that branch
or additional location is warranted. Under the first option, the SPRE
may review that branch campus or additional location before a review is
conducted of the main campus of that institution. The second option
provides that the SPRE may delay its review of that branch campus or
additional location until a review is conducted of the main campus of
that institution. Under the last option, if the State's allotment will
not allow the SPRE to review all referred institutions, the SPRE may
choose not to review that branch campus or additional location if the
SPRE of the State in which the main campus of that institution is
located reviews that institution and makes no significant findings.
Finally, the Secretary proposes that SPREs may agree among
themselves to alter these review requirements. Thus, if the institution
was located in a metropolitan area such as Washington, DC and had its
main campus in Washington, DC and branch campuses in Virginia and
Maryland, the Washington, DC, Virginia, and Maryland SPREs could agree
among themselves that the Virginia SPRE would review all the
institution's locations. However, the applicable review standards would
not change. Therefore, to the extent that the three jurisdictions had
different standards, the Washington, DC locations would be subject to
the Washington, DC standards, the Maryland locations would be subject
to the Maryland standards and the Virginia locations would be subject
to the Virginia standards.
Subpart B--Allotment Formula and Funding Procedures
Section 667.11 Allotment Formula
Section 494(a)(2) of the HEA authorizes the Secretary to provide
Federal funds to a SPRE for performing the functions contained in the
State's agreement with the Secretary. Accordingly, in Sec. 667.11, the
Secretary proposes a funding formula under which the Secretary allots
annually to each SPRE its share of the Federal funds appropriated for
the SPRP. The following discusses the proposed funding formula.
For each fiscal year that Federal funds are appropriated for the
SPRP, the Secretary proposes to allot $20,000 to Guam, $20,000 to the
Northern Mariana Islands, $20,000 to the Virgin Islands, $20,000 to the
Trust Territory of the Pacific Islands (Palau), and $20,000 to American
Samoa. The Secretary believes this amount is sufficient for these
States to carry out SPRE activities because only three institutions are
located in Guam, and only one institution is located in each of the
other jurisdictions.
The Secretary proposes to allot the remaining fiscal year
appropriation so that each remaining State receives the greater of
$50,000, or the amount determined under a formula that uses the
following two variables--
(1) The number of institutions located in a State that are
certified to participate in the Title IV, HEA programs; and
(2) The amount of Title IV, HEA program funds made available to
students enrolled in those institutions during the latest year for
which complete data is available.
For purposes of the formula, the Title IV, HEA programs only
include the Federal Pell Grant, Federal Family Education Loan (FFEL),
Federal Direct Loan, Federal Supplemental Educational Opportunity Grant
(FSEOG), Federal Work-Study (FWS), and Federal Perkins Loan programs.
The Secretary proposes the formula described in greater detail in
Sec. 667.11(a) because the Secretary believes that each State needs at
least $50,000 to carry out SPRE activities. In addition, at least in
the initial years of the program, the Secretary believes it equitable
to allot Federal funds to States based on the relative exposure of
Title IV, HEA program funds in each State as represented by the two
variables in the proposed funding formula. However, after several
years, when there is a history of referrals to States and SPRE reviews
of institutions as a result of those referrals, the Secretary plans to
reexamine the funding formula to determine whether to base the formula
on the percentage of referrals each State receives, the number of
reviews each State performs, or a combination of those two variables.
In Sec. 667.11(b), the Secretary proposes to reallot Federal funds
not expended by a State to other States in a manner that best carries
out the purposes of the program. The Secretary proposes to reallot
those funds the Secretary determines a State will not spend during the
period for which those funds are available, and those funds a State
does not spend by the end of the period for which those funds are made
available.
Section 667.12 Application for Funds
In Sec. 667.12, the Secretary proposes procedures under which a
State applies to receive its allotment for each fiscal year in which
Congress appropriates funds for the State Postsecondary Review Program.
Under these procedures, a State's application for funds consists of a
plan to carry out specific activities and a budget that accounts for
those activities. The Secretary views these application procedures as
satisfying the requirement in section 494A(b)(5) of the HEA that a
State include in its agreement with the Secretary its plan to carry out
SPRE activities.
The Secretary proposes a two-phased State application process. In
the first phase, a State applies for funds to develop review standards
and to carry out other activities that are necessary before the SPRE
conducts reviews of referred institutions. In the second phase, a State
applies for funds to conduct reviews of referred institutions and to
perform other allowable activities. A State may apply for funds in the
second phase only after it has established review standards. The
Secretary considers a State to have established review standards if
those standards were developed in accordance with the requirements
contained in Sec. 667.21 and those standards were not disapproved by
the Secretary under Sec. 667.22.
Application before standards are established. For this phase of the
application process, in Sec. 667.12(b), the Secretary proposes that the
State submit a plan to--
(1) Develop the State review standards described in section 494C(d)
of the HEA and discussed further in Secs. 667.21 and 667.22 of this
preamble; and
(2) Develop procedures for receiving and responding to complaints
from students, faculty, and others regarding an institution, as
required by section 494C(j) of the HEA.
Both the standards and the complaint procedures must be developed
in consultation with institutions in the State, as required under
sections 494C(d) and 494C(j) of the HEA, respectively. In addition, the
State may submit a plan to identify information systems maintained by
institutions and State agencies that are relevant to developing State
review standards. Finally, the plan may contain estimates of the costs
of coordinating those information systems with an information system
for the SPRE.
The Secretary proposes these allowable activities because the SPRE
cannot carry out a review of an institution to determine whether the
institution is in compliance with State standards until the State has
developed those standards in required consultation with institutions in
that State. Similarly, a State cannot process complaints until it has
developed procedures, in required consultation with institutions in the
State, to respond to complaints. Finally, a State cannot determine
whether it will be cost-effective to coordinate existing data systems
without first determining the costs of coordinating those systems.
Several negotiators suggested that the Secretary specify the manner
in which States were to consult with institutions in their State while
developing State standards and complaint procedures. The Secretary
believes that each State is in a better position than the Secretary to
determine the most appropriate consultation method for that State.
Moreover, the Secretary believes that States should be able to select
from a variety of consultation formats when developing its standards
and complaint procedures with the institutions in its State. Therefore,
the Secretary has not specified the type of required consultation under
this section. However, the Secretary expects a State's consultation
process to be thorough and inclusive of the range and types of
institutions in the State.
With its plan, the State must submit a budget for carrying out the
allowable activities. In Sec. 667.12(b)(2), the Secretary proposes that
a State carry out the allowable activities in a priority order if the
State anticipates that the cost of carrying out all those activities
will exceed its allotment. Specifically, the Secretary proposes that a
State first use its allotment to develop review standards. If a portion
of the allotment remains after the State has developed its review
standards, the State may develop procedures for receiving and
responding to complaints from students, faculty, and others regarding
institutions in the State. Finally, the State may use any remaining
portion of its allotment to provide costs estimates for the SPRE's
information system after it has completed its review standards and
complaint procedures.
The Congress made $5.3 million of fiscal year 1993 funds available
to initiate the State Postsecondary Review Program. Under a notice
published in the Federal Register on July 14, 1993, 58 FR 38022-38025,
the Secretary has allotted those funds to States for the purposes set
forth in Sec. 667.12(b). Therefore, except for the following provision,
the Secretary acknowledges that most States will have complied with the
provisions contained in Sec. 667.12(b) when these provisions are
published as final regulations.
If a State does not establish review standards with its fiscal year
1993 allotment, the Secretary proposes that the funds it may receive in
any future fiscal year for those activities may not exceed the amount
it received or was scheduled to receive in fiscal year 1993. The
Secretary proposes this provision because the Secretary believes that
the primary purpose of the State Postsecondary Review Program is SPRE
reviews of institutions and that the funds allotted to States in fiscal
year 1993 were adequate to develop review standards.
Application after standards are established. For the second phase
of the application process, the Secretary proposes in Sec. 667.12(c)
that a State submit--
(1) A plan to review referred institutions;
(2) A plan to carry out the activities described in Sec. 667.14;
and
(3) A budget for those reviews and activities that does not exceed
the State's allotment.
The Secretary acknowledges that a State's allotment of funds may be
inadequate to review all the institutions that must be reviewed under
Secs. 667.5 and 667.6. Therefore, in Sec. 667.12(c)(2), the Secretary
proposes that a SPRE submit, as part of its plan, a priority system for
selecting institutions for review from among the referred institutions
if the SPRE anticipates that the cost of reviewing all the referred
institutions will exceed the State's allotment. The Secretary proposes
to provide maximum flexibility to States in selecting institutions to
review, except as limited by section 494A(b)(2) of the HEA. That
section requires States to review referred institutions on a schedule
that coincides with the dates set by the Secretary to recertify those
institutions to participate in the Title IV, HEA programs. However, the
Secretary expects States to establish review priorities that reflect
the objectives of protecting students, saving tax dollars, and
promoting educational quality.
The Secretary requests public comment on the potential benefits of
developing specific criteria for States to consider in determining
their review priorities and the nature of those criteria.
Section 667.13 Approval of Funding Application
Approval of funding application before a State establishes review
standards. In Sec. 667.13(a), the Secretary proposes to approve a
State's plan and budget for the first phase of the SPRP, the
development of standards and complaint procedures in consultation with
institutions in the State, if--
(1) The State's plan provides a reasonable basis, and adequate
budget justification, for conducting those activities;
(2) The State's plan provides for conducting those activities in
the priority order proposed in Sec. 667.12(b)(2); and
(3) The State's budget includes only reasonable allowable costs
within the State's fiscal year 1993 allotment. The Secretary proposes
allowable costs in Sec. 667.14.
Approval of funding application after a State establishes review
standards. In Sec. 667.13(b), the Secretary proposes to approve a
State's plan and budget for the second phase of the SPRP, primarily the
review of referred institutions, if--
(1) The State's plan provides adequate budget justification for
carrying out the activities proposed and described in Sec. 667.14
within its allotment,
(2) The State's plan provides a reasonable scheme for reviewing
referred institutions;
(3) The State's plan includes a priority system for reviewing
referred institutions; and
(4) Any contract the State proposes to enter into with another
agency to carry out SPRE functions, as provided in section 494C(f) of
the HEA, is reasonable and appropriate.
If a State that does not submit an application for funds under
Sec. 667.12 or does not submit an approvable application, the Secretary
proposes in Sec. 667.13(c) to impose on that State the sanctions
described in section 494(c) of the HEA.
Section 667.14 Allowable Costs and Activities
As required by sections 494A(c) and 494B of the HEA, a State is not
required to expend any funds under the SPRP to carry out allowable
activities unless the Secretary reimburses the State for the costs it
incurs in carrying out those activities. To the extent appropriations
are available the Secretary proposes to reimburse a State for the
direct and indirect costs of carrying out allowable SPRE activities if
those activities are included in a plan that is approved by the
Secretary.
The terms ``direct costs'' and ``indirect costs'' are defined in
the Office of Management and Budget (OMB) Circular A-87. In addition,
the Secretary proposes to rely on the cost principles described in OMB
Circular A-87 for determining allowable costs under the State
Postsecondary Review Program.
The Secretary proposes to consider as allowable activities those
activities that are directly related to--
(1) Establishing State review standards in consultation with
institutions in the State;
(2) Publicizing and providing initial and continuing training to
State and other personnel in the State, including personnel at the
institution subject to review;
(3) Establishing and implementing procedures for receiving and
responding to complaints from students, faculty, and others regarding
institutions in the State;
(4) Reviewing referred institutions; and
(5) Developing and maintaining an information system for SPRE
review activities.
In Sec. 667.14(d), the Secretary identifies a nonexhaustive list of
direct costs associated with carrying out the proposed allowable
activities.
Section 667.15 Fiscal Procedures and Records
In Sec. 667.15, the Secretary proposes requirements regarding a
State's use and accounting of the Federal funds it receives under this
part. To minimize burden on States, the Secretary proposes that a State
account for funds it receives under this part in accordance with the
procedures it uses to account for its own funds.
In addition, the Secretary proposes that a State keep fiscal and
accounting records that support, on audit, its expenditure of funds
under this part and maintain those records for five years. Finally, the
Secretary proposes that a State must have an audit performed of the
SPRE's activities under this part at least once every two years. An
audit conducted under the Single Agency Audit Act satisfies this audit
requirement.
Section 667.16 Supplement, Not Supplant, Requirement
Section 494(B) of the HEA provides that the Secretary may reimburse
a State for the costs of necessary SPRE activities ``which supplement,
but do not supplant, existing licensing or review functions conducted
by the State.'' This statutory provision is repeated in Sec. 667.16.
The Secretary requests comments on what standards and measures
would most accurately determine whether a State has satisfied the
supplement but not supplant requirement.
Subpart C--State Review Standards, SPRE Reviews, and Termination of
Institutional Participation
Section 667.21 State Review Standards
Section 494C(d) of the HEA requires a State to develop review
standards, in consultation with the institutions in the State, that are
consistent with the laws and constitution of the State. A State's
authority to develop review standards is further clarified in section
494C(g) of the HEA. That section prohibits the Secretary from requiring
a State to establish review standards that are unrelated to ensuring
institutional or program integrity or that violate the provisions of
the State's constitution or laws.
The SPRE reviews referred institutions under the State-developed
standards set forth in section 494C(d) of the HEA. In conducting its
review, the SPRE must determine whether a referred institution has
complied with standards that address the following areas--
(1) The availability to students and prospective students of
catalogs, admissions requirements, course outlines, schedules of
tuition and fees, policies regarding course cancellations, and the
rules and regulations of the institution relating to students and the
accuracy of such catalogs and course outlines in reflecting the courses
and programs offered by the institution;
(2) Assurance that the institution has a method to assess a
student's ability to successfully complete the course of study for
which he or she has applied;
(3) Assurance that the institution maintains and enforces standards
relating to academic progress and maintains adequate student and other
records;
(4) Compliance by the institution with relevant safety and health
standards, such as fire, building, and sanitation codes;
(5) The financial and administrative capacity of the institution as
appropriate to a specified scale of operations and the maintenance of
adequate financial and other information necessary to determine the
financial and administrative capacity of the institution;
(6) For institutions financially at risk, the adequacy of
provisions to provide for the instruction of students and to provide
for the retention and accessibility of academic and financial aid
records of students in the event the institution closes;
(7) If the stated objectives of the courses or programs of the
institution are to prepare students for employment, the relationship of
the tuition and fees to the remuneration that can be reasonably
expected by students who complete the course or program and the
relationship of the courses or programs (including the appropriateness
of the length of such courses) to providing the student with quality
training and useful employment in recognized occupations in the State;
(8) Availability to students of relevant information by
institutions of higher education, including--
(A) Information relating to market and job availability for
students in occupational, professional, and vocational programs; and
(B) Information regarding the relationship of courses to specific
standards necessary for State licensure in specific occupations;
(9) The appropriateness of the number of credit or clock hours
required for the completion of programs or of the length of 600-hour
courses;
(10) Assessing the actions of any owner, shareholder, or person
exercising control over the educational institution which may adversely
affect eligibility for programs under Title IV of the HEA;
(11) The adequacy of procedures for investigation and resolution of
student complaints;
(12) The appropriateness of advertising and promotion and student
recruitment practices;
(13) That the institution has a fair and equitable refund policy to
protect students; and
(14) The success of the program at the institution, including--
(A) The rates of the institution's students' program completion and
graduation, taking into account the length of the program at the
institution and the selectivity of the institution's admissions
policies;
(B) The withdrawal rates of the institution's students;
(C) with respect to vocational and professional programs, the rates
of placement of the institution's graduates in occupations related to
their course of study;
(D) where appropriate, the rate at which the institution's
graduates pass licensure examinations; and
(E) the variety of student completion goals, including transfer to
another institution of higher education, full-time employment in the
field of study, and military service.
Except for the following standard, the statutory provisions
contained in section 494C(d) of the HEA are essentially repeated in
Sec. 667.21(a).
In Sec. 667.21(a)(4), the Secretary proposed to interpret the
standard described in 494C(d)(2) of the HEA to require that a judgement
be made regarding the effectiveness of an institution's method to
assess a student's ability to complete successfully an educational
program. The proposed standard would require a SPRE to measure the
effectiveness of its assessment method by the completion rate of the
assessed students enrolled in the institution's program.
Several negotiators indicated that the proposed standard implies a
highly predictive association between the institution's assessment
method and the students' completion of the program. According to those
negotiators, such a predictive association does not exist. Therefore,
the negotiators suggested that the success of the institution's
assessment method be judged by using measures other than completion
rates. The Secretary invites comments on this suggestion and
alternative approaches for evaluating the effectiveness of an
institution's method to assess a student's ability to complete
successfully an educational program.
With regard to the standard described in section 494C(d)(4) of the
HEA and Sec. 667.21(a)(7), the Secretary invites public comments on
whether the SPRE's review of an institution should include a review of
the institution's compliance with statutes and regulations governing
access to disabled individuals.
In Sec. 667.21(b), the Secretary has proposed a framework under
which a State develops review standards. Under that framework the
Secretary proposes--
(1) To permit States to develop different standards for different
types or categories of institutions and educational programs;
(2) That States specify the records that referred institutions
would need to maintain to satisfy State standards;
(3) That States must quantify certain review standards; and
(4) That States determine whether a Title IV, HEA program standard
would be an adequate State standard.
Negotiators disagreed among themselves with regard to the proposal
in Sec. 667.22(b)(1), to provide latitude to States to develop
different standards for different types or categories of institutions
or educational programs. While many negotiators agreed strongly with
this approach, others disagreed vociferously, arguing that States would
use this latitude to establish unreasonably stringent standards for
vocational and proprietary institutions.
The Secretary believes the statute does not prohibit the
establishment of different standards for different institutions and
therefore does not wish to preclude a State from establishing such
standards, provided the State can adequately justify that different
standards are more appropriate than uniform standards for the
institutions in its State.
In Sec. 667.21(b)(2), the Secretary proposes that a State establish
standards that specify the records and information a referred
institution would need to maintain to demonstrate to a SPRE the
institution's compliance with those standards. The Secretary wishes to
make clear that technically, only a referred institution is subject to
the recordkeeping requirements specified in the State's standards
unless, as discussed previously in Sec. 667.3 of this preamble, the
State has or creates an entity that is responsible for ensuring that
all institutions in the State remain in compliance with those
standards. Otherwise, a nonreferred institution may choose not to
maintain the specified records. However, that institution would risk
losing its participation in the Title IV, HEA programs if as a result
of some future event it triggered a statutory review criterion, and was
unable to produce the records required to demonstrate to the SPRE its
compliance with the State's standards.
In addition, concern has been raised regarding a State's authority
to collect information from all institutions in the State for the
purpose of establishing review standards. For example, a State may
establish on an annual basis a student graduation rate standard that is
equal to the average graduation rate of students at all institutions in
the State. While the Secretary believes that this method of
establishing review standards is reasonable and appropriate, a State
does not have the authority under the SPRP to require all institutions
in the State to report standards-related information to the SPRE.
Notwithstanding this limitation, the Secretary encourages all
institutions to comply with a request from a SPRE for this information,
particularly if the only alternative available to the SPRE is to
establish arbitrary standards. The Secretary wishes to make clear,
however, that a SPRE has the authority under section 494C(d) of the HEA
to require standards-related information from all referred institutions
in the State. The Secretary notes that if a State standard is based
upon an average, such as an average graduation rate, there must be a
sufficient number of institutions providing data to support that rate,
and the reporting institutions should be representative of the
institutions located in the State.
In Sec. 667.21(b)(4), the Secretary proposes that a State must
quantify certain review standards. Thus, for the standard described in
section 494C(d)(7) of the HEA and repeated in Sec. 667.21(a)(10), the
Secretary proposes that a State establish an acceptable percentage for
the relationship between the tuition and fees charged by an institution
for an educational program and the amount of money that a student who
successfully completes that program actually earns.
Similarly, for the standard described in section 494C(d)(14) of the
HEA and repeated in Sec. 667.21(a)(18), the Secretary proposes that a
State establish acceptable percentages for--
(1) The completion and graduation rates of students enrolled in
educational programs offered by an institution;
(2) The withdrawal rate of students at an institution;
(3) With respect to an institution's vocational and professional
programs, the placement rate of the institution's graduates in
occupations related to their educational program; and
(4) The rate or rates at which the institution's graduates pass
licensure examinations.
For each of these areas, the acceptable percentage sets the level
above which a SPRE must consider an institution to be in compliance
with the review standard, and below which a SPRE makes either a finding
of noncompliance or conducts a further review of the institution to
account for the reasons the institution failed to meet that percentage.
The Secretary understands that developing such standards will be
difficult and will therefore allow States great flexibility in
developing these quantifiable standards, both in terms of the methods
used to determine an acceptable percentage and the actual acceptable
percentage. Moreover, the Secretary wishes to reiterate that the
acceptable percentage that a State establishes should reflect whether
an institution is successfully providing its educational programs to
its students rather than whether the institution should automatically
be terminated from participation in the Title IV, HEA programs solely
because it failed to satisfy that standard. The Secretary also
reiterates that a State need not recommend the termination of an
institution's participation in the Title IV, HEA programs solely
because the institution failed to meet any particular State standard.
In Sec. 667.21(b)(5) the Secretary proposes to require a State to
determine the extent to which it is appropriate to base a State review
standard on a related Title IV, HEA program standard or requirement or
to establish as the State's review standard the comparable Title IV,
HEA standard or requirement.
The Secretary believes it is imperative that States take into
consideration the standards and requirements institutions must satisfy
to participate in the Title IV, HEA programs before increasing the
burden on those institutions by adopting entirely new standards for
this part. In this regard, the Secretary expects States to avoid
establishing standards that are weaker than similar Title IV, HEA
program standards that an institution must otherwise satisfy to
participate in those programs. In addition, when the Secretary
publishes regulations implementing the Student-Right-to-Know provisions
in section 485(a) of the HEA, the Secretary expects States to adopt the
methodology contained in those regulations for calculating student
completion and graduation rates.
For the convenience of the reader, the following Title IV, HEA
program standards and requirements are related or comparable to the
State review standards described in Sec. 667.21--
(1) With respect to the State review standards in paragraphs (a)(1)
and (a)(2), the consumer information requirements in 34 CFR part 668,
subpart D, 34 CFR 668.14, and 34 CFR 668.15; and the standards and
rules in 34 CFR part 668, subpart F, under which the Secretary
initiates an adverse action against an institution for any substantial
misrepresentation made by that institution regarding its educational
program, financial charges, or employability of its graduates;
(2) With respect to the State review standards in paragraphs (a)(3)
and (a)(4), the State process and testing requirements regarding
students who do not have a high school diploma or its recognized
equivalent in section 484(d) of the HEA;
(3) With respect to the State review standards in paragraphs (a)(5)
and (a)(6), the standards of satisfactory progress in 34 CFR 668.14;
and the record retention and audit requirements in 34 CFR 668.23;
(4) With respect to the State review standard in paragraph (a)(8),
the standards and requirements in 34 CFR 668.13, 34 CFR 668.14, and
subpart 3 of part H of the HEA regarding an institution's financial and
administrative capability;
(5) With respect to the State review standard in paragraph (a)(10),
the standards and requirements in 34 CFR 668.14 regarding an
institution's administrative capability, and 34 CFR part 600, subpart
A, regarding an educational program offered by an institution that
prepares students for gainful employment in recognized occupations; or
an educational program that is designed to provide occupational skills
to students for useful employment in recognized occupations;
(6) With respect to the State review standards in paragraphs
(a)(11) and (a)(16), the provisions in section 487(a)(8) of the HEA
that require an institution that advertises job placement rates as a
means of attracting students to provide to those students information
concerning employment statistics, graduation statistics, other
information necessary to substantiate the truthfulness of the
advertisement, and any State licensing requirements for a job for which
the institution's educational program prepares such students; and the
provisions in section 487(a)(20) of the HEA prohibiting an institution
from paying a commission, bonus, or other incentive based on securing
enrollments to any person engaged in student recruiting or admission
activities;
(7) With respect to the State review standard in paragraphs (a)(12)
and (a)(13), the formula in 34 CFR 668.8 and 34 CFR 668.9 that an
institution that offers an educational program in credit hours must use
to determine if that program satisfies the requirements of an eligible
program;
(8) With respect to the State review standard in paragraph (a)(14),
the standards in 34 CFR 668.13, regarding an institution's financial
responsibility; the provisions in 34 CFR 668.14 regarding an
institution's administrative capability; and the standards in 34 CFR
600.30 regarding a person's ability to affect substantially the actions
of an institution;
(9) With respect to the State review standard in paragraph (a)(17),
the requirements in section 484B of the HEA regarding an institution's
refund policy; and,
(10) With respect to the State review standards in paragraph
(a)(18), the provisions in section 485(a) of the HEA regarding the
calculation of the completion or graduation rate of certificate- or
degree-seeking, full-time undergraduate students; the standard in 34
CFR 668.15 regarding the withdrawal rate of students at an institution;
and, the provisions in section 481(e)(2) of the HEA regarding the
placement rate and graduation rate of students enrolled in educational
programs of less than 600 clock-hours.
The Secretary recognizes that many of the referenced Title IV, HEA
program standards will be revised or recodified in the near future as
additional regulations are published implementing changes made in the
HEA by the Higher Education Amendments of 1992.
The Secretary invites public comment regarding the development of
standards under the proposed framework and on alternative approaches
that would assure the development of meaningful and rigorous standards.
Specifically, the Secretary seeks comment on ways to establish common
methodologies for computing quantitative standards, and common
recordkeeping requirements associated with those standards, among
institutions in all States, and among the three members of the
Integrity triad in a manner that reduces the administrative burden on
institutions and the triad. In addition, the Secretary invites comments
on approaches that would minimize extreme disparities in standards
between States.
Section 667.22 Disapproval of State Review Standards
Under section 494C(d) of the HEA, State-developed standards are
``subject to disapproval by the Secretary.'' In accordance with that
section of the HEA, in Sec. 667.22, the Secretary proposes procedures
under which the Secretary evaluates a State's review standards to
determine whether to disapprove those standards.
Specifically, in Sec. 667.22(a), a State must submit to the
Secretary its review standards along with an explanation of how each
standard was established, including--
(1) A description of the manner in which institutions in the State
were consulted in the development of the standards;
(2) An explanation of the relationship between each of the State's
review standards and the related or comparable Title IV, HEA program
standards or requirements; and
(3) If applicable, an explanation of the reasons for establishing
different review standards for different types of institutions or
educational programs.
In Sec. 667.22(b), the Secretary proposes criteria to determine
whether to disapprove a State's review standards. Specifically, the
Secretary proposes to disapprove a State's review standards if--
(1) The State does not assure the Secretary that the State's review
standards are consistent with the laws and constitution of that State,
as required by section 494C(d) of the HEA;
(2) The State does not submit evidence that the State's review
standards were developed in consultation with institutions in that
State, as required in section 494C(d) of the HEA;
(3) The State's review standards do not meet or exceed all of the
requirements and cover all the areas described in section 494C(d) of
the HEA and Sec. 667.21; or
(4) The standards the State quantified under Sec. 667.21(b)(4) do
not meet certain procedural and statistical requirements.
Finally, in Sec. 667.22(c), if the Secretary disapproves a State's
review standards, the Secretary proposes to give the State the reasons
for that disapproval and proposes to provide the State an opportunity
to either demonstrate why the Secretary's disapproval was incorrect or
submit revised standards that address the reasons for the Secretary's
disapproval.
The Secretary invites public comment regarding the proposed
evaluation criteria and on additional criteria the Secretary should use
to evaluate a State's review standards.
Section 667.23 SPRE Reviews of Institutions
In Sec. 667.23, the Secretary proposes procedures regarding SPRE
reviews of referred institutions. In general, if the Secretary refers
an institution to a SPRE for review under Sec. 667.5, or the SPRE
selects an institution for review under Sec. 667.6 and the Secretary
approves that selection, the SPRE reviews, or arranges for the review
of, that institution to determine whether the institution is in
compliance with the State review standards described in Sec. 667.21.
To implement the part of section 494C(d) of the HEA that requires a
SPRE to review referred institutions in accordance with published State
standards, in Sec. 667.23(b), the Secretary proposes that the SPRE
provide written notice of the State's established review standards to
each institution in the State before the SPRE conducts reviews of
referred institutions.
In Sec. 667.23(c), the Secretary proposes that the SPRE issue a
report of its findings and provide it to the institution no later than
45 days after the SPRE completes its review. For each finding contained
in the report, the SPRE must cite the standard violated and cite the
nature of the violation. The SPRE may prescribe, if necessary, a course
of action the institution must follow to correct the violation, or the
SPRE may determine that the institution should no longer participate in
the Title IV, HEA programs. If the SPRE chooses to prescribe a
corrective action, the Secretary proposes to give the SPRE sole
discretion to determine an appropriate period for the institution to
correct the violation and bring itself into compliance with the State's
review standards. Alternatively, if the SPRE determines that the
institution should no longer participate in the Title IV, HEA programs,
as provided in section 494C(h) of the HEA, the SPRE may initiate the
process described in Sec. 667.25, under which the Secretary ultimately
terminates the institution's participation in those programs.
In Sec. 667.23(d), the Secretary proposes that the SPRE give the
institution an opportunity to respond to its findings and required
actions. If the institution chooses to respond within the time
permitted by the SPRE, in Sec. 667.23(e), the Secretary proposes that
the SPRE evaluate the institution's response and issue a final report
to the institution that includes its findings and required action.
Section 494C(h)(1) provides that a SPRE must notify the Secretary
of its findings and the actions the SPRE is taking, or has taken, in
response to those findings within a time period prescribed by the
Secretary in regulations. Therefore, in Sec. 667.23(f), the Secretary
proposes that the SPRE provide to the Secretary a copy of its final
report to an institution within 30 days of its issuance to the
institution. A final report includes the report that the SPRE produces
after the institution responds to its initial findings. However, if the
institution does not respond to the SPRE's initial report in the time
permitted by the SPRE, the SPRE's initial report becomes its final
report on the day after the deadline date provided to the institution
for responding to that report.
In Sec. 667.23(g), the Secretary proposes that a SPRE may determine
that an institution should no longer participate in the Title IV, HEA
programs for reasons other than the institution's failure to meet the
State's review standards. Specifically, a SPRE may initiate a
proceeding to effect the termination of the institution's participation
in the Title IV, HEA programs under Sec. 667.25, if that institution--
(1) Does not respond to the SPRE's findings or required actions
within the time permitted by the SPRE and the SPRE's findings show
serious violations of the State's standards; (2) Does not allow SPRE
personnel at the institution; or (3) Fails to provide SPRE officials
with prompt access to its documents and records.
The Secretary wishes to make clear that these proposed regulations
do not require a SPRE to take specific actions against an institution
that fails to meet a State's review standards. The Secretary believes
strongly that SPREs be afforded the latitude to prescribe appropriate
corrective actions, or, if the SPRE finds that an institution has
continuously or egregiously violated the State's standards, make the
determination that the institution should no longer participate in the
Title IV, HEA programs. On the other hand, the Secretary would be
concerned if a SPRE failed consistently to prescribe appropriate and
adequate corrective actions for institutions that did not satisfy the
State's standards.
Finally, the Secretary intends to add to this section a requirement
that a SPRE establish performance standards that would enable the
Secretary to evaluate the conduct and quality of the SPRE's reviews.
Public comment is invited regarding the specific areas where SPRE
performance standards should be established and how that performance
should be evaluated.
Section 667.24 Peer Reviews of Institutions
For each referred institution, section 494C(d)(15) of the HEA
requires a SPRE to contract with a nationally recognized accrediting
agency or other peer review system with demonstrated competence in
assessing educational programs to carry out a review or provide
information to the SPRE regarding that agency's or system's assessment
of the quality and content of the institution educational programs.
Under a literal reading of this provision, a SPRE could contract
with the accrediting agency that had previously accredited the referred
institution for the latter to conduct another, limited accreditation
review. Under normal circumstances, the Secretary believes that use of
SPRP funds for that activity would not be a prudent use of those funds.
Therefore, under normal circumstances, the Secretary recommends that a
SPRE satisfy the requirements of section 494C(d)(15) of the HEA by
contracting with the referred institution's accrediting agency for the
latter to provide a copy of the relevant information that was included
in connection with its previous grant of accreditation.
Except for the proposal that allows a SPRE to contract with a peer
review system that it determines has competence in assessing
educational programs, the provisions in section 494C(d)(15) are
repeated in Sec. 667.24.
Several negotiators argued that the Secretary should define the
term ``peer review system'' or specify criteria to determine the
competence of a peer review system. Those negotiators believed strongly
that a peer review system selected by a SPRE would not be a credible
authority in assessing postsecondary educational programs because that
peer review system would not be subject to the requirements and
standards imposed on accrediting agencies in subpart 2 of Part H of the
HEA.
One negotiator suggested specific criteria to determine the
competence of a peer review system. In particular, that negotiator
suggested that the Secretary approve a peer review system if that
system demonstrates that--
(1) The geographical scope of the system's activities covers a
State, region, or the United States;
(2) The system has the administrative and fiscal capability to
carry out its activities in light of the system's objectives and scope;
(3) The system has established standards and adequate experience to
assess the quality and content of institutions' programs of
instruction, training, or study in relation to achieving the stated
objectives for which the courses or programs are offered;
(4) The system has effective mechanisms for evaluating compliance
with its standards and applying its standards consistently; and
(5) The system's activities will meet the needs of the State and
the Secretary in accomplishing the purposes of the SPRP and not
unnecessarily duplicate the capabilities of a nationally recognized
accrediting agency available to perform the assessment described in
Sec. 667.24(b) of these regulations.
The Secretary believes that a peer review system for purposes of
this program does not, in effect, have to qualify as a recognized
accrediting agency to be used under the SPRP. Nevertheless, the
Secretary invites comment on these suggested criteria and alternative
approaches for determining the competence of a peer review system.
Section 667.25 Termination of an Institution's Participation in the
Title IV, HEA Programs
In Sec. 667.25, the Secretary proposes the procedures a SPRE must
follow to effect the termination of an institution's participation in
the Title IV, HEA programs. Under those procedures, if a SPRE
determines, based upon its review, that an institution is in violation
of the State's review standards and should no longer continue to
participate in the Title IV, HEA programs or violates one of the
provisions proposed in Sec. 667.23(g), the SPRE provides the
institution with the opportunity to contest that determination in
accordance with procedures the Secretary has approved for that purpose
under Sec. 667.26.
If the SPRE concludes after affording the institution the
opportunity to challenge the SPRE's findings and determination, that
the institution should be terminated from participating in the Title
IV, HEA Programs, the SPRE notifies the Secretary of those findings and
that determination. Upon notice by the SPRE that the institution should
no longer participate in the Title IV, HEA programs, the Secretary
immediately terminates that institution's participation in those
programs and notifies the institution and the SPRE of the effective
date of that termination.
Further, the Secretary proposes that an institution terminated
under this part may not reapply to the Secretary to participate in a
Title IV, HEA program until 18 months have expired from the effective
date of its termination. This proposal is consistent with the
provisions in 34 CFR 668.96. Under that section of the Title IV, HEA
program regulations, an institution whose participation in the Title
IV, HEA programs has been terminated may not seek reinstatement in
those programs before the expiration of 18 months from the effective
date of its termination. Moreover, section 494C(h)(1) of the HEA does
not authorize any appeal to the Secretary of a termination
determination.
Section 667.26 Due Process Requirements
Section 494C(h)(3) of the HEA requires the Secretary to prescribe
in regulations minimum procedural standards for the disapproval of
institutions by a SPRE. Thus, in Sec. 667.26, the Secretary proposes
due process criteria that a State must satisfy when permitting an
institution to challenge a SPRE's finding that the institution is in
violation of the State's review standards and should no longer continue
to participate in the Title IV, HEA programs.
Specifically, the Secretary proposes to approve the State's
procedures if those procedures satisfy basic due process requirements.
Therefore, the Secretary proposes procedures that require the SPRE to--
(1) Notify an institution of any required action and the basis for
that action;
(2) Permit the institution the opportunity to challenge that
adverse action in a hearing or in writing;
(3) Notify the institution in writing of the result of its
challenge, and the basis for that result; and
(4) Follow other applicable procedural requirements of State law.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. Because these proposed regulations would affect only States
and State agencies, the regulations would not have an impact on small
entities. State and State agencies are not defined as ``small
entities'' in the Regulatory Flexibility Act.
Paperwork Reduction Act of 1980
Sections 667.3, 667.4, 667.12, 667.15, 667.21, and 667.22 contain
information collection requirements. As required by the Paperwork
Reduction Act of 1980, the Department of Education will submit a copy
of these sections to the Office of Management and Budget for its
review. (44 U.S.C. 3504(h))
These proposed regulations contain information collection
requirements for States that apply to the Secretary to receive funds
under this part and for States that develop review standards and submit
those standards to the Secretary for approval. The Department needs and
uses the information collected to determine whether to approve a
State's application for funds.
Annual public reporting burden for this collection of information
is estimated to average 1480 hours for each of the 57 States that
prepare plans to perform SPRE activities, prepare budgets that account
for those activities, develop review standards, and submit those plans,
budgets, and standards to the Secretary for approval.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, OMB, Room 3002, New Executive
Office Building, Washington, DC 20503; Attention: Daniel J. Chenok.
Invitation To Comment
Interested persons are invited to submit comments and
recommendations regarding these proposed regulations.
All comments submitted in response to these proposed regulations
will be available for public inspection, during and after the comment
period, in room 4318, ROB-3, 7th & D Streets, SW, Washington, D.C.,
between the hours of 8:30 a.m. and 4 p.m., Monday through Friday of
each week except Federal holidays.
Assessment of Educational Impact
The Secretary particularly requests comments on whether the
proposed regulations in this document would require transmission of
information that is being gathered by or is available from any other
agency or authority of the United States.
List of Subjects in 34 CFR Part 667
Administrative practice and procedure, Colleges and universities,
Education, Grant programs--education, Loan programs--education,
Reporting and recordkeeping requirements, States, Student aid.
(Catalog of Federal Domestic Assistance Number: 84.267, State
Postsecondary Review Program)
Dated: January 14, 1994.
Richard W. Riley,
Secretary of Education.
The Secretary proposes to amend title 34 of the Code of Federal
Regulations by adding a new part 667 to read as follows:
PART 667--STATE POSTSECONDARY REVIEW PROGRAM
Subpart A--General
Sec.
667.1 Scope and purpose.
667.2 Definitions.
667.3 State agreement.
667.4 State postsecondary review entity.
667.5 Criteria the Secretary uses to refer institutions to a SPRE
for review.
667.6 SPRE selection of institutions for review.
667.7 Notice to SPRE of Federal actions.
667.8 Institutions with locations in more than one State.
Subpart B--Allotment Formula and Funding Procedures
667.11 Allotment formula.
667.12 Application for funds.
667.13 Approval of funding application.
667.14 Allowable costs and activities.
667.15 Fiscal procedures and records.
667.16 Supplement, not supplant, requirement.
Subpart C--State Review Standards, SPRE Reviews, and Termination of
Institutional Participation
667.21 State review standards.
667.22 Disapproval of State review standards.
667.23 SPRE reviews of institutions.
667.24 Peer reviews of institutions.
667.25 Termination of an institution's participation in the Title
IV, HEA programs.
667.26 Due process requirements.
Authority: 20 U.S.C. 1099a through 1099a-3, unless otherwise
noted.
Subpart A--General
Sec. 667.1 Scope and purpose.
(a)(1) This part establishes the rules and procedures that govern
the State Postsecondary Review Program, which is authorized under Title
IV, Part H, Subpart 1 of the Higher Education Act of 1965, as amended
(HEA). The purpose of the program is to strengthen State oversight of
institutions participating in the Title IV, HEA programs through the
development of State standards for those institutions, and State review
under those standards of institutions referred by the Secretary under
Sec. 667.5 or selected by the State under Sec. 667.6.
(2) Under this part, if a State finds that an institution it
reviews does not satisfy the State standards, the State may--
(i) Require the institution to take prompt actions to bring itself
into compliance with the State's standards; or
(ii) Determine that the institution should no longer participate in
a Title IV, HEA program.
(b) A State must carry out activities under this part only to the
extent that the costs of those activities will be reimbursed by Federal
funds.
(c) As used in this part, ``an institution'' includes--
(1) An institution of higher education as defined in 34 CFR 600.4;
(2) A proprietary institution of higher education as defined in 34
CFR 600.5; and
(3) A postsecondary vocational institution as defined in 34 CFR
600.6.
(d) The provisions in the Education Department General
Administrative Regulations, State Administered Programs, 34 CFR Part
76, do not apply to this part except for the provisions in--
(1) 34 CFR 76.1, 76.2, and 76.50 of subpart A;
(2) 34 CFR 76.500 through 76.534, 76.561, 76.563, and 76.580
through 76.592 of Subpart F; and
(3) 34 CFR 76.700 through 76.702, 76.707, 76.720, 76.730, 76.731,
76.734, 76.760, and 76.761 of subpart G.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.2 Definitions.
(a) The following terms used in this part are defined in the
regulations governing Institutional Eligibility under the Higher
Education Act of 1965, as amended, 34 CFR Part 600:
Branch campus
Educational program
Federal Family Education Loan (FFEL) programs
Nationally recognized accrediting agency
Recognized occupation
Regular student
Secretary
(b) The following terms used in this part are defined in the
Student Assistance General Provisions regulations, 34 CFR part 668:
Award year
Clock hour
Eligible program
Enrolled
Federal Pell Grant Program
Federal Perkins Loan Program
Federal PLUS Program
Federal Stafford Loan Program
Federal Supplemental Educational Opportunity Grant (FSEOG) Program
Federal Supplemental Loans for Students (SLS) Program
Federal Work-Study (FWS) Program
National Early Intervention Scholarship and Partnership (NEISP)
Program
State
State Student Incentive Grant (SSIG) Program
(c) The following definitions apply to terms used in this part:
Classification of Instructional Programs (CIP): A manual published
by the U.S. Department of Education, National Center for Education
Statistics, that lists the codes, titles, and descriptions of
instructional programs used by institutions and States for reporting
and analyzing education data at the national level.
Education and general expenditures: The total amount expended by an
institution for instruction, research, public service, academic support
(including library expenditures), student services, institutional
support, scholarships and fellowships, operation and maintenance
expenditures for the physical plant, and any mandatory transfers which
the institution is required to pay by law.
National Occupational Information Coordinating Committee (NOICC):
An agency jointly sponsored by the Departments of Education and Labor
to facilitate comparisons between educational programs and related
occupations and to provide information to State employment counseling
services.
Professional program: An undergraduate or graduate educational
program that prepares individuals for an occupation, if that
occupation--
(i) Is listed in SOC or CIP;
(ii) Requires at least an associate degree to qualify for entry;
(iii) Involves the independent practice or application of a defined
or organized body of competencies that is unique to the occupation; and
(iv) Is formally recognized and regulated under a national or State
licensure, accreditation, or permit system.
Referred institution: An institution that a SPRE reviews as a
result of--
(i) A referral by the Secretary under Sec. 667.5; or
(ii) State selection under Sec. 667.6.
Standard Occupational Classification (SOC) Manual: A manual
published by the U.S. Department of Commerce, used for reporting
national statistics on occupations and employment projections, compiled
from data collected through the census and other Federal surveys.
State Postsecondary Review Entity (SPRE): The entity described in
Sec. 667.4.
Title IV, HEA program: One of the programs identified in 34 CFR
668.1.
Vocational program: An educational program below the baccalaureate
degree level, that is not classified as a professional program, that
prepares students for gainful employment in a recognized occupation.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.3 State agreement.
(a) To participate in the State Postsecondary Review Program, a
State must enter into an agreement with the Secretary.
(b) In the agreement, the State--
(1) Designates a SPRE;
(2) Describes the organizational structure of the SPRE;
(3) Assures that--
(i) The SPRE has the legal authority under State law to carry out
the functions required of it under this part;
(ii) The SPRE will perform the functions required of it under this
part;
(iii) The SPRE will keep records or have access to records and
provide information to the Secretary as may be requested for financial
and compliance audits, and program evaluations;
(iv) The SPRE will review referred institutions on a schedule that
coincides with the Secretary's schedule for recertifying those
institutions to participate in the Title IV, HEA programs;
(4) Describes the relationship between the SPRE, the State
approving agency for Veterans Affairs, the State guaranty agency under
the FFEL programs, the State agency responsible for administering the
SSIG Program, any State entity that provides a license to institutions
to operate in the State or otherwise legally authorizes institutions to
provide postsecondary education in the State, any State-level entity
that approves service providers under the Job Training Partnership Act,
and any State-level entity that certifies vocational education;
(5) Indicates that the SPRE--
(i) Shall contract with a nationally recognized accrediting agency
or a peer review system for purposes of Sec. 667.23; and
(ii) May contract with a private agency, nationally recognized
accrediting agency, or peer review system for assistance in performing
the SPRE's functions; and
(6) Includes the SPRE's plan for performing the functions described
in Sec. 667.12.
(c) The agreement between the State and the Secretary goes into
effect when it is signed by the Secretary and remains in effect until
it is terminated by the Secretary or the State. The Secretary or the
State terminates an agreement under the provisions of that agreement.
(d) The sanctions set forth in paragraph (e) of this section follow
if the State--
(1) Does not enter into an agreement with the Secretary;
(2) Fails to comply with the terms of the agreement and the
Secretary terminates that agreement;
(3) Terminates the agreement with the Secretary; or
(4) Does not establish review standards under Sec. 667.21 that are
approved by the Secretary by the end of the second year for which the
State received an allotment under Sec. 667.11.
(e) If any of the events listed in paragraph (d) of this section
occur--
(1) The State is ineligible to receive--
(i) Any funds appropriated to carry out this program;
(ii) Its allotment of any funds appropriated under the SSIG
Program; and
(iii) Any funds appropriated to carry out the NEISP Program; and
(2) The Secretary--
(i) Does not designate as eligible for participation in a Title IV,
HEA program any institution seeking initial participation in that
program, any branch campus for which an institution seeks an initial
designation of eligibility under 34 CFR part 600, or any institution
that has undergone a change in ownership that results in a change in
control as determined in 34 CFR part 600, that is located in that
State;
(ii) Grants only provisional certification, as determined in 34 CFR
part 668, to an institution in that State not described in paragraph
(e)(2)(i) of this section; and
(iii) May--
(A) Establish the review standards for that State described in
Sec. 667.21; and
(B) Carry out, or arrange to carry out, the State's other
responsibilities and requirements under this part.
(Authority: 20 U.S.C. 1099a-1)
Sec. 667.4 State postsecondary review entity.
The SPRE is the entity designated by the State in the agreement
between the State and the Secretary under Sec. 667.3, to--
(a) Represent all existing State entities that are, and all future
State entities that will be, responsible for--
(1) Granting State authorization to provide postsecondary education
in that State; and
(2) Ensuring that all institutions in the State that participate in
a Title IV, HEA program remain in compliance with the State review
standards established under Sec. 667.21;
(b) Perform the functions required of it under this part; and
(c) Keep records or have access to records and provide information
to the Secretary as may be requested for financial and compliance
audits, and program evaluations.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.5 Criteria the Secretary uses to refer institutions to a SPRE
for review.
(a)(1) The Secretary refers an institution that participates in a
Title IV, HEA program to a SPRE for review if the institution meets one
or more of the criteria contained in paragraph (b) of this section.
(2) In determining whether an institution meets one or more of the
criteria contained in paragraph (b) of this section, the Secretary uses
the most recently available data.
(b) Except as provided in paragraphs (c), (d), and (e) of this
section, the Secretary refers an institution to a SPRE if--
(1) The institution has a cohort default rate (defined in 34 CFR
668.15) equal to or greater than 25 percent;
(2)(i) The institution has a cohort default rate equal to or
greater than 20 percent; and
(ii) During the latest completed award year for which data are
available--
(A) More than two-thirds of the institution's regular undergraduate
students who were enrolled as at least half-time students received
assistance under any Title IV, HEA program, excluding assistance
received from the SSIG, NEISP, and Federal PLUS Programs; or
(B) The amount that the institution's students received under the
Title IV, HEA programs, excluding funds from the SSIG, NEISP, and
Federal PLUS Programs, is equal to or greater than two-thirds of the
institution's education and general expenditures;
(3) The amount that the institution's students received under the
Federal Pell Grant Program is equal to or greater than two-thirds of
the institution's education and general expenditures;
(4) The Secretary initiated a limitation, suspension, or
termination action against the institution under 34 CFR part 668,
subpart G, within the preceding 5 years;
(5) An audit finding in the institution's two most recent audits
under 34 CFR 668.23 resulted in a required repayment by the institution
of an amount greater than 5 percent of the funds the institution
received under the Title IV, HEA programs for any one award year
covered by those audits;
(6) The Secretary cited the institution for its failure to submit
an audit report by the deadlines established under 34 CFR 668.23;
(7)(i) The amount that the institution's students received under
the Federal Pell Grant Program during any award year differed by more
than 25 percent from the amount those students received under that
program in the award year that preceded that award year, unless the
differences can be accounted for by changes in that program;
(ii) The amount that the institution's students received under the
Federal Stafford Loan Program during any award year differs by more
than 25 percent from the amount those students received under that
program in the award year that preceded that award year, unless the
differences can be accounted for by changes in that program; or
(iii) The amount that the institution's students received under the
Federal SLS Program during any award year differs by more than 25
percent from the amount those students received under that program in
the award year that preceded that award year, unless the differences
can be accounted for by changes in that program;
(8) The institution failed to meet the financial responsibility
standards in 34 CFR part 668, subpart B;
(9) The institution underwent a change in ownership that resulted
in a change of control as defined in 34 CFR 600.31;
(10) Except with regard to any public institution affiliated with a
State system of higher education, the institution has participated for
less than 5 years in--
(i) The Federal Pell Grant Program;
(ii) The FFEL programs;
(iii) The FSEOG Program;
(iv) The FWS Program; or
(v) The Federal Perkins Loan Program; or
(11) The institution has been subject to a pattern of complaints
from students, faculty, or others, including information provided to
the Secretary by the SPRE, related to its management or conduct of the
Title IV, HEA programs or to misleading or inappropriate advertising
and promotion of the institution's educational programs, that in the
Secretary's judgment are sufficient to warrant review.
(c) If the Secretary refers an institution to the SPRE under
paragraph (b)(9) with regard to the same change of ownership or (b)(6)
of this section, and the SPRE conducts a review of the institution as a
result of that referral and finds no significant violations of the
State's standards, the Secretary reserves whether to refer that
institution again to the SPRE for the same reason that resulted in the
initial referral.
(d) The Secretary reserves whether to refer again to the SPRE an
institution that meets only the conditions of paragraph (b)(10) of this
section, if the SPRE previously conducted a review of that institution
and found no violations of the State's standards.
(e)(1) An institution may request the Secretary to confirm the data
used by the Secretary in referring that institution to a SPRE.
(2) The Secretary rescinds a referral if confirmation reveals that
the data used to make a referral was inaccurate and a referral would
not be required under accurate data.
(3) The Secretary does not rescind a referral if the Secretary--
(i) Confirms that the data are accurate; or
(ii) Is unable to confirm the data.
(4) In confirming data, the Secretary presumes that records
maintained in the normal course of business by the U.S. Department of
Education, a guaranty agency under the FFEL programs, a SPRE, a State
licensing agency, or another State agency are accurate unless the
institution proves to the Secretary's satisfaction that the records are
not properly maintained or are inaccurate.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.6 SPRE selection of institutions for review.
A SPRE may review an institution under this part that was not
referred by the Secretary if--
(a) The SPRE--
(1)(i) Determines that the institution meets a referral criterion
in Sec. 667.5 based on more recent data available to the SPRE; or
(ii) Has reason to believe the institution is engaged in fraudulent
practices; and
(2) Requests the Secretary to approve its review of that
institution; and
(b) The Secretary--
(1) Approves that request; or
(2) Does not respond to the SPRE's request within 21 days after the
date the Secretary receives that request.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.7 Notice to SPRE of Federal actions.
(a) If the Secretary takes an action against an institution, the
Secretary notifies the SPRE of the State in which the institution is
located within 10 days of taking that action.
(b) If the Secretary is informed that another Federal agency is
taking an action against an institution, the Secretary notifies the
SPRE of the State in which the institution is located as soon as
possible but not later than 10 days after learning of that action.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.8 Institutions with locations in more than one State.
(a) If an institution that is subject to a referral has locations
in more than one State, the Secretary refers the institution to the
SPRE in each State in which the institution is located and informs each
SPRE of the other States in which the institution is located.
(b) The SPRE of the State in which the main campus of the
institution is located has the principal responsibility for reviewing
that institution.
(c) If a branch campus or additional location of an institution is
in a State other than the State in which the institution's main campus
is located, the SPRE of the State in which that branch campus or
additional location is located--
(1) May review that branch campus or additional location before a
SPRE review is conducted of the main campus of that institution;
(2) May delay its review of that branch campus or additional
location until a SPRE review is conducted of the main campus of that
institution; or
(3) May choose not to review that branch campus or additional
location if--
(i) The SPRE of the State in which the main campus of that
institution is located reviews that institution and makes no
significant findings; and
(ii) The State's allotment is insufficient to allow the SPRE to
review all referred institutions.
(d) An institution, its branch campuses, and additional locations
are subject to the review standards of the State in which they are
located.
(e) Notwithstanding paragraphs (b) and (c) of this section, to
review a referred institution that has locations in more than one
State, the SPREs of those States may enter into an agreement under
which the SPREs may alter the review responsibilities set forth in
paragraphs (b) and (c) of this section.
(Authority: 20 U.S.C. 1099a-3)
Subpart B--Allotment Formula and Funding Procedures
Sec. 667.11 Allotment formula.
(a) For each fiscal year for which funds are appropriated to carry
out this part:
(1) The Secretary--
(i) Allots $20,000 to Guam, $20,000 to American Samoa, $20,000 to
the Northern Mariana Islands, $20,000 to the Virgin Islands, and
$20,000 to the Trust Territory of the Pacific Islands;
(ii) Calculates each remaining State's allotment of the remaining
funds under paragraph (a)(2) of this section; and
(iii) Notifies each State of its allotment.
(2) Except for Guam, American Samoa, the Northern Mariana Islands,
the Virgin Islands, and the Trust Territory of the Pacific Islands, the
Secretary allots those funds to a State by--
(i) Determining the percentage of institutions participating in a
Title IV, HEA program in the State by dividing the number of
institutions located in that State that are certified to participate in
a Title IV, HEA program by the total number of institutions that are
certified to participate in all States;
(ii) For the latest award year for which information is available,
determining the percentage of Title IV, HEA program funds by dividing
the total amount of Title IV, HEA program funds that were made
available to students who enrolled in the institutions in that State
that participate in a Title IV, HEA program, or to those students'
parents, by the total amount of Title IV, HEA program funds that were
made available to students, or to those student's parents, who enrolled
in institutions that participate in a Title IV, HEA program in all
States;
(iii) Averaging the two percentages determined in paragraph
(a)(2)(i) and (ii) of this section;
(iv) Calculating an ``initial distribution'' by multiplying the
average percentage determined in paragraph (a)(2)(iii) of this section
by the amount appropriated to carry out this part less the total amount
allotted to Guam, American Samoa, the Northern Mariana Islands, the
Virgin Islands, and the Trust Territory of the Pacific Islands;
(v)(A) Determining which States receive less than $50,000 under the
initial distribution;
(B) Providing each of those States with $50,000; and
(C) Calculating the difference between the $50,000 provided to each
of those States and those States' initial distribution;
(vi)(A) Determining which States receive more than $50,000 under
the initial distribution; and
(B) Calculating the difference between each of those States'
initial distribution and $50,000;
(vii) Calculating a ``reduction percentage'' by dividing the total
amount obtained in paragraph (a)(2)(v)(C) of this section by the total
amount obtained in paragraph (a)(2)(vi)(B) of this section; and
(viii) Reducing the initial distribution of each State in paragraph
(a)(2)(vi)(A) of this section by the product of the amount obtained in
paragraph (a)(2)(vi)(B) of this section and the reduction percentage in
paragraph (a)(2)(vii) of this section.
(b) If the Secretary determines that a SPRE will not spend its
entire allotment during the period for which those funds are made
available, or if a SPRE does not spend its allotment by the end of the
period for which those funds are made available, the Secretary reallots
those funds to other SPREs in a manner that the Secretary determines
best carries out the purposes of the State Postsecondary Review
Program.
(c) SSIG and NEISP Program Federal and State matching funds are
excluded from the calculations in this section.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.12 Application for funds.
(a)(1) General. For each fiscal year for which funds are
appropriated to carry out this part, a State that has entered into an
agreement with the Secretary under Sec. 667.3 shall apply to the
Secretary to receive its allotment. The State's application must
contain the information required in paragraph (b), (c), or (d) of this
section, as appropriate. The Secretary publishes in the Federal
Register the date by which a State must submit its application.
(2) Established review standards. A State has established review
standards if those standards met the requirements in Sec. 667.21 and
the Secretary did not disapprove those standards under Sec. 667.22.
(b) Application before standards are established.
(1) If a State has not established review standards, to receive its
allotment the State--
(i) Must submit a plan to develop--
(A) The review standards described in Sec. 667.21, in consultation
with the institutions in that State, which shall describe the manner in
which consultation will take place; and
(B) The procedures for receiving and responding to complaints from
students, faculty, and others regarding institutions in the State, in
consultation with institutions in that State, which shall describe the
manner in which consultation will take place;
(ii) May submit a plan to identify information maintained by
institutions and State agencies, other than the information
institutions are required to maintain under the Student Right-to-Know
and Campus Security Act, that is relevant to developing the State
review standards, to identify systems in which this information is
maintained, and to provide estimates of the costs of coordinating the
institutions' and State's information systems with an information
system developed by the SPRE; and
(iii) Must submit a budget for developing the standards and the
complaint procedures and for providing cost estimates for the SPRE's
information system, if relevant, that does not exceed the State's
fiscal year 1993 allotment.
(2) If the State's fiscal year 1993 allotment is less than the
State's anticipated cost of carrying out the activities described in
paragraphs (b)(1) (i) and (ii) of this section, the State shall first
use its allotment to develop the review standards. If a portion of the
allotment remains after the State develops its review standards, the
State may develop procedures for receiving and responding to complaints
from students, faculty, and others regarding institutions in the State.
The State may use any remaining portion of its allotment to provide
cost estimates for the SPRE's information system only after it has
completed developing its review standards and complaint procedures.
(c) Application after standards are established. (1) If the
Secretary has not disapproved the State's review standards under
Sec. 667.22, to receive its allotment, the State must submit to the
Secretary--
(i) Its plan to review referred institutions; and
(ii) A budget for those reviews that does not exceed the State's
allotment calculated under Sec. 667.11 less any amount expended by the
SPRE in carrying out the activities under paragraph (b) of this
section.
(2) If a SPRE anticipates that the cost of reviewing all the
referred institutions will exceed the State's allotment, the SPRE
shall, as part of its plan, submit a priority system for selecting
institutions to review from among the referred institutions.
(3) The SPRE shall have discretion in developing its priority
system, except that the SPRE must make its top priority for review,
referred institutions that the Secretary has scheduled for
recertification under 34 CFR part 668, subpart B.
(d) If a State first applies to the Secretary to receive an
allotment after fiscal year 1993, the State must submit the information
and documentation required under paragraph (b) of this section, and may
submit the information required in paragraph (c) of this section.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.13 Approval of funding application.
(a) Before standards are established. The Secretary approves a
State's plan and budget submitted before the State establishes review
standards if--
(1) The plan provides a reasonable basis, and adequate budget
justification, for carrying out the activities described in
Sec. 667.12(b)(1);
(2) If applicable, the plan includes a priority system for using
the State's allotment as described in Sec. 667.12(b)(2); and
(3) The budget includes only reasonable allowable costs within the
State's fiscal year 1993 allotment.
(b) After standards are established. After the State establishes
review standards, the Secretary approves a State's plan and budget for
the allowable activities described in Sec. 667.14 if--
(1) The plan provides adequate budget justification for those
activities;
(2) The plan provides for a reasonable scheme for reviewing
referred institutions;
(3) The plan includes a priority system for review as described in
Sec. 667.12(c)(3);
(4) The proposed contracts with private agencies, accrediting
agencies, or peer review systems to carry out SPRE functions included
in the plan are reasonable and appropriate; and
(5) The budget includes only reasonable allowable costs within the
State's allotment.
(c) Failure to submit an acceptable application. If a State does
not submit an application for funds under Sec. 667.12 or its
application is not approved under this section--
(1) The State is ineligible to receive--
(i) Any funds appropriated to carry out this program;
(ii) Its allotment of any funds appropriated under the SSIG
Program; and
(iii) Any funds appropriated to carry out the NEISP Program; and
(2) The Secretary--
(i) Does not designate as eligible for participation in a Title IV,
HEA program any institution seeking initial participation in that
program, any branch campus for which an institution seeks an initial
designation of eligibility under 34 CFR part 600, or any institution
that has undergone a change in ownership that results in a change in
control as determined in 34 CFR part 600, that is located in that
State; and
(ii) Grants only provisional certification, as determined in 34 CFR
part 668, to an institution in that State not described in paragraph
(c)(2)(i) of this section.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.14 Allowable costs and activities.
(a) If included in a State's approved plan, the Secretary pays, by
reimbursement, direct costs, in paragraph (c) and described in Office
of Management and Budget (OMB) Circular A-87, and indirect costs as
determined in paragraph (b) of this section, of--
(1) Establishing State review standards in consultation with
institutions in the State, publicizing the State review standards, and
providing initial and continuing training to State and other personnel
in the State, including personnel at the institution subject to review;
(2) Establishing and implementing the procedures for receiving and
responding to complaints from students, faculty, and others regarding
institutions in the State, in consultation with institutions in that
State;
(3) Reviewing referred institutions; and
(4) Developing and maintaining an information system for SPRE
review activities.
(b) If a State seeks reimbursement for indirect costs, the State
shall--
(1) Use the restricted indirect cost rate, computed under 34 CFR
75.564, and approved by the Secretary under 34 CFR 75.561; and
(2) Not charge as a direct cost any cost that qualifies as an
indirect cost.
(c) The direct costs of carrying out the activities described in
paragraph (a) of this section include, but are not limited to--
(1) The salary of State employees engaged in allowable activities;
(2) Travel costs incurred--
(i) Consulting with institutions in developing standards and
complaint procedures; and
(ii) Reviewing referred institutions;
(3) Training for--
(i) State employees to perform reviews of referred institutions;
and
(ii) Institutional and other personnel regarding the State review
standards;
(4) Contracting with private organizations, accrediting agencies,
and peer review systems to carry out required activities; and
(5) Costs incurred by the State for administrative actions and
legal proceedings.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.15 Fiscal procedures and records.
(a) A State must account for the funds it received under this part
in accordance with the procedures it uses to account for the
expenditure of its own funds and must keep fiscal and accounting
records that support, on audit, its expenditure of funds under this
part.
(b) (1) Except as provided in paragraph (b)(2) of this section,
the State must keep intact and accessible records relating to its
activities under this part for five years after the end of the period
for which funds were provided.
(2) The State shall keep records on any claim or expenditure
questioned on audit until any audit question is resolved.
(c) A State must have an audit performed of the SPRE's activities
under this part at least once every two years and must submit that
audit to the Secretary. An audit conducted under the Single Audit Act
satisfies this requirement.
(Authority: 20 U.S.C. 1099a-1099a-3)
Sec. 667.16 Supplement, not supplant, requirement.
The Secretary reimburses a State for the costs of necessary SPRE
activities which supplement, but do not supplant, existing licensing or
review functions conducted by the State.
(Authority: 20 U.S.C. 1099a-2)
Subpart C--State Review Standards, SPRE Reviews, and Termination of
Institutional Participation.
Sec. 667.21 State review standards.
(a) Each State participating under this part must develop
standards, in consultation with institutions in the State, under which
the SPRE reviews referred institutions. The State-developed review
standards must evaluate, with regard to a referred institution--
(1) The extent to which the institution makes available to its
students and prospective students its catalogs, admission requirements,
course outlines, tuition and fee schedules, refund policy, course
cancellation policy, its rules and regulations, and its enrollment
agreement if appropriate;
(2) Whether the institution's descriptions of its courses and
programs are accurate;
(3) Whether the institution has a method to assess that a student
has the ability to complete successfully the educational program for
which he or she applies;
(4) The extent to which the institution's method to assess that a
student has the ability to complete successfully the educational
program for which he or she applies accurately assesses that ability as
measured by the completion rate of that program;
(5) Whether the institution maintains and enforces standards
relating to satisfactory progress;
(6) Whether the institution maintains adequate student and other
records;
(7) Whether the institution complies with relevant safety, and
health standards, such as fire, building, and sanitation codes;
(8) The extent to which the institution's financial and
administrative capacity is appropriate to its scale of operations, and
whether the institution maintains adequate financial and other
information to determine the adequacy of its financial and
administrative capacity;
(9) For an institution that the SPRE determines is at financial
risk, the adequacy of the institution's plans to provide for, if the
institution closes--
(i) Instruction to enrolled students; and
(ii) Retention of and access to academic and financial aid records;
(10) If an institution provides an educational program that is
designed to prepare students for gainful employment--
(i) Whether the tuition and fees charged for that educational
program are reasonable given the amount of money that a student who
successfully completes the program may reasonably be expected to earn;
and
(ii) Whether the educational program provides students with quality
training that leads to useful employment in an occupation recognized in
that State. In making this evaluation, one of the factors the SPRE
shall consider is the appropriateness of the length of the educational
program in terms of both the number of days of instruction and the
number of credit or clock hours the program offers;
(11) The extent to which the institution provides to its students
relevant information regarding--
(i) Market and job availability for students in its occupational,
professional, and vocational programs; and
(ii) The relationship between the institution's educational
programs and State licensing standards for specific occupations;
(12) The appropriateness of the number of semester, trimester, or
quarter credit or clock hours required for the completion of an
educational program;
(13) The appropriateness of the length of 600-hour educational
programs;
(14) Whether, and the extent to which, the actions of any owner or
shareholder of the institution, or any person exercising control over
the institution may adversely affect its participation in a Title IV,
HEA program;
(15) The extent to which the institution's procedures for
investigating and resolving student complaints are adequate;
(16) The extent to which the institution's advertising promotion,
and student recruiting practices are appropriate;
(17) Whether the institution has a fair and equitable refund
policy; and
(18) The extent to which the institution's educational programs are
successful as measured by--
(i) The completion and graduation rates of the students enrolled in
those programs, taking into account the length of the program and the
selectivity of the institution's admissions policy (for the purpose of
this provision, a completion rate is the same as a graduation rate);
(ii) The institution's withdrawal rate;
(iii) With respect to the institution's vocational and professional
programs, the placement rate of the institution's graduates in
occupations related to their educational programs, with related
programs and occupations determined by reference to the NOICC CIP/DOT
Master Crosswalk;
(iv) Where appropriate, the rate at which the institution's
graduates pass licensure examinations; and
(v) The success of the institution's students who express other
completion goals, such as transferring to another institution, full-
time employment in their field of study, or military service, in
meeting those goals.
(b) In developing the review standards in paragraph (a) of this
section, a State--
(1) May establish different standards for different types or
categories of institutions or educational programs;
(2) Shall specify the records and information an institution would
need to maintain to demonstrate to a SPRE the institution's compliance
with those standards;
(3) Except for standards regarding prospective students in
paragraph (a)(1) of this section, shall establish standards that apply
at least to all regular students;
(4) Shall quantify the standards described in paragraphs (a)(10)(i)
and (a)(18) (i), (ii), (iii), and (iv) of this section by
establishing--
(i) An acceptable percentage for the relationship between the
tuition and fees charged by an institution for an educational program
and the amount of money that a student who successfully completes that
program actually earns;
(ii) Acceptable completion and graduation rates of students
enrolled in educational programs offered by an institution;
(iii) An acceptable withdrawal rate of students at an institution;
(iv) With respect to an institution's vocational and professional
programs, an acceptable placement rate of the institution's graduates
in occupations related to their educational program; and
(v) An acceptable rate or rates at which the institution's
graduates pass licensure examinations; and
(5) Shall determine the extent to which it is appropriate to base a
State review standard on a related Title IV, HEA program standard or
requirement or establish as the State's review standard the comparable
Title IV, HEA program standard or requirement.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.22 Disapproval of State review standards.
(a) (1) Each State shall submit to the Secretary for his evaluation
the review standards it developed under Sec. 667.21.
(2) The State shall also submit to the Secretary an explanation of
how each standard was established, including--
(i) An explanation of the relationship between each of the State's
review standards and the related or comparable Title IV, HEA standards
and requirements;
(ii) If applicable, an explanation of the reasons for establishing
different review standards for different types of institutions or
educational programs; and
(iii) A description of the manner in which institutions were
consulted in developing the review standards.
(b) The Secretary disapproves a State's review standards if--
(1) The State does not assure the Secretary that the State's review
standards are consistent with the laws and constitution of that State;
(2) The State does not submit evidence that the State's review
standards were developed in consultation with the institutions in that
State;
(3) The State's review standards do not meet or exceed all of the
requirements and cover all the areas described in Sec. 667.21; or
(4) The standards developed under Sec. 667.21(b)(4)--
(i) Do not specify the methods and procedures that an institution
must use to calculate--
(A) The relationship between the tuition and fees charged by an
institution for an educational program and the amount of money that a
student who successfully completes that program actually earns; and
(B) The graduation or completion rates, withdrawal rates, placement
rates, and licensure examination pass rates of the institution's
students or graduates; and
(ii) Do not specify statistically valid methods and procedures that
an institution must use if that institution conducts surveys of its
graduates to obtain data regarding the type of employment, placement,
earnings, or licensure examination pass rates of the institution's
graduates;
(c) If the Secretary disapproves a State's review standards, the
Secretary gives the State the reasons for that disapproval and gives
the State an opportunity to--
(1) Demonstrate why the Secretary's disapproval was incorrect; or
(2) Submit revised review standards that address the reasons for
the Secretary's disapproval.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.23 SPRE reviews of institutions.
(a) If the Secretary refers an institution to a SPRE for review
under Sec. 667.5 or the SPRE selects an institution for review under
Sec. 667.6 and the Secretary approves that selection, the SPRE reviews,
or arranges for the review of that institution, to determine whether
the institution is in compliance with the State review standards
described in Sec. 667.21.
(b) The SPRE shall provide written notice to all institutions in
the State of the review standards approved by the Secretary under
Sec. 667.22 before it may conduct reviews of referred institutions.
(c) The SPRE must issue an initial report of its findings and
provide it to the institution no later than 45 days after the SPRE
completes its review. If the SPRE finds that the institution is in
violation of a standard, for each finding, the SPRE--
(1) Must cite the standard violated and the nature of the
violation; and
(2) May--
(i) Prescribe, if necessary, a course of action the institution
must follow to correct the violation. The SPRE has sole discretion to
determine an appropriate period for the institution to correct the
violation and bring itself into compliance with the State's review
standards; or
(ii) Initiate a proceeding under Sec. 667.25 to effect the
termination of the institution's participation in the Title IV, HEA
programs.
(d) The SPRE must give the institution an opportunity to respond to
its findings and required actions.
(e) If the institution chooses to respond within the time permitted
by the SPRE, the SPRE must evaluate the institution's response and
issue a final report to the institution that includes its findings and
required action.
(f) (1) The SPRE must provide to the Secretary a copy of its final
report to an institution within 30 days of its issuance to the
institution; or
(2) If the institution did not respond to the SPRE's initial report
by the date permitted by the SPRE, the SPRE must provide to the
Secretary a copy of its initial report. The SPRE's initial report
becomes its final report on the day after the date provided to the
institution for responding to that report; and
(3) If the SPRE did not prescribe a course of action the
institution must follow to correct a violation of the State's standards
under paragraph (c) of this section, the SPRE must include in its
report to the Secretary an explanation of why no action was prescribed.
(g) In addition to the reasons for initiating a proceeding to
effect the termination an institution's participation in the Title IV,
HEA programs under paragraph (c) of this section, the SPRE may
determine that the institution should no longer participate in the
Title IV, HEA programs if that institution--
(1) Does not respond to the SPRE's findings or required actions
within the time permitted by the SPRE and the SPRE's findings show
serious violations of the State's standards;
(2) Does not allow SPRE personnel at the institution; or
(3) Fails to provide SPRE officials with prompt access to its
documents and records.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.24 Peer reviews of institutions.
(a) To carry out a review of a referred institution, the SPRE must
contract with a nationally recognized accrediting agency or other peer
review system the SPRE determines demonstrates competence in assessing
educational programs.
(b) (1) Under the contract described in paragraph (a) of this
section, the accrediting agency or peer review system shall carry out a
review or provide information from its previous grant of accreditation
or previous review to the SPRE regarding the agency's or system's
assessment of the quality and content of the institution's educational
programs in relation to achieving the stated objectives for which the
programs were offered.
(2) In making its assessment under paragraph (b)(1) of this
section, for each educational program, the agency or system shall take
into account the adequacy of the space, equipment, instructional
materials, staff, and student support services, including student
orientation and counseling provided for each program, and any other
areas specified in the agency's contract with the SPRE.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.25 Termination of an institution's participation in the Title
IV, HEA programs.
(a) (1) If a SPRE determines that an institution should no longer
participate in a Title IV, HEA program, based upon its review, because
the institution is in violation of State standards or has not complied
with the SPRE requirements such as those listed in Sec. 667.23(g), the
SPRE must provide the institution with the opportunity to contest that
determination in accordance with procedures the Secretary has approved
for that purpose under Sec. 667.26.
(2) If the SPRE still concludes after affording the institution the
opportunity to challenge the SPRE's initial determination that the
institution is in violation of the State's review standards and should
no longer continue to participate in a Title IV, HEA program, the SPRE
notifies the Secretary of those findings and that determination.
(b) (1) Upon notice by the SPRE that the institution should no
longer participate in a Title IV, HEA program, the Secretary
immediately terminates that institution's participation in that program
and notifies the institution and the SPRE of the effective date of that
termination.
(2) If an institution's participation in a Title IV, HEA program is
terminated under this section--
(i) The institution may not appeal that termination to the
Secretary; and
(ii) The institution may not reapply to the Secretary to
participate in that program until 18 months have expired from the
effective date of its termination.
(Authority: 20 U.S.C. 1099a-3)
Sec. 667.26 Due process requirements.
(a) Each State shall submit to the Secretary for approval the
procedures it uses to allow an institution to challenge a SPRE's
finding that the institution is in violation of the State's review
standards and should no longer continue to participate in a Title IV,
HEA program.
(b) The Secretary approves a State's procedures described in
paragraph (a) of this section if--
(1) The State review standards are in writing; and
(2) The procedures require the SPRE to--
(i) Notify an institution of any required action and the basis for
that action;
(ii) Permit the institution the opportunity to challenge that
adverse action in a hearing or in writing;
(iii) Notify the institution in writing of the result of its
challenge, and the basis for that result; and
(iv) Follow other applicable procedural requirements of State law.
(Authority: 20 U.S.C. 1099a-3)
Note: This appendix will not appear in the Code of Federal
Regulations.
Appendix A to Preamble.--Major Issues Discussed at the Regional
Meetings
The Department convened four regional meetings in September 1992 to
obtain public involvement in the development of regulations to
implement Title IV, part H, subpart 1 of the Higher Education Act of
1965, as amended by the Higher Education Amendments of 1992, Public Law
102-325. This subpart describes the rules and procedures that govern
the State Postsecondary Review Program.
The Department invited individuals and representatives of groups
involved in student financial assistance programs to the four regional
meetings. At each meeting, the Department provided for a comprehensive
discussion and exchange of information regarding the implementation of
subpart 1 by providing participants with an issue paper that raised
issues and questions with regard to the statutory provisions included
in subpart 1. The following is a summary of the information provided to
the Department by participants at the regional meetings. The section of
the proposed regulations that is the subject of the information is
provided as a reference.
Time requirement for development of State review standards--
Sec. 667.3.
Participants in the regional meetings discussed whether the
Secretary should require States to develop review standards within a
specified time. The participants agreed that the Secretary should
specify a time period but disagreed on what that time period should be.
Allotment formula--Sec. 667.11.
Participants discussed how Federal funds should be divided among
the States that have entered into an agreement with the Secretary and
suggested a funding scheme under which each participating State would
receive (1) an allotment sufficient to carry out minimum SPRE
activities, and (2) a supplemental allotment based on the number of
institutions in the State, the total Title IV, HEA program funds made
available to students attending institutions in the State, or the
number institutions referred to the State by the Secretary.
Allowable costs and activities--Sec. 667.14.
Participants discussed the extent to which a State should be
reimbursed for the costs of performing reviews and other activities and
suggested that the Secretary reimburse the State for the direct and
indirect costs of SPRE review activities, including salaries and fringe
benefits, travel and other review costs, costs for developing State
review standards and complaint procedures, and litigation costs.
Consultation with institutions--Sec. 667.12.
Participants discussed whether the Secretary should establish
procedures that a State must use to consult with institutions in its
State in the development of State review standards. They recommended
that the Secretary suggest, but not establish, consultation procedures.
Federal minimum review standards--Sec. 667.21.
Participants discussed whether the Secretary should establish
Federal minimum standards and whether a State could establish standards
that are weaker than comparable standards that govern an institution's
eligibility and participation in the Title IV, HEA programs. The
participants were divided on the first issue; the majority argued that
Federal minimums would not be appropriate because they could not be
developed in a manner that would adequately account for the mission and
diversity of all postsecondary institutions. With respect to the second
issue, some participants felt that a State should have the flexibility
to develop weaker standards, while others felt that no distinction
should be made between a ``weaker'' standard or a ``different''
standard. Those participants felt that a State should be able to
develop different standards for different types of institutions.
Quantifiable standards--Sec. 667.21.
Participants discussed whether a State should quantify review
standards and suggested that, to the extent that standards could be
quantified, they should be quantified. However, most participants felt
that the State should have the flexibility to establish the level at
which an institution would be considered to be in violation of the
quantified standard.
SPRE review findings--Sec. 667.23.
Participants discussed whether a SPRE should be required to
determine that an institution should no longer participate in the Title
IV, HEA programs based on the institution's failure to satisfy a
particular State standard. Most participants felt that a SPRE could,
but should not be required to, make that determination. The
participants suggested that, based on the nature and severity of an
institution's violations, the SPRE should have the latitude to take an
adverse action against the institution or to require the institution to
take actions to bring itself into compliance with the State's
standards.
Disapproval of State review standards--Sec. 667.22.
Participants discussed the basis under which the Secretary should
disapprove a State's review standards. Most participants felt that the
Secretary should disapprove a State's standards only if those standards
did not adequately address the statutory requirements.
[FR Doc. 94-1460 Filed 1-21-94; 10:00 am]
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