ED has posted the final rules federal register on distance education and innovation published on 9/2/20. The proposed rules were published on 4/2/20. We are providing a summary below. However, all schools should review this federal register in its entirety. There are significant changes regarding distance education, R2T4, clock to credit hour conversion requirements, SAP and CBE/Direct Assessment Programs. All of these final rules are eligible for early implementation. Otherwise, they are effective 7/1/21.

The Final Rules

  • Provide a definition of “academic engagement”. This is similar (some minor modifications) to what already exists for academic attendance and attendance at an academically-related activity that are used in relation to withdrawals.
  • Amend the definition of “clock hour” and also adds language as it relates to clock hours used in distance education. Additionally, ED stipulates that the institution must be capable of monitoring a student’s online attendance for each clock hour under this definition.
  • Revise the definition of correspondence course. ED wants to clarify the role of instructors and a team approach to instruction to make the distinction between a correspondence course and distance education.
  • Revise the definition of credit hour so that the amount of student work, defined by the institution as appropriate, be approved by the institution’s accreditor or state approval agency and the amount of work defined by the institution be consistent with commonly accepted practice in post-secondary education. Additionally, the institution would be permitted to determine the amount of work associated with a credit hour to take into account a variety of delivery methods, measurements of student work, academic calendars, disciplines, and degree levels.
  • Revise the definition of distance education to refer to “the instructor or instructors” rather than the “instructor”. A definition of “instructor” would be added and will be defined as an individual responsible for delivering course content and who meets the qualifications for instruction established by the institution’s accrediting agency. Substantive interaction will also be added to the distance education definition and will be defined as engaging students in teaching, learning and assessment, consistent with the content under discussion, and including at least two of the following – providing direct instruction; assessing or providing feedback on a student’s coursework; providing information or responding to questions about the content of a course or competency; facilitating a group discussion regarding the content of a course or competency; or other instructional activities approved by the institution’s or program’s accrediting agency.
  • Revise the definition of incarcerated student to add “juvenile justice facility” to the list of correctional institutions. For purposes of Pell eligibility, ED proposes that a student who is incarcerated in a juvenile justice facility or in a local or county facility is not considered to be incarcerated in a Federal or State penal institution regardless of which governmental entity operates or has jurisdiction over the facility but is considered incarcerated for purposes of determining the COA.
  • Define Juvenile Justice Facility as a public or private residential facility that is operated primarily for the care and rehabilitation of youth who, under State juvenile justice laws are accused of committing a crime or delinquent act, have been adjudicated delinquent, or are determined to be in need of supervision.
  • Make a minor revision in 600.2 in the definition of Nonprofit Institution to delete repetitive language related to IRS Code 501(c)(3).
  • Add a new paragraph under Conditions of Institutional Eligibility. The new paragraph provides that a student is considered to be enrolled in correspondence courses if correspondence courses constitute more than 50% of the courses in which the student enrolled during an award year.
  • Revise the requirement that an institution obtain approval from ED every time the institution adds a Direct Assessment program. Under the proposal, institutions would be required to obtain approval from ED when it adds a Direct Assessment Program for the first time at each level of offering than what has previously been approved (i.e., a first direct assessment master’s degree or a first direct assessment of a bachelor’s degree). Schools would not need to obtain approval for subsequent Direct Assessment programs at the same credential level as a Direct Assessment Program that has already been approved by ED unless required under 600.20(c)(1). However, as indicated below, the school must report the additional Direct Assessment Programs to ED.
  • Modify the regulations related to establishing, reestablishing, maintaining or expanding institutional eligibility and certification. As part of those changes ED is committing to take prompt action in response to any initial eligibility application or reapplication received from an institution.
  • Add two new reporting requirements to 600.21, Updating Application Information. Following the information above for Direct Assessment Programs, schools will be required to report no later than 10 days after the change occurs for the addition of a second or subsequent Direct Assessment Program at the same credential level. Schools must also report to ED the establishment of a written arrangement for an ineligible institution or organization to provide more than 25% of any program.
  • Amend the definition of a foreign institution to allow the foreign institution to enter into a written arrangement with an eligible institution within the U.S. to provide no more than 25% of the courses required for the student’s program. Additionally, students will be permitted to complete up to 25% of an eligible program by enrolling in coursework, research work, or special studies offered by an eligible institution in the U.S. or through an internship/externship with an ineligible organization.
  • Make a technical amendment to provide that if a regulation belongs only to one type of institution (for example, a postsecondary vocational institution), the regulation would note that. Otherwise, the term “institution” includes all 3 types of institutions (institution of higher education, proprietary institution of higher education, and postsecondary vocational institution).
  • Remove the definition of ACG since that program is no longer authorized by the HEA.
  • Amend the definition of full-time student to exclude subscription-based programs from the types of term-based programs in which a student’s workload may include no more than one repetition of a previously passed course. ED proposes to add a new paragraph that describes the requirements for full-time enrollment in a subscription-based program as completion of a full-time course load commensurate with the definitions of full-time. Subscription-based programs measure student progress based on demonstrated competencies rather than the passage of time that applies to term-based programs. As such, ED does not see any reason for a student who completed a competency to be given an opportunity to repeat the course.
  • Add a definition for subscription-based program to be a standard or nonstandard-term direct assessment program in which the institution charges a student for each term on a subscription basis with the expectation that the student will complete a specified number of credit hours during that term. This section clarifies that coursework in a subscription-based program is not required to begin or end within a specified timeframe in each term and that students in subscription-based programs must complete a cumulative number of credit hours (or the equivalent) during or following the end of each term before receiving subsequent disbursements of Title IV aid. The final rules also require that an institution must establish a single enrollment status that will apply to a student throughout the student’s enrollment in a subscription-based program except that a student may change his or her enrollment status no more often than once per academic year. ED also provides the method for determining the number of credit hours (or the equivalent) that a student in a subscription-based program must complete before receiving subsequent disbursements. ED has clarified in the preamble that schools with a subscription-based program that meets the requirements for a term-based program (students are required to begin and end all courses and competencies within the term start and end dates) may disburse funds using standard terms or non-standard terms instead of the subscription-based format.
  • Revise the definition of 3rd party servicer to replace “certifying loans” with “originating loans”. This change reflects current terminology used for the Direct Loan process.
  • Revise the definition of a week of instructional time as it pertains to an institution’s definition of an academic year. This will be separated into two parts: 1) traditional programs – there would not be any changes; and 2) programs using asynchronous coursework through distance education or correspondence courses (this definition does not currently exist; presently, it is one definition that is applied to all programs). The change will define a week of instructional time as a week in which the institution makes available the instructional materials, other resources, and instructor support necessary for academic engagement and completion of course objectives. The final rules also establish that in a program using asynchronous coursework through distance education (not a correspondence course) the institution must also expect enrolled students to perform educational activities demonstrating academic engagement during the week.
  • Modify the regulations pertaining to written arrangements. Currently, if a written arrangement is made between two or more eligible institutions that are owned or controlled by the same individual, partnership or corporation, the institution that grants the degree or certificate must provide more than 50% of the educational program. This requirement will be removed. ED will also add 3 new paragraphs to 668.5: f) workforce responsiveness – ED is clarifying that institutions may align or modify their curriculum in order to meet the recommendations or requirements of industry advisory boards on industry-recognized credentialing bodies as an alternative to allowing or requiring faculty control or approval, or integrating industry-recognized credentials into existing degree programs; g) calculation of percentage of program – this codifies the method to determine the percentage of the program being offered by the ineligible institution – number of hours (clock or credit) provided by the ineligible institution divided by the total number of hours in the program; and h) non-applicability to other interactions with outside entities – this clarifies that written arrangements are not necessary for acceptance of transfer credits, the use of prior learning assessment, or other non-traditional methods of providing academic credit and is not required for the internship or externship if the internship or externship is governed by accrediting agency standards that require the oversight and supervision of the institution where the institution is responsible for the internship or externship and students are monitored by qualified institutional personnel.
  • Revise the calculation for clock to credit hour conversion requirements. This revision removes the homework hours from the calculation and reverts back to the old method of simply using 20 clock hours of instruction for a quarter hour and 30 clock hours of instruction for a semester hour. Additionally, in order for a program to be exempt from the clock to credit requirements the school must be able to demonstrate that at least one student graduated from the degree program in the current award year or two prior award years. Currently the regulations require that the school demonstrate that students enroll in and graduate from the program. Also, 668.14(b)(26) provides requirements related to reasonable program length. This will be modified as indicated below. Rather than repeating that information in 668.8 as it is currently, ED will update 668.8(e)(1)(iii) to refer to 668.14(b)(26).
  • Amend the definition of “direct assessment” to simplify it. ED will add a requirement that the institution establish a methodology to reasonable equate each module in the direct assessment program to either credit hours or clock hours and state that all requirements in that section that refer to credit or clock hours will apply to direct assessment programs, and that to be considered an eligible program the accrediting agency must have evaluated the program based on the accrediting agency’s standards and criteria and the agency reviews and approves the institution’s determination of credit or clock hour equivalence. ED will remove definitions from this regulation that are found elsewhere and simply refer to the requirements elsewhere in regulations. Additionally, this section will clarify that any credits or competencies earned on the basis of prior learning are not eligible for Title IV aid.
  • Clarify that ED will certify a location of an institution as a branch if it meets the regulatory definition of a branch campus. ED will also add a section that if the Secretary does not make a determination to grant or deny certification within 12 months of the expiration date of its current period of participation, the institution will automatically be granted renewal of certification which may be provisional for cause.
  • Amend the PPA requirements as it relates to job placement and graduation statistics to remove the requirement to provide the source of these statistics and the timeframes and methodology. ED revises the requirements related to demonstrating a reasonable relationship between the length of the program and the entry-level requirements for which the program prepares the student (applies to programs designated as gainful employment programs). This requirement will still apply but rather than being based solely on the state requirements for the state in which the institution is located, it can be based on the state in which the institution is located (up to 150% of that state’s requirements) or any adjacent state (up to 100% of the adjacent state’s requirements). ED provides an example of massage therapy for which New Jersey requires 500 hours but New York requires 1,000 hours. If a student is attending a school in New Jersey, the program is currently limited to 750 hours – 150% of the 500 hours required by the state of New Jersey. This would not be sufficient for employment in New York. Under the revision, schools can compare and use either 150% of the hours required by their state (up to 750 hours) or use the hours required by the adjacent state (up to 1,000 hours). In 668.14(b)(31), the regulations specifies the circumstances under which an institution must submit a teach-out plan to its accrediting agency. ED will further require the institution to update its teach-out plan under those circumstances.
  • Make significant changes to the regulations pertaining to Return to Title IV Funds (668.22). Standard term programs and non-standard terms made up of modules that are not subscription-based programs will be added to the types of programs in which students must be considered withdrawn if they have ceased attendance and are not scheduled to begin another course in that payment period within 45 calendar days after the end of the module they ceased attending. Written confirmation of future attendance in the same payment period will not prevent a student from being withdrawn if the future mod begins more than 45 days after the end of the mod in which they ceased attendance. Students in nonterm and subscription-based programs will not be considered withdrawn if the institution obtains written confirmation at the time of withdrawal that the student will resume attendance provided they will resume attending within 60 calendar days after the student ceased attendance. The revision would also stipulate that students in subscription-based programs may only avoid withdrawal if they will resume attendance during the same payment period or period of enrollment. ED will add 2 new exceptions to the requirements for determining a student has withdrawn: 1) student completes all the requirements for graduation from his/her program before completing the days or hours in the period that he/she was schedule to complete; and 2) for a program offered in modules, a student will not be considered withdrawn if the student successfully (at least one passing grade) completes one module that includes 49% or more of the number of days in the payment period; successfully completes a combination of modules that when combined contain 49% or more of the number of days in the payment period, or successfully completes coursework that is equal to or greater than the coursework required for the institution’s definition of a half-time student under 668.2 for the payment period (for this particular item, the student must successfully complete, meaning passing grades, enough credits that are equal to ½ time status). In calculating the percentage of completion for this purpose only, schools will exclude scheduled breaks of 5 days or more just as they currently do but they will also exclude all days between modules. The final rules make some technical changes as well as remove outdated references to old programs that are no longer applicable (i.e., FFEL, ACG, SMART and Perkins) and will add IASG to the types of grants that are included in the R2T4 calculation and insert those grants as the 2nd type of grant to be returned by an institution in the order of returns (follows Pell and precedes FSEOG). Under Leave of Absence, subscription-based programs will be included in the types of programs that do not require the student to return to the same coursework in which the student was enrolled when the LOA began (this should only apply to programs that use the subscription period disbursement method). The final rules clarify that programs made up of modules does not apply to subscription-based programs or nonterm programs. ED’s references to modules and the requirements related to modules apply to term-based programs. So, ED wants to eliminate any references of modules related to nonterm programs as well as clarifying they do not apply to subscription-based programs. For term-based programs made up of mods the final rules make a significant change on determining the number of days to be used in the denominator. Currently, this is based on the student’s schedule at the time of withdrawal. As such, future mods in that payment period could have been excluded from the denominator if the student had withdrawn from those mods while still in attendance. Under the proposed change the days in the denominator will be based on the mods in which they were enrolled that were used to determine eligibility for Title IV aid. For example, basing it on the student’s enrollment as of the census date (add/drop) rather than enrollment at the time of the full withdrawal. As an example of how this will work, let’s say a student is scheduled for 2 five-week mods and enrollment status is “locked-in” as full time status as of the census date using the entire 10-week term. The student withdraws from the 2nd mod during the 3rd week of the 1st mod and this is after the census date. The student subsequently requests a full withdrawal during the 4th week of the 1st mod. The current process is to only include the days in the 1st mod in the denominator. The new method will use all the days in the entire 10-week term.
  • Remove the provision pertaining to the use and calculation of the Net Present Value of institutional loans for the calculation of 90/10 because this is no longer applicable.
  • Revise the regulations pertaining to SAP. The requirement for measuring pace for clock hour and credit hour nonterm will be removed and will not apply to subscription-based programs (should not be applicable only if the school is using the subscription period disbursement method). These students have to complete the hours or competencies associated with the payment period before receiving a subsequent disbursement. This eliminates any necessity for measuring pace. For term-based programs that are not subscription-based, ED is providing more flexibility related to measuring maximum timeframe. Currently this is measured by dividing the number of credit hours attempted by the total credit hours in the program and determining if the student is on pace to complete within the maximum timeframe. ED will now allow schools to use a measure of calendar time instead of the hour calculation for monitoring maximum timeframe. The credit hour calculation is useful to account for variations in enrollment status. However, for some programs, using calendar time might be a less burdensome process. Regarding pace, the institution will have the option of using the existing calculation or using a calculation that uses the number of hours the student should have completed at that point by the number of hours in the program to determine if they meet the pace requirement. For example, a 4-year program would have a maximum timeframe of 6 years if the institution is expressing maximum timeframe in calendar time. Using calendar time for a 4-year program of 120 hours, the student would need to complete at least 20 hours each year to remain on pace to complete within the maximum timeframe.
  • Make minor changes to 668.111 (Scope and Purpose).
  • Add a new section related to 668.113 (Request for Review) to indicate that if a final audit determination or final program review determination includes liabilities resulting from the institution’s classification of a course or program as distance education, or the institution’s assignment of credit hours, the Secretary will rely on the requirements of the institution’s accrediting agency or State approval agency regarding qualifications for instruction and whether the work associated with the institution’s credit hours is consistent with commonly accepted practice in higher education.
  • Revise the regulations pertaining to disbursing funds to exclude subscription-based programs from the current provisions for early disbursements and establish requirements that will apply specifically to subscription-based programs. These changes were discussed above in the definition of a subscription-based program.
  • Amend 668.171 (General) under the Financial Responsibility regulations to codify existing ED practices.
  • Add a new section to 668.174 (Past Performances) which would state that an institution is not considered financially responsible if a person or entity who exercises substantial ownership or control over the institution, or any member or members of that person’s family, alone or together exercised substantial ownership or control over another institution that closed without a viable teach-out plan or agreement approved by the institution’s accrediting agency and faithfully executed by the institution.
  • Make a minor change to 668.175 (Alternative Standards and Requirements) to delete the reference to facsimile transmission since this is an outdated method of correspondence that is encompassed by the broader term of “electronic transmission”.

To access this final rules federal register -

To access this 4/2/20 NPRM federal register that contains the proposed rules -