Pell Grants for Prison Education Programs; Determining the Amount of Federal Education Assistance Funds Received by Institutions of Higher Education (90/10); Change in Ownership and Change in Control

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, and 690

[Docket ID ED-2022-OPE-0062]

RIN 1840-AD54, 1840-AD55, 1840-AD66, 1840-AD69

Pell Grants for Prison Education Programs; Determining the Amount of Federal Education Assistance Funds Received by Institutions of Higher Education (90/10); Change in Ownership and Change in Control

AGENCY:

Office of Postsecondary Education, Department of Education.

ACTION:

Final regulations.

SUMMARY:

The Secretary amends regulations for the Federal Pell Grant program (Pell Grants or Pell), institutional eligibility, and student assistance general provisions. First, we amend the regulations for Federal Pell Grants for prison education programs (PEPs), to implement new statutory requirements to establish Pell Grant eligibility for a confined or incarcerated individual enrolled in a PEP to implement the statutory change in the Consolidated Appropriations Act, 2021. Second, we amend the Title IV Revenue and Non-Federal Education Assistance Funds regulations (referred to as “90/10” or the “90/10 Rule”) to implement the statutory change in the American Rescue Plan Act of 2021 (ARP). We further amend which non-Federal funds can be counted when determining compliance with the 90/10 rule to align allowable non-Federal revenue more closely with statutory intent. Finally, we amend regulations to clarify the process for consideration of changes in ownership and control (CIO), to promote compliance with the Higher Education Act of 1965, as amended (HEA), and related regulations and reduce risk for students and taxpayers, as well as institutions contemplating or undergoing such a change.

DATES:

Effective date:

The regulations are effective July 1, 2023.

Applicability date:

The 90/10 regulations will apply to institutional fiscal years beginning on or after January 1, 2023, consistent with the effective date of the statutory changes to the 90/10 calculation.

FOR FURTHER INFORMATION CONTACT:

For PEPs: Aaron Washington. Telephone: (202) 987-0911. Email:

Aaron.Washington@ed.gov.

For 90/10: Ashley Clark. Telephone: (202) 453-7977. Email:

Ashley.Clark@ed.gov.

For Change in Ownership: Brian Schelling. Telephone: (202) 453-5966. Email:

Brian.Schelling@ed.gov.

You may also email your questions to

Sophia.Mcardle@ed.gov.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose of this Regulatory Action

These final regulations address three areas: Pell Grants for PEPs, the 90/10 rule, and institutional changes in ownership. The PEP final regulations, on which the Affordability and Student Loans Committee reached consensus, implement statutory changes that extend Pell Grant eligibility to confined or incarcerated individuals who enroll in qualifying PEPs. The 90/10 final regulations, on which the Institutional and Programmatic Eligibility Committee (Committee) reached consensus, implement statutory changes that require proprietary institutions to obtain at least 10 percent of their revenue from sources other than Federal education assistance funds and more closely align allowable non-Federal revenue with statutory intent. Finally, the changes to the current CIO regulations provide a clearer and more defined process for institutions undergoing changes in ownership and control.

Prison Education Programs

The PEP regulations provide to the Department and stakeholders, including students, correctional agencies and institutions, postsecondary institutions, accrediting agencies, and related organizations, a detailed and clear framework for how to implement the new section 484(t) of the HEA, which takes effect on July 1, 2023. The Department amended the regulations in §§ 600.2, 600.7, 600.10, 600.21, 668.8, 668.32, 668.43, and 690.62, and added part 668, subpart P. Section 484(t) of the HEA sets forth PEP requirements that include: (1) a prohibition on PEPs offered by proprietary institutions; (2) definitions of a “confined or incarcerated individual” and a “prison education program;” (3) the program approval process by the Bureau of Prisons, State department of corrections, or other entity that is responsible for overseeing the correctional facility (which we refer to throughout these final regulations as the oversight entity); (4) a credit transfer requirement for PEPs; (5) a prohibition against program offerings by institutions that are subject to adverse actions by the Department, their accrediting agency, or the relevant State authorizing agency; (6) requirements that PEPs offer educational programming that satisfies professional licensure or certification, as applicable; (7) student enrollment restrictions for programs where ultimate licensure or employment would be prohibited; (8) the requirement that confined or incarcerated individuals be enrolled in an eligible PEP in order to access a Pell Grant; and (9) various Department reporting requirements for postsecondary institutions offering PEPs.

The final regulations clarify and implement these statutory requirements by setting clear standards for postsecondary institutions offering PEPs and outlining the requirements to develop and implement such programs to gain and maintain access to Pell Grant funds. The final regulations also ensure that institutions report necessary data to the Department to assist in assessing program outcomes, also consistent with statutory requirements under section 484(t)(5) of the HEA for an annual report by the Secretary regarding the impact of the new requirements. The final rule establishes important guardrails for confined or incarcerated individuals and taxpayers, to protect students from enrolling in programs that will not permit them to benefit by finding employment in the field after graduation and release, and to prevent taxpayer funds from financing such programs. It also outlines title IV program requirements for PEPs related to State authorizing agencies and accrediting agencies.

Section 484(t)(1)(B)(iii) of the HEA requires an oversight entity, defined in the final regulations as a State department of corrections or other entity responsible for overseeing correctional facilities or the Federal Bureau of Prisons, to determine that any PEP it approved is “operating in the best interest” of the confined or incarcerated individuals it supervises. Congress outlined indicators of “best interest”—both inputs and outcomes—which are explained below. Because oversight entities may not have previously assessed some of the “best interest” indicators outlined in statute, such as student earnings and job placement post-release, the final regulations clarify how to implement this requirement. To facilitate a thorough and well-informed program assessment, these final regulations require oversight entities to seek input from relevant stakeholders in making the “best interest” determination.

90/10 Rule

The final 90/10 regulations amend § 668.28 to change how proprietary institutions calculate and report to the Department the percentage of their revenue that comes from Federal sources, in accordance with section

487(a) of the HEA. Section 487(a) establishes the requirement that proprietary institutions derive not less than 10 percent of their revenue from non-Federal sources. Section 487(d) of the HEA: (1) defines how proprietary institutions calculate the percentage of their revenue that is derived from non-Federal sources; (2) outlines sanctions for proprietary institutions that fail to meet the requirement in section 487(a); (3) requires the Secretary to publicly disclose on the College Navigator website proprietary institutions that fail to meet the requirement; and (4) requires that the Secretary submit a report to Congress that contains the Federal and non-Federal revenue amounts and percentages for each proprietary institution.

The ARP amended these sections to require proprietary institutions to include other sources of Federal revenue, in addition to title IV revenue from the Department, in the calculation that proprietary institutions make to determine if they comply with the 90/10 rule. These final regulations codify this statutory change and inform proprietary institutions how to determine which Federal funds they must include in their calculations.

Additionally, the final regulations amend how proprietary institutions calculate 90/10 to address practices that some proprietary institutions have used to alter their revenue calculation or inflate their non-Federal revenue percentage. The final regulations also create a new requirement for when proprietary institutions must request and disburse title IV student aid funds to prevent them from delaying disbursements to the next fiscal year. The final regulations will also more closely align allowable non-Federal revenue with statutory intent by clarifying: (1) allowable non-Federal revenue generated from programs and activities that can count for the purposes of 90/10; (2) how schools must apply Federal funds to student accounts and determine the funds' inclusion in the Federal revenue percentage of 90/10; (3) which revenue generated from institutional aid can count as non-Federal revenue for purposes of 90/10; and (4) funds that institutions must exclude from the 90/10 calculation.

The final regulations also modify the steps that proprietary institutions must take if they fail to derive at least 10 percent of their revenue from allowable non-Federal sources by requiring them to notify students of the failure and of the students' potential loss of title IV aid at that proprietary institution. Additionally, the final regulations establish the process that proprietary institutions must follow if they initially determine that they met the 90/10 requirement for the preceding fiscal year but subsequently determine that they did not. Lastly, the final regulations provide that a proprietary institution will be liable for repaying all title IV funds disbursed for the fiscal year after it becomes ineligible to participate in the title IV program due to failing 90/10.

Changes in Ownership

To address the risks that some changes in ownership of postsecondary institutions present to students and taxpayers and to address the growing complexity of those transactions, the Department, under the authority of section 498(i) of the HEA, amends regulations covering changes in ownership in §§ 600.2, 600.4, 600.20, 600.21, and 600.31. These changes modify the definitions of “additional location,” “branch campus,” “main campus,” and “nonprofit institution,” as well as the terms “closely-held corporation,” “ownership or ownership interest,” “parent,” “person,” and “other entities” in the context of changes in ownership that result in a change in control, where the individual or entity with control has the power to direct the management or policies of the institution.

Under the final regulations, we require institutions to provide a minimum 90-day notice to the Department when they are to undergo a change in control. The Department may apply conditions to the new Temporary Provisional Program Participation Agreement (TPPPA) after the change and until we issue a decision on the pending application for approval of the change. The final regulations also increase transparency for changes in ownership that do not constitute a change of control by increasing the reporting requirements to the Department on such transactions at lower percentages of ownership.

Summary of the Major Provisions of This Regulatory Action

The final regulations make the following changes.

• Update appropriate cross-references.

Prison Education Programs (PEPs) (§§ 600.2, 600.7, 600.10, 600.21, 668.8, 668.32, 668.43, 668.234 through 668.242, and 690.62).

• Extend access to Pell Grants for confined or incarcerated individuals in qualifying postsecondary education programs and define an eligible PEP based on the statutory requirements.

• Clarify that only public or private nonprofit institutions as defined in § 600.4, or vocational institutions as defined in § 600.6, may offer eligible PEPs and require that PEPs offered at a correctional institution be reported to the Department as an “additional location.”

• Amend requirements for postsecondary institutions to obtain and maintain a waiver from the Secretary to allow students who are confined or incarcerated to exceed 25 percent of the institution's regular student enrollment.

• For a PEP designed to meet educational requirements for a specific professional license or certification, require disclosures to students of typical State or Federal prohibitions on the licensure or employment of formerly incarcerated individuals.

• Prohibit institutions from enrolling a confined or incarcerated individual in a PEP that is designed to lead to licensure or employment in a specific job or occupation where State or Federal law would prohibit that individual from licensure or employment based on the type of the criminal conviction for which the student has been confined or incarcerated.

• Define the process and the factors that the oversight entity will use to determine if a PEP is operating in the best interest of the confined or incarcerated individuals they supervise, including consulting with interested third parties and conducting periodic re-evaluations.

• Define the requirements for approval from the Secretary and the Institutions of Higher Education's (“IHE's”) accrediting agency for the first PEP at the institution's first two additional locations at prison facilities.

• Require a postsecondary institution to obtain and report to the Department the release or transfer date of all confined or incarcerated individuals who participated in its PEP.

• Outline the process for winding down eligible programs for confined or incarcerated individuals that are not operating at a Federal or State correctional facility and are not approved as eligible PEPs, prior to July 1, 2023.

• Outline the process a postsecondary institution must follow to reduce a Pell Grant award that exceeds the confined or incarcerated individual's cost of attendance. Title IV Revenue and Non-Federal Education Assistance Funds (90/10 Rule) (§ 668.28)

• Amend the revenue calculation methodology in the 90/10 rule by changing references to “title IV revenue” to “Federal revenue” where appropriate to align with the statutory amendment that changes the 90/10

revenue requirement to include all Federal revenue.

• Outline how the Department will publish, and update as necessary, which Federal funds it requires proprietary institutions to include in their 90/10 calculation.

• Create a new requirement for when proprietary institutions must request and disburse title IV, HEA program funds to prevent them from delaying disbursements to reduce their Federal revenue percentage for a fiscal year in order to meet the 90/10 revenue requirement.

• Clarify the allowable revenue generated from programs and activities that can be counted as non-Federal revenue for purposes of the 90/10 revenue requirement to provide additional consumer protections.

• Revise how proprietary institutions apply funds to student accounts and determine the funds' inclusion in the 90/10 revenue requirement calculation to incorporate statutory changes, clarify how grants from non-Federal public agencies that include Federal funds must be treated, and add additional consumer protection measures.

• Revise the provisions governing which revenue generated from institutional aid can be included in the 90/10 revenue calculation to remove paragraphs that are no longer applicable, codify existing practices in regulation, promote consumer protection measures, and close potential loopholes related to Income Share Agreements (ISAs) or other alternative financing agreements issued by the institution or a related party.

• Revise the provisions governing which funds must be excluded from a proprietary institution's calculation of its revenue percentage to remove regulations that no longer apply and to limit certain types of revenues that some proprietary institutions have employed to alter their revenue calculation.

• Revise the steps that a proprietary institution must take to better protect students and taxpayers if it does not generate 10 percent or more of its revenue from allowable non-Federal sources in a fiscal year. The regulations provide reporting procedures for proprietary institutions that become aware, based on information received after the initial 45-day reporting period, that they failed the revenue requirement for the previous fiscal year.

Changes in Ownership (CIO) (§§ 600.2, 600.4, 600.20, 600.21, and 600.31)

• Clarify the definitions of “additional location,” “branch campus,” “main campus,” and “nonprofit institution;” and for nonprofit institution, we describe institutional characteristics that do not generally meet the definition of a “nonprofit institution.”

• Require that institutions provide the Department with 90 days' notice of an impending change in ownership, ensure that accreditation and State licensure are in effect as of the day before the proposed change, and codify practices on submission of financial statements and provision of financial protection.

• Explain the terms by which a TPPPA may be extended to institutions seeking a change in ownership.

• Clarify what constitutes a change in ownership and, more narrowly, a change in control, distinguishing between natural persons and entities in § 600.21 and the conditions under which they constitute a change of control.

• Add “trust” to the definition of “person” and refine the definitions of the terms “ownership or ownership interest,” “parent,” and “other entities,” as applied to changes in ownership.”

• Add to the list of covered transactions the acquisition of another institution and clarify the application of the regulations in cases of resignation or death of an owner.

Costs and Benefits:

As further detailed in the

Regulatory Impact Analysis,

the final regulations have significant impacts on students, borrowers, educational institutions, taxpayers, and the Department.

The PEP regulations benefit incarcerated individuals, taxpayers, and communities by creating higher employment and earnings, and lower recidivism rates, for those who enroll in higher education programs in prison, as described in the

Regulatory Impact Analysis.

Institutions that offer programs in correctional facilities and do not currently receive Pell Grants may bear some or all costs of that programming. Institutions that do not currently receive Pell funds for these programs benefit from these changes. Pell Grant transfers to institutions and students are estimated to increase by $1.1 billion from these programs. These transfers are overwhelmingly the result of the statutory changes made by Congress to make incarcerated students eligible for Pell Grants again. There are increased costs for the Department due to various requirements in the final regulations including, but not limited to: data collection and dissemination, approval of PEPs, and required reporting to Congress and the public. There are increased costs to the oversight entity due to the required “best interest determination” defined in § 668.241. There are no direct costs to students. Completing the Free Application for Federal Student Aid (FAFSA®) is free (though there is some minimal burden associated with completing the form) and grants under the Pell Grant program do not need to be repaid. To qualify for a Pell Grant, the student must be charged tuition and the charges cannot be covered by another source. Generally, students do not pay anything to participate in these programs. However, there could be occasions where a student only qualifies for a partial Pell Grant and owes a balance to the postsecondary institution.

Under the final 90/10 regulations, military-connected students will benefit as proprietary institutions' incentive to aggressively recruit GI Bill and Department of Defense (DOD) Tuition Assistance recipients is greatly reduced because Federal assistance for those students will be treated the same as title IV funds in the 90/10 revenue calculation. The Department is aware that some proprietary institutions have sought to enroll additional Department of Veterans Affairs (VA) or DOD recipients because their dollars provide a larger cushion in their 90/10 calculation to pursue more title IV, HEA funds, sometimes to the detriment of those veterans and service members. The regulatory changes remove that incentive by counting all Federal education assistance funds on the 90 side of the 90/10 calculation. These changes produce some savings to the taxpayer in the form of reduced expenditures of title IV, HEA aid to institutions that are not able to adapt and lose title IV eligibility. As indicated in the

Regulatory Impact Analysis,

we estimate transfers are reduced by -$292 million from the changes to the 90/10 provisions. These reduced transfers are mostly a result of the statutory changes made by Congress to amend the 90/10 provision. In as much as only repayment of principal on institutional loans and ISAs may be counted as revenue, the regulatory changes may further decrease proprietary institutions' incentive to rely on such potentially costly student financing options to meet 90/10 requirements. Costs to institutions include the need to ensure compliance with the regulations. For example, institutions unable to generate sufficient non-Federal revenues through their eligible programs may create programs that are not title IV eligible to generate revenue to meet 90/10 requirements.

The changes to the CIO regulations benefit institutions and the Department by clarifying requirements as well as providing timely feedback for institutions undergoing CIO

transactions. Students and borrowers benefit from the 90-day CIO notice requirement that provides students with timely information that impacts their education and enables them to make future decisions based on that knowledge. Costs to institutions include compliance and the paperwork burden associated with the increased reporting and disclosure requirements.

On July 28, 2022, the Secretary published a notice of proposed rulemaking (NPRM) for these parts in the

Federal Register

(87 FR 45432). These final regulations contain changes from the NPRM, which we explain in the

Analysis of Comments and Changes

section of this document.

Public Comment:

In response to our invitation in the NPRM, 142 parties submitted comments on the proposed regulations.

We discuss substantive issues under the sections of the proposed regulations to which they pertain. Generally, we do not address technical or other minor changes or recommendations that are out of the scope of this regulatory action or that would require statutory changes.

Analysis of Public Comment and Changes:

Analysis of the comments and of any changes in the regulations since publication of the NPRM follows.

General Comments Regarding the Negotiated Rulemaking Process

Selection of Negotiators and Negotiated Rulemaking Process Comments:

A few commenters wrote that there should have been other negotiators to represent other interests or sectors, including ISAs, proprietary institutions, and veterans. A few commenters stated that the Committee members were not sufficiently familiar with the issues involved in 90/10. One commenter questioned why the Department selected a Committee member whose employer was under investigation by the Department of Veterans Affairs (VA) Office of Inspector General. One commenter claimed that the Department did not provide adequate time for Committee negotiators to consider the Department's proposed language. Finally, one commenter stated that because 90/10 negotiations happened in caucus that the consensus language does not meet the statutory requirement that negotiations provide for a comprehensive discussion and exchange of information.

Discussion:

Section 492 of the HEA provides that the Secretary “select individuals with demonstrated expertise or experience in the relevant subjects under negotiation, reflecting the diversity in the industry, presenting both large and small participants, as well as individuals servicing local areas and national markets.” The Department identified the relevant subjects to be negotiated and invited the public to nominate negotiators and advisors. The Department reviewed the qualifications of nominees and made selections for Committee members. Further, during the first negotiation session, negotiators had the opportunity to suggest additional Committee members by consensus. The Committee added one additional Committee member representing civil rights organizations through this process. We have used this process for many years and believe it meets the statutory requirements for selecting negotiators. Further, none of the commenters identified nominated individuals who should have been selected but were not.

On October 4, 2021, the Department published a

Federal Register

document announcing public hearings on 90/10 (86 FR 54666). We held those hearings October 26-27, 2021. The Department also accepted written public comments from October 4, 2021, through November 2, 2021. We then held three weeks of virtual negotiated rulemaking sessions on January 18-21, 2022, February 14-18, 2022, and March 14-18, 2022, that we livestreamed.

The Committee adopted by consensus a set of protocols that allowed any Committee member, including the Federal negotiator, to call for a caucus with other Committee members. The protocols also stated that the Department would provide its proposed language prior to the start of the week's negotiation sessions, which the Department did with its initial proposed 90/10 language. During the last week of negotiations, the Federal negotiator and the negotiator representing proprietary institutions called for caucuses to discuss possible 90/10 regulatory language with a small group of negotiators during the final session. The Federal negotiator presented this language to the full Committee for discussion and review before taking the consensus check. This process met the statutory requirements and provided ample time for discussion of the regulations.

Changes:

None.

Public Comment Period

Comments:

A few commenters asked the Department to extend the public comment period an additional 30 days. These commenters pointed out that there were several large regulatory packages that impact the higher education sector out for public comments at once, and the commenters also observed that Executive Orders 12866 and 13563 cite 60 days as the recommended length for public comment. One commenter asked the Department why the Department's proposed regulations related to Title IX received more time for public comment than these regulations.

Discussion:

As discussed previously, the Department's negotiated rulemaking process provides ample time for public comment and engagement before the public comment period. Additionally, the proposed regulations for 90/10 were the same as the regulations agreed to by consensus in March 2021, providing the public with additional time to review the Department's proposed regulations. Further, the regulations related to Title IX are not subject to the negotiated rulemaking process, and therefore the public did not have the same opportunity to weigh in on the regulations before they were published for public comment. The Executive orders provide a recommendation for an appropriate time for public comment, but that timeline is not a requirement, nor does it take into account the Department's individual process for regulating under the HEA. The Department declines to extend the comment period for an additional 30 days.

Changes:

None.

Prison Education Program (PEP) (§§ 600.2, 600.7, 600.10, 600.21, 668.43, 668.234 through 668.242, and 690.62)

General Support

Comments:

Several commenters submitted general letters of support by noting that the regulations will benefit both taxpayers and incarcerated individuals and may ultimately lead to lower recidivism rates, which could lead to a smaller prison population.

Discussion:

We thank the commenters for their support.

Changes:

None.

General Opposition

Comments:

Many commenters stated that the regulations will be bureaucratic, burdensome, and costly and that the additional proposed regulatory requirements go beyond the statutory framework.

Discussion:

The Department disagrees with these comments and believes the regulations strike an appropriate balance between imposing requirements that will increase access to incarcerated individuals, improving the quality of PEPs, and limit administrative burden to schools, correctional agencies, and other stakeholders.

We also disagree that the regulations exceed the scope of the statutory

authority for PEPs. The Department has the authority to expand on and clarify statutory text, and we believe that the requirements in the final regulations are a logical outgrowth of the HEA. For example, the main concern from commenters was the prescriptive nature of the best interest determination and the accompanying requirement to assess PEP outcomes under § 668.241. While the HEA requires the oversight entity to determine if a PEP is operating in the best interest of the confined or incarcerated individual, it does not prescribe how often and when that process should be undertaken. The regulations supply that necessary clarification.

The statute also requires the oversight entity to approve PEPs, but we heard from non-Federal negotiators and from commenters that the oversight entities may not be equipped to make these determinations because they are not education experts. By identifying what factors to consider, who to consult, and how often to revisit the determinations, we created a formal process with clear measurements that will be consistent across all oversight entities.

We also believe that the oversight entity should continue to reassess PEPs operating in a correctional facility because a PEP will not always be operating in the best interest of its population. For example, changes over time in program offerings, instructors, academic counseling, transfer of credits, or labor market trends might impact a PEP, such that it no longer operates in the best interest of the confined or incarcerated individuals. We believe that mandatory periodic assessment will ensure that PEPs serve the programmatic and financial purposes for which they were authorized. We have set reasonable standards, with extensive public input, to ensure that the process is not overly burdensome to the oversight entity.

Commenters also raised concerns about the initial two-year approval period, accreditation requirements, and reporting requirements. We respond to those comments and other commenter concerns in the individual sections devoted to those topics below.

Changes:

See the discussion under Best Interest Determination (§ 668.241) for changes the Department has made in the final regulations.

General Comments

Comments:

One commenter requested that the Department require standardization of access to technology for confined or incarcerated individuals across the United States and within States.

Discussion:

The Department does not have the authority to require postsecondary institutions or correctional facilities to standardize technology across all spaces. Further, technology requirements will vary between PEPs, and a one-size-fits-all approach could inhibit the flexibility of institutions to offer appropriate forms of technology in their PEPs.

Changes:

None.

Comments:

One commenter stated that the Department should extend Pell Grant eligibility to individuals who have been released from a correctional facility. That commenter also recommended that the Department increase the amount of the Pell Grant.

Discussion:

Under existing law, individuals released from a correctional facility will qualify for Pell Grant funds if they otherwise continue to meet all applicable eligibility requirements and enroll in eligible postsecondary programs.

The Department does not have the authority to adjust the maximum Pell Grant award because that amount is established annually through Congressional appropriations.

Changes:

None.

Comments:

One commenter stated that all Pell Grant funding received by a confined or incarcerated individual must go directly to support the individual's education and should not be used to support the postsecondary institution's main campus or other non-PEP locations.

Discussion:

The Department lacks the authority to adopt the commenter's suggestion. The Department maintains authority over the use of Pell Grant funds only to the extent that the grants are appropriately calculated, awarded, and disbursed to students. As long as the institution follows all applicable laws and Department regulations, once Pell Grant funds have been correctly disbursed, the Department does not control institutional budgets or how institutions use funds that have been correctly applied to institutional charges.

Changes:

None.

Comments:

One commenter noted that the subcommittee that discussed these regulations during negotiated rulemaking should have included greater representation from oversight entities (which are defined in § 668.235). The commenter requested that in the future any issue that does not fit well with the regulatory agenda should have its own negotiated rulemaking instead of discussing the topic in a subcommittee.

Discussion:

We believe the subcommittee had appropriate representation from oversight entities. The eight-member subcommittee included representatives from both State departments of corrections and State correctional education directors, and the representative from State departments of corrections was added during negotiated rulemaking specifically to ensure additional representation in that area.

Moreover, the Department has successfully used subcommittees during several prior rulemakings to gain additional critical feedback from specialists with experience related to the issues to be discussed. Use of a subcommittee during the Affordability and Student Loans Committee Meetings was appropriate and valuable because the eight subcommittee members provided substantial background on the topic of postsecondary education in carceral settings to the main committee, offered numerous recommendations that were adopted by the main committee, and ultimately expressed their support for the draft regulations to the main committee at the conclusion of the negotiations, all of which enabled the main committee to reach consensus on the proposed regulatory language. Three members of the subcommittee also had a seat on the main committee, including representatives for independent students, private nonprofit institutions, and State departments of corrections. An additional member of the subcommittee presented information to the main committee and was available during the November and December sessions to answer questions.

Changes:

None.

Comments:

Many commenters requested that the Department provide guidance to ensure smooth implementation of the regulations, including guidance or additional actions the Department should take on the following topics:

• The Second Chance Pell experiment under the Experimental Sites Initiative.

• How to apply for PEP, step-by-step.

• Overcoming barriers to completing the FAFSA® and verification of application information.

• Supporting students with delinquent or defaulted Federal student loans.

• Automatically enrolling confined or incarcerated individuals with Federal loan debt into income-driven repayment plans.

• Cancelling Federal student loans if the borrower is incarcerated for a minimum of five years.

• Supporting individuals post-release in collaboration with the Office of Career, Technical, and Adult Education.

• The grievance or complaint process for confined or incarcerated individuals.

• Protecting confined or incarcerated individuals who do not meet Satisfactory Academic Progress (SAP) standards for confined or incarcerated individuals.

• Monitoring issues related to lack of access to technology and accessing coursework online.

• Dependency overrides for confined or incarcerated individuals.

• Return of Title IV funds (R2T4) calculations for confined or incarcerated individuals.

• The conditions for Pell restoration in the event of closure of an institution.

• Releasing and making public an annual listing of PEPs by correctional facility and State.

• Developing an interagency communications process between the oversight entity, accrediting or State approval agency, and the Department.

• Establishing that correctional facilities that are additional locations need not be included in Clery Act campus reporting.

• The roles and responsibilities of accrediting and State approval agencies, especially regarding accreditation requirements in § 668.237.

• The timelines for reporting requirements under § 668.239.

• The best interest determination under § 668.241(a), including data sources or infrastructure that are available to stakeholders.

• The role of the advisory committee.

• The role of community-based organizations.

Discussion:

The Department appreciates the recommendations for additional guidance and actions the Department should take to support confined or incarcerated individuals and address other implementation issues that may arise. The Department plans to publish guidance addressing many of the topics identified by commenters. The Department is also currently developing a dedicated landing page for PEP resources about prison education programs, and we have also created a central mailbox,

pep@ed.gov,

for ongoing PEP questions from stakeholders.

Changes:

None.

Definitions (§ 600.2)

General Comments

Comments:

One commenter requested definitions and clarification of several phrases in the preamble to the NPRM, including “greater oversight” and “high program standards.” The commenter also asked what metrics we will use to ascertain whether a PEP is providing confined or incarcerated individuals with education that meets high program standards, and how frequently and through what mechanism we will evaluate and report on such high program standards.

Discussion:

The Department elects not to provide definitions of these terms or to outline these operational processes in regulation. Instead, the Department will consider providing guidance to postsecondary institutions, accrediting and State approval agencies, and oversight entities, as appropriate.

Changes:

None.

Additional Location

Comments:

Several commenters requested that the Department remove juvenile justice facilities and jails from the definition of “additional location” and exempt programs offered at such facilities from statutory and regulatory PEP requirements. They argued that the “scale” and cost associated with the regulations will harm small programs.

Discussion:

The Department declines to remove juvenile justice facilities and local jails from the “additional location” definition. The statute does not provide an exemption or waiver for such programs. To qualify for Pell Grant funds, the statute requires that all confined or incarcerated individuals be enrolled in an eligible PEP that adheres to statutory requirements. These regulations reinforce statutory protections for the benefit of all confined or incarcerated individuals by ensuring that PEPs also comply with requirements of the Department, the State authorizing agency, the accrediting agency or the State approval agency, and oversight entities.

Including juvenile justice facilities and jails as additional locations also allows the Department to track and monitor PEPs offered at these facilities and include them in data collection, trending, and reporting. This will help us better understand if certain PEPs need more oversight or supports, or both.

Finally, as noted in the NPRM, if an institution ceases all operations at a correctional facility (the additional location of the postsecondary institution) the confined or incarcerated individual may be eligible for Pell Grant restoration. 87 FR 45441. Without the inclusion of these facilities in the definition of an additional location, confined or incarcerated individuals may not be eligible for restoration of their Pell Grant if all PEPs at the correctional facility close.

Changes:

None.

Comments:

One commenter noted that some of their institution's programs operating in a prison setting are extensions of their existing academic programs and are not distinct programs operating at a correctional facility. The commenter asked if these types of programs would need to be reported as additional locations.

Discussion:

Even if the program the postsecondary institution plans to offer at the correctional facility is an extension of a program offered either at the main campus or at another additional location, the program still must meet the definition of and be approved as a PEP. In addition, the correctional facility where that program is offered must be reported as an additional location.

Changes:

None.

Comments:

One commenter requested that correctional facilities only offering correspondence courses be removed from the definition of “additional location,” because the postsecondary institution would be unable to consistently review the facility or gain access to locations where the confined or incarcerated individuals complete their coursework.

Discussion:

The Department declines to adopt the commenter's request. We seek to hold all programs accountable to the standards outlined in these final regulations, regardless of the method of delivery. With the monitoring and oversight required under these regulations, the Department will be able to track and monitor PEPs offered at these facilities and include them in data collection, trending, and reporting. This will help us to better understand if certain PEPs need more oversight and supports.

The Department also noted in the NPRM that if an institution ceases all operations at a correctional facility (the additional location of the postsecondary institution), enrolled students may be eligible for Pell Grant restoration. 87 FR 45441. Without the inclusion of facilities where only correspondence courses are offered, confined or incarcerated individuals may not be eligible for restoration of their Pell Grant in the event all PEPs at the correctional facility close.

Changes:

None.

Confined or Incarcerated Individual

Comments:

The same commenters that requested removal of juvenile justice facilities and jails from the definition of “additional location” also requested removal of these facilities from the definition of “confined or incarcerated individual.” They argued that the “scale” of the regulations and cost associated with the regulations would harm small programs.

Discussion:

The Department declines to make this change, for the reasons

described in the “additional location” discussion above.

Changes:

None.

Comments:

Several commenters suggested additions to the types of individuals who are not considered to be confined or incarcerated, including individuals in pretrial detention, individuals under correctional custody in temporary release programs, or individuals living in a halfway house.

Discussion:

To be eligible for a Pell Grant, those meeting the definition of a “confined or incarcerated individual” must enroll in a PEP. Section 484(t)(1)(a)(i) of the HEA defines a “confined or incarcerated individual” as “an individual who is serving a criminal sentence[.]” An individual who is not serving a criminal sentence thus is not considered to be confined or incarcerated for the purposes of the PEP provision and would not be required to enroll in a PEP to establish eligibility for Pell Grant funds. The Department also notes that, under section 484 of the HEA, individuals living in a halfway house are not considered to be incarcerated and therefore would qualify for Pell Grant eligibility through enrollment in any eligible program, whether or not it is a PEP. While the Department did not amend the definition of “confined or incarcerated individual,” we plan to release guidance as necessary to assist postsecondary institutions with questions that may arise regarding student eligibility.

Changes:

None.

Conditions of Institutional Eligibility (§ 600.7)

Comments:

One commenter asserted that the waiver of the enrollment cap for incarcerated individuals under § 600.7(c) is overly narrow because the commenter believed it would only apply to a subset of PEPs that had already received an initial waiver. The commenter also believed that some of the considerations listed in § 600.7 may not be appropriate when determining whether to grant a waiver.

Discussion:

The commenter appears to have misunderstood the application of § 600.7, which applies to any institution seeking a waiver to exceed the 25 percent enrollment cap on incarcerated individuals. As provided in the regulations, an institution that does not already have a waiver must wait at least two years from the date of its first approved PEP before applying for a waiver. We thank the commenter for making the Department aware of implementation considerations and note that we accepted a proposed revision from a different commenter below that will make the waiver language clearer.

While we do not anticipate a large number of applications that will exceed the 25 percent cap on enrollment of confined or incarcerated individuals, the Department intends to provide guidance for institutions that wish to exceed the 25 percent cap, as necessary. We also do not anticipate a large number of applications will exceed the 25 percent cap. The Department plans to provide direct one-on-one assistance to postsecondary institutions that wish to apply for the waiver to assist with regulatory compliance.

Changes:

None.

Comments:

One commenter asked whether non-profit institutions that exclusively provide educational services to students who are incarcerated will be required to apply for a waiver.

Discussion:

The only automatic exemption in § 600.7(c) is for public institutions chartered for the explicit purpose of educating confined or incarcerated individuals. The Department declines to include private non-profit institutions in this automatic exemption. Public institutions are likely to be backed by the full faith of a State government, and there are stronger centralized administrative processes and support systems in place. We believe that these State processes will ensure that a postsecondary institution that is chartered for the purpose of exclusively providing educational services to confined or incarcerated individuals will receive a thorough review by an entity within the State government and be found capable of fulfilling the needs of confined or incarcerated individuals. Private non-profit institutions would thus have to apply for the waiver.

Changes:

None.

Comments:

One commenter noted that the draft language in § 600.7(c) refers to two 5-year waiver periods allowing expansion first to 50 percent and then to 75 percent incarcerated student enrollment, but that it is unclear what happens after the second five-year period has elapsed, specifically whether the Department would automatically extend the waiver if there was no reason to limit or terminate it.

Discussion:

The Department will not automatically extend the waiver. At the end of the five-year period following the Department's initial approval of the waiver, if the Department has not otherwise informed the institution that it is revoking the institution's waiver, up to 75 percent of the institution's regular enrolled students may be confined or incarcerated individuals. However, at each recertification, defined under § 668.13, the Department will review whether the postsecondary institution is eligible to maintain its waiver. We believe that monitoring an institution's administrative capability and financial health at recertification is important because the administrative capability and financial responsibility of an institution can fluctuate. Failures in either of those areas could call into question whether the institution is best situated to maintain its waiver or have it revoked. Additionally, the Department's recertification evaluation provides an opportunity to evaluate whether the oversight entity has determined whether the program continues to be offered in the best interest of students and whether the program continues to meet all of the Department's requirements for PEPs. We have the authority to review for compliance as a normal part of operational considerations and decline to include additional regulatory language to this effect.

The Department agrees, however, that certain language in proposed § 600.7(c)(4)(i)(B) is unclear regarding the extent of available waivers. That provision allows up to 75 percent of an institution's students to be confined or incarcerated “for the five years” following the period described in § 600(c)(4)(i)(A) (which allows enrollment up to 50 percent). Because the regulations are intended to cap institutions at 75 percent enrollment of confined or incarcerated individuals, the cited five-year clause is unnecessary.

Changes:

To clarify that enrollment of incarcerated individuals at postsecondary institutions will be capped at 75 percent enrollment, the Department amends § 600.7(c)(4)(i)(B) to clarify that, following the period described in paragraph (c)(4)(i)(A), no more than 75 percent of the institution's regular enrolled students may be confined or incarcerated.

Comments:

One commenter questioned the rationale for the 75 percent enrollment cap given that the Department has the authority to limit or terminate the waiver at any point if it determines the institution does not meet the waiver requirements.

Discussion:

Section 102 of the HEA says that an institution of higher education is not an eligible institution for the purposes of the title IV aid if the institution has a student enrollment in which more than 25 percent of the students are incarcerated, except that the Secretary may waive the limitation for a public or nonprofit institution that provides a two- or four-year program of instruction (or both) for which the institution awards a bachelor's degree, or an associate's degree or a

postsecondary diploma, respectively. Because it is optional for the Secretary to waive the limitation, the Department has authority to set reasonable upward limits through regulation. A subcommittee member recommended the 75 percent limit on enrollment of confined or incarcerated individuals, and the Department formally adopted the recommendation, which was agreed to by the committee. The Department believes that the upper limit strikes an appropriate balance between increasing options to serve this population and the heightened demands and responsibilities of operating successful PEPs. Public postsecondary institutions that are specifically chartered for educating confined or incarcerated individuals are exempt from the 75 percent cap on enrollment.

Some postsecondary institutions currently have a waiver to exceed 25 percent enrollment of confined or incarcerated individuals. Institutions that received a waiver prior to the implementation date of these regulations are currently permitted to enroll up to 100 percent of confined or incarcerated individuals and are automatically granted a waiver. However, we will limit the growth of incarcerated enrollment at those institutions to ensure consistent program quality and adequate oversight. Beginning on the implementation date of July 1, 2023, enrollment of incarcerated individuals in any such institution will be limited to 50 percent in the first five years after the regulations take effect, and the cap will be raised to 75 percent if the institution is granted an additional waiver after the initial five-year period.

Changes:

None.

Comments:

One commenter asked whether the entire postsecondary institution becomes ineligible for the title IV, HEA programs, or if only the PEP would lose eligibility if the Secretary limits or terminates an institution's waiver of the limitation on the percentage of regular students who may be confined or incarcerated.

Discussion:

Under § 600.7(c)(6), the entire postsecondary institution becomes ineligible at the end of the award period that begins after the Secretary's action, unless the institution comes back into compliance or reduces its enrollment of confined or incarcerated individuals to no more than 25 percent of its regular enrolled students.

Changes:

None.

Comments:

One commenter asked the Department to restructure § 600.7(c) to separate the waiver from the waiver denial.

Discussion:

The Department agrees with the recommended edit and believes the change will improve the clarity of the regulations.

Changes:

Paragraph (c)(1) will now be split into paragraphs separately addressing waiver grant and waiver denial.

Commenter:

One commenter asked the Department to define “demonstrated program success” and explain what is meant by “expand the number of incarcerated students.”

Discussion:

The Department intends to provide details of the waiver application process, such as information about program success and expanding the number of an institution's confined or incarcerated students, in subregulatory guidance.

Changes:

None.

Comments:

One commenter asked how the Secretary will utilize the required reviews, assessments and reporting by the accrediting agencies and the oversight entity to approve, deny, or delay the waiver request and increase.

Discussion:

The accrediting agency and oversight entity must provide approval at various points the throughout the process. We note here and under the preamble discussion for § 668.237 that the PEP is not eligible if either the oversight entity or the accrediting or State approval agency denies approval. The PEP must meet all regulatory requirements to be an eligible PEP. The Department plans to release more subregulatory guidance to postsecondary institutions wishing to apply for a waiver and to institutions that already have the waiver.

Changes:

None.

Comments:

One commenter asked for clarification concerning the Secretary's revocation and reduction of the waiver under paragraph (c)(6)(i).

Discussion:

If the institution demonstrates to the Secretary that it met all the requirements under paragraph (c)(1) prior to the end of the award year that begins after the Secretary's action to limit or terminate the waiver, then the institution may keep the waiver and need not reapply or reduce its confined or incarcerated student enrollment.

Changes:

None.

Date, Extent, Duration, and Consequence of Eligibility (§ 600.10)

Comments:

One commenter noted that there should be an “and” at the end of § 600.10(c)(1)(iii).

Discussion:

The commenter is correct.

Changes:

We have added an “and” to the end of § 600.10(c)(1)(iii).

Comments:

One commenter stated that the Department should remove § 600.10(c)(1)(iv), which requires Department approval for the first eligible PEP offered at an institution's first two additional locations, because it is too burdensome given other requirements.

Discussion:

The Department disagrees that the requirements under § 600.10(c)(1)(iv) are excessively burdensome to institution. We also believe that the requirements outlined in the final rule, including securing all necessary program approvals, will benefit confined or incarcerated individuals, by ensuring that PEPs serve their best interests and avoiding needless exhaustion of their Pell Grant eligibility. The requirements will benefit postsecondary institutions and oversight entities by providing a clear regulatory framework. Finally, the rules will benefit the taxpayer by ensuring that Pell Grant funds are directed to postsecondary institutions that are compliant.

Changes:

None.

Student Eligibility General (§ 668.32)

Comment:

Multiple commenters stated that the Department must consider in these regulations ways to prevent postsecondary institutions and oversight entities from applying additional eligibility restrictions that are unrelated to academic qualifications. Commenters suggested the regulations should stipulate that PEPs cannot bar people based on nature or length of their sentence, for example. Alternatively, the commenters suggested that, at a minimum, the Department must require postsecondary institutions and oversight entities to disclose to accreditors, the Department, and confined or incarcerated individuals any additional eligibility restrictions they intend to put in place, including but not limited to restrictions based on sentence, release date, convictions, and facility-based disciplinary infractions.

Discussion:

The Department declines to add additional disclosures as requested for a few reasons. First, we do not have the authority to regulate an institution's admissions requirements. Additionally, the Department also does not have the authority to mandate how the oversight entity manages its internal operations, including restrictions on enrollment in postsecondary programs. If a confined or incarcerated individual is eligible for Pell Grant, meaning the individual has met all student eligibility requirements under the HEA and the regulations, and the individual has been accepted into a PEP, that individual cannot be denied the Pell Grant for which they are eligible. Furthermore, there is no statutory or regulatory

provision that would prohibit a postsecondary institution from enrolling or admitting a confined or incarcerated individual into a PEP due to nature or length or the individual's sentence. For example, an institution could choose to admit a student that is likely to be released within a year even if the student's program is two years in length.

Changes:

None.

Comments:

One commenter asked the Department to clarify that confined or incarcerated individuals enrolled in PEPs through correspondence are eligible for a Pell Grant.

Discussion:

A confined or incarcerated individual who is enrolled in a correspondence course as defined in § 600.2 is eligible for a Pell Grant, as long as the standards for student, program, and institutional eligibility are met. It is important to note, however, that if an institution offers correspondence courses to a student that is confined or incarcerated at a correctional facility and the student can complete at least 50 percent of the program through such correspondence courses, the institution must add that facility as an additional location.

Changes:

None.

Institutional Information (§ 668.43)

Comments:

One commenter disagreed that postsecondary institutions should be responsible for providing information regarding whether an occupation typically involves State or Federal prohibitions on the licensure or employment of formerly confined or incarcerated individuals. The commenter asserted that responsibility for making and reporting this determination lies with the State correctional agency. The commenter stated that providing such information would be costly and time consuming because of the diversity of convictions and changes in State law.

Discussion:

The Department disagrees with the commenter. The postsecondary institution is the entity offering the educational programming and, as such, needs to be aware of licensing and employment conditions in the field. Therefore, it is best situated to ascertain State or Federal prohibitions on licensure or employment. Moreover, if a postsecondary institution chooses to offer a PEP in a State, it already must comply with § 668.236(a)(7) and (8), which require the program to satisfy certain educational requirements for professional licensure or certification, and thus the additional requirements in § 668.43 are not significant.

The Department notes that postsecondary institutions are not required to be aware of State or Federal prohibitions on licensure or employment in States where they do not offer a PEP, unless the postsecondary institution offers it in a Federal correctional facility. For a Federal correctional facility, the institution is only required to be aware of any prohibitions in the State where most confined or incarcerated individuals will reside post release. See discussion of § 668.236.

Changes:

None.

Comments:

A few commenters requested that the Department require postsecondary institutions to disclose the use of any third-party vendors involved in the development, management, maintenance, and provision of programs, as well as involvement in marketing, recruitment, and enrollment management of programs, regardless of the way in which the vendor classifies or identifies its services to clients or the public.

Discussion:

Postsecondary institutions are subject to all applicable requirements under § 668.25, which pertain to contracts between an institution and a third-party servicer. Also, the Department plans to establish procedures for eligible PEP applications. Therefore, we decline to add specific regulations for PEPs. If the Department needs more information about third-party vendors, we have authority under § 668.239(a) to require the submission of reports.

Changes:

None.

Comments:

One commenter requested clarification on the word “other” in § 668.43(a)(5)(vi). The commenter stated that neither paragraph (a)(5)(vi) nor the preceding paragraph (a)(5)(v) refers to a specific State or group of States that would be distinguished from the “other” States referred to in paragraph (a)(5)(vi).

Discussion:

The “other” States referenced toward the end of § 668.43(a)(5)(vi) are those not already identified earlier in the sentence through § 668.236(a)(7) and (8). Section 668.236(a)(7) and (8), respectively, require a PEP to meet any applicable educational requirements for professional licensure or certification, and not offer education that is designed to lead to licensure or employment for a specific occupation if there are prohibitions on licensure or employment, “in the State where the correctional facility is located, or, in the case of a Federal correctional facility, in the State where most of the individuals confined or incarcerated in such a facility will reside upon release[.]” The “other” State reference in § 668.43(a)(5)(vi) refers to any other State that falls outside those states identified in § 668.236(a)(7) and (8).

Changes:

None.

Comments:

A few commenters stated that the Department should provide institutions with a central location where they can access information about licensure restrictions in a particular State or disclose information about licensure restrictions and update that information annually.

Discussion:

State licensure restrictions will likely continue to change and there is no language in the HEA or regulations that requires institutions or other organizations to report licensure restrictions to the Department. Therefore, at this time we decline to create a central location to access such information. The Department endeavors to provide up-to-date resources and technical assistance to postsecondary institutions, but it is incumbent upon postsecondary institutions, prior to and while offering a PEP, to remain current with State and Federal licensure restrictions and ensure they are correctly implementing the requirements in § 668.236(a)(7) and (8).

Additionally, institutions can avail themselves of resources provided by other organizations. For example, the National Reentry Resource Center maintains a National Inventory of Collateral Consequences of Conviction at

https://niccc.nationalreentryresourcecenter.org

that may be useful to institutions and students.

Changes:

None.

Comments:

One commenter indicated that the Department should expand its requirement that postsecondary institutions provide information about PEPs that typically involve State or Federal prohibitions on the licensure or employment of formerly incarcerated individuals, to require similar information from all educational programs designed or advertised as leading to a required license for employment in a State. The commenter acknowledged that the request may not be a logical outgrowth of the PEP regulations.

Discussion:

The Department agrees that this requirement would not be a logical outgrowth of regulations focused on PEPs and, therefore, declines to make the requested change.

Changes:

None.

Definitions (§ 668.235)

Comments:

One commenter requested that the Department eliminate the definitions of “feedback process” and the “advisory committee” due to the complexity and cost.

Discussion:

Because the definitions of “feedback process” and “advisory committee” are tied to many concepts throughout subpart P, including the best interest determination in § 668.241, we decline to remove these definitions.

Changes:

None.

Comments:

A few commenters suggested that the Department define PEP and proposed this definition: “an education or training program that meets the definitions in § 668.236. The [PEP] is created exclusively for incarcerated individuals as defined in § 600.2 who are eligible for and will be awarded a Federal Pell Grant to pay for the program's cost of attendance, as defined in 20 U.S. Code § 1087.”

Discussion:

We decline to make this change because § 668.236 defines a PEP and believe that adding an additional definition would be redundant. We agree with the commenter, however, that a PEP is distinct from an institution's other eligible programs, and that the definition of “confined or incarcerated individual” under § 600.2 only allows a PEP to be offered at locations that are classified as Federal, State, or local penitentiaries, prisons, jails, reformatories, work farms, juvenile justice facilities, or other similar correctional institutions.

Changes:

None.

Relevant Stakeholder

Comments:

Several commenters requested that the Department add various stakeholders to the definition, including community colleges, boards, commissions, associations, and departments at the State level that oversee, coordinate, or otherwise represent community colleges, employers, workforce development boards, industry associations and community-based organizations; community-based organizations that provide reentry services; employers who have demonstrated a commitment to hiring justice-involved individuals; and current and former confined or incarcerated individuals.

Discussion:

We do not believe it is necessary to add additional members to the relevant stakeholder definition. We are not convinced that an oversight entity could feasibly gather information from all of the new groups that commenters proposed in a reasonable timeframe. This could create administrative burden that could limit the implementation of PEPs. We note that the Department's definition permits the oversight entity to include additional stakeholders as appropriate.

Changes:

None.

Oversight Entity

Comments:

Several commenters suggested removing the Bureau of Prisons and State departments of corrections from the definition of “oversight entity” or expanding the definition to include other members.

Discussion:

Section 484(t)(1)(B)(ii) of the HEA confers authority on “the appropriate State department of corrections or other entity that is responsible for overseeing correctional facilities, or by the Bureau of Prisons” to approve PEPs at any correctional facility it oversees. The Department proposed using the term “oversight entity” as a short-hand reference for that statutory list. The Department does not have the authority to amend the list. While the statute allows for some flexibility by including “or other entity that is responsible” for oversight, it will be within the purview of the Bureau of Prisons, State departments of corrections, and the correctional facilities themselves to determine if a different entity also has the requisite level of control.

Changes:

None.

Feedback Process

Comments:

One commenter stated that the advisory committee mentioned in the definition of feedback process should be mandatory.

Discussion:

The Department believes that relevant stakeholder input through the feedback process is sufficient. Requiring an advisory committee could also be too burdensome for some oversight entity systems. Additionally, the Federal Bureau of Prisons would likely need to follow the Federal Advisory Committee Act if it convened an advisory committee, which would significantly limit the development of PEPs.

Changes:

None.

Comments:

One commenter asked the Department to include examples of input that the relevant stakeholders can provide to the oversight entity to assist with PEP operation, including information on reentry services, services offered by a community-based organization that are available to confined or incarcerated individuals, and information on in-demand industries or occupations with career opportunities available to formerly incarcerated individuals.

Discussion:

The Department believes that these are all excellent examples of input that the relevant stakeholders can provide to the oversight entity. We decline to prescribe these in regulation, however.

Changes:

None.

Eligible Prison Education Program (§ 668.236)

Comments:

One commenter suggested that the Department require all PEPs to partner with a community-based organization offering reentry services and counseling.

Discussion:

As a part of the application process for the first PEP at the first two additional locations, the Department requests information about reentry services, see § 668.238(b)(5), and the Department strongly encourages institutions to offer reentry services to students enrolled in PEPs. However, the Department declines to require reentry services as a part of every PEP. Because the statute does not require reentry services and we are prohibited from regulating on educational program offerings, we believe that requiring each program to maintain such services is beyond our authority.

We also note that oversight entities are required to consider whether a PEP's academic services, including in advance of reentry, are comparable to similar services that the institution offers to its on-campus students. We believe that this consideration will provide institutions with an incentive to create strong reentry services for students enrolled in their PEPs.

Changes:

None.

Comments:

One commenter was opposed to excluding proprietary institutions from offering PEPs under § 668.236(a)(1).

Discussion:

The HEA specifically excludes proprietary institutions from offering PEPs. See HEA, section 484(t)(1)(B)(i) (limiting PEP offerings to institutions of higher education as defined in sections 101 or 102(a)(1)(B) of the HEA, which do not include proprietary institutions).

Changes:

None.

Comments:

Several commenters questioned whether every PEP would get a two-year initial approval, who gives the two-year initial approval, what the accrediting or State approval agencies must do for the initial approval process, on what basis the oversight entity should make the two-year initial approval, and finally, how the term “initial” is defined in different contexts in the regulations.

Discussion:

Every PEP must be approved by the oversight entity, which will permit initial operation of the program for up to two years. Every PEP is eligible to be considered for initial approval by the oversight entity for two years. The oversight entity has sole authority to provide the two-year initial approval. Initial approval may be granted without making a best interest

determination. Specifically, to allow flexibility and time to build the PEP, there are no specific requirements for the initial approval, and the oversight entity can use whatever information it has available. After two years, the oversight entity must assess all PEPs using the requirements in § 668.241(a). The accrediting or State approval agency must follow the requirements under § 668.237. The Department intends to provide guidance to further explain the regulatory text, as necessary.

Changes:

None.

Comments:

One commenter asked what happens if a PEP is not approved after the initial two-year period.

Discussion:

If a PEP is not determined to be operating in the best interest of confined or incarcerated individuals, the PEP would lose eligibility. The Department will provide additional information on the process for the loss of eligibility in future guidance, as necessary.

Changes:

None.

Comments:

One commenter suggested that the Department reduce the two-year initial approval period to one year because, in the commenter's opinion, two years is too long to remove a failing program.

Discussion:

The Department declines to make this change, because we believe that one year is not sufficient time to make reasonable determinations about whether a program is operating in the best interests of students. If an oversight entity has concerns about the quality of a program in the initial two-year period, it has the authority at any time to revoke approval of a PEP to operate in a facility that it oversees, even after the oversight entity has approved the program. Additionally, the Department has the authority under part 668, subpart G, to terminate the eligibility of a program that it has determined does not meet our PEP regulatory requirements.

Changes:

None.

Comments:

Multiple commenters offered that the initial two-year approval period under § 668.236(a)(3) is too short. The commenters claimed that such a short period will disincentivize institutions from offering slow-growing or small programs and that the initial two-year period is not based in evidence or research.

Discussion:

The Department noted in the proposed rule that the two-year timeframe would ensure confined or incarcerated individuals receive the protections of the best interest framework in a timely manner, while recognizing the need for some time to gather the necessary information to meet the statutory requirement for a data-informed decision by the oversight entity. Two years is sufficiently long enough to assess outcomes for shorter programs and will ensure accountability for poorly performing programs.

During negotiations, in response to similar concerns, the Department amended its proposed language in § 668.241 to make the assessment of certain “best interest” indicators—namely program outcomes—permissive instead of mandatory. This change will relieve institutions of conducting outcome assessments at the two-year point where no data may yet be available, while retaining an assessment of program inputs to ensure the foundation for the program remains strong.

Finally, we note that a two-year assessment timeframe is used elsewhere in the title IV, HEA regulations to establish continuity of operations and experience at new institutions. In § 600.6(a)(5), for example, to establish institutional eligibility, a postsecondary vocational institution must be in existence for at least two years.

Changes:

None.

Comments:

Multiple commenters requested that the Department add language to § 668.236(a)(4) either requiring or encouraging transferability of credits to more than one institution in the State in which the correctional facility is located.

Discussion:

The Department declines to make this change, because section 484(t)(1)(B)(iv) of the HEA states that credits from a PEP must transfer to “at least 1 institution of higher education[.]” A postsecondary institution, the oversight entity, or the accrediting or State approval agency could set higher standards. The Department strongly encourages institutions to ensure that credits earned by students in PEPs are transferable to more than one other eligible institution, thus providing students enrolled in such programs with as many options as possible for continuing their education following release from incarceration.

Changes:

None.

Comments:

One commenter stated that Pell Grant eligibility through a PEP should be expanded to include enrollment in liberal arts subjects.

Discussion:

Neither the HEA nor the applicable PEP regulations prohibit enrollment in liberal arts subjects offered through a PEP.

Changes:

None.

Comments:

In regard to § 668.236(a)(6) and (b), one commenter wrote that the text itself specifies that an institution already offering one or more PEPs that are subject to an initiated adverse action may maintain eligibility for those existing PEPs, provided that they submit a teach-out plan. However, when read together, these provisions state that “An eligible PEP means an education or training program that . . . [i]s offered by an institution that is not subject to a current initiated adverse action,” which, according to the commenter, would seem to create a blanket policy of ineligibility for programs offered by institutions subject to an adverse action.

Discussion:

We believe the paragraph is clear both in the general description of the program and in defining the limited situation in which a program loses approval to enroll new students while teaching out those who are currently enrolled.

Changes:

The Department made non-substantive technical edits to restructure the paragraphs to improve the flow and clarity of the text.

Comments:

One commenter suggested that the Department further regulate on the teach-out plan required under § 668.236(b)(2), to require that the plan include options for confined or incarcerated individuals beyond transferring to a postsecondary institution once they are no longer incarcerated.

Discussion:

The definition of “teach-out plan” is in § 600.2 and the requirements related to teach-out plans and agreements for accrediting agencies are in § 602.24(c). The Department declines to establish additional requirements for teach-out plans. The Department has not generally regulated on the contents of a teach-out plan because they are not one size fits all. The postsecondary institution's accrediting or State approval agency could also set standards for the teach-out plan.

Changes:

None.

Comments:

One commenter asked what would happen when a fully informed student is aware of licensure restrictions in advance but, nevertheless, desires to earn that credential and attempt to overturn an unjust licensure restriction. The commenter also recommended providing resources to approved PEPs, State Higher Education Executive Offices (SHEEOs), community-based partners, and prospective employers to help them advocate for the removal of unjust licensure restrictions that prevent people with felony convictions from attaining their educational and career goals.

Discussion:

There is no exception in the regulations to waive the requirements under § 668.236(a)(8). While the Department acknowledges the commenter's concern, § 668.236(a)(8) was adopted to protect confined or

incarcerated individuals from unnecessary exhaustion of their Pell Grant benefits, and to ensure PEP enrollees receive the full benefit of their education. These goals are undermined if time and money are spent pursuing training in an employment field barred to the student. If a State or Federal law prohibits licensure or employment of the formerly incarcerated individual in the State the correctional facility is located, or, for a Federal correctional facility, the State the most individuals will reside upon release, then that individual cannot enroll in the PEP. In general, the Department cannot lobby, recommend lobbying, or provide resources to aid in lobbying a State legislature for the purpose of removal or modification of laws.

Changes:

None.

Comments:

One commenter asked the Department to require oversight entities and postsecondary institutions to annually review collateral consequences relevant to education and workforce training pathways and add new pathways that align with confined or incarcerated individual's interests and labor market demands in the State and region under § 668.236(a)(8).

Discussion:

The Department does not have the authority to mandate that a postsecondary institution offer a PEP or add new pathways that better align with students' interests and labor market demands in the State or region. It is the postsecondary institution's choice whether to offer a PEP.

For institutions that choose to offer a PEP, while we can prohibit them from enrolling students in programs for fields where they know their students will be barred, we cannot dictate how they otherwise structure the academic component of the PEP. The Department's authority in postsecondary education matters is limited to issues relating to Federal student aid, the use of Federal funds, and the specific programs administered by the Department. The Department is prohibited from exercising any direction, supervision, or control over curriculum or a certain type of PEP.

Changes:

None.

Comments:

One commenter suggested that we consider advising postsecondary institutions that, where they offer a vocational program affiliated with employment bans for a confined or incarcerated individual with certain convictions, the provider should offer another non-degree or degree program that does not lead to such licensure or employment prohibitions.

Discussion:

The Department does not have the authority to require that postsecondary institutions offer a confined or incarcerated individual specific prison education programming. We also do not have any regulations prohibiting a postsecondary institution from providing non-degree programs.

Changes:

None.

Comments:

One commenter stated that the requirement to meet “any applicable education requirements” in § 668.236(a)(7) and (c)(1) and (2) is too broad in scope and would not allow for the materiality of education requirements to be considered. The commenter stated that postsecondary institutions may not have the resources to make these decisions annually.

Discussion:

The requirements in § 668.236(a)(7) and (8) (and corresponding requirements in § 668.236(c)(1) and (2)) are based in statute and further clarified through the regulation. The Department has the authority to set reasonable parameters in regulation. PEPs may not be widely accessible within a correctional facility and confined or incarcerated individuals may have to rely on the postsecondary institution's determinations regarding educational requirements for and prohibitions on licensure or employment to a greater extent than would individuals who are not incarcerated. A postsecondary institution is not required to offer a PEP in a State where it is unsure about educational or licensure requirements or where it does not wish to remain up to date regarding these requirements. The Department believes many postsecondary institutions will recognize the benefits of the regulatory framework for confined or incarcerated individuals.

Changes:

None.

Accreditation Requirements (§ 668.237)

Comments:

One commenter asked whether the regulations define the actions an accrediting agency should take to determine the academic quality of a program for an established PEP through the Second Chance Pell program, or whether an accrediting agency would be allowed to fully use their process and professional assessment standards in determining the academic quality of a program.

Discussion:

The accrediting agency must evaluate the first PEP at the first two additional locations. Additionally, the accrediting agency must conduct a site visit at those locations to evaluate the first additional PEP offered by a new method of delivery. They must also approve the methodology for how the institution made the best interest determination under § 668.241. We fully specify the accreditation requirements for PEPs in these final regulations.

Changes:

None.

Comments:

One commenter called for the elimination of § 668.237 because accrediting and State approval agencies already have standards by which they evaluate educational programs, regardless of location. The commenter stated that prescribing additional program evaluations is unnecessary and burdensome and will discourage participation in PEPs.

Discussion:

The Department disagrees with the commenter. First, we wish to make clear that the policies and standards of accrediting and State approval agencies differ, and the Department's regulations for agency recognition do not require the evaluation of every new program or location. Furthermore, PEPs are unique in that participants may only have one educational option at their correctional facility. The Department has chosen to mandate additional safeguards so that the PEP is beneficial to the confined or incarcerated individual. We also believe that requiring that the accrediting or State approval agency take a more proactive role in ensuring quality in PEPs is a logical outgrowth of the statutory requirements. Section 484(t)(1)(B)(v) of the HEA specifically provides, for example, that an institution offering a PEP cannot be subject to an adverse action in the last five years “by the institution's accrediting agency or association.”

Finally, the Department has similar rules for other programs, such as direct assessment programs under § 668.10(a)(5), that require evaluation by the accrediting or State approval agency to establish eligibility for title IV purposes.

Comments:

One commenter believed that programs offered via correspondence courses should be exempt from the Department's requirements for accreditation review because postsecondary institutions are already required to be approved for that method of delivery by their accrediting or State approval agency. The commenter stated that the accreditation requirements would add unnecessary burden to correctional facilities and postsecondary institutions.

Discussion:

The Department disagrees with the commenter, as we seek to hold all programs regardless of the method of delivery to the standards outlined in these final regulations. The Department believes that offering educational programming through any method of delivery in a correctional facility for the first time may present various challenges that require creative thinking and collaboration amongst several stakeholders. A new method of delivery

in a correctional facility may also involve unique obstacles that institutions are unaccustomed to, which in turn could result in risks to confined or incarcerated individuals that may not have been addressed when the accrediting agency or State approval agency last approved the institution's use of distance education or correspondence courses. The accrediting and State approval agencies are uniquely authorized to confirm educational quality and we believe they must do so for all methods of delivery.

Changes:

None.

Comments:

One commenter asked the Department to require that any postsecondary institution offering a PEP at an additional location for a program that also exists on the postsecondary institution's main campus be included in any programmatic accreditation that may be held by the institution for that same program.

Discussion:

The Department declines this recommendation because it can only require a postsecondary institution to hold accreditation by a nationally recognized accrediting agency for title IV purposes. We do not have the authority to require an institution to obtain programmatic accreditation for its PEPs.

Changes:

None.

Comments:

One commenter requested that, under § 668.237(b)(1), we require the accrediting or State approval agency, in addition to the oversight entity, to review and approve all PEPs.

Discussion:

The Department disagrees with this commenter and believes that such a requirement would be overly burdensome to postsecondary institutions and accrediting and State approval agencies. If the PEP is a “significant departure from existing offerings or educational programs, or method of delivery,” § 602.22(a)(1)(i) and (a)(1)(ii)(C) already require review and approval by an accrediting agency prior to implementation.

Further, by requiring the Secretary's approval of the first PEP at the first two additional locations the regulations mirror the requirements of the accrediting and State approval agencies. We believe that a postsecondary institution that can sufficiently demonstrate satisfactory standards need not seek direct approval from the accrediting or State approval agency for every PEP. The regulations do not preclude an accrediting or State approval agency itself from requiring every PEP to be approved, however.

Changes:

None.

Comments:

Several commenters stated that the Department should approve the PEP prior to the accrediting or State approval agency approval required under § 668.237(b)(1).

Discussion:

The Department disagrees with commenters because we must have a completed application to decide whether the PEP meets all regulatory requirements, particularly for the first PEP at the first two additional locations.

Changes:

None.

Comments:

One commenter asked for clarification on § 668.237(b)(1), specifically about the process for a postsecondary institution that has recently completed the accreditation process for the first or second additional location at a correctional facility and is in compliance.

Discussion:

Rather than regulating on operational process, the Department intends to provide this information through guidance.

Changes:

None.

Comments:

Several commenters suggested that the Department remove the requirement under § 668.237(b)(3) for site visits, because postsecondary institutions have no control over correctional facilities. Instead, the commenters suggested that the Department require program evaluation, review of contact, and Learning Management System delivery.

Discussion:

The Department disagrees with the commenters' suggestion. While the postsecondary institution does not have control over the correctional facility, it is important for the accrediting or State approval agency to ensure educational quality is still being achieved in unfamiliar or atypical settings. We believe that it is very important to have in-person on-site visits so that the accrediting or State approval agency can review how confined or incarcerated individuals are learning regardless of the method of delivery of the instruction.

Changes:

None.

Comments:

One commenter asked whether they could assume that the next site visit to a correctional facility would occur during the next accreditation cycle rather than no later than one year after initiating the PEPs in the first two additional locations, if an existing Second Chance Pell school's accrediting agency completed their site visit within 5 years of the July 1, 2023, regulations and found the institution to be compliant.

Discussion:

Under the regulations, a site visit must occur no later than one year after initiating the PEP at the first two additional locations. The Department wants to ensure that the PEP complies with all applicable accreditation requirements in these final regulations. We also want to ensure that sites are visited shortly after a PEP begins, to confirm that there are adequate faculty, facilities, student support systems, and other resources. The next accreditation cycle for an institution could potentially be years into the future and would be too long for an accrediting or State approval agency to wait to confirm that the PEP met their standards. It would also be too long for a PEP that was not providing quality education and could mean significant numbers of students exhaust sizable portions of their Pell eligibility in furtherance of a worthless credential from a low-quality program.

Changes:

None.

Comments:

Several commenters asked for clarification about how the accreditation requirements in § 668.237(b)(4) relate to the best interest determination in § 668.241(a)(1) and whether that requirement is an additional evaluation. The commenters also asked whether the accrediting agency has the authority to invalidate the oversight entity's best interest determination if the agency does not find the oversight entity's methodology sufficiently rigorous.

Discussion:

These are two separate and unique approvals in the regulations. The Bureau of Prisons or the State department of corrections (oversight entity) conducts the best interest determination under § 668.241. The other is the review and approval by the accrediting or State approval agency of methodology used the oversight entity in making the determination that the PEP is in the best interest of the confined or incarcerated individuals under § 668.237(b)(4).

Under § 668.237(b)(4) the accrediting or State approval agency has reviewed and approved the methodology for how the institution, in collaboration with the oversight entity, determined that the PEP meets the same standards as substantially similar programs that are not PEPs at the institution for the elements listed under § 668.241(a)(1)(i) through (iv).

Finally, the PEP is not eligible if either the oversight entity or the accrediting or State approval agency denies approval. The PEP must meet all regulatory requirements to be an eligible PEP.

Changes:

None.

Application Requirements (§ 668.238)

Comments:

One commenter recommended the removal of § 668.238.

Discussion:

The Department believes an application process is necessary to ensure that the PEP is able to comply with all applicable standards. We require a similar process for direct assessment programs under § 600.10(c).

The Department is not proposing to approve all PEPs, but only the first PEP at the first two additional locations. We believe this is a reasonable requirement.

Changes:

None.

Comments:

One commenter stated there need to be explicit timeframes for each step of PEP approval.

Discussion:

The Department will work expeditiously to review and approve or deny applications, but we choose not to provide timeframes for those approvals.

Changes:

None.

Comments:

One commenter requested that any eligible programs that participated in the Second Chance Pell experiment under the Experimental Sites Initiative should be automatically approved to avoid a bottleneck of applications.

Discussion:

The Department will not exempt any postsecondary institutions or programs from the application process. Approving the first PEP at the first two additional locations will ensure that the PEP is able to comply with all applicable regulations. The Department continues to consider options for institutions currently participating in the Second Chance Pell experiment to transition to the new statutory and regulatory requirements and will announce its transition plans for the experiment at a later date.

Changes:

None.

Comments:

One commenter noted that the way § 668.238(a) is written implies that after one postsecondary institution gets approval to offer a PEP at a particular correctional facility, another postsecondary institution would not need approval to operate a PEP at that correctional facility. The commenter suggested the paragraph be updated to read: “Following the Secretary's initial approval of an institution's prison education program, additional prison education programs offered by the same institution at the same location may be determined eligible without further approval from the Secretary . . .”

Discussion:

The Department agrees that this will clarify the regulation. Every postsecondary institution, without exception, must have the first PEP at the first two additional locations where the postsecondary institution offers that PEP approved by the Department.

Changes:

We have revised § 668.238(a) to provide that following the Secretary's initial approval of an institution's prison education program, additional prison education programs offered by the same institution at the same location may be determined eligible without further approval from the Secretary except as required by § 600.7, § 600.10, § 600.20(c)(1), or § 600.21(a), as applicable, if such programs are consistent with the institution's accreditation or its State approval agency.

Comments:

One commenter suggested that the Department require a memorandum of understanding between the PEP and oversight entity that requires library services and resources.

Discussion:

The Department does not have the authority to regulate library services or resources.

Changes:

None.

Comments:

One commenter stated that that people are leaving prison having earned a significant number of credits but have no pathway to an actual degree and have exhausted their Pell Grant eligibility. The commenter stated that postsecondary institutions should be required to submit to the Department and oversight entity a curricular plan that details how the program's course offerings will lead to a degree. The commenter requested that the Department amend § 668.238(b)(1) to add a clause at the end as follows: “A description of the educational program, including the educational credential offered (degree level or certificate), the field of study, and curricular plan or pathway for degree completion.”

Discussion:

The Department's authority in postsecondary education matters is limited to issues relating to Federal student aid, the use of Federal funds, and the specific programs administered by the Department. We are prohibited for exercising any direction, supervision, or control over curriculum. We cannot evaluate the PEP curriculum but would expect a review of curricula by accrediting agencies and State approval agencies.

Changes:

None.

Comments:

A few commenters stated that the oversight entity should be required to prove that it properly gathered input from all the relevant stakeholders. The commenters said the Department should add a rule that requires the oversight entity to disclose all the feedback it received from stakeholders to the postsecondary institution, accrediting agency or State approval agency, and the Department. The commenters also said the Department should require postsecondary institutions to include this documentation in their application to the Department.

Discussion:

The Department declines to make this change, because we have language in § 668.241(f) that requires a postsecondary institution to maintain records related to the eligibility of a PEP, which includes ensuring that the oversight entity responsible for determining that the PEP is being offered in students' best interest appropriately conducted outreach to stakeholders as part of its evaluation of the program.

Changes:

None.

Comments:

One commenter requested that the Department insert language into § 668.238(b)(4) encouraging PEPs to align their data collection methodology and metrics with those required by the Integrated Postsecondary Education Data System, to ensure comparability of data across programs and ease the burden of submission.

Discussion:

The Department does not want to hinder flexibility and innovation by requiring the standardization of methods.

Changes:

None.

Comments:

One commenter stated that requiring the postsecondary institution to explain the oversight entity's methodology for approving the PEP in § 668.238(b)(4) is significant, overly broad, and not well defined.

Discussion:

Upon further review, the Department acknowledges that the oversight entity will not have to make the best interest determination for the first two years of the prison education program and therefore the postsecondary institution could not detail the methodology the oversight entity used in making the best interest determination under § 668.241(a). The information that the Department will now request is simply any information from the postsecondary institution that the oversight entity used to approve the prison education program. The Department will not prescribe this information in regulation to allow the oversight entity and postsecondary institution flexibility to be innovative in the application.

Changes:

The Department will amend § 668.238(b)(4) to provide that an institution's PEP application must provide information satisfactory to the Secretary that includes documentation detailing the methodology including thresholds, benchmarks, standards, metrics, data, or other information the oversight entity used in approving the PEP and how all the information was collected.

Comments:

One commenter stated that the Department needs to be more specific about information on reentry services requested in the application under § 668.238(b)(5). The commenter proposed breaking the paragraph into academic counseling which refers to the educational and career support students receive to help guide their enrollment in the prison education program and beyond; academic reentry counseling which refers to the support students

receive to plan and prepare for continuing their education post-release from incarceration; and reentry counseling which refers to preparing students for all facets of reentry, including securing housing, parole preparation, merit release, etc.

Discussion:

While we decline to make this change in regulation, any postsecondary institution seeking approval of a PEP is welcome to provide this type of information to the Department. Reentry services are not required in the definition of a PEP in § 668.236, but if they are offered, the Department would appreciate that information.

Changes:

None.

Comments:

One commenter requested that the Department make clear that postsecondary institutions can partner with community-based organizations that have expertise in the field of prison education to help provide orientation, tutoring, and academic counseling.

Discussion:

In § 668.238(b)(5), the Department notes that it is aware that postsecondary institutions partner with community-based organizations to provide certain types of services. This is allowable as long as the postsecondary institution is following applicable rules regarding title IV aid, including those relating to written arrangements under § 668.5.

Changes:

None.

Comments:

One commenter stated that § 668.238(b)(9), which allows the Department to request “[s]uch other information as the Secretary deems necessary,” is too open-ended. The commenter stated that postsecondary institutions may not be able to comply with the Department's request if the information and supported data are not collected through current information technology data systems.

Discussion:

The Department needs to be able to ask applicants for more information if any area of an application is lacking. The Department does not intend to request information from postsecondary institutions that they cannot obtain, and if the Department does so, the postsecondary institution will have the opportunity to note that it cannot obtain the information and why.

Changes:

None.

Comments:

Several commenters asked that the Department create specific application requirements relating to correspondence PEPs, because the regulations would be burdensome, not feasible and cost prohibitive for those programs.

Discussion:

As noted throughout the discussion section, the Department will hold PEPs offered through all methods of delivery to the same standards. The Department therefore declines to adopt the commenter's suggestion.

Changes:

None.

Comments:

One commenter asked whether a postsecondary institution may offer PEPs in States other than where its main campus is located.

Discussion:

A postsecondary institution may offer PEPs in States other than where its main campus is located. Note that every correctional facility where a postsecondary institution offers a PEP and enrolls a confined or incarcerated individual must be reported as an additional location of the postsecondary institution, even if the prison education program is offered through distance education or correspondence courses.

Changes:

None.

Reporting Requirements (§ 668.239)

Comments:

One commenter asked the Department to mandate additional PEP reporting requirements including which PEP courses are equivalent to courses offered on the main campus and are eligible for credit transfer; the share of confined or incarcerated individuals accessing Pell grants who complete the course; and the share of confined or incarcerated individuals accessing Pell grants who fail to complete the course, indicating the reasons, including transfer or release.

Discussion:

The Department will have information on completion and withdrawal rates in our internal systems or databases. While we decline to incorporate other information collection into the regulation, we will consider these suggestions when developing an information collection under § 668.239(a).

Changes:

None.

Comments:

A few commenters believe that the Department should not require postsecondary institutions to report information about transfer and release through an agreement with the oversight entity under § 668.239(c). One of those commenters suggested that the Department modify the National Student Loan Data System to allow the oversight entity to directly provide this information.

Discussion:

While we appreciate the commenter's input and emphasis on the most efficient method to collect this important data, the Department declines to remove the requirements for institutions to obtain this information. The HEA requires that the Department provide annual publicly available reports to Congress about PEPs. Some of that information is about outcomes, including earnings outcomes or individuals who continue their education post-release. The Department needs information about transfer or release dates to fulfill the statutory mandate, and it is unclear whether the Department can collect such information from the large number of separate agencies and facilities that would otherwise be required.

The Department will also provide data through various systems to the oversight entity and postsecondary institutions to assist in completing the best interest determination.

We commit to continue to analyze the feasibility of information collection directly from oversight entities or correctional facilities, and the regulatory language allows for that option. If the Department ultimately decides to collect such information from oversight entities or correctional facilities, we will not require institutions to obtain the information separately. We also intend to provide guidance regarding how and where transfer and release date information must be reported.

Changes:

None.

Comments:

One commenter expressed concern regarding the potential reporting under § 668.239(a). This section allows the Department to publish a notice in the

Federal Register

requesting data from participating institutions. The commenter is concerned that the Department will require postsecondary institutions to report data beyond the specific data items prescribed in the HEA. The commenter was concerned that we will request additional data from the oversight entities and institutions that they may not typically collect. The commenter noted that postsecondary institutions may not have effective information technology systems that are capable to collecting some of the data that the Department may request.

Discussion:

Because the Department is required to submit an annual report to Congress, we must be able to collect applicable data items. We cannot publish in regulation all of the data elements that we will need from participating institutions, because we may need to update data items. The Department must have the flexibility to amend, change, rescind, or further develop collection items. We have used similar processes in other contexts. For example, we publish an annual notice regarding the application verification of FAFSA® information. The Department has not always added verification criteria; in fact, in response to data analysis and feedback received, we removed several verification items over the years and endeavored to streamline requirements annually. We hope to do the same with any notice regarding PEPs.

Changes:

None.

Limitation or Termination of Approval (§ 668.240)

Comments:

One commenter stated that the scope of the Department's authority to limit or terminate a PEP for violating any terms of proposed subpart P is unreasonable, too restrictive, does not consider the materiality of violation observed, and does not provide a process to appeal and time to cure the violation. The commenter suggested we clarify term violation and related materiality and establish a process for an institution to appeal and a time to cure the violation.

Discussion:

The Secretary's action to remove a PEP would be the same as an action to remove any other eligible program, meaning that the action would be taken under part 668, subpart G; through a revocation action under § 668.13(d) for a provisionally certified institution; or addressed during an institution's application for recertification.

The decision to terminate, revoke, or end the approval during recertification of a PEP will be based upon the Department's evaluation of the violation and in consideration of the institution's ability to administer the program. While the Department declines to create a separate process in regulation for removing PEPs, we acknowledge the commenter's concerns about materiality. We have changed the language to clarify these decisions will be made on a case-by-case basis. The Department will work with postsecondary institutions to resolve reasonable issues or minor violations throughout of the PEP requirements.

Changes:

We have revised § 668.240(a) to state that the Secretary may limit or terminate or otherwise end the approval of an institution to provide an eligible prison education program if the Secretary determines that the institution violated any terms of the subpart or that the institution submitted materially inaccurate information to the Secretary, accrediting agency, State agency, or oversight entity.

Best Interest Determination (§ 668.241)

Comments:

Many commenters submitted concerns regarding the required assessment of the PEP by the oversight entity. Commenters generally stated that the Department was proposing to regulate beyond congressional intent and the Department's statutory authority. The commenters noted that postsecondary institutions and oversight entities may choose not to offer PEPs due to the regulatory burden and cost. Commenters argued that there was little research to support the requirement to assess items proposed in regulation.

Many commenters also noted that the oversight entity may not have the expertise, data, training, or resources in the postsecondary education to set thresholds and benchmarks for the indicators related to outcomes, such as earnings and job placement rates of formerly confined or incarcerated individuals who have been released. Several commenters stated that the regulations do not consider labor market biases or post-release employment barriers to formerly incarcerated students.

The following are recommendations made by commenters to improve the best interest determination:

· Make all best interest indicator assessments permissive instead of mandatory, by changing “must” to “may” assess.

· Remove the exception for exceptional circumstances from the assessment of transferability of credits to any location of the institution that offers a comparable program.

· Make all the indicators optional except transferability of credits and academic and career advising for at least four years due to lack of data.

· Replace the indicators with faculty contact hours, meaningful engagement with peers, and ability to engage in research.

· Replace the indicators with civic engagement, family reunification, and increased self-efficacy.

· Assess other dimensions including physical, mental, and emotional issues.

· Add as optional metrics information about reentry services, whether credentials gained align with current labor market needs for in-demand industry sectors, and credentials that confined or incarcerated individuals gain through their participation that led to in-demand careers.

· Add an optional metric of how much regular and meaningful involvement programs have between students, faculty, and program administrators at the correctional facility.

· Replace metrics with access to support services and academic resources, tutoring, library resources and services, and technology.

· Add additional indicators that include whether the mode of course instruction for the prison education program is substantially similar to the primary instructional format at the home institution, preferably weighting in-person over virtual instruction, whether the demographics of the confined or incarcerated individual match the wider prison population, regardless of the main campus population of the home institution, and whether the prison education program staff and faculty represent or have experience or background working with or pertaining to underrepresented populations and groups, including individuals directly impacted by systemic racism, generational cycles of poverty and exclusion, or incarceration.

· Remove threshold requirements for the indicators related to outcomes.

· Modify the indicator related to earnings post release to include a succeeding sentence to outline if earnings data for individuals who graduated from the prison education program has been recorded, that data should carry more weight than a comparison to graduates of programs offered by the institution writ large.

· Clarify and rearrange indicators related to transfer.

· Specify how the earnings indicator is calculated.

· Revert to the statutory language for the assessment of earnings.

· Replace the oversight entity with the accrediting or State approval agency as the entity that determines best interest.

· Remove the oversight entity from the best interest determination.

· Replace the oversight entity with the relevant stakeholders for the best interest determination.

Discussion:

The Department disagrees with commenters that we are regulating beyond congressional intent and the Department's statutory authority. We have the general authority to regulate on the HEA unless otherwise directly prohibited from doing so in statute. We thank the community for its feedback on the best interest determination section. However, we acknowledge the wide-ranging comments and suggestions about the proposed best interest indicators, in particular those indicators focused on student outcomes. Based on persuasive commentary, we have decided to make all outcomes indicators optional but maintain the requirement that the current input indicators must be assessed by the oversight entity. We believe the input indicators are foundational requirements. It is important that the oversight entity assess whether confined or incarcerated individuals are receiving these necessary supports as a part of the PEP.

The Department believes that assessment of inputs and outcomes is paramount in establishing a standardized framework for the oversight entity. We reiterate that the oversight entity is not required to deny a PEP if it fails to satisfy one of the

indicators. The oversight entity can take the totality of circumstances into account, which we have purposefully left undefined for flexibility in making decisions that are unique to each correctional facility and each PEP.

While assessment of outcomes indicators is optional, we encourage the oversight entity to assess as many of them as possible. As we stated in the NPRM, we intend to provide the oversight entity with data to assist in making outcomes assessments, and we will do so even if the oversight entity chooses not to assess one or more of the outcomes metrics. The Department also will assess outcomes, because the HEA requires the Department to provide a publicly available annual report to Congress that includes numerous outcomes measures.

The Department may:

• Publicly report on the rates of confined or incarcerated individuals continuing their education post-release. As the Department obtains transfer and release dates from postsecondary institutions, we could calculate rates of reenrollment using our internal data systems.

• Publicly report of job placement rates. The Department may be able to calculate and report on job placement rates through employment information that may be available via the College Scorecard using Internal Revenue Service (IRS) data or using the employment information of high school graduates from the U.S. Census Bureau.

• Publicly report on earnings of formerly confined or incarcerated individuals through program-level earnings via the College Scorecard using IRS data.

• Publicly report on rates of recidivism of PEP graduates through data obtained through reporting to the Department from States required by the Workforce Innovation and Opportunity Act. There may be additional data on recidivism from the Bureau of Justice Statistics and the U.S. Sentencing Commission that the Department may also be able to incorporate into a published analysis.

• Publicly report about rates of program completion of confined or incarcerated individuals. Postsecondary institutions currently report graduation rates to the Integrated Postsecondary Education Data System (IPEDS) and the Department produces completion rates of title IV recipients through the College Scorecard.

Finally, there may be other items that the Department reports on as required by statute or if the Department requests information from the postsecondary institutions through a

Federal Register

notice as required in § 668.239(a).

With respect to the indicator related to transfers in § 668.241, the Department accepts the suggestion to remove the exception for exceptional circumstances surrounding the student's conviction. It is not our intention to encourage postsecondary institutions to deny admission to formerly incarcerated students that were once enrolled in PEPs, and we are persuaded by the commenter that such language could form the basis for an institution's decision for such a denial.

With respect to the earnings indicator related to earnings, we have amended the language to no longer suggest a comparison to the earnings of a typical high school graduate. Although the Department continues to believe that post-graduation earnings are an important indicator of quality in postsecondary programs, we are persuaded by commenters that due to the ongoing barriers to employment for formerly incarcerated individuals and the resulting discrepancies in earnings between typical high school graduates and such individuals, it is not appropriate to compare the earnings of confined or incarcerated students who complete programs and are released from incarceration and the earnings of high school graduates.

The Department declines to add additional indicators or to further edit the remaining indicators to the regulation, but the oversight entity in collaboration with the relevant stakeholders through the feedback process has the flexibility to add other pertinent indicators relevant to PEP success.

The Department also declines to replace the oversight entity with the accrediting agency or relevant stakeholders. Section 484(t) of the HEA is clear that the oversight entity has sole authority to approve a PEP and make the best interest determination.

With these changes, the Department is confident that there are sufficient existing guardrails in the final regulations to protect confined or incarcerated individuals from subpar prison education programs, support postsecondary institutions and oversight entities, and safeguard the taxpayer investment.

Changes:

We have revised § 668.241(a) to make the three outcome indicators—postsecondary enrollment following release, job placement rates, and earnings for graduates—optional factors that an oversight entity may consider in its determination of whether a program is operating in students' best interest.

Comment:

One commenter suggested requiring that PEPs transcript credits in the same way that they would transcript courses offered to students who are not confined or incarcerated individuals.

Discussion:

The Department does not have the authority to regulate an institution's transcripts.

Changes:

None.

Comments:

One commenter suggested that the Department require the oversight entity to identify how it determines the appropriate stakeholders, including any applicable conflict of interest standards.

Discussion:

Under the statute, the oversight entity has the authority the approve a PEP and determine that it is in the best interest of confined or incarcerated individuals. Relevant stakeholders provide nonbinding feedback to the oversight entity. The list of relevant stakeholders is reported to the Department under § 668.241(f). We decline to add additional requirements, but we do believe that these final regulations will create a more informed, holistic process.

Comments:

One commenter suggested that the feedback process under § 668.242(b)(1) be open to the public.

Discussion:

The feedback process allows relevant stakeholders to provide nonbinding input to the oversight entities. The Department does not intend to regulate further on the parameters of the feedback process, to allow the oversight entity flexibility to set up that process.

Changes:

None.

Comments:

One commenter suggested that the Department provide guidance on how many indicators a PEP is permitted to not meet under § 668.241(b)(2) but still be deemed as operating in the best interest of confined or incarcerated individuals.

Discussion:

The statute allows the oversight entity to not only approve a PEP's operation in a correctional facility but also to determine that it is operating in the best interest of the enrolled confined or incarcerated individuals. Apart from identifying the factors that the oversight entity may and must consider in making its determination, the Department will provide flexibility to the oversight entity and not regulate further in this area.

Changes:

None.

Comments:

Several commenters suggested that the Department further articulate an appeal process under § 668.241(c) if the oversight entity declines to permit a PEP from operating at a correctional facility. The commenters suggested that the appeal process include an explanation for the rejection, timeframes for an appeal,

incorporating a vote from the relevant stakeholders and a mediation process with the Department.

Discussion:

The Department agrees that an appeal process is a best practice and supports the use of an appeal process by oversight entities wherever possible. However, the oversight entities include the Federal Bureau of Prisons and the State departments of corrections, and the Department does not have the authority to directly regulate the process of another Federal or State agency.

Changes:

None.

Comments:

One commenter suggested that the Department note in regulation that it will review the standards utilized by the oversight entity at recertification or in program reviews to ensure consistency and compliance across the oversight entities.

Discussion:

The Department will ensure that postsecondary institutions are complying with the regulations during program reviews and at recertification. As stated under § 668.241(f), the postsecondary institution must maintain documentation about the PEP, which can be used by the Department for program reviews or recertification reviews.

Changes:

None.

Comments:

One commenter suggested that the Department include language that permits an approved PEP to continue in approved status if the institution provides all required materials to the oversight entity for approval 240 days in advance of the expiration of the program participation agreement. Section 668.241(e)(1) requires an institution to obtain final evaluations of each PEP not less than 120 days before the expiration of the institution's Program Participation Agreement (PPA), but there is no provision for delays by the oversight entity. The commenter requested the addition of regulatory language that permits approved programs to continue to be approved if the institution provides all required materials to the oversight entity for approval 240 days in advance of the expiration of the PPA. This, according to the commenter, would put the onus on the oversight entity to act in a timely fashion.

Discussion:

The Department will consider the totality of circumstances on a case-by-case basis during the recertification process. The Department will consider whether the postsecondary institution is actively working with the oversight entity and the oversight entity indicates that it is actively reviewing the PEP. The Department declines to regulate on a formal process for case-by-case considerations.

Changes:

None.

Comments:

One commenter stated that the term “subsequent final evaluations” under § 668.241(e)(1) is not clear.

Discussion:

“Subsequent final evaluations” refers to the requirement that the oversight entity make a best interest determination at least 120 days prior to expiration of the postsecondary institution's program participation agreement, in perpetuity, as long as the institution seeks to maintain the eligibility of the PEP.

Changes:

We have removed the word “final” from § 668.241(e)(1).

Comments:

One commenter inquired whether the cross-reference to paragraph (c) in § 668.241(e)(1) was correct.

Discussion:

The cross-reference was incorrect. We updated the paragraph for clarity.

Changes:

The paragraph will now state that after its initial determination that a program is operating in the best interest of students under paragraph (a), the institution must obtain subsequent evaluations of each eligible prison education program from the responsible oversight entity not less than 120 calendar days prior to the expiration of each of the institution's Program Participation Agreements, except that the oversight entity may make a determination between subsequent evaluations based on the oversight entity's regular monitoring and evaluation of program outcomes.

Comments:

Under § 668.241(e)(2)(i), the regulation requires the postsecondary institution to submit data on “all” students for the oversight entity to determine continued approval. One commenter requested that the Department delete the word “all,” because in limited circumstances, data may not be available to the postsecondary institution.

Discussion:

The Department agrees in part with the recommendation. It is not our intent for an oversight entity to deny a PEP for reasons beyond an institution's control, because the institution may lack data that is unavailable, for example, or that was not part of the oversight entity's determination of whether the program was being operated in students' best interest. We do not agree, however, with the commenters who suggested that the regulation should not apply to all students. Instead, we believe that the regulation should require the institution to provide all applicable data for students who were enrolled in the PEP, which would exclude data that the oversight entity did not require to make its determination and any data that are unavailable and cannot be obtained by the institution.

Changes:

Section 668.241(e)(2)(i) will be updated to reflect application of “applicable” factors, providing that each subsequent evaluation must include the entire period following the prior determination and be based on the applicable factors described under paragraph (a) for all students enrolled in the program since the prior determination.

Comment:

One commenter suggested to remove the word “for” before “public disclosure” in § 668.241(f)(1).

Discussion:

The Department views this as a style preference and declines to make the change.

Changes:

None.

Comments:

One commenter suggested that all documentation related to records mandated under § 668.241(f) be made public.

Discussion:

The Department believes that requiring the oversight entity or postsecondary institution to publish all documentation related to the decision-making process would discourage participation. There are also confined or incarcerated individual privacy considerations that would be particularly problematic given the small size of many of these programs. The oversight entity or postsecondary institution would not be able to publish data that would indirectly identify an individual from the information provided.

The HEA requires the Department to release an annual data report that is available to the public, and we believe that will provide valuable information to both institutions and other policymakers sufficient to evaluate prison education programs.

Changes:

None.

Comments:

One commenter stated that State departments of corrections will require financial assistance to offset material and human resources needed to implement the regulations in § 668.241.

Discussion:

The HEA does not provide for an administrative cost allowance for oversight entities, and the Department does not have the authority to establish such an allowance.

Changes:

None.

Comments:

One commenter asked the Department to define several terms, including “unique constraints,” “career advising,” “substantially similar,” and “overarching requirement.” In addition, the commenter asked many technical questions regarding how the process of the best interest determination will work.

Discussion:

The regulations establish a framework to implement the statutory provisions. While we believe this framework is sufficiently clear without providing additional defined terms and decline to provide technical guidance in this document, the Department intends to provide guidance to oversight entities and postsecondary institutions regarding the best interest determination, as required by section 484(t)(2) of the HEA.

Changes:

None.

Transition to a Prison Education Program (§ 668.242)

Comment:

One commenter requested that the Department specify the date on which a confined or incarcerated individual needs to be enrolled in a formerly eligible program in order to qualify for transitional eligibility. The commenter stated that it is not clear whether this provision applies to a confined or incarcerated individual who was enrolled in an eligible program outside a correctional facility prior to becoming incarcerated. The commenter also stated that it is unclear whether this provision restricts the ability of title IV-eligible institutions to offer non-Pell-eligible programs in correctional facilities.

Discussion:

Section 668.242(b) provides that an institution is not permitted to enroll a confined or incarcerated individual on or after July 1, 2023, who was not enrolled in an eligible program prior to July 1, 2023, unless the institution first converts the eligible program into an eligible prison education program as defined in § 668.236.

This provision applies to any individual who is confined or incarcerated and who is enrolled in any program at a correctional facility in which the individual is receiving any title IV aid. For example, if an individual was enrolled in a distance education program prior to July 1, 2023, and subsequently becomes incarcerated after July 1, 2023, that individual can continue receiving a Pell Grant only until they have reached the time or eligibility limits under § 668.242(a), unless that distance education program becomes a PEP, which would include reporting the individual's correctional facility as an additional location.

Finally, the Department does not have the authority to restrict the ability of an eligible institution to offer programs that are not eligible for title IV aid, including Pell Grants, at correctional facilities.

Changes:

None.

Calculation of a Federal Pell Grant (§ 690.62)

Comment:

One commenter stated that the Department should insert language requiring PEPs to include the cost of obtaining required professional credentials for confined or incarcerated individuals in PEPs in their cost of attendance calculations.

Discussion:

The Department will not regulate on cost of attendance with these final regulations. The Consolidated Appropriations Act of 2021 made changes to allowable costs that may be considered in a confined or incarcerated individual's cost of attendance, which are “only tuition, fees, books, course materials, supplies, equipment, and the cost of obtaining a license, certification, or a first professional credential[.]” Therefore, a postsecondary institution may include the cost of obtaining the first professional credential in the individual's cost of attendance. The Department will provide additional guidance on the changes to cost of attendance components established by the Consolidated Appropriations Act of 2021 in the near future.

Changes:

None.

90/10 Rule (§ 668.28)

General Support

Comments:

Many commenters supported the 90/10 regulations and the consensus reached on the regulatory changes. Commenters overwhelmingly supported including financial aid administered by the VA as Federal revenue in the 90/10 calculation. Additionally, many commenters supported the changes to allowable non-Federal revenue and encouraged the Department to enforce the regulations with the full intent of the law.

Discussion:

The Department thanks commenters for their support. We intend to fully enforce the regulations.

Changes:

None.

General Opposition

Comments:

Several commenters opposed the proposed regulations on the basis that the regulations unfairly burden one sector of higher education and restrict academic choices of students. Several other commenters opposed the changes to the regulations because they stated that proprietary institutions will be disincentivized to enroll veterans because of the regulations and the significant cost of running a separate and distinct compliance program to remain eligible for VA funds. These commenters further stated that this will lead to decreased opportunities for veterans returning to civilian life after their service. Other commenters opposed the 90/10 rule generally because they claimed that the rule will cause proprietary institutions to increase tuition, incentivize proprietary institutions to recruit students who can pay for tuition without Federal funds, and reduce learning opportunities for low-income students and American students by encouraging proprietary institutions to recruit international students. One commenter suggested that the Department exempt certain institutions, such as those that offer terminal degree programs, post-baccalaureate programs, or medical programs from 90/10 because these institutions are already held to a high standard by other oversight mechanisms and provide unique value by helping the country fill its need for medical providers.

Discussion:

The ARP modified section 487(a) and (d) of the HEA to require proprietary institutions to count all Federal funds in the numerator of their 90/10 calculation. The Department's regulations for which funds must be counted in the numerator and the formula for how these institutions must calculate the percentage of their revenue derived from Federal funds are consistent with statutory requirements. Further, the statute does not provide a basis to exempt certain proprietary institutions from this requirement.

Changes:

None.

Comments:

Several commenters generally opposed the proposed changes to allowable non-Federal revenue. A few of these commenters requested additional facts, evidence, data, or other sources the Department employed as a basis for our assertion that proprietary institutions have maneuvered to game the system and that there is a need to modify allowable non-Federal revenue or other components of the 90/10 calculation, including creating a disbursement rule and disallowing the proceeds from the sale of accounts receivable, in response to these behaviors.

Discussion:

As stated in the NPRM, the Department based its regulations on observations of 90/10 calculations, audit workpapers, program reviews, and other oversight activities.

1

Based on the Department's observations and its experience enforcing 90/10 (and previous enforcement of 85/15), the Department believes that the changes to allowable non-Federal revenue are necessary to uphold the statutory intent of the 90/10 calculation.

2

1

See 87 FR 45454 and 87 FR 45459.

2

As an example, Kofoed (2020) demonstrates that proprietary institutions account for a

disproportionate share of GI Bill spending while graduating relatively few veterans, which he attributes to the exclusion of GI Benefits from the 90/10 calculation. See Kofoed, Michael (2020). “Where have all the GI Bill dollars gone? Veteran usage and expenditure of the Post-9/11 GI Bill.”

Brookings Institute

report available at

https://www.brookings.edu/research/where-have-all-the-gi-bill-dollars-gone/

.

Changes:

None.

Calculating the Revenue Percentage (§ 668.28(a)(1))

Statutory Authority and Congressional Intent

Comments:

Several commenters stated that the 90/10 regulations exceed statutory authority and Congressional intent. Some of these commenters stated that the proposed regulations do not provide a definition for “Federal revenue,” and the lack of a definition gives the Department an amount of discretion that Congress did not intend. A few commenters suggested that the Department restart the negotiation process to define “Federal funds.”

These commenters further stated that it is clear that Congress intended for the Department to include VA and DOD education funds used to attend such proprietary institution as “Federal education assistance funds,” and clarified that they are not disputing that portion of the regulations. These commenters further stated that Federal agencies are required to point to clear grants of congressional authority in order to enact the regulations that are contemplated. Commenters requested clarification on the congressional authority that the Department believes allows it to include other types of Federal education assistance funds as Federal funds beyond DOD and VA funding.

Discussion:

The ARP amended the HEA to state that proprietary institutions should include “all Federal education assistance funds” in the numerator of their 90/10 calculation. It is apparent that Congress intended for institutions to include all other Federal funds, in addition to title IV funds, used to pay for tuition, fees, and other institutional charges in the numerator of their 90/10 calculation based on this language, not just DOD and VA funds. Further, Federal appropriations for education assistance programs and disbursements to institutions may change from year to year. We do not want to inadvertently create an incentive for proprietary institutions to identify a large source of Federal funds not on the list and then target students that receive this funding.

The Department defines Federal funds in § 668.28(a)(1)(i) as title IV, HEA program funds and any other education assistance funds provided by a Federal agency directly to an institution or student including the Federal portion of any grant funds provided by or administered by a non-Federal agency, except for non-title IV Federal funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges. The ARP language is broad, and a broad regulatory definition aligns with statutory intent. We do not believe it is necessary to renegotiate the definition of Federal funds because the current definition implements the statutory change in the ARP.

Changes:

None.

Comments:

A few comments stated that in

W. Virginia

v.

EPA,

142 S. Ct. 2587, 2608 (2022), the Court held that Congress did not grant a Federal agency the authority necessary to create a regulatory scheme that the agency had attempted to enact, and under a body of law, known as the “major questions doctrine,” the Court found that, given both the separation of powers principles and a practical understanding of legislative intent, an agency must point to “clear congressional authorization” for the authority it claims. These commenters questioned whether Congress provided clear authorization for the Department to make any changes to allowable non-Federal revenue in the proposed 90/10 regulations given that the ARP only modified what funds must be counted in the numerator. In addition, these commenters stated the proposed regulations violate the Administrative Procedure Act (APA) as the regulations are arbitrary and capricious.

Discussion:

The ARP modified the statutory provisions in section 487 of the HEA governing which funds institutions must include in the numerator of their 90/10 calculation. The statute did not prohibit the Department from amending other portions of the 90/10 regulatory calculation related to allowable non-Federal funds. Further, it included a section directing the Department to amend the 90/10 regulations through the negotiated rulemaking process, without any new limitation on our authority to revise other parts of the 90/10 regulations, as has been done in prior years. The Department has the statutory authority granted by section 437 of the General Education Provisions Act to promulgate regulations that are consistent with statutory requirements and necessary for us to effectively administer the program using the negotiated rulemaking process required in section 492 of the HEA. Additionally, our rulemaking to determine how to calculate the 90/10 statutory requirement is not of such political and economic consequence that involves a major question under

W. Virginia

v.

EPA.

Finally, we have provided our reasoned basis for these regulations in the proposed and final rules.

Changes:

None.

Comments:

A few commenters requested clarification on the authority upon which the Department relied for its proposal that it has the authority to publish, on a semi-regular basis, “updates” as to what Federal funds should be counted in the 90/10 calculation without any notice and comment rulemaking or negotiated rulemaking process given that the ARP requires that its amendments to section 487 of the HEA be subject to negotiated rulemaking. These commenters stated that we should provide the public with an opportunity to comment on the definition of Federal funds.

Several commenters stated the Department has no authority to enforce the proposed rule prior to the effective date of the regulations, and that the HEA states that a regulation related to title IV programs cannot take effect during the current award year. These commenters further stated the Department lacks the authority under the HEA to force proprietary institutions to early implement the regulation, and that the ARP stated that its statutory changes should follow master calendar. Several commenters questioned the statutory authority on which we relied to justify enforcing a title IV regulation prior to the effective date of the final rule. They requested further clarification on how we will reconcile its application of the proposed regulations to proprietary institutions with a fiscal year beginning on January 1, 2023, with the clear statutory authority set forth in 20 U.S.C. 1089(c). These commenters recommended that revenues subject to the regulation should only be counted after July 1, 2023, regardless of the institution's fiscal year calendar. In addition, these commenters stated that the Department cannot retroactively apply these regulations. Some of these commenters requested that, if the Department contends that the regulations are not retroactively applied, the Department provide legal support for the assertion.

Finally, a few commenters requested that we clarify on which HEA provisions we relied in determining that certain proprietary institutions, but not all, would be required to comply with the changes to the 90/10 regulations on January 1, 2023.

Discussion:

Section 668.28(a)(1) defines Federal funds. The updates published in the

Federal Register

would simply notify institutions about which types of specific educational assistance funds are covered by the regulatory language. This is similar to how the Department publishes annually in the

Federal Register

which components of the FAFSA® institutions must verify, and this type of guidance does not require notice and comment.

3

Therefore, the Department's rulemaking activity has met the ARP's statutory requirements that the revisions to section 487 of the HEA be subject to public involvement and the negotiated rulemaking process.

3

34 CFR 668.56.

Section 2013 of the ARP has two provisions related to the timing of this change. First, it requires that these changes be subject to master calendar requirements. It also states that the amendments to section 487 of the HEA, which describe funds that must be included in the numerator of the 90/10 calculation, apply to institutional fiscal years beginning on or after January 1, 2023. This is why the Department chose to implement the regulations when an institution's fiscal year begins rather than requiring all institutions to implement the changes on January 1, 2023. The regulations meet both requirements because the regulations will apply to institutional fiscal years beginning on or after January 1, 2023, and institutions will determine their compliance with the regulations and file their related audited financial statements after July 1, 2023. The Department would enforce any consequences of failing 90/10 after July 1, 2023, and the regulations are, therefore, not retroactive in their application. It is not correct to characterize this process as “early implementation” of the regulations because the audit submissions and compliance requirements go into effect July 1, 2023. Proprietary institutions that fail the 90/10 requirements for the 2023 fiscal year will not be impacted until early in 2024, and an institution must determine if it fails 90/10 within 45 days after the end of its fiscal year.

Changes:

None.

Definition of Federal Funds

Comments:

A few commenters supported our definition of Federal funds as only those used to pay for tuition, fees, and other institutional charges. These commenters also supported not including in the definition of Federal funds those that are expressly used for other purposes, such as housing or books when those are not included in institutional charges.

Discussion:

The Department thanks commenters for their support. Our definition most accurately reflects statutory intent.

Changes:

None.

Comments:

Several commenters urged the Department to publish the list of Federal funds as soon as possible so that proprietary institutions can begin developing systems and procedures to track these funds. These commenters emphasized that institutions also need adequate notice so that they can effectively manage any changes they might need to make regarding admissions and enrollment. A few commenters asserted that this lack of clarity on which Federal funds must be included in an institution's 90/10 calculation at this point of implementation deprives institutions of fair notice of laws they are supposed to follow. Many of these commenters urged the Department to delay implementation of the new 90/10 regulations for a year or publish an abbreviated list in the first year if we cannot publish the list in a timely manner.

Discussion:

The Department recognizes the need to publish the list so that proprietary institutions know which funds they must include, and we plan to publish on a timeline that will provide adequate time to account for the full list of Federal funds in the first fiscal year that begins on or after January 1, 2023.

Changes:

None.

Comments:

One commenter asked if Chapter 31 of the Veteran Readiness and Employment program would be counted as Federal funds in the 90/10 calculation. A few commenters recommended the Department exclude scholarship aid awarded through the Health Professions Scholarship Program (HPSP), the National Health Service Corps (NHSC) Scholarship Program, and the Indian Health Service Scholarship (IHSS) Program from the definition of Federal funds that institutions must include in the numerator of their 90/10 calculation. These commenters further recommended that we recognize the unique nature of these competitively awarded programs and not consider this aid as Federal funds under these regulations.

Discussion:

The Department will publish in the

Federal Register

the full list of Federal funds that proprietary institutions must include. We will publish on a timeline that provides institutions with adequate time to account for the full list of identified funds. The statute defines Federal education assistance funds that institutions must count as Federal funds as funds disbursed or delivered to or on behalf of a student to be used to attend the institution. Therefore, the list will include all identified Federal education assistance funds that meet the definition in statute.

Changes:

None.

Comments:

Several commenters supported including Federal funds awarded directly to students as Federal funds in the 90/10 calculation. A few other commenters opposed including Federal funds paid directly to students in the numerator of the 90/10 calculation. A few of these commenters expressed concern with how proprietary institutions should account for funds disbursed directly to students if the agency does not provide this information to the institution, and they recommended that the Department should limit this to only funds that the institution receives notice of. One commenter recommended that the Department accept a proprietary institution's use of a certification from an agency or student that contains the details of Federal funds received as sufficient basis for the Federal funds it includes in its 90/10 calculation.

Discussion:

The Department appreciates commenters' support for including Federal funds disbursed directly to students in the numerator of the 90/10 calculation. The ARP amended section 487(a) of the HEA to require proprietary institutions to include “Federal funds that are disbursed or delivered to or on behalf of a student,” and, thus, it is a statutory requirement to include all Federal funds disbursed to a student in the numerator of the 90/10 calculation.

For purposes of 90/10, we understand that proprietary institutions need a basis to calculate the Federal funds disbursed directly to its students. The Department considers a certification from an agency describing the Federal funds that a student received as a sufficient basis for this calculation. In cases where an agency does not provide this information to an institution, we will evaluate on a case-by-case basis whether the institution made a good-faith effort to obtain this information, including if a student certifies that they received Federal funds and the amount of funds received.

Changes:

None.

Comments:

A few commenters requested clarification on whether proprietary institutions would only need to include revenues from new Federal sources when those funds paid for institutional costs for the fiscal year

starting after the Federal program has been identified on the published list. These commenters requested further clarification on how proprietary institutions should manage the termination of students based on projections that the students' enrollment and reliance on Federal funds may cause the institution to violate the 90/10 rule. Additionally, one commenter suggested that the Department allow proprietary institutions to exclude in their 90/10 calculation newly identified Federal funds that are added to the

Federal Register

notice that a currently enrolled student receives. A few commenters asked that we publish any updates to the list of Federal funds by November 1 of the preceding year for an institution to be required to include those Federal funds in its fiscal year beginning on or after July 1 of the following year, following the master calendar outlined in section 482 of the HEA. One commenter suggested revising the regulatory language to state that proprietary institutions will only be required to include newly added Federal funds that are added to the

Federal Register

notice at least six months before the start of an institution's fiscal year.

Discussion:

As we stated in the preamble to the NPRM, in instances where the Department updates the initial

Federal Register

notice midway through an institution's fiscal year, the proprietary institution will be responsible for including those funds paid for institutional costs the fiscal year starting after the Federal program has been identified on the published list.

4

This lead time is also adequate for institutions to begin accounting for Federal funds from currently enrolled students, and therefore it is not necessary to allow institutions to exempt counting newly identified Federal funds that these students receive. Likewise, it is unnecessary to publish updates by November 1 or at least six months before the start of an institution's fiscal year for institutions to include those funds in a fiscal year beginning on or after July 1 of the following year. Proprietary institutions are responsible for generating at least 10 percent of their revenue from allowable non-Federal sources. How to meet this requirement is up to the institutions, provided that they follow regulatory and statutory requirements. The regulations neither contemplate, nor require, institutions to terminate the enrollment of students if they would otherwise fail the 90/10 rule. The Department hopes that institutions make enrollment decisions that are best for students and clearly communicate about potential issues in a clear and timely manner.

4

See 87 FR 54453.

Changes:

None.

Comments:

A few commenters requested clarification upon what basis, elements, factors, and evidence will the Department evaluate whether an institution has made a “good faith” effort to identify all Federal funds. They further requested clarification of what process and procedures the Department will employ to make this determination and what appeal process proprietary institutions will be provided. A few commenters also requested clarification on how the Department will observe institutional due process protections during the determination and appeal procedures.

Discussion:

We will evaluate the facts of a situation on a case-by-case basis to determine if an institution made a good faith effort to identify all Federal funds. This evaluation may include what information was readily available to an institution and the materiality of funds from that Federal source to an institution's 90/10 measure. Institutions have opportunities to resolve disputes with Department staff regarding the 90/10 measure (for example, providing additional information and/or documentation), or through an administrative process if a resolution is not reached.

Changes:

None.

Appendix C

Comments:

Several commenters recommended the Department clarify and streamline appendix C in the final rule, including by combining certain refund and adjustment categories and by combining title IV and Federal funds into one section. A few of these commenters suggested that the Department work with external certified public accountants to revise appendix C. Many of these commenters also requested that we include additional examples of adjustment and revenue categories in appendix C to allow institutions to reflect revenues more accurately in their 90/10 calculation. One commenter stated that it is confusing for appendix C to include an institutional matching payment as a subtraction from cash payments as usually it is treated as a non-cash write off. In addition to asking that we publish the list of Federal funds in the

Federal Register

at least six months prior the start of an institution's fiscal year, a few commenters asked the Department to publish any updates to appendix C at least six months before the start of an institution's fiscal year.

Many commenters recommended that as these 90/10 changes are implemented, we should be vigilant in monitoring the cash flows of institutions, through the calculations derived from the modified appendix C, to better understand how the new regulations changes institutional financial behavior and to ensure the regulations are strongly enforced to protect students and taxpayers.

Discussion:

The Department intends to evaluate the impact of the new 90/10 regulations on institutional financial behavior, as supported in the comments. Thus, the Department declines to combine Federal funds and title IV, HEA funds in appendix C so that the Department can more easily observe how the inclusion of other Federal funds impacts 90/10 rates. Likewise, we decline to collapse and combine the title IV and Federal funds category to only require institutions to report a topline dollar amount for Federal funds received because that would make it difficult for us to ascertain the impact of our new regulations. The Department expects institutions to apply title IV funds before applying other Federal funds to student accounts for 90/10 purposes because these regulations relate to title IV eligibility, and the Department intends to evaluate how the inclusion of Federal funds effects institutions' ability to comply with 90/10 requirements.

We understand that appendix C does not include every type of adjustment an institution may need to make when calculating 90/10. Appendix C is intended to generally outline how institutions must calculate 90/10 by providing an example that cannot reflect every situation. Institutions may need to add other refund or adjustment categories that are not included in our example to calculate their own 90/10 compliance. We have shown a variety of common line items in an institution's 90/10 calculation, and therefore we decline to add additional line items in appendix C. We also clarify that institutions should include a general adjustmen

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