Transcript Slide 1

Presentation © Dow Lohnes pllc 2011

How the New Federal Student Financial Aid Regulations Affect Adult Learners and Adult Learning

Michael B. Goldstein

Practice Leader Higher Education Dow Lohnes, pllc

The Tip of the Iceberg

Ignorance of the Law…

October 29, 2010 Federal Register Pages 66832 thru 66975 (143 pages)

On the Internet Nobody Knows You’re a Dog

The above cartoon by Peter Steiner has been reproduced from page 61 of July 5, 1993 issue of The New Yorker, (Vol.69 (LXIX) no. 20)only for academic discussion, evaluation, research and complies with the copyright law of the United States as defined and stipulated under Title 17 U. S. Code.

Rules Affecting Adult Learning & Adult Learners

• • • • • • State Authorization Definition of a “Credit Hour.” Prohibition against “Incentive Compensation.” Definition of “Misrepresentation.” Clarification of “Last Day of Attendance” and “Engagement” in online programs.

Definition of “Gainful Employment”

Hour” Credit Hour State Authorization

State Authorization

If an institution [is] offering postsecondary education through distance or correspondence education to students in a state in which it is not physically located * * * the institution must meet any State requirements for it to be legally offering postsecondary education in that State.

An institution must be able to document to the Secretary the State’s approval upon request.

34 CFR 600.9(c)

State Authorization

If an institution [is] offering postsecondary education through distance or correspondence education to students in a state in which it is not physically located * * * the institution must meet any State requirements for it to be legally offering postsecondary education in that State.

An institution must be able to document to the Secretary the State’s approval upon request.

34 CFR 600.9(c)

State Authorization Before the New Rule: Long Ago, In a Galaxy Far, Far Away

The 2006 Survey

When I came to America to establish the U.S. version of the Open University I thought I was dealing with one country.

51 Agencies representing

Vice-Chancellor, British Open University

43 States

National Governors Association Copyright © 2010 Dow Lohnes pllc

The 2006 Survey

When I came to America to establish the U.S. version of the Open University I thought I was dealing with one country.

I was mistaken...

51 Agencies representing

Vice-Chancellor, British Open University

43 States

National Governors Association Copyright © 2010 Dow Lohnes pllc

The 2006 Survey

51 Agencies representing 43 States

Copyright © 2010 Dow Lohnes pllc

Approval Required No Approval Required

The 2006 Survey

Low presence threshold Conflicting agency rules Unable to ascertain, in flux 51 Agencies representing 43 States District of Columbia

Copyright © 2010 Dow Lohnes pllc

Sample State Entry – Dow Lohnes 2011 Survey Authorizing State Agency Jurisdiction Web Access Average Approval Period Licensure for an Exclusively Online Program Required?

Physical Presence/Operating Defined?

State Board of Private Career Education

Private postsecondary career schools For regulations: http://www.sbpce.org/codes_regs.html

For forms: http://www.sbpce.org/forms.html

Less than 6 months No No

Department of Higher Education

Nonpublic or out-of-state postsecondary institutions For regulations and forms: http://www.adhe.edu/divisions/academicaffairs/Pages/aa _certification.aspx

Less than 6 months Yes Yes

Summary of Formal Requirements

No persons shall operate, conduct, maintain, or offer to operate in Arkansas a school, or solicit the enrollment of students residing in the state, unless a license is first secured from the Board. Any non-public or out-of-state postsecondary institution offering courses/degree programs customarily offered at college and universities must obtain certification from the Arkansas Higher Education Coordinating Board before offering distance delivery college-level courses/degree programs to AR students. Physical presence is defined as an institution offering courses/degree programs at a physical campus in AR and/or advertising distance delivery/online programs by direct mail and/or advertising to AR citizens, and targeted e-mails and postal mail to specific occupations.

Staff Guidance and Comments Legislative & Regulatory Developments

While the law is broadly written, guidance indicates that the Board does not require licensure of a strictly online program. Written confirmation is strongly recommended.

Agency guidance confirms that any online program must get approval from the Department.

Hour” Credit Hour The “New” Credit Hour

The New Credit Hour

• • • • The regulations describe a credit hour as: an amount of work represented in intended learning outcomes verified by quantifiable evidence of student achievement, as measured against the standard of the Carnegie Unit.

The “New” Credit Hour

• Based on the early 20 th Century “Carnegie Unit” – a unit of faculty workload.

• One credit hour = • one hour of classroom work + • two hours of outside-of-class study • for a minimum of 15 semester weeks or 10-12 quarter weeks, •

or the equivalent amount of work over an equivalent amount of time.

The “New” Credit Hour

• The regulations “affirm” that • Credit hour determination is an institutional responsibility, • The definition is a minimum • expectation, but Credit hour policies and procedures must be reviewed by an institution’s accreditor and

found consistent with the

regulatory standard.

The “New” Credit Hour

Recognition of Accrediting Agencies: (f) Credit hour policies. The accrediting agency, as part of its review of an institution for initial accreditation or pre accreditation or renewal of accreditation, must conduct an effective review and evaluation of the reliability and accuracy of the institution's assignment of credit hours.

34 CFR § 602.24

Hour” Credit Hour Incentive Compensation

Incentive Compensation

The institution will not provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance . . .

Incentive Compensation

People covered:

Any

person or entity engaged in

any

student recruiting or admission activities, or in making decisions regarding the award of financial aid.

Payments covered:

Any

commission, bonus or other incentive payment.

Basis of payments:

• Based directly

or indirectly

enrollments or financial aid.

on success in securing

Incentive Compensation

• • • • • • • • • • • • “Safe Harbors” in Effect July 2003-June 2011 Fixed compensation (salary or fixed wages) Programs not eligible for Title IV aid Arranging contracts between institution and employer, for employer’s employees Profit-sharing and bonus plans Completion of program or one academic year Clerical pre-enrollment activities Managerial and supervisory employees Token gifts to students and alumni Profit distributions based on ownership interests Internet-based recruitment activities Payments to third parties whose activities do not include recruitment, admissions Payment to third parties whose activities do include recruitment, admissions,

Incentive Compensation

New regulations effective July 1, 2011: • All safe harbors repealed • Emphasis on statutory language: • Institutions may not provide

any

incentive payment based [in

any

commission, bonus, or other part,] directly or indirectly, upon success in securing enrollments or award of financial aid, to

any

person or entity engaged in

any

student recruitment or admissions activity or in making decisions regarding award of Title IV funds

Incentive Compensation

Payments to Outside Organizations for Services • • • • Old Rule: Permitted any payment arrangement by an institution to an outside organization that provided services involving recruiting or admissions activities or awarding of Title IV funds Specifically permitted tuition-sharing arrangements

Provided that:

An outside organization could not compensate individuals performing recruitment/admissions/financial aid services for school in any manner that was impermissible for institution to compensate its own employees

Incentive Compensation

• • New regulations: An institution may not provide incentive compensation to any entity engaged in any student recruitment (or admissions or financial aid awarding) activity The same restrictions apply to school’s payment to third parties as apply to payments to its own employees

Incentive Compensation

• • Dear Colleague Letter attempt at clarification… Not permissible: Tuition-sharing payments based on formula that ties the amount payable to an entity to the number of students enrolled as result the entity’s work.

Permissible: Tuition as source of revenue from which compensation is paid to an unrelated third party for a variety of bundled services, including student recruitment, if the payment compensates an unaffiliated third party

Incentive Compensation

And the prohibition is

comprehensive --

Under prior rules, excluded from coverage of incentive compensation restrictions was: • Any compensation to recruiters based on their recruitment of students who enrolled only in programs that were not eligible for Title IV funds (For example, short-term training programs not leading to a degree or certificate, that were not approved for students to receive Title IV funds).

Incentive Compensation

Incentive Compensation

The new regulations no longer have this exemption • The definition of “enrollment” in the new regulations simply means the admission of a student into any part of an eligible institution • For enrollment in any program offered by the institution.

Hour” Credit Hour Misrepresentation

Misrepresentation

• • • “Misrepresentation is – Any false, erroneous or misleading statement Made to a student, prospective student or to any member of the public Or to an accrediting agency, a state agency or the Department of Education

Misrepresentation

• • • by the institution, or by one of its representatives, or by persons with whom an institution has an agreement to provide educational programs or marketing, advertising, recruiting or admissions services.

Misrepresentation

Misrepresentation specifically includes

• • • • •

representations about:

accreditation status or scope, or requirements for specialized accreditation to practice in a field or employability, or the prospect for employment, including employability of graduates, or transferability of credits, as well as conditions for accepting credits earned at another institution, or false, erroneous or misleading statements about whether successful completion of a course of instruction qualifies a student to receive, apply to take or take required licensure or certification examinations.

Misrepresentation

(LDA)

The “Sleeper” Issue

Last Day of Attendance (LDA)

What is it?

“LDA” is the date an institution is expected to use to calculate the amount of a Title IV refund when a student withdraws from a program.

The later the LDA, the less the refund.

Last Day of Attendance (LDA)

This is known as the R2T4 calculation.

Last Day of Attendance (LDA)

A majority of institutions with significant online programs reported that they calculated LDA based on the last day a student entered a secure classroom site – That is, “last click.” Source: WCET/ITC Survey, 2010

Last Day of Attendance (LDA)

• Guidance included with new regulations requires evidence of student engagement in an academically-related activity to demonstrate attendance in an online program. • Versus requiring evidence of “physical presence in the classroom” for on-the-ground programs.

Last Day of Attendance (LDA)

• ED reviewers have rejected a student logging into his or her secure online class as sufficient evidence of “attendance” to determine LDA.

• Instead, the measurement date is the last evidence of student engagement in an academically related activity, such as submission of a paper or participation in a discussion group.

• ED has retroactively applied the new standard to prior years’ program practices.

Last Day of Attendance (LDA)

• • • •

The ultimate bad outcome:

Inspector General audit: Because an institution’s online program did not require sufficient “engagement” it would be classified as “Correspondence Study.” Law: If an institution enrolls a majority of its students in correspondence study it ceases to be eligible to participate in the Title IV programs.

IG: The institution must refund several tens of millions of dollars of student aid.

The institution is a small independent (non-profit) college.

Last Day of Attendance (LDA)

Title IV

Hour” Credit Hour Gainful Employment

Gainful Employment

The law: • An eligible [for-profit] institution [is one that] offers a • postsecondary education program that is: At least a one-academic-year training program that leads to a certificate, degree or other recognized educational credential, and

Prepares students for gainful employment in a recognized occupation.

Gainful Employment

The law says a “recognized occupation” is An occupation that is identified by a Standard Occupational Classification (SOC) code * * *

Gainful Employment

That has been the interpretation of the law from 1965 to June 30, 2011.

Gainful Employment

The new Rule replaces the nature of the program (leads to a known occupation) with a set of metrics based on student completion and employment rates, salary outcomes and default rates.

A program that does not meet the Gainful Employment standard would cease to be Title IV-eligible.

Gainful Employment

The Gainful Employment rule is applicable to non-degree programs offered by public and independent [non-profit] Institutions

Gainful Employment

• • • • Only programs that are at a non-profit or public institution and are at least two academic years in length and that are specifically designed to be a transfer program and that do not lead to a certificate or other credential

awarded by the institution

are not subject to the Gainful Employment rules.

Gainful Employment

What Now?

What Now?

What Now?

Thank you!

Michael B. Goldstein

Member of the Firm and Practice Leader Higher Education Dow Lohnes pllc 1200 New Hampshire Ave NW Washington, DC 20036 202.776.2569

[email protected]

www.dowlohnes.com/education