New Guidance from U.S. Department of Education Clarifies Title IV Limitations on Written Arrangements for Program Offerings

Earlier this summer, the U.S. Department of Education (Department) issued Dear Colleague Letter GEN-22-07 (the DCL), identifying arrangements that do not comply with its Title IV federal student aid program (Title IV program) regulations governing agreements between Title IV-participating institutions of higher education (eligible institutions) and non-Title IV entities (ineligible entities) under which an ineligible entity provides part of the eligible institution’s academic program. The DCL also reminds institutions about related accreditation and disclosure requirements, and provides a Q&A pertaining to these arrangements.

Under Title IV program regulations at 34 C.F.R. § 668.5, a domestic eligible institution can enter into a written arrangement for an ineligible entity to provide up to 50 percent of the institution’s academic program and the program will remain Title IV eligible if (1) the arrangement has been approved by the institution’s accrediting agency and (2) the institution and ineligible entity are not owned or controlled by the same person or entity. Without accreditor approval, the ineligible entity can provide no more than 25% of the institution’s program. 

Based on instances where the Department has identified noncompliance with the requirements of 34 C.F.R. § 668.5, the DCL clarifies both (1) the manner in which the respective percentages of a program offered pursuant to a written arrangement between an eligible institution and an ineligible entity should be determined, and (2) the requirements for a student engaged in a “gap-year” experience under a written arrangement with an ineligible entity to be considered a “regular student” for purposes of Title IV eligibility.

Percentage of Program Offered by the Institution vs. the Ineligible Entity

The Department has found that in certain written arrangements, the portion of a program offered by an ineligible entity was inaccurately calculated, making it appear that it met the applicable regulatory limits when it actually exceeded the limits. When attributing course hours of a program offered under a written arrangement with an ineligible entity, the DCL states that the party providing a course within a program is the party with authority over design, administration or instruction of a course. Moreover, the ineligible entity is considered to be providing a course for the purposes of 34 C.F.R. § 668.5 if it establishes course completion requirements, delivers instruction or mandatory tutoring, assesses the student learning outcomes, or develops curricula and course materials where the institution and its instructors cannot make changes to such materials.

The DCL further provides examples of situations that the Department considers to be the provision of coursework by an ineligible entity for the purposes of 34 C.F.R. § 668.5, rather than coursework provided by an eligible institution:

1. A program is offered in its entirety by an ineligible entity, but the program is inaccurately represented as being offered by the eligible institution for the primary purpose of obtaining Title IV funds for an otherwise ineligible program.
2. The ineligible entity provides instructors for the program, and any part of the compensation for those instructors is paid directly or indirectly by the ineligible entity rather than paid by the institution.
3. The eligible institution designates one of employees as the “instructor of record,” or a similar designation, while course instruction is actually performed by an employee of the ineligible entity.
4. The eligible institution agrees to serve as the “institution of record” for the purposes of transcribing hours where the ineligible entity is actually providing the program instruction. 
5. The eligible institution utilizes curricular materials obtained from an ineligible entity and agrees that neither it nor its instructors can modify those materials, effectively surrendering its control over the program's curriculum.

An institution must ensure that it properly attributes the provision of coursework by an ineligible entity when assessing a program’s compliance with 34 C.F.R. § 668.5. If the applicable limitations are exceeded, the program is ineligible for Title IV funds.

“Gap-Year” Experiences

The Department notes increasing prevalence of written arrangements between eligible institutions and entities that specialize in organizing and conducting “gap-year” experiences, with its particular focus on arrangements that involve academic credit for student experiences occurring prior to commencement of conventional academic studies. The DCL makes clear that an eligible institution being the “institution of record,” admitting the student, and awarding academic credit for the gap-year experience are not sufficient to consider a student eligible for Title IV funds.

To establish eligibility for Title IV funds, a student must be a “regular student” in an eligible program of study. A regular student is defined by 34 C.F.R. § 600.2 as a person “enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate, or other recognized educational credential offered by that institution.” The Department asserts that in many written arrangements for gap-year experiences, it is evident that a student does not actually intend to earn an academic credential from the institution of record. Additionally, for the reasons discussed in the preceding section of this alert, if the ineligible entity provides most or all of the instruction during the gap-year experience, the student is not enrolled in a Title IV eligible program of study. (The Q&A of the DCL clarifies that gap-year experiences should not be confused with study-abroad programs, which are typically preceded by and followed by regular enrollment at the institution, and which can be part of a Title IV eligible program.)

Accreditation Requirements

The DCL reminds institutions that when they offer distance education for the first time, they must obtain approval from a recognized institutional accrediting agency that includes distance education in its scope of recognition by the Department, including if only part of a program is offered through distance education. In addition, if an institution offers more than 50 percent of a program through distance education, enrolls at least 50 percent of its students through distance education, or offers 50 percent of its courses through distance education, the institution must be evaluated and approved under the accrediting agency’s substantive change process. Coursework offered by an ineligible entity can trigger these requirements. However, the guidance states that “an institution’s accrediting agency is not permitted to evaluate an ineligible entity’s offering of distance education in the context of a written arrangement for Title IV purposes if it does not also accredit that entity.”  Thus, an institution must ensure that when it offers a program for distance education for the first time, the distance education coursework is not provided by an unaccredited ineligible entity.

Disclosure Requirements 

The DCL also reminds institutions of disclosure requirements set forth at 34 C.F.R. § 668.43(a)(12), which require that an institution provide a description, in the program description, of the institution’s written arrangements related to its offering of the program. This description must include information related to the portion of the educational program that the other institution or ineligible entity provides, the name or location of other institutions or organizations providing portions of the program, the method of delivery for the portion of the program that the institution does not provide, and estimated additional costs that students may incur as a result of enrolling in a program offered through the written arrangement.

Penalties for Noncompliance

If the Department determines that an arrangement failed to comply with the regulatory limitations, it may find the program ineligible for Title IV funds and assess liabilities for all funds disbursed to students in the program while the arrangement was in place. Where it finds that an institution misrepresented the portion attributable to the ineligible entity, the Department could also initiate a fine or administrative action to terminate the institution’s participation in the Title IV programs. Institutions are therefore encouraged to review all existing written arrangements for compliance with the applicable regulatory requirements, including the clarifications set forth in the DCL, and to promptly address any deficiencies that could result in liability or sanction.

Please do not hesitate to contact John Przypyszny, Jonathan Tarnow, Cindy Irani or Sarah Pheasant if you have any questions regarding this alert or other educational regulatory matters.