Office of Postsecondary Education - U.S. Department of Education
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Office of Postsecondary Education - U.S. Department of Education Office of Postsecondary Education - U.S. Department of Education

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WReier-Aviles on DSKGBLS3C1PROD with RULES266878 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsemployees could be rewarded throughprofit-sharing or other payments forsuccess in meeting retention,graduation, and placement goals as longas they are not rewarded for the numberof students recruited and admitted.These commenters requested that wedefine an acceptable percentage of anemployee’s compensation adjustmentthat can be based on the number ofstudents recruited, admitted, enrolled,or awarded financial aid.One commenter asked that we clarifywhether payments tied to overallinstitutional revenues, including profitsharing,pension, and retirement plansare allowed. A number of commentersasked more broadly whether such planswould be permissible. A fewcommenters requested changes toincorporate the distribution of profitsharingor bonus payments undercertain circumstances, such as when apayment is made to a broad group ofemployees.Discussion: While there is nostatutory proscription upon offeringemployees either profit-sharing or abonus, if either is based in any part,directly or indirectly, upon success insecuring enrollments or the award offinancial aid, it is not permitted undersection 487(a)(20) of the HEA or§ 668.14(b)(22).The Department agrees withcommenters that there arecircumstances when profit-sharingpayments should be permitted. Underproposed § 668.14(b)(22), an institutionmay distribute profit-sharing paymentsif those payments are not provided toany person who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds. TheDepartment believes that such paymentsare consistent with the HEA as they arenot being made to a particular groupwho is active in admissions or financialaid.For this reason, we are making achange to § 668.14(b)(22)(ii) to providethat institutions may make payments,including profit-sharing payments, solong as they are not provided to anyperson who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.Changes: We have revised§ 668.14(b)(22)(ii) to clarify that,notwithstanding the ban in§ 668.14(b)(22)(i), eligible institutions,organizations that are contractors toeligible institutions, and other entitiesmay make profit-sharing payments, solong as such payments are not providedto any person who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.Comment: Several commenters askedus to clarify what kinds of activitieswould not be considered under thedefinition of securing enrollments or theaward of financial aid. They asked thatwe revise the regulations to provideexplicitly that payments based on anyadditional activities are not allowed ifthey are directly or indirectly based onenrollment or the awarding of aid.Other commenters raised questionsabout the use of ‘‘aggregators,’’ that is,entities that assist an institution withthe institution’s outreach efforts. Theseefforts include but are not limited to,identifying students, offering counselingand information on multipleinstitutions, and encouraging potentialstudents to fill out an applicationdirectly with the individual institutions.Aggregators are paid based on thestudent remaining at the institution fora certain time period rather than basedon the fact that the student enrolls.Commenters asked us to clarify whetherthese practices are permitted undersection 487(a)(20) of the HEA and§ 668.14(b)(22).Some commenters focused onarrangements under which institutionspay third parties for student contactinformation and asked whether suchinformation may be sorted or qualified.Further, they questioned whetherinstitutions would be permitted to payonly for information that yields actualcontact with a student. They asked thatwe confirm that institutions may paystudents for contact information on aper person basis as long as payments arenot based on the number of studentswho apply or enroll. In addition, theysuggested that we allow qualitativefactors to be included in theconsideration of the price to provideincentives to third parties toappropriately identify students thatmore closely fit an institution’s profile.Some commenters believed that theproposed definition of securingenrollments or the award of financialaid does not make it clear that theactivities are prohibited through thecompletion of a student’s educationalprogram.Discussion: The Department agreesthat it would be helpful to clarify thetype of activities that are and are notconsidered securing enrollments or theaward of financial aid. For this reason,we have revised the definition ofsecuring enrollments or the award offinancial aid to specifically include (asexamples) contact through preadmissionor advising activities, scheduling anappointment for the prospective studentto visit the enrollment office or anyVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2other office of the institution,attendance at such an appointment, orinvolvement in a prospective student’ssigning of an enrollment agreement orfinancial aid application (see§ 668.14(b)(22)(iii)(B)(1) of these finalregulations).We also revised the definition toclarify that it does not include makinga payment to a third party for theprovision of student contact informationprovided that such payment is not basedon any additional conduct by the thirdparty, such as participation inpreadmission or advertising activities,scheduling an appointment to visit theenrollment office or any other office ofthe institution or attendance at such anappointment, or the signing, or beinginvolved in the signing of a prospectivestudent’s enrollment agreement orfinancial aid application (see§ 668.14(b)(22)(iii)(B)(2) of these finalregulations).With respect to the commentsrequesting guidance on ‘‘aggregators,’’we do not believe it is necessary orappropriate for the Department toindicate whether these types ofactivities would, across the board, bepermitted. Each arrangement must beevaluated on its specific terms. As notedearlier in this preamble, we believe anyinstitution can determine whether apayment it intends to make isprohibited by § 668.14(b)(22) byapplying the two-part test we havedescribed. Specifically, the first step foran institution in determining if paymentfor an activity or action is consideredincentive compensation is to evaluatewhether the entity is receivingsomething of value, then to determinewhether the payment is made based inany part, directly or indirectly, onsuccess in securing enrollments or theaward of financial aid.Finally, we agree with commentersthat the definition of the term securingenrollments or the award of financialaid should be revised to specify thatthese activities include activities thatrun throughout completion of thestudent’s educational program.Changes: We have revised thedefinition of securing enrollments or theaward of financial aid in§ 668.14(b)(22)(iii)(B) to provide moredetail about actions that are consideredto be covered by the definition. We alsohave revised the definition to clarifythat it includes activities through thecompletion of an educational program.Comment: Numerous commentersrequested that the Department offerguidance on the practicalimplementation of the proposeddefinitions. Many expressed concernabout our stated intention to address

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66879WReier-Aviles on DSKGBLS3C1PROD with RULES2only broadly applicable principlesrather than responding to questions onindividual compensation issues. Thesecommenters asserted that institutionsneed guidance before they should be thesubject of an investigation or legalaction. They raised concerns about theconfusion that could result withoutadditional clarification and theattendant costs to partners in thestudent aid process in ‘‘today’s legalenvironment.’’ They believed that theDepartment already knows thatguidance will be needed based on ourpre-2002 experiences and noted thatissuing guidance is a fundamentalpurpose of the Department and shouldbe continued.Discussion: The Department believesthe proposed language is clear andreflective of section 487(a)(20) of theHEA. As modified, it is designed toappropriately guide institutions as theyevaluate compensation practices. To theextent that ongoing questions arise on aparticular aspect of the regulations, theDepartment will respond appropriatelyin a broadly applicable format and willdistribute the information widely to allparticipating institutions. This responsemay include a clarification in aDepartment publication, such as theFederal Student Aid Handbook or aDear Colleague Letter. The Departmentdoes not intend to provide privateguidance regarding particularcompensation structures in the futureand will enforce the regulations aswritten.Changes: None.Satisfactory Academic Progress(§§ 668.16(e), 668.32(f), and 668.34)GeneralComment: Many commenterssupported the proposed changes to theSatisfactory Academic Progress (SAP)regulations. Several commenters notedthat the consolidation of the SAPrequirements into § 668.34 would easecompliance and suggested that it wouldbe helpful to revise the Federal StudentAid (FSA) Handbook to mirror the neworganization of the requirements in theregulations.Several commenters noted that theyappreciated that the proposed SAPregulations retain the flexibilityprovided under the current regulationsfor institutions to establish policies thatbest meet the needs of their students.Many commenters expressed supportfor the proposed changes to the SAPregulations because they viewed themas a means for helping hold studentsaccountable for their academic goalsearlier in their careers, which theybelieved would lead to lower studentdebt levels. Several commenters notedthat their current policy and practiceseither met or exceeded the requirementsin the proposed regulations.Many commenters supported, inparticular, the definition of the termsfinancial aid warning and financial aidprobation as well as the standardizeddefinitions of other terms related toSAP. These commenters stated that thisstandardization would lead to a moreconsistent application of the SAPregulations among institutions, which,in turn, will make them moreunderstandable to students.Many commenters also supported theSAP regulations because they give thoseinstitutions that choose to evaluate SAPmore frequently than annually theability to use a financial aid warningstatus, which they viewed as beingbeneficial to students. They stated thatsuch a warning would lead to earlyintervention for students who faceacademic difficulties. Commenters alsonoted that the financial aid warningstatus will allow financial aid offices tostrengthen their SAP policies toencourage students to use designatedsupport services on campus and lead tofurther student success.Discussion: The Departmentappreciates the support of its efforts toimprove program integrity through itsSAP regulations. With regard to thecomment recommending that we revisethe FSA Handbook to align it with thechanges we have made in the SAPregulations, we will take thisrecommendation into account duringthe next revision of the FSA Handbook.Changes: None.GeneralComment: Several commenters didnot support the proposed changes to theSAP regulations. Two commentersstated that the Department should delayimplementation of the SAP regulations,including proposed § 668.34, so that wecan resubmit these proposals fornegotiation and evaluation in a futurenegotiated rulemaking proceeding.These commenters argued that theDepartment had not made a sufficientargument for what would be gained bythe changes, and how these benefitswould justify the additional burdenimposed upon institutions by theseregulations.Two commenters stated thatinstitutions were in the best position todesign and implement a satisfactoryacademic progress policy that fit theirinstitutional needs, and that the currentregulations were sufficient for achievingthis purpose. These commentersasserted that the proposed changes wereintrusive and would lead to increasedVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2audit exceptions. These commentersalso noted that the Department shouldconsider incentives to encourageinstitutions to research student successin light of their own SAP policies. Onecommenter stated that the proposedregulations were too prescriptive, andthat institutions would requiresignificant guidance in the FSAHandbook in order to be able to complywith the new regulations.Two commenters stated that whilethey generally agreed with theDepartment’s desire to clarify the SAPregulations and with the proposedapproach reflected in the NPRM, theregulations had a number of unintendedconsequences. These commentersindicated that the Department’sproposal would force institutions tochoose whether to take on additionalworkload by evaluating students eachterm, or to take on the additionalworkload caused by the dramaticincrease in appeals. One of thecommenters noted as an example aninstitution that has a number of AlaskanNative students to whom it providessignificant support, particularly early intheir careers; in this case, thecommenter stated that these studentswould be significantly harmed by theseSAP regulations as the students oftencannot remedy their academic problemsin a short period of time. Both of thesecommenters noted that while theDepartment believes that it has toaddress abuses with the currentregulations, that it should weigh thisagainst the unintended consequences ofthe proposed regulations, which includeincreased workload for institutions andunfair impact on certain groups ofstudents.Discussion: The Department disagreeswith the commenters who suggestedthat these regulations should beresubmitted for the negotiatedrulemaking process. The proposedchanges to the SAP regulations in§§ 668.16(e), 668.32(f), and 668.34 havealready been through the negotiatedrulemaking process. In fact, thenegotiators reached tentative agreementon these proposed changes. Duringnegotiations, most negotiators statedthat it was appropriate for theDepartment to provide certainflexibilities for those institutions thatchose to check on the satisfactoryacademic progress of students moreoften than was required by the statutoryminimum of annually. Many of thenegotiators said that they supported theproposed changes to the SAPregulations because they continued toprovide significant flexibilities forinstitutions to craft SAP policies thatmet the needs of their student bodies

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66879WReier-Aviles on DSKGBLS3C1PROD with RULES2only broadly applicable principlesrather than responding to questions onindividual compensation issues. Thesecommenters asserted that institutionsneed guidance before they should be thesubject <strong>of</strong> an investigation or legalaction. They raised concerns about theconfusion that could result withoutadditional clarification and theattendant costs to partners in thestudent aid process in ‘‘today’s legalenvironment.’’ They believed that the<strong>Department</strong> already knows thatguidance will be needed based on ourpre-2002 experiences and noted thatissuing guidance is a fundamentalpurpose <strong>of</strong> the <strong>Department</strong> and shouldbe continued.Discussion: The <strong>Department</strong> believesthe proposed language is clear andreflective <strong>of</strong> section 487(a)(20) <strong>of</strong> theHEA. As modified, it is designed toappropriately guide institutions as theyevaluate compensation practices. To theextent that ongoing questions arise on aparticular aspect <strong>of</strong> the regulations, the<strong>Department</strong> will respond appropriatelyin a broadly applicable format and willdistribute the information widely to allparticipating institutions. This responsemay include a clarification in a<strong>Department</strong> publication, such as theFederal Student Aid Handbook or aDear Colleague Letter. The <strong>Department</strong>does not intend to provide privateguidance regarding particularcompensation structures in the futureand will enforce the regulations aswritten.Changes: None.Satisfactory Academic Progress(§§ 668.16(e), 668.32(f), and 668.34)GeneralComment: Many commenterssupported the proposed changes to theSatisfactory Academic Progress (SAP)regulations. Several commenters notedthat the consolidation <strong>of</strong> the SAPrequirements into § 668.34 would easecompliance and suggested that it wouldbe helpful to revise the Federal StudentAid (FSA) Handbook to mirror the neworganization <strong>of</strong> the requirements in theregulations.Several commenters noted that theyappreciated that the proposed SAPregulations retain the flexibilityprovided under the current regulationsfor institutions to establish policies thatbest meet the needs <strong>of</strong> their students.Many commenters expressed supportfor the proposed changes to the SAPregulations because they viewed themas a means for helping hold studentsaccountable for their academic goalsearlier in their careers, which theybelieved would lead to lower studentdebt levels. Several commenters notedthat their current policy and practiceseither met or exceeded the requirementsin the proposed regulations.Many commenters supported, inparticular, the definition <strong>of</strong> the termsfinancial aid warning and financial aidprobation as well as the standardizeddefinitions <strong>of</strong> other terms related toSAP. These commenters stated that thisstandardization would lead to a moreconsistent application <strong>of</strong> the SAPregulations among institutions, which,in turn, will make them moreunderstandable to students.Many commenters also supported theSAP regulations because they give thoseinstitutions that choose to evaluate SAPmore frequently than annually theability to use a financial aid warningstatus, which they viewed as beingbeneficial to students. They stated thatsuch a warning would lead to earlyintervention for students who faceacademic difficulties. Commenters alsonoted that the financial aid warningstatus will allow financial aid <strong>of</strong>fices tostrengthen their SAP policies toencourage students to use designatedsupport services on campus and lead t<strong>of</strong>urther student success.Discussion: The <strong>Department</strong>appreciates the support <strong>of</strong> its efforts toimprove program integrity through itsSAP regulations. With regard to thecomment recommending that we revisethe FSA Handbook to align it with thechanges we have made in the SAPregulations, we will take thisrecommendation into account duringthe next revision <strong>of</strong> the FSA Handbook.Changes: None.GeneralComment: Several commenters didnot support the proposed changes to theSAP regulations. Two commentersstated that the <strong>Department</strong> should delayimplementation <strong>of</strong> the SAP regulations,including proposed § 668.34, so that wecan resubmit these proposals fornegotiation and evaluation in a futurenegotiated rulemaking proceeding.These commenters argued that the<strong>Department</strong> had not made a sufficientargument for what would be gained bythe changes, and how these benefitswould justify the additional burdenimposed upon institutions by theseregulations.Two commenters stated thatinstitutions were in the best position todesign and implement a satisfactoryacademic progress policy that fit theirinstitutional needs, and that the currentregulations were sufficient for achievingthis purpose. These commentersasserted that the proposed changes wereintrusive and would lead to increasedVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2audit exceptions. These commentersalso noted that the <strong>Department</strong> shouldconsider incentives to encourageinstitutions to research student successin light <strong>of</strong> their own SAP policies. Onecommenter stated that the proposedregulations were too prescriptive, andthat institutions would requiresignificant guidance in the FSAHandbook in order to be able to complywith the new regulations.Two commenters stated that whilethey generally agreed with the<strong>Department</strong>’s desire to clarify the SAPregulations and with the proposedapproach reflected in the NPRM, theregulations had a number <strong>of</strong> unintendedconsequences. These commentersindicated that the <strong>Department</strong>’sproposal would force institutions tochoose whether to take on additionalworkload by evaluating students eachterm, or to take on the additionalworkload caused by the dramaticincrease in appeals. One <strong>of</strong> thecommenters noted as an example aninstitution that has a number <strong>of</strong> AlaskanNative students to whom it providessignificant support, particularly early intheir careers; in this case, thecommenter stated that these studentswould be significantly harmed by theseSAP regulations as the students <strong>of</strong>tencannot remedy their academic problemsin a short period <strong>of</strong> time. Both <strong>of</strong> thesecommenters noted that while the<strong>Department</strong> believes that it has toaddress abuses with the currentregulations, that it should weigh thisagainst the unintended consequences <strong>of</strong>the proposed regulations, which includeincreased workload for institutions andunfair impact on certain groups <strong>of</strong>students.Discussion: The <strong>Department</strong> disagreeswith the commenters who suggestedthat these regulations should beresubmitted for the negotiatedrulemaking process. The proposedchanges to the SAP regulations in§§ 668.16(e), 668.32(f), and 668.34 havealready been through the negotiatedrulemaking process. In fact, thenegotiators reached tentative agreementon these proposed changes. Duringnegotiations, most negotiators statedthat it was appropriate for the<strong>Department</strong> to provide certainflexibilities for those institutions thatchose to check on the satisfactoryacademic progress <strong>of</strong> students more<strong>of</strong>ten than was required by the statutoryminimum <strong>of</strong> annually. Many <strong>of</strong> thenegotiators said that they supported theproposed changes to the SAPregulations because they continued toprovide significant flexibilities forinstitutions to craft SAP policies thatmet the needs <strong>of</strong> their student bodies

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