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Focus on Colleges & Universities: Proposed Federal Student Aid Rules

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Designed to protect college students and taxpayers from abusive and fraudulent practices, the Department of Education has released a set of proposed rules related to federal student aid.
June 23, 2010

Designed to protect college students and taxpayers from abusive and fraudulent practices, the Department of Education has released a set of proposed rules related to federal student aid.

If passed, these rules would affect the 6,000 institutions of higher education that receive federal student aid.

The proposed rules address 14 key issues, which are expanded on in detail in a 503-page document, which is the result of dialogue over the past year with the higher education community. Once published, a final version of the rules would take effect in July 2011.

The proposed rules are summarized below to help RubinBrown contacts and clients understand how it may affect their institutions.

Gainful Employment

The Department of Education has proposed that proprietary and postsecondary vocational schools provide prospective students with eligible programs’ graduation and job placements. Institutions would also be required to provide the Department of Education with information on student debt levels and incomes after program completion.

Verification of Free Application for Federal Student Aid (FAFSA) Information

Under proposed regulations, verification would be a much more targeted process. The Department of Education would specify on each selected Individual Student Information Record (ISIR) which data elements need to be documented. Under the proposed changes, only one or two items from a student’s ISIR may require review by the school’s Financial Aid Staff. However, the items requiring review may be subject to additional scrutiny and require additional support in order to complete the verification process. The Department of Education would publish annually, well in advance of the start of the processing cycle, the data elements subject to selection.

Additionally, the 30% Verification Option would be eliminated, and language was included in the proposed regulation that would require schools to submit all corrections for processing.

Satisfactory Academic Progress (SAP)

Draft rules would impose limits on how long a student could continue to receive Title IV aid in order to make up deficiencies in meeting SAP standards. The proposal distinguishes between warning periods and probationary periods, and only schools that assess SAP at the end of every payment period could apply warning periods.

Schools assessing SAP less frequently would have to require a successful appeal for any student to continue receiving Title IV aid despite failing SAP standards. Despite these guidelines, the new language gives institutions flexibility in establishing policies, in order to ease concerns about undergraduates who may need to go beyond the 150 percent maximum time frame and to allow for the treatment of second appeals.

Retaking Coursework

The Department of Education proposes adding language to the definition of “full-time student” to allow repeated courses to count towards a student’s enrollment status for a term-based program. Credits would not have to be awarded for all repetitions (the current policy). The policy for non-term programs would remain unchanged.

Return of Title IV Funds (R2T4): Term-based Programs with Modules or Compressed Courses

The Department of Education would revoke current policy to better define when a student is considered to have withdrawn from a module or compressed course/mini-session.

Under new regulations, a student would be considered to have withdrawn if the student does not attend all days that he or she was scheduled to attend.

Taking Attendance

Department of Education proposes a clarification to the definition of “required to take attendance” by abandoning the current policy that requirement is only present when imposed by an outside entity as defined by that entity.

The effect of this rule is that any institution that requires its faculty to take attendance on its own (that is, without the request of an outside agency) is now subject to rules for institutions that are required to take attendance.

Additionally, the Department of Education would require institutions where faculty must take attendance for a limited period of time to use those records to determine a last day of attendance for students who withdraw during the period.

If a student is still in attendance at the end of the limited period and then subsequently stops attending, he or she would be treated as a student for whom the institution was not required to take attendance.

Disbursement of Title IV Funds

This proposed rule change aims to ensure that students with Title IV credit balances are able to obtain books and supplies at the beginning of a payment period. The proposal would allow for the early payment of anticipated credit balances to Pell Grant-eligible students.

The language gives institutions the flexibility to determine how they provide funds to students, which could be a book voucher or a book credit to a student’s account. Further, the amount made available to the student would be the lesser of the amount the institution determines the student needs for books and supplies or the student's presumed Title IV credit balance.


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