On November 1, 2019, the U.S. Department of Education (the “Department”) published in the Federal Register final regulations (the “Final Rule”) governing the recognition of accrediting agencies for postsecondary education and state authorization. The Final Rule was the first to be issued as a result of negotiated rulemaking sessions that took place between January and April 2019 to address various regulatory changes for postsecondary education, including changes regarding accreditation, credit and clock hours, the Robert C. Byrd Honors Scholarship, TEACH Grants, religious freedom, distance education programs, state authorization for distance education, and competency-based education. The Final Rule is effective July 1, 2020; however, institutions may opt for early implementation of the state authorization as well as institutional disclosure provisions.

Accreditation Provisions

The accreditation provisions in the Final Rule do not differ substantially from the proposed regulations issued in June 2019, which we summarized in a previous alert dated July 2, 2019. Overall, the Department states that the goal of the Final Rule is to provide accrediting agencies with greater flexibility to apply their standards, as well as making certain changes to the recognition process, in an effort to promote innovation and to honor the autonomy of accrediting agencies.

Changes with Respect to Adverse Actions

• Timelines for institutions and programs to come into compliance: In one of the Final Rule’s most significant provisions, the Department removes the specific timelines by which an accrediting agency must take an adverse action against an institution or program that is not complying with its standards. Instead, an agency must provide a written timeline for coming into compliance that is “reasonable,” based on the nature of the finding and the stated mission and educational objectives of the institution or program. The timeline may include intermediate compliance checkpoints but may not exceed the lesser of four years, 150% of the length of the program (for a programmatic accrediting agency), or 150% of the length of the longest program (for an institutional accrediting agency).

• Policy for agency to take immediate adverse action: Under the Final Rule, the Department requires an agency to have a policy for taking immediate adverse action and to take such action when the agency has determined that such action is warranted. The Final Rule also establishes that an institution may remain out of compliance with the agency’s standards for a period of up to three years and longer for good cause shown, where there are circumstances beyond the institution’s or program’s control, such as a natural disaster.

• Notification of accrediting decisions: The Department is requiring an accrediting agency to provide written notice of a final decision of a probation or equivalent status or of an initiated adverse action (such as non-final actions denying, withdrawing, suspending, revoking or terminating the accreditation/preaccreditation of an institution or program) to the Secretary, to the appropriate State licensing or authorizing agency, and to the appropriate accrediting agencies at the same time that it notifies the institution or program of the decision. It requires an institution or program to disclose such action within seven business days of receipt to all current and prospective students.

• Appeals process: The Department removes reversal as an option available to an accrediting appeals panel. It requires that an appeals panel explain the basis for a decision to remand if it differs from the original decision-maker’s decision. The “reversal” requirement had resulted in significant confusion among accrediting agencies and had resulted in some appeals panels becoming the ultimate decision-making authority within the accrediting process. This change will alleviate that issue.

• Programmatic-level actions: The Department gives institutional accrediting agencies the ability to impose programmatic-level actions when an institution’s noncompliance with the agency’s standards is at the program level.

NACIQI Recognition Changes

• Concepts of “substantial compliance” and “monitoring report”: With respect to the Department’s recognition process for accrediting agencies, the Final Rule adds the concept of “substantial compliance.” Under the prior regulations, the Department only recognized an accrediting agency when it had demonstrated full compliance with every recognition criterion. This resulted in some agencies’ recognition being placed in jeopardy for failure to meet largely technical procedural requirements. Under the Final Rule, “substantial compliance” means, “the agency has demonstrated to the Department that it has the necessary policies, practices and standards in place and generally adheres with fidelity to those policies, practices, and standards; or the agency has policies, practices, and standards in place that need minor modifications to reflect its generally compliant practice.” The Final Rule also introduces the use of a “monitoring report,” which will be required of accrediting agencies that are in “substantial compliance” with the Department’s recognition criteria. An agency could thus be recognized with findings of substantial compliance subject to a monitoring report requirement. These concepts will add an intermediate step between full compliance and a compliance report. The monitoring report will be reviewed by staff but not be considered by the National Advisory Committee on Institutional Quality and Integrity (“NACIQI”) unless the response does not satisfy the Department staff or raises other issues that the staff determines should be considered by NACIQI.

• Geographic area: In perhaps one of the most talked about changes to the Final Rule, the Department will allow regional accrediting agencies to accredit outside their region, if they choose to do so. The Department seeks to encourage accrediting agencies to conduct their activities in the geographic areas most appropriate for them. The preamble to the Final Rule notes that the Department has removed the “artificial distinction” between regional and national accrediting agencies. The Department states that an agency’s geographic area will include not only the states in which the main campuses of its accredited institutions are located, but also any state in which an accredited location or branch may be found. However, agencies will not be required to accept applications for accreditation from other institutions in states where it only accredits additional locations or branch campuses. In addition, the Department will not consider a change to an agency’s geographic area to be an expansion of the agency’s scope but will require the agency to notify the Department and disclose the change to the public on its website.

• “Two-year rule”: Under the Final Rule, the Department will not continue the requirement that an agency seeking initial recognition must have conducted accrediting activities for two years if that agency was previously affiliated with or was a division of a recognized agency. This exception to the two-year rule is meant to address situations where an accrediting agency is “spinning-off” from a parent or other agency but is essentially the same accrediting agency accrediting the same institutions as prior to the spin-off or change in affiliated agency.

• Review of change in scope: The Department previously had adopted the practice of allowing accrediting agencies to change their scope to include distance education simply by notifying the Department. As part of the Final Rule, the Department included the existing statutory requirement that NACIQI review any expansion in scope by an accrediting agency to include distance education, if any institution that the agency accredits and that offers distance education or correspondence courses increases its enrollment by 50 percent or more in any institutional fiscal year. The review by NACIQI would occur at the next meeting after which the 50% growth threshold is met.

Changes to Substantive Change Procedures

• What constitutes “substantive change”: The Department made several changes to what constitutes a substantive change requiring an accrediting agency’s review. The Final Rule also made a clarifying change from the proposed regulations, which some parties had interpreted to suggest that substantive changes requiring prior approval included only changes to an institution’s or program’s mission; in the Final Rule, the Department revised the wording of the regulations to make it absolutely clear that substantive changes subject to 602.22(a)(1) were not limited to changes to an institution’s or a program’s mission. Under the Final Rule, an agency’s definition of a “substantive change” will be required to cover “high-impact, high-risk changes,” which must include the following: substantial changes to the mission of the institution; changes in legal status, form of control or ownership; addition of programs that represent a significant departure from existing offerings, educational programs or method of delivery; addition of graduate programs by institutions that previously only offered undergraduate programs or certificates; change in the way the institution measures student progress (i.e., clock or credit hours, or other time-based or non-time-based methods); the acquisition of another institution or any program or location of another institution; the addition of a permanent location at a site at which the institution has been conducting a teach-out for another institution that ceased operating; entering into written arrangements with an institution that is not certified to participate in the Title IV programs (in which that institution offers between 25% and 50% of a program); addition of direct-assessment programs; and addition of a new location or branch campus (subject to the following caveat). Notably, while the addition of a new location or a branch is treated as a substantive change requiring prior approval, the Department will, in certain cases, allow institutions to report new locations or branch campuses to their accreditor within 30 days rather than obtain prior approval. In particular, an institution that has successfully completed at least one cycle of accreditation and received agency approval for the addition of at least two additional locations, that has not been placed on probation or equivalent status or been subject to a negative action by the agency over the prior three academic years, does not need to apply for approval of subsequent additions of locations.

• Senior staff review: In an effort to expedite reviews of substantive changes, the Department will allow an agency to designate a senior agency staff member to approve or disapprove certain substantive change requests, including but not limited to those regarding written arrangements for non-Title IV ineligible entities to offer between 25 and 50 percent of a program. The accrediting agency staff member must make a final decision within 90 days of receipt of a materially complete request unless circumstances require the agency’s decision-making body to review the request, which it must do within 180 days.

• Differing levels of review for higher-risk institutions: Under the Final Rule, certain enumerated changes will only need to be reported to (and not approved by) an accrediting agency. However, if an institution is on probation or equivalent status with its accreditor, on provisional certification with the Department or subject to negative accreditor action over the prior three academic years, it must receive prior approval for those changes. In the proposed regulation, the Department had described one such change as “a change of 25 percent or more of a program since the agency’s most recent accreditation review.” In response to one commenter’s request for clarification regarding this provision, the Department clarified in the Final Rule that this provision includes a single change, or the sum total of the aggregate changes, to a program’s curriculum, learning objectives, competencies, number of credits required, or required clinical experiences.

• Retroactive approvals permitted: The Final Rule codifies, as an acceptable practice, granting retroactive approval of a substantive change.

Religious Mission

• Definition of religious mission: The Final Rule defines “religious mission” as follows: “A published institutional mission that is approved by the governing body of an institution of postsecondary education and that includes, refers to, or is predicated upon religious tenets, beliefs, or teachings.” In setting forth this definition, the Department distinguishes institutions that have explicit faith-based principles included in their missions from those with simply a “historical connection to a religious order that is no longer relevant to the institution’s mission.”

• Direction regarding religious mission: The Final Rule provides greater clarity regarding the requirement that an accrediting agency not interfere with the religious mission of an institution. The Department states that agencies may not use as a negative factor an institution’s religious-based policies, decisions or practices if the institution’s or program’s curriculum include all core components required by the agency. If an institution believes its mission has been used by an agency as a negative factor, it may submit a complaint to the Department.

Teach-Out Plans

• When teach-out plans are required: Under the Final Rule, the circumstances under which an accrediting agency will be required to request a teach-out plan are expanded to include the following circumstances: when the Department notifies the agency of a determination that an institution’s independent auditor has expressed doubt about the institution’s ability to operate as a going concern or has provided an adverse opinion or material weakness finding regarding financial stability; an institution is placed on probation or equivalent status; or an institution is required to submit a teach-out plan as a condition of provisional certification. In addition, the Department will require both a teach-out plan and, if practicable, a teach-out agreement when: the institution is placed on reimbursement or heightened cash monitoring; the Department has taken emergency action or an action to limit, suspend or terminate participation; the agency acts to withdraw, terminate, or suspend accreditation or preaccreditation; the institution notifies the agency that it will cease operations (either entirely or to close a location providing 100% of a program); or the institution’s license or legal authorization to provide an educational program has been or will be revoked.

• New elements required: As part of the Final Rule, the Department is requiring that teach-out plans requested by accrediting agencies include additional elements, including a list of current students, academic programs offered, and names of potential teach-out partner institutions. A teach-out agreement will be required to include a complete list of current students and the program requirements that each has completed, a plan for giving all potentially eligible students closed school discharges and state refund information, a record retention plan that would be provided to all students, the number and types of credits the teach-out institution will accept before the student enrolls, and a clear statement of tuition and fees.

• Accuracy of teach-out communications: The Final Rule requires accrediting agencies to obtain from closing institutions all notifications from the institution to students about a closure or teach-out options and to ensure the communications are accurate.

Additional Accreditation Changes

Additional accreditation-related elements of the Final Rule include but are not limited to the following:

• Direct assessment: The Final Rule adds direct assessment to the types of education that an agency’s standards must effectively address if the agency accredits such programs.

• Qualifications and composition of accrediting agencies: The Final Rule requires an agency to have individuals qualified by “education or experience” rather than “education and experience.” It also includes the option to include students as possible public representatives on agency decision-making bodies.

• Record-keeping clarifications: Under the Final Rule, the Department clarifies that agencies must retain decision letters regarding an institution’s or a program’s accreditation or preaccreditation and its substantive changes; however, they do not need to retain every record of conversations or interim decisions when superseded by a final decision or determination.

• Preaccreditation: The Department will require agencies to have policies to offer preaccreditation only to institutions likely to succeed in obtaining accreditation and to clarify that a student who completes a preaccredited program will have the same benefits as a student who completes an accredited program. In addition, an agency will be mandated to require preaccredited institutions to have a teach-out plan that ensures that students completing the teach-out would meet curricular requirements for professional licensure or certification, if any.

• “Federal link” changes: The Department will consider as satisfying the “federal link” requirement situations where an accrediting agency accredits one or more institutions that could designate the agency as its link to the Title IV programs, even if those institutions have not identified that agency as their link to Title IV programs.

• Non-Title IV schools: The Final Rule clarifies that the Department does not require agencies to apply accrediting standards required by the Higher Education Act of 1965 to institutions that do not participate in Title IV programs.

State Authorization Provisions

In general, the Final Rule modifies the Title IV program participation requirements for State authorization to clarify the responsibilities of institutions and States regarding students enrolled in distance education programs and programs that lead to licensure and certification. These provisions are subject to early implementation. Significant provisions in the Final Rule regarding state authorization and disclosure requirements include the following:

Distance Education State Authorization Requirements

• State authorization for distance education: The Final Rule continues the requirement from previous Department regulations that an institution offering distance education to students located in a State in which the institution is not physically located must meet any of that State’s requirements for it to be legally offering postsecondary distance education or courses to students in that State. Institutions will be required to document this, on request. This could also include evidence that a State has waived direct authorization of the particular institution or institutions of its types.

• Complaint process: The Final Rule removes the requirement currently in 34 C.F.R. § 600.9(c)(2) that institutions offering distance education must document that there is a State process for review and act on complaints from any enrolled students in each state where each student resides. Accordingly, for a non-SARA institution, evidence of a complaint process in the institution’s home State appears to be sufficient to meet the revised requirements.

• Student location and determination of student’s location: Institutions must determine which State’s authorization laws are applicable to an institution based on a student’s location, rather than a student’s residence. An institution must determine, in accordance with its policies, the State in which a student is located at the time of enrollment and have policies for updating its records if a student’s location changes thereafter.

• State authorization reciprocity agreement: An institution can demonstrate that it meets State requirements to offer postsecondary distance education or correspondence courses in a State by participating in a State authorization reciprocity agreement (if the State participates in a State authorization reciprocity agreement). Under the proposed regulations, the Department proposed to require that a “State authorization reciprocity agreement” does not prohibit a member of the agreement from “enforcing its own statutes or regulations, whether general or specifically directed at all or a subgroup of educational institutions.” The Final Rule revises the definition of “State authorization reciprocity agreement’’ to clarify that such agreements cannot prohibit any member State of the agreement from enforcing its own general-purpose State laws and regulations outside of the State authorization of distance education.

• State authorization for religious institutions: The Department has revised the definition of a religious institution for state authorization purposes. Under the current regulations, an institution is considered to be legally authorized to operate post-secondary programs in a State if it is: 1) exempt from State authorization under the State constitution or by State law; and 2) owned, controlled, operated and maintained by a nonprofit religious corporation and awards only religious degrees or certificates. In the Final Rule, the Department removes prong #2 of the current definition.

Disclosure Requirements

As part of its revisions to the State authorization provisions, the Department also revised certain disclosure requirements that would apply to distance education programs. These provisions are subject to early implementation.

Under the Final Rule, the Department broadened the applicability of the institutional disclosure requirements for distance or correspondence programs in 34 C.F.R. § 668.50 by requiring that all programs, regardless of modality, make the same disclosures. Accordingly, the Final Rule deletes the currently effective 34 C.F.R. § 668.50 (which applies only to institutions with distance and correspondence programs) in its entirety, but revises 34 C.F.R. § 668.43 to include several additional disclosures (which apply to all institutions). Accordingly, as a result of the Final Rule, institutional information that an institution must make readily available to enrolled and prospective students includes the following:

• Institutions with programs designed to prepare students for professional licensure or certification must disclose three categories of States: 1) States for which the institution has determined that the curriculum meets State requirements for licensure/certification; 2) States for which the institution has determined that the curriculum does not meet State requirements for licensure/certification; and 3) States for which the institution has not made a determination that the curriculum meets State requirements for licensure/certification.

• In addition, if an institution determines that its program’s curriculum does not meet State licensure/certification requirements or did not make such a determination in a State in which a prospective student is located, it must provide notice to that effect to the student prior to their enrollment in the program. If the institution determines that a program’s curriculum does not meet such State licensure/certification requirements in a State where a currently enrolled student is located, it must notify that student within 14 calendar days of making the determination. The disclosures must be made directly to the student in writing (which can include via email or other electronic communication).

• The disclosures that are currently required under 34 C.F.R. §§ 668.43(a)(1)-(4) and (6)-(10) remain unchanged (these disclosures include, but are not limited to, those regarding cost of attendance, refund policies, requirements for withdrawing from the institution, and agencies that accredit, approve or license the institution and its programs).

• The transfer of credit policy disclosures are amended to require additional information about criteria used to evaluate and award credit for prior learning experience and types of institutions or sources from which the institution will not accept credits.

• The disclosure requirements regarding an institution’s written arrangements to provide educational programs are now required to be included within the program descriptions.

• An institution must disclose to students if an enforcement action or prosecution is brought against it by a State or Federal law enforcement agency in any matter where a final judgment against the institution, if rendered, would result in an adverse action by an accreditation agency, revocation of State authorization or limitation, suspension, or termination of Title IV eligibility.

• An institution must disclose to students if its accrediting agency requires it to maintain a teach-out plan and indicate the reason the agency requires the plan.

• The Final Rule adds to 34 C.F.R. § 668.43 several disclosures that are currently required by statute but not reflected in current regulations, including: the percentage of students who are Pell Grant recipients, disaggregated by race, ethnicity and gender; certain student outcome rates, to the extent an institution’s accrediting agency or State requires the institution to calculate and report them; types of graduate and professional education in which graduates of the institution’s four-year degree programs enrolled; retention rates; fire safety reports; and institutional policies regarding vaccinations.

Institutions deciding whether to early-implement the State authorization and disclosure components of the Final Rule should carefully review the new obligations that would apply, including the revised disclosure requirements, some of which will apply for the first time to on-ground programs, and the requirement to determine a student’s location.