Key Points to the U.S. Department of Education's Dear Colleague Letter (DCL) on Written Arrangements - DCL-GEN-22-07
The following is a brief summary of the Dear Colleague Letter that the Department issued on June 16, 2022, regarding potential compliance concerns it has seen in written agreements between eligible institutions and other entities. The Department has long-standing regulations - 34 CFR § 668.5 – that govern written arrangements between an eligible institution of higher education (institution or IHE) and either another eligible institution or an ineligible one. Those regulations were most recently amended in 2020. This recent DCL is meant to provide clarification and guidance to avoid circumstances of non-compliance that it has seen and to clarify how institutions should calculate and consider certain relationships with other institutions, especially ineligible institutions or organizations.
More specifically, the Department indicates concern over circumstances where (1) ineligible institutions are incorrectly determining a portion of a program as being offered by them, when the Department views them as being attributable to the ineligible entity (thereby jeopardizing Title IV eligibility) and separately, (2) where institutions are acting as institutions of record and allowing for use of Title IV funds with ineligible entities that are offering “gap-year experiences” to students not determined to be “regular students” of the IHE. This summary focuses only on the first area of concern.
For context, it is helpful to note certain aspects of the existing regulations. These regulations:
· provide that an institution may enter into written arrangements with ineligible institutions or organizations and may do so for 25% or less of a program offering without any prior approval; or for more than 25% and less than 50% of a program, if there is no shared ownership between the two entities and the agreement is approved by an accrediting agency (under its review of written arrangements and as a substantive change review). 34 CFR § 668.5(c).
· provide that, under (g) of the regulation, an IHE must consider a course as offered by an ineligible institution or organization and therefore must calculate the percentage of the overall offering, if that entity has “authority over the design, administration, or instruction in the course, including but not limited to:
(1) Establishing the requirements for successful completion of the course;
(2) Delivering instruction in the course; or
(3) Assessing student learning.”
A few key takeways in the DCL where the Department appears to provide guidance beyond existing regulatory language:
· The Department raises concerns that some institutions are incorrectly calculating the percentage of an offering by an ineligible institution, in effect calculating portions of a program as being offered by the IHE instead of by the ineligible entity.
· Specifically, in this guidance the Department extends the quoted portion of the regulation above to include the following activities by an ineligible entity:
o “Mandatory tutoring” as part of the instructional delivery[1], and also,
o “Developing curricula or course materials, where the institution and its instructors cannot make changes to the materials.” This addition seems potentially relevant where a third-party provider maintains ownership of IP and control over the curriculum or any changes to it, and particularly where the third-party “involves itself with the delivery of the actual instruction.” This latter quotation can be found in Q/A #3 of the Department’s DCL.
· In sum, under the DCL, it appears that there could be circumstances whereby the Department determines an ineligible entity as providing courses, not an IHE, if in those cases, the IHE has no control or ability under the written arrangement to change a curriculum and materials.
· Further, when providing examples of potentially offending circumstances, the Department appears to clarify that:
o an IHE may not calculate an offering as being its own by classifying instructors as its own employees/“adjunct faculty” if an ineligible entity is providing those instructors for the program and directly or indirectly compensating those individuals.
o An IHE also may not classify a program as their own if it purchased curriculum or curricular materials from an ineligible entity and agreed that it or its faculty could not modify that curriculum at all, i.e., giving up curricular control.
In all of the above situations, the Department may find that the ineligible entity, not the IHE, provided a portion of the program and in that case, the institutions must be calculating the percentage of offerings to determine that it is 25% or less of the program, received accreditation approval for offerings amounting to between more than 25% and less than 50%, or if greater than 50%, a potentially ineligible program for Title IV purposes.
Finally, the DCL contains two additional reminders. First, when a program is offered at least in part by distance education and the institution has not been previously evaluated and approved by its accreditor to offer distance education, the IHE must go through this process. Importantly, the DCL appears to state that if an IHE is new to distance education, “an institution must ensure that when it offers a program that uses distance education for the first time, the coursework provided using distance education is not provided by an unaccredited ineligible entity.” (Emphasis added.) The letter is not clear what “provided by” means in this context. For example, it is unclear whether an IHE may seek accreditation approval for distance education for the first time when it purchases curriculum/course materials from an ineligible entity and the IHE retains full control to change that curriculum or materials and fully provide the instruction. Presumably, if the IHE retains control over curriculum and instruction, but is receiving the online materials, technology and other services from a third party, it could seek accreditation approval. However, this seems unclear, and some entities may want to seek further clarification to this portion of the letter.
The second reminder made in the DCL is of the regulatory obligation in 34 C.F.R. § 668.43(a)(12) to disclose to students and others of the existence of written agreements and that other entities are providing a portion of the program.
[1] The DCL includes a further example and Q/A relating to the role of non-faculty tutors, tutor assistants provided by ineligible entities and problems created when an institution uses such staff for instruction and designates itself as the “institution of record” for Title IV purposes.