87 FR 196 pgs. 61544-61548 - 85/15 Rule Calculations, Waiver Criteria, and Reports
Type: PRORULEVolume: 87Number: 196Pages: 61544 - 61548
Pages: 61544, 61545, 61546, 61547, 61548FR document: [FR Doc. 2022-22107 Filed 10-11-22; 8:45 am]
Agency: Veterans Affairs Department
Official PDF Version: PDF Version
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 21
RIN 2900-AR56
85/15 Rule Calculations, Waiver Criteria, and Reports
AGENCY:
Department of Veterans Affairs.
ACTION:
Proposed rule.
SUMMARY:
The Department of Veterans Affairs (VA) is proposing to amend its educational assistance regulations by eliminating the four 85/15 rule calculation exemptions for students in receipt of certain types of institutional aid. Currently, VA regulations provide exceptions that allow certain categories of students to be considered "non-supported" for purposes of the 85/15 rule notwithstanding their receipt of institutional aid. VA is proposing to eliminate these exceptions, thus clarifying the types of scholarships that educational institutions must include in their calculations of "supported" students. Also, VA is proposing to revise the criteria that shall be considered by the Director of Education Service when granting an 85/15 rule compliance waiver. Lastly, VA is proposing to amend the timeline for certain educational institutions' submission of 85/15 compliance reports.
DATES:
Comments must be received on or before December 12, 2022.
ADDRESSES:
Comments may be submitted through www.Regulations.gov, Comments should indicate that they are submitted in response to "RIN 2900-AR56(P)-Amendments to 85/15 Rule Calculations, Waiver Criteria, and Reports. Comments received will be available at regulations.gov for public viewing, inspection, or copies.
FOR FURTHER INFORMATION CONTACT:
Cheryl Amitay, Chief, Policy and Regulation Development Staff (225B), Chief of Policy & Regulations, Education Service, Department of Veterans Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 461-9800. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION:
[top] The 85/15 rule (38 U.S.C. 3680A(d); 38 CFR 21.4201(a)) prohibits the Department of Veterans Affairs (VA) from paying educational assistance benefits to any new students once "more than 85 percent of the students enrolled in the [program of education] are having all or part of their tuition, fees, or other charges paid to or for them by the educational institution or by the Department of Veterans Affairs." 38
Currently, in accordance with 38 CFR 21.4201, educational institutions are required to track the percentage of supported and non-supported students enrolled in each of their approved programs and to confirm their compliance with the required 85/15 percent ratio. 38 CFR 21.4201(e)-(f). During the time that the ratio of supported to non-supported students exceeds 85 percent, no new students can be certified to receive VA education benefits for that program. 38 CFR 21.4201(g)(2). "New students" include students returning after a break in enrollment unless the break is wholly due to circumstances beyond the student's control. 38 CFR 21.4201(g)(6). The 85/15 rule does allow VA to continue to pay benefits for students already enrolled in the program and receiving benefits prior to the ratio of supported students exceeding 85 percent of the total population enrolled in the program. 38 CFR 21.4201(g)(2). Further, although students receiving Veteran Readiness and Employment (38 U.S.C. chapter 31) or Survivors' and Dependents' Educational Assistance (38 U.S.C. chapter 35) benefits must be counted as supported students when calculating 85/15 rule compliance, we note that the rule does not prohibit the enrollment of new chapter 31 and chapter 35 students while the 85 percent ratio is exceeded. The rules regarding reporting requirements and how individual students must be assessed based on their program of education and campus location are detailed in 38 CFR 21.4201. Specifically, paragraph (e) details the rules regarding how to compute the 85/15 percent ratio, and paragraph (e)(2) provides special rules by which some students, even though they are in receipt of institutional aid, are nonetheless counted as "non-supported students."
VA proposes to amend 38 CFR 21.4201(e)(2) to define "non-supported students" and "supported students" and remove paragraphs (e)(2)(i) through (e)(2)(iv), which diminish the effectiveness of the market validation mechanism of the rule. Although 38 U.S.C. 3680A(d)(1) explicitly states that the 85 percent side of the ratio ( i.e., the supported student count) should include all students "having all or part of their tuition, fees, or other charges paid to or for them by the educational institution or by the Department of Veterans Affairs," current VA regulations at §?21.4201(e)(2) create tension with this essential goal of the 85/15 rule by providing four categories of students who are considered "non-supported" students notwithstanding their receipt of institutional aid. Currently, the four categories of such "non-supported" students are as follows: (1) non-Veteran students not in receipt of institutional aid; (2) all graduate students receiving institutional aid; (3) students in receipt of any Federal aid (other than VA benefits); and (4) undergraduate and non-college degree students receiving any assistance provided by the educational institution, if the institutional policy for granting this aid is the same for Veterans and non-Veterans alike. VA is proposing to remove all four categories.
Removal of the first and third categories would have no impact because these students are already "non-supported," as they are not receiving institutional or VA aid. Consequently, their inclusion is non-substantive since their numbers would remain on the 15-percent side of the ratio calculation. The practical impact would be in the removal of the second and fourth categories, which provide that students can be in receipt of institutional aid and still be considered non-supported. These two categories (and particularly the fourth category) have created loopholes that educational institutions have exploited since the inception of the Post-9/11 GI Bill (PGIB). The problem stems from the fact that the PGIB pays up to the full amount of tuition and fees directly to educational institutions. This is unlike prior VA educational benefits implemented since 1952, from the Korean War GI Bill through the Montgomery GI Bill, for which VA pays a one-size-fits-all stipend amount directly to the beneficiary, and the beneficiary then pays tuition, fees, or other approved education-related expenses to the school using the stipend and/or other means. Under the prior model, if the tuition and fees exceed the stipend amount, then the beneficiary incurs out-of-pocket costs. By the same token, if the tuition and fees are less than the stipend amount, then the beneficiary may apply the funds towards other education costs. When beneficiary payments are structured this way, there is no incentive for an educational institution to inflate costs, as such a tactic might drive VA beneficiaries away in a competitive free market. Conversely, since tuition and fees under the PGIB are paid directly to the educational institution, often in an amount equal to the net charges for tuition and fees (subject to statutory caps for certain types of educational institutions), PGIB beneficiaries are not similarly incentivized to bargain shop. Consequently, the only students who can serve to validate the cost effectiveness of the program are those non-supported students who are counted on the 15-percent side of the 85/15 rule. However, given that the provisions in §§?21.4201(e)(2)(ii) and (iv) stipulate that certain scholarship recipients are to be considered "non-supported," a school can meet its 15-percent non-supported requirement while providing scholarships to some number of students so long as the students are graduate level, or the terms of the scholarship are such that Veterans and non-Veterans alike may qualify. These students are likewise not motivated by competitive free market forces to bargain shop, as their actual charges for tuition and fees are reduced. Because these students are allowed, through §§?21.4201(e)(2)(ii) and (iv), to be considered "non-supported," they serve as a false-positive market validation for the tuition and fee charges levied on VA. This undermines the operative mechanism of the 85/15 rule by allowing schools to inflate their tuition and fees since there is no longer an effective counterweight.
[top] The original GI Bill (for Veterans of World War II, in effect from 1944 to 1948) also paid tuition and fees directly to schools and was fraught with abuses
These proposed changes would also clarify requirements for schools, thereby making it easier for schools operating in good faith to remain in compliance. The current various classifications of students are difficult for the School Certifying Officials at educational institutions to follow, which can lead to improper payments and overpayments. Currently, when school officials have questions about making accurate student count calculations, they must individually reach out to their state Education Liaison Representative or VA staff in Washington, DC. As a result, the guidance they receive may be delayed or vary slightly depending upon the source of guidance. Further, some schools may opt not to make this effort and just guess on which side of the ratio certain students should be reported. All these scenarios have resulted in unsupported calculations by schools which do not reflect the intent of the current regulation's underlying statute. The proposed removal of all four current exceptions to the "non-supported" side of the 85/15 ratio would simplify the calculation of the 85/15 ratio-meaning, any student receiving any funding from either VA, or the school will be considered "supported." Further, these proposed amendments would resolve related compliance process issues by removing ambiguity about the appropriate classification of students in receipt of aid. In sum, these regulatory amendments would both simplify and promote consistency in calculating and reporting 85/15 counts and would better align the regulation with its underlying statute.
There may be instances where certain schools have a large percentage of their students (both Veteran and non-Veteran alike) in receipt of institutional aid, even if the amount of the aid is insignificant. In these situations, it is unlikely that the school's institutional aid program is a subterfuge to disguise tuition inflation while complying with the 85/15 rule. In response to any concerns that such schools would be unfairly placed in noncompliance with the 85/15 rule by operation of this proposed rule, VA notes that whenever an educational institution exceeds the 85-percent limit, it may apply for a waiver of the 85/15 rule under 38 CFR 21.4201(h). Accordingly, VA proposes to amend §?21.4201(h) to allow an education institution to demonstrate that although its program is in violation of 85/15, its non-VA scholarship recipients are effectively serving as market validation, and, therefore, continued enrollment of new VA education beneficiaries is nonetheless in the best interests of the student and the Federal government. Consequently, the proposed elimination of §?21.4201(e)(2) does not mean that all generous schools would be eliminated from the GI Bill. It merely means that, on a case-by-case basis, a well-intentioned generous school could be granted a waiver while simultaneously limiting the potential for miscalculations and misapplication of scholarship information, whether intentional or unintentional.
Regarding the current 85/15 waiver criteria, VA further proposes to amend the criteria found at 38 CFR 21.4201(h) by removing paragraphs (2) and (3) while leaving paragraph (1) in place and modifying paragraph (4). This is necessary because, while current regulations list four criteria to be considered, only paragraphs (1) and (4) (the availability of comparable education facilities effectively open to Veterans in the vicinity of the school requesting a waiver; and the general effectiveness of the school's program in providing educational and employment opportunities to the Veteran population it serves) are cogent indicators of a program's qualifications to obtain a waiver.
Paragraph (2) only applies to schools in receipt of a Strengthening Institutions Program grant or a Special Needs Program grant administered by the Department of Education. The Strengthening Institutions Program grant is only available to accredited institutions of higher learning. However, many GI Bill-approved institutions are non-degree granting and thus ineligible for these programs. Therefore, this criterion is irrelevant when considering waiver requests for such programs. Furthermore, the "Special Needs Program" grants referenced in paragraph (2) as being located in title 34, parts 624-626, of the Code of Federal Regulations no longer exist at that reference. VA rarely receives waiver requests from schools in receipt of either of these grants, so the criterion in paragraph (2) rarely is satisfied. This absence of qualifying schools therefore is not dispositive in the adjudication of waiver requests. Paragraph (3)-previous compliance history of the school-is of no independent value to VA's decision-making because if a school has failed to satisfy the criterion in paragraph (3), then the program's approval would be suspended or withdrawn by the State Approving Agency. Consequently, by default, the Director of Education Service bases decisions on waiver requests exclusively on a school's performance relative to the criteria in paragraphs (1) and (4). However, because paragraphs (2) and (3) are included in this regulation, schools must expend resources to address these criteria in their requests. Likewise, the Director must expend resources to respond to these criteria in his or her decision. Therefore, VA proposes to remove paragraphs (2) and (3) to conserve both school and VA resources. It is important to note that because these criteria have been functionally irrelevant in the adjudication of waiver requests, such a removal would have no substantive effect on the likely outcome of any future waiver request decisions.
[top] Additionally, we propose to amend the list of factors to be considered in paragraph (4) because the current list is not particularly helpful to the decision maker. The list contains only two criteria, and one of them-ratio of educational and general expenditures to full-time equivalency enrollment-is difficult to ascertain and verify while also being of questionable utility. Therefore, there is only one practical and pertinent factor-the percentage of Veteran-students completing the entire course-generally left to consider. Accordingly, VA proposes to amend the list to provide a broader range of factors that may be considered (although the list would not be all inclusive). VA proposes to maintain the current graduation rate factor but add other factors of graduate employment
Lastly, for educational institutions organized on a term, quarter, or semester basis, the 85/15 calculations must currently be submitted to VA no later than 30 days after the beginning of each regular school term (excluding summer sessions) or before the beginning of the following term, whichever occurs first. 38 CFR 21.4201(f)(2)(i). Educational institutions not organized on a standard term, quarter, or semester basis must also submit their 85/15 calculations to VA, however, no later than 30 days after the beginning of each calendar quarter to which the waiver applies. 38 CFR 21.4201(f)(2)(ii). Consequently, educational institutions with short, non-standard terms that begin and end more frequently than once per calendar quarter may have several terms that begin before VA is notified of failure to comply with the 85/15 rule. To remedy this shortcoming, VA proposes to amend 38 CFR 21.4201(f)(1) and (f)(2)(ii) to require that educational institutions with non-standard terms submit their exemption justification reports and 85/15 percent calculations to VA no later than 30 days after the beginning of each non-standard term. This would provide VA with the opportunity to review compliance reports submitted by educational institutions before approving additional enrollments that impact compliance with the 85/15 rule. This proposed amendment would promote accurate and up to date 85/15 calculations, ensure that reporting is done on a fair and consistent basis, and enable VA to base consideration of 85/15 waiver requests on relevant criteria.
In summary, the 85/15 rule was created to prevent training institutions from developing courses solely for GI Bill students and then inflating tuition charges. The 85/15 rule serves as a market validation tool by which the cost of the program is validated by demonstrating that a sufficient number of students (15 percent of the total program enrollment) are willing to pay the full cost of tuition out of pocket. These proposed changes would strengthen the existing 85/15 rule by addressing the regulatory provisions that, over time, have been shown to be ineffective with regard to the rule's intent.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The Office of Information and Regulatory Affairs has determined that this rule is a significant regulatory action under Executive Order 12866. The Regulatory Impact Analysis associated with this rulemaking can be found as a supporting document at www.regulations.gov.
Regulatory Flexibility Act
The Secretary hereby certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-612). Notwithstanding data collection limitations regarding the number of schools that are classified as small entities, VA's certification is based on the fact that students would continue to provide revenue to schools regardless of whether they were classified as supported or non-supported. Should a school already at or near the statutory 85/15 ratio limit find that a reclassification of students from "non-supported" to "supported" would alter its ratio to the point where it would fall out of compliance with the 85/15 rule, the school could recruit additional non-supported students to restore that ratio. While needing to recruit more non-supported students would be an effect on schools, it does not qualify as a significant economic impact. Therefore, pursuant to 5 U.S.C. 605(b), the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do not apply. Nonetheless, VA acknowledges that the provisions in this rulemaking may create some uncertainty and reactive behavior from both Veteran students and personnel within institutions of higher learning. Therefore, VA welcomes input and comment about whether the provisions of this rulemaking would have an adverse impact or significant impact on a substantial number of small entities, including lost revenue or other costs.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This proposed rule would have no such effect on State, local, and tribal governments, or on the private sector.
Paperwork Reduction Act
Although this proposed rule contains collections of information under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521), there are no provisions associated with this rulemaking constituting any new collection of information or any revisions to the existing collections of information. The collections of information for 38 CFR 38 CFR 21.4201 are currently approved by the Office of Management and Budget (OMB) and have been assigned OMB control numbers 2900-0896 and 2900-0897.
Assistance Listing
The Assistance Listing numbers and titles for the programs affected by this document are 64.027, Post-9/11 Veterans Educational Assistance; 64.028, Post-9/11 Veterans Educational Assistance; 64.032, Montgomery GI Bill Selected Reserve; Reserve Educational Assistance Program; 64.117, Survivors and Dependents Educational Assistance; 64.120, Post-Vietnam Era Veterans' Educational Assistance; 64.124, All-Volunteer Force Educational Assistance.
List of Subjects in 38 CFR Part 21
[top] Administrative practice and procedure, Armed forces claims, Colleges and universities, Education, Employment, Reporting and
Signing Authority
Denis McDonough, Secretary of Veterans Affairs, approved this document on September 7, 2022, and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs.
Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of General Counsel, Department of Veterans Affairs.
For the reasons stated in the preamble, the Department of Veterans Affairs proposes to amend 38 CFR part 21 as set forth below:
PART 21-VETERAN READINESS AND EMPLOYMENT AND EDUCATION
Subpart D-Administration of Educational Assistance Programs
1. The authority citation for part 21, subpart D continues to read as follows:
Authority:
10 U.S.C. 2141 note, ch. 1606; 38 U.S.C. 501(a), chs. 30, 32, 33, 34, 35, 36, and as noted in specific sections.
2. Amend §?21.4201 by revising paragraphs (e)(2), (f)(1) introductory text, (f)(2)(ii), and (h) to read as follows:
§?21.4201 Restrictions on enrollment; percentage of students receiving financial support.
(e) * * *
(2) Assigning students to each part of the ratio. In accordance with the provisions of paragraph (a) of this section, non-supported students are those students enrolled in the course who are having none of their tuition, fees or other charges paid for them by the educational institution, or by VA under title 38, U.S.C., or under title 10, U.S.C., while supported students are those students enrolled in the course who are having all or part of their tuition, fees or other charges paid for them by the educational institution, or by VA under title 38, U.S.C., or under title 10, U.S.C.
(f) * * * (1) Schools must submit to VA all calculations (those needed to support the exemption found in paragraph (c)(4) of this section as well as those made under paragraph (e)(3) of this section). If the school is organized on a term, quarter, or semester basis, it shall make that submission no later than 30 days after the beginning of the first term for which the school wants the exemption to apply. If the school is organized on a non-standard term basis, it shall make its submission no later than 30 days after the beginning of the first non-standard term for which the school wishes the exemption to apply. A school having received an exemption found in paragraph (c)(4) of this section shall not be required to certify that 85 percent or less of the total student enrollment in any course is receiving Department of Veterans Affairs assistance:
(2) * * *
(ii) If a school is organized on a non-standard term basis, reports must be received by the Department of Veterans Affairs no later than 30 days after the end of each non-standard term.
(h) Waivers. Schools which desire a waiver of the provisions of paragraph (a) of this section for a course where the number of full-time equivalent supported students receiving VA education benefits equals or exceeds 85 percent of the total full-time equivalent enrollment in the course may apply for a waiver to the Director, Education Service. When applying, a school must submit sufficient information to allow the Director, Education Service, to judge the merits of the request against the criteria shown in this paragraph. This information and any other pertinent information available to VA shall be considered in relation to these criteria:
(1) Availability of comparable alternative educational facilities effectively open to veterans in the vicinity of the school requesting a waiver.
(2) General effectiveness of the school's program in providing educational and employment opportunities to the particular veteran population it serves. Factors to be considered should include, but are not limited to: percentage of veteran-students completing the entire course, graduate employment statistics, graduate salary statistics, satisfaction of Department of Education requirements regarding gainful employment (where applicable), other Department of Education metrics (such as student loan default rate), student complaints, industry endorsements, participation in and compliance with the Principles of Excellence program, established by Executive Order 13607 (where applicable), etc.
(3) Whether the educational institution's aid program appears to be consistent with or appears to undermine the 85/15 rule's tuition and fee costs market validation mechanism.
[FR Doc. 2022-22107 Filed 10-11-22; 8:45 am]
BILLING CODE 8320-01-P