The U.S. Department of Education published Final Rules on Institutional Eligibility in the October 27, 2009 Federal Register and Final Rules on Institution and Lender Requirements Relating to Student Loans, General Provisions and Federal Family Education Loan (FFEL) Program Provisions, in the October 28, 2009 Federal Register. These regulations have an effective date of July 1, 2010. The Secretary of Education has determined that certain regulations may be implemented on or after November 1, 2009 at the discretion of the lender, guaranty agency, loan servicer or institution.

These Final Rules incorporate changes necessary to implement provisions of the Higher Education Opportunity Act (HEOA) of 2008, and also incorporate certain changes made to the Higher Education Act (HEA) by the Higher Education Reconciliation Act (HERA) of 2005. Also these final rules clarify, improve, and update the current regulations.

Since there were so many changes in the regulatory packages published on October 27 & 29, 2009, this announcement only attempts to summarize the most important changes. Please review the final rules and attend workshops or Webinars to receive more details on these changes and how to implement them.

Questions regarding this guidance should be directed to the Office of Regulatory Compliance at 1-518-473-3986; toll free at 1-866-431-HESC (866-431-4372), press 6; or by e-mail at askpolicy@hesc.org.

Section I. Institutional Eligibility

Distance & Correspondence Education- §600.2
  • Adds the definition of distance education – education that uses one or more technologies, such as the internet; satellite, or wireless communications devices, to deliver instruction to students who are separated from the instructor and to support regular substantive interaction between the students and the instructor - which is essentially the same as the definition for telecommunications course which has been removed.3
  • Revises the definition of correspondence course – a course provided by an institution under which the institution provides instructional materials, by mail or electronic transmission, including examinations on the materials, to students who are separated from the instructor. The correspondence course unlike a distance education course has limited interaction between the instructor and the student, is not regular and substantive, and is primarily initiated by the student and the courses are typically self-paced.

Section II. General Provisions

Program Participation Agreement - §668.14
  • Adds a requirement that the institution will develop, publish, administer and enforce a code of conduct with respect to its FFEL loans in accordance with §601.21 and must annually inform its officers, employees, and agents of their responsibilities with respect to these loans of the provisions of the code of conduct.
  • Adds a requirement that for any year that the institution has a preferred lender arrangement ,as defined in §601.2(b), it will at least annually compile, maintain, and make available to its students and families, a list of the specific FFEL or private loan lenders that the institution recommends, promotes, or endorses. In making this list, the institution must comply with the requirements in §682.212(h) and §601.10.
  • Adds a requirement that the institution will provide upon request from its enrolled or admitted students, who apply for a private education loan, the private loan self certification form developed by the Secretary along with the information required to complete the form, to the extent the institution has the information.

Disclosures of Reimbursements for Service on Advisory Boards - §668.16
  • Requires institutions to disclose to the Secretary any reimbursements made to their employees for service on advisory boards.

Cohort Default Rates (CDRs) – §§668.200-668.207& §§668.209-668.217
  • Increases the period used to calculate CDRs from 2 to 3 years effective for CDRs calculated for fiscal year 2009 and subsequent years.
  • Adds the provision that an institution, whose CDR is greater than or equal to 30 percent for any fiscal year, is required to establish a default prevention plan.
  • Increases from 25 to 30 percent the CDR threshold that would render an institution ineligible to participate in the Pell, FFEL, and Direct Loan Programs.

Financial Assistance Information - §668.42
  • Adds a requirement that institutions must describe the terms and conditions of loans received under the FFEL, Direct, and Perkins Loan Programs to their current and prospective students.

Section III. FFEL Provisions

Counseling FFEL Borrowers - §682.604
  • Modifies the entrance and exit counseling provisions to reflect the expansion of the entrance and exit counseling requirements in the HEA as amended by the HEOA.

Section III. Institution and Lender Requirements Relating to Education Loans

(New part 601 of the regulations is added)

Definitions- §601.2
  • Adds the following definitions: Agent; Covered Institution; Education loan; Institution-affiliated organization; Lender; Officer; Preferred lender arrangement; and Private education loan.

Covered Entities – §601.10, §601.11&§601.20
  • Reflects the requirements for education loan borrower disclosures by institutions of higher education, and institution affiliated organizations.
  • Adds the borrower disclosures by covered institutions and institution-affiliated organizations that participate in a preferred lender arrangement.
  • Outlines the reporting requirements for covered institutions and institution-affiliated organizations.


Date Posted: 11/17/09