The U.S. Department of Education (Department) today released a set of final regulations to improve reporting on distance education and changes related to how institutions of higher education (institutions) calculate the return of Federal financial aid when a student withdraws. Starting July 1, 2027, the final rules require institutions to report information into the National Student Loan Data System (NSLDS) about which students who received Federal financial aid are enrolled in distance education or correspondence courses. These data will help the Department better understand the outcomes and effectiveness of online learning.
“Online learning can reach more students and sometimes at a lower cost to students, but what we know about the outcomes of online education compared to traditional in-person instruction is woefully inadequate,” said U.S. Under Secretary of Education James Kvaal. “The new reporting in this final rule will help the Department and the public better assess student outcomes at online programs and help students make informed choices.”
Collecting information on students in distance education courses through NSLDS received greater support from institutions than a second way to get this information proposed in the draft rules. Accordingly, the Department is not moving forward with that second proposal, which would have required institutions to report all of their fully online programs at a virtual additional location. By setting the implementation date for NSLDS reporting in 2027, the Department is also providing schools the time needed to comply with this requirement.
Rules related to the Return of Title IV Funds (R2T4) when a student withdraws, meanwhile, increase the accuracy and simplicity of performing R2T4 calculations; address unique circumstances for what constitutes a withdrawal; and codify longstanding policies into regulation. In particular, they create a new optional process for institutions to avoid conducting R2T4 calculations when they treat the student as never having been enrolled, when certain conditions are met. They also allow for flexibilities to schools leave of absence policies in order to increase retention for students who are incarcerated that have unforeseen interruptions to their eligible prison education programs.
The Department refined these final rules based upon extensive public comment on a notice of proposed rulemaking published over the summer. That package addressed topics in three areas: distance education, return of title IV funds when a student withdraws, and the Federal TRIO programs. In considering these comments, the Department decided to not move forward with a number of provisions in the draft rule to allow for greater additional study and consideration. These include proposals to adjust the eligibility for Federal TRIO programs, allow borrowers who never began attendance to repay amounts owed as a loan instead of a lump sum, and require online programs to take attendance.
Similarly, the Department is not at this time moving forward with a proposal to disallow the offering of asynchronous clock-hour programs through distance education. However, we remind institutions that asynchronous clock hours cannot be used for homework and that there must be robust verification of regular and substantive interaction with an instructor.
The final rules are on public inspection at the Federal Register today. They will publish in the Federal Register on Friday, January 3, 2025. The rules will go into effect on July 1, 2026. However, the Department is giving institutions the option to early implement the withdrawal exemption leave of absence modifications for students who are incarcerated starting in 30 days, and the NSLDS reporting will not be required until July 1, 2027.