Eligible Programs for Aid

Community and technical colleges by their very mission are required to react quickly to emerging vocational trends by developing and developing educational programs to meet the needs of their students and community employers. However, institutions are required by federal regulations to take certain steps in order to establish financial aid eligibility for new degree and certificate programs.

34 CFR 600.10(c)(2)(ii) offers guidance to institutions regarding their rights and responsibilities pertaining to new or emerging programs. According to 34 CFR 600.10(c)(2)(ii), an eligible institution may disburse Title IV funds for an eligible program prior to the Department of Education’s approval of the program as long as the program meets the general requirements for an eligible program and “prepares students for gainful employment” in the same or a similar field as an education program “that was previously designated as an eligible program at that institution by the Secretary”

Recent case law decided in Washington, D.C. offers guidance regarding DOE’s implementation of this regulatory scheme and offers an example of the consequences for an institution which is determined by DOE to have failed to comply. Such was the case In the Matter of Trocaire College(Docket No. 02-78-SP(2003), Trocaire is small a private college offering associate degree and certificate programs in areas such as Business Administration, Massage Therapy, Surgical Technology, and Office Technology. It is a career oriented institution providing education to students in a variety of occupational paths. In response to community need, in January of 2000, the College began offering a Transportation Technology certificate program. Relying on 34 CFR 600.10(c)(2)(ii), the College disbursed aid to student enrolled in the program prior to gaining the approval of the Secretary.

DOE disagreed with the College’s decision. Trocaire College asserted that the new program met the appropriate criteria to be considered an eligible educational program that prepared its students for gainful employment. However, when the College submitted the Program for approval, it was determined by DOE to be an ineligible program. As a result, DOE asserted that the College was liable for the return of over $450,000 that it had disbursed to students enrolled in the program. Chief Administrative Law Judge Allan C. Lewis found that the new educational program was “not similar to the occupations taught in the other certificate programs offered by Trocaire”. He found against Trocaire and ordered the College to return $450,000.00 to DOE.

Similar to Trocaire, Hicks Academy of Beauty Culture, in response to community needs attempted to make funds available for a new program prior to its approval by the Department. Although the liability amount was significantly less than that of Trocaire, In the Matter of Hicks Academy of Beauty Culture, (Docket No. 05-17-SP (2007) provides a more recent and definitive example of why an institution must proceed with extreme care when self-approving programs.

In August of 2001, Hicks self approved a newly created Nail Technology program for financial aid eligibility and began disbursing aid to student enrolled in the program. Applying 34 CFR 600.10(c)(2)(ii)., Hicks determined that the new program prepared students for employment in a field similar to their existing cosmetology program, a program that had already been designated as eligible by the Secretary.

In August of 2003, Hicks received approval from the Department of Education for the Nail Technology program. However, Hicks was found out of compliance for disbursing aid to students in the program prior to departmental approval. The Department determined that the new program was not the same or similar to the existing cosmetology program. Hicks argued that the Classification of Instructional Programs Codes listed both cosmetology and nail technology under the same occupational heading. Further, the Dictionary of Occupational Titles placed manicurist under the same occupational group as cosmetology. Additionally, the school asserted that many of the tasks of nail technology were also contained within the list of responsibilities of those of a cosmetologist. Lastly, Hicks pointed out that 530 hours of the 630 hour nail program were the same as in the cosmetology program.

Nonetheless, the Department did not agree with the Hick’s arguments and required it to return the funds disbursed under the program prior to departmental approval. In June 2007, Judge Richard F. O’Hair asserted that ‘relationship between the newly offered educational program and the existing eligible program was not close enough to meet the requirements of the regulation and ruled in favor of the Department. He found it particularly persuasive that both the state and accrediting agencies required each program to be approved separately and that their was minimal overlap between the two programs.

A careful review of both cases suggests that institutions must be very careful when self-approving programs. Given the interpretation applied by DOE and supported by the Administrative Law Judges, a risk aversive interpretation of the regulations would be most appropriate. To that end, since institutions are permitted to rely on the advice of their respective DOE regional office, it makes sense to contact your regional office for guidance prior to self-approval of new degree or certificate programs.

If you have any comments or questions, you can contact Milton L. Kerstein, Esq. via Email at mkerstein@kcl-law.com or by telephone at 617-965-9698.

These articles are provided for general information purposes only and with the understanding that neither the author or publisher are engaged in rendering legal advice or opinion. If legal advice is required, the services of a competent professional person should be sought.