IN THE MATTER OF ACADEMY FOR SOCIAL ACTION,
Docket No. 91-6-SP
Student Financial Assistance Proceeding
Appearances: Leslie H. Wiesenfelder, Esq., of Dow, Lohnes &
Albertson, Washington, D.C., for the Respondent
M. Kraut, Esq., of the Office of the
General Counsel, United States Department of
Education, for the Office of Student Financial
Before: Judge Allan C. Lewis
This is an action initiated by the United States Department of
Education (ED) to recover $695,751 in Federal funds advanced to
the Academy for Social Action (ASA) under the Pell Grant program.
This action was proposed following a program review which
concluded that ASA was erroneously determined to be eligible to
participate in the student financial assistance programs under
the Higher Education Act of 1965, Pub. L. No. 89-329, 79 Stat.
1219 (to be codified at 20 U.S.C. § 1001 et seq.), as amended. ASA argues, in effect, that
its program constituted a curriculum
of at least a six-month program under 20 U.S.C. § 1088(c) and
was, therefore, properly qualified as an eligible institution for
Title IV funds. Alternatively, even if its program was less than
a six-month program, ASA asserts that it need not repay the Pell
Grant funds to ED since it neither knew nor should have known
that the information upon which ED based its eligibility
designation was inaccurate. Based upon the findings of fact and
the conclusions of law, infra, the Department may recover $695,751 in Federal funds advanced
I. FINDINGS OF FACT
The pertinent facts are set forth in the opinion. The detailed
findings of fact are set forth in the appendix, infra.
Under the Pell Grant Program, the Secretary provides grants to
eligible, financially needy students attending eligible
institutions of higher education to assist these students to pay
for their postsecondary educational costs. 20 U.S.C § 1070a(a)
and (b) (1987). The amount of a student's Pell Grant award is
determined by statutory and regulatory formulas and depends, in
part, on the length of the student's program of study. 20 U.S.C.
In order to receive a Pell Grant award, the student must be
enrolled or accepted for enrollment in a degree or certificate
program at an institution of higher education that is an eligible
institution. 20 U.S.C. § 1091(a).
An institution of higher education is defined under 20 U.S.C. §
an educational institution of any State which (1) admits as
regular students only persons having a certificate of
graduation from a school providing secondary education, or
the recognized equivalent of such a certificate, (2) is
legally authorized within such State to provide a program of
education beyond secondary education, (3) provides an
educational program for which it awards a bachelor's degree
or provides not less than a two-year program which is
acceptable for full credit toward such a degree, (4) is a
public or other nonprofit institution, and (5) is accredited
by a nationally recognized accrediting agency or association
. . . . Such term also includes any school which provides
not less than a one-year program of training to prepare
students for gainful employment in a recognized occupation
and which meets the provisions of clauses (1), (2), (4), and
For purposes of the student financial assistance provisions, an
institution of higher education also includes a postsecondary
vocational institution which is defined as--
a school (1) which provides not less than a 6-month
program of training to prepare students for gainful
employment in a recognized occupation, (2) which meets
the requirements of clauses (1), (2), (4), and (5) of
section 1141(a) of this title, and (3) which has been
in existence for at least 2 years.
20 U.S.C § 1088(c).
There is no dispute between the parties that, under 20 U.S.C. §
1088(c), ASA satisfies clauses (1), (4), and (5) of 20 U.S.C. §
1141(a), that is, ASA admitted the appropriate individuals as
students, was a nonprofit institution, and was accredited by a
nationally recognized accrediting agency.
There is also no dispute that, under 20 U.S.C. § 1088(c), the
General Office (Core) Word Processing Machine (General Office)
aspect of the curriculum was legally authorized within the State
of New York by the New York State Education Department (NYSED) to
provide a program of education beyond secondary education as
required by 20 U.S.C. § 1141(a).
The dispute between the parties is whether, under 20 U.S.C. §
1088(c), ASA's General Office curriculum alone, or in conjunction
with certain elective courses, constituted at least a six-month
program as required by 20 U.S.C. § 1088(c) and, therefore,
constituted an eligible institution to disburse Title IV funds.
A six-month program under 20 U.S.C. § 1088(c) requires a program
of at least 16 semester hours or 600 clock hours. 34 C.F.R. §
668.7 (1986).See footnote 1
ASA asserts two arguments in an effort to establish that it had a
program of at least six-months. First, ASA argues that the
elective component of the curriculum was part of the legally
authorized program, and, therefore, it satisfies the six-month
requirement of 20 U.S.C. § 1088(c). Second, ASA argues that even
if the elective aspect of the curriculum was not legally
authorized within the State of New York, the General Office
aspect of the curriculum constituted at least a six-month
Initially, ASA asserts that the elective component was part of
the legally authorized curriculum. ASA argues that Mr. Craig
Farley of NYSED's Bureau of Adult Program Supervision, orally
represented that it was not necessary for ASA to obtain specific
approval of the elective courses as part of the curriculum and
that it was only necessary to obtain approval of the General
Office courses which ASA did, in fact, obtain. ASA further
asserts that its catalog was approved by the NYSED and indicates
that the elective courses were part of the curriculum.
ED counters, on the other hand, that the elective aspect of the
curriculum was not legally authorized by the New York
Commissioner of Education under 8 NYCRR § 126.4(a) and,
therefore, it may not be included within the curriculum. The
effect of excluding the elective courses, according to ED,
reduces the legally authorized curriculum to the General Office
aspect which, on the basis of instructional (clock) hours, is
insufficient to satisfy the minimum number of hours to constitute
a six-month program.
Section 126.4(a) of the regulations of the New York Commissioner
of Education (8 NYCRR) sets forth the standards and methods of
instruction for licensed private schools and registered private
business schools. It provides that schools "shall conduct only those curricula or courses
which have been approved by the
Commissioner." (emphasis added). Moreover, the regulation adds
that it is the responsibility of "the director of the school [to]
. . . cause to be prepared data concerning curriculum or courses
of study" and "[h]e shall submit such data to the Commissioner in
such form as said Commissioner shall direct, accompanied by a
request for approval." 8 NYCRR § 126.4(b). Under 8 NYCRR
§ 126.4(c), the "[d]ata submitted for approval of curricula or courses . . . shall include . . . (3) [t]he minimum and/or maximum instructional hours and the allocation of time to each portion of the curriculum or course." (emphasis added).
Thus, it is clear that, under New York law, a school must obtain
approval from the Commissioner for all courses which comprise its
curriculum, and that a school is not legally authorized to
conduct courses which are not part of its approved curriculum.
The above interpretation of New York law is consistent with In re French Fashion Academy,
U.S. Dep't of Education (Sec. Dec. Mar. 30, 1990). There, the Secretary held that the eligibility
New York institution to participate in the Pell Grant program--
depends on whether the institution is authorized to provide
postsecondary vocational education programs in the State of
New York. 20 U.S.C. 1085(c), 1088(b)(2), and 1141(a)(2).
Under the statutes and regulations of New York, in order for
an institution, such as the Academy, to offer postsecondary
vocational education programs in New York, it must be (1)
licensed by the NYSED, and (2) each program it offers must
be approved by NYSED.
Id. at 1 (citing In re French Fashion Academy, U.S. Dep't of Education (Initial Decision Oct. 26,
1989, at 12-14)).
While it is evident from the record that Mr. Farley may have misled ASA by representing that it was not necessary for ASA to obtain specific approval of the Commissioner for the elective courses offered at ASA,See footnote 2 2/ his advice was contrary to New York law. See 8 NYCRR §§ 126.4(a), (b), and (c)(3). In this regard, the incorrect interpretation of New York state law by a state employee provides no basis for reliance under the doctrine of equitable estoppel. See Parkview Assoc. v. City of New York, 519 N.E.2d 1372, 1374-75 (N.Y. 1988); Central Diagnostic Lab. v. Perales, 568 N.Y.S.2d 224, 226 (N.Y. App. Div. 1991); Schwartz v. Crosson, 566 N.Y.S.2d 679, 681 (N.Y. App. Div. 1991).
Since the elective courses were not approved by the New York
Commissioner of Education, these courses cannot be considered for
purposes of the Pell Grant program in determining whether ASA's
program met the required six-month minimum program.
The second argument advanced by ASA is that, even if the elective
aspect of the curriculum was not legally authorized by the State
of New York, the legally authorized aspect of the curriculum,
i.e. the General Office program, constituted at least a six-month
program for purposes of 20 U.S.C. § 1088(c). In this regard, ASA
argues that, under New York law, the General Office program was
legally authorized to be measured in credit (semester) hours, and
that, utilizing the credit (semester) hour system, its legally
authorized curriculum was at least a six-month program.
Alternatively, ASA argues that, even if the General Office
program was legally authorized only under the instructional
(clock) hour system under New York law rather than the credit
(semester) hour system, it could, nevertheless, convert its
program to credit (semester) hours for Pell Grant purposes, and
that, under this approach, its legally authorized General Office
program constituted at least a six-month program.
Initially, ASA contends that, as a registered private business
school under New York law, it had a choice to offer its General
Office program under the credit (semester) hour system or under
the instructional (clock) hour system and that its usage of the
credit (semester) hour system was approved by virtue of various
actions and representations by New York officials. In this
regard, ASA asserts that, by virtue of the oral representations
by Mr. Craig Farley of the NYSED, NYSED assented to ASA's
utilization of semester hours, so long as the courses were also
measured in instructional hours as required by the State of New
York.See footnote 3
ED conversely argues that New York law permits the curriculum of
a registered private business school to be measured only in
instructional hours and that, under this measurement system,
ASA's General Office program did not meet the minimum
requirements for a six-month program. In this regard, it relies
primarily upon the Secretary's allusion to New York law in In re French Fashion, U.S. Dep't of
Education (Mar. 30, 1990) and on two statements by NYSED officials who were purportedly
with the administration of education law in New York.
Under New York law, a private business school, such as ASA, may
not operate in the State of New York "unless it is registered by
the education department" which enjoys jurisdiction "exclusively"
over virtually all matters dealing with such schools. N.Y. Educ. Law §§
5002.1 and 5003. Each school is required to "comply with standards for approval set forth
in regulations of the
commissioner." N.Y. Educ. Law § 5003.1.
Under the regulations promulgated by the Commissioner of
Education, each private business school may conduct only
curricula or courses approved by the Commissioner and, as
required by 8 NYCRR § 126.4(c), "[d]ata submitted for approval of
curricula or courses . . . shall include: . . . (3) [t]he minimum
and/or maximum instructional hours and the allocation of time to each portion of the curriculum
or course."See footnote 4
(emphasis added). Therefore, ASA's curriculum may only employ the instructional
(clock) hour system and may not utilize the credit (semester)
The instructional (clock) hour system is required in other areas.
For example, the school's catalog must measure the courses in
instructional (clock) hours--
(e) Each . . . registered private business school shall
publish a catalog or bulletin . . . including
(11) a brief description of each course showing subjects or units and the approximate time and clock hours to be spent on each subject or unit.
8 NYCRR § 126.3(e).
The student's enrollment contact must state the length of the
curriculum in instructional (clock) hours as the enrollment
contract must provide, inter alia,--
(2) the title of the curriculum, course or courses as
(3) the length of the curriculum, course or courses in instructional hours.
8 NYCRR § 126.7(b).
Therefore, it is clear that New York law requires a registered
private business school to measure its academic curriculum in
terms of instructional (clock) hours.
In addition, a registered private business school, such as ASA,
awards a certificate for the successful completion of its
program. As of 1980, New York reserved the credit (semester)
hour system to an institution which awards a degree for the
successful completion of its program--
[a credit is defined as] a unit of academic award applicable
towards a degree offered by an institution [and represents a
8 NYCRR §§ 50.1(n) and (o).
Thus, a college or university which awards a degree may utilize
the semester (credit) hour system, while a registered private
business school, such as ASA, which offers a certificate, may not
use this system.
The conclusion that ASA is legally authorized to utilize only the
institutional (clock) hour system is also consistent with a
public pronouncement by the Office of the Assistant Commissioner
for Occupational and Continuing Education of NYSED in a
memorandum dated August 6, 1980. This public notice informed all
licensed private schools and registered private business schools
that "institutions which do not have degree granting powers,
including all licensed private schools and registered private
business schools, cannot award credit or credit hours to
students."See footnote 5
Lastly, this conclusion regarding New York law comports with the
Secretary's statement of New York law in In re French Fashion Academy, U.S. Dep't of
Education (Mar. 30, 1990) that the use of "clock hours . . . is required by New York law
schools."See footnote 6
Id. at 3.
Alternatively, ASA argues that, even if it was legally authorized
only to use instructional (clock) hours in its curriculum, it
could, nevertheless, convert to the credit (semester) hour system
for purposes of the Pell Grant program. Based on the credit
(semester) hours adopted by ASA in its General Office curriculum,
ASA asserts that its program was at least a six-month program.
ED argues that the inconsistent employment of a course
measurement system is prohibited under French Fashion. ASA challenges the French Fashion
decision urging that it was erroneously decided.
The facts in French Fashion are similar to the facts in the present case. Like ASA, French
Fashion Academy sought legal
authorization to conduct business in New York as a vocational
school using instructional (clock) hours. Further, as in this
proceeding, French Fashion Academy applied to ED for Title IV
eligibility and measured its program in credit (semester) hours.
On this basis, ED approved the French Fashion Academy as an
eligible institution. French Fashion Academy then calculated and
awarded Pell Grant funds on a credit (semester) system.
Subsequently, ED sought to recover from French Fashion the
difference between the amount of the awards under the credit
(semester) system and the amount of the awards that would have
been made under the instructional (clock) hour system which it
was required to use under New York law.
In French Fashion, the Secretary held that the New York school could not convert to another
measurement system for purposes of
the Pell Grant program--
[i]t has been the policy of the Secretary and of ED that a
school apply to ED in the same terms that it used when
providing applications to the state authorities. See e.g., 34 C.F.R. § 600.3.
French Fashion Academy, at 3.
Therefore. the Secretary held that the school was liable for the
difference in the amount of funds awarded.
ASA challenges the Secretary's conclusive statement in French Fashion that ED had a policy in
effect for years prior to 1990 which prohibited the inconsistent usage of the measurement
systems. In its view, there was no such policy in existence
during the years pertinent herein. As support for its position,
ASA relies upon a series of internal Departmental documents and a
House Committee Report.
While there may be merit to ASA's contention that the Secretary
lacked a "policy" which prohibited the conversion between clock
hours and semester hours by an otherwise eligible institution, it
is not necessary to address this issue in the present proceeding.
The General Office curriculum was approved by New York as a 570
instructional (clock) hour program. A program of this length
does not satisfy the minimum number of hours required for
eligibility under 34 C.F.R. § 668.8(a).
Where the effect of an inconsistent usage of the measurement
system recasts an ineligible institution into an eligible
institution for purposes of the Pell Grant program, such a
conversion will not be approved by this tribunal. Therefore,
ASA's argument -- that even if it was legally authorized by the
NYSED in instructional (clock) hours, it could, nevertheless,
apply to ED for Pell purposes in credit (semester) hours -- is
rejected. Accordingly, ASA's curriculum does not constitute a
program of at six-months under 20 U.S.C. § 1088(c)(1), and
therefore, its program was ineligible for Pell Grant funds.
Lastly, ED asserts that the Secretary adheres to a policy which
does not require an institution, erroneously designated as an
eligible institution, to repay Federal student financial
assistance funds if the institution neither knew nor should have
known that the information upon which ED based its eligibility
designation was inaccurate. This position is premised on the
fact that if the institution knew or should have known that the
designation was inaccurate, the institution was, in effect, the
cause of the improper distribution of Federal funds and,
therefore, is liable for the repayment thereof.
This policy has been applied in the three institutional
certificate cases when, subsequent to the initial eligibility
designation, a third party institution notifies the Department
that its original representation to the Department--that the
third party institution gave credit for courses taken by its
students while they were attending the applicant institution--was
incorrect.See footnote 7
In this proceeding, the initial eligibility designation was based
on ASA's application for eligibility and its catalog which
collectively reflect that the curriculum constituted 64 credit
(semester) hours. Subsequently, ED determined that ASA was an
ineligible institution because it had been legally authorized to
conduct only the General Office program and it was legally
authorized to measure this program only in institutional (clock)
hours. As such, the General Office curriculum, when measured in
instructional (clock) hours, did not meet the minimum number of
hours required to constitute an eligible institution.
ASA contends that Mr. Farley represented that NYSED's approval of
the non-business (elective) courses was not required and that it
was permissible, under New York law, for ASA to offer the non-
approved courses along with the approved General Office program.
ASA also asserts that Mr. Farley indicated that ASA could use
credit (semester) hours in its catalog so long as it also used
the instructional (clock) hour measurement in the catalog and
therefore, NYSED approved, at least implicitly, a dual system for
the measurement of academic progress. ASA further argues that it
relied upon its counsel's view that--
[i]n our opinion, NYED has clearly approved your use of
credits as a measurement of enrollment status and course
Accordingly, ASA urges that it did not know nor should it have
known that the elective courses should have been excluded and
that it could not use the credit (semester) hour system for
purposes of eligibility designation.
The nature of these representations must be considered in light
of the overall circumstances. The oral representations by Mr.
Farley are inconsistent with the regulations promulgated by the
NYSED. Although individuals are presumed to know the law, ASA
had a copy of the regulations as well as actual notice, in
writing, by NYSED regarding these matters. In February 1986, ASA
was given authority to operate in New York and was told "[t]he
school is hereby authorized to give only such courses of study as
have been properly approved in writing by the Commissioner of
Education." (ASA Ex. 21 at 1) ASA was also notified in writing
in February 1986 by the Commissioner of Education that approval
was granted for the General Office curriculum which consisted of
570 instructional (clock) hours. (ASA Ex. 23 at 1) In addition,
it is not reasonable for an institution to conclude that a mere
change in its system of measurement for its courses without any
change in their actual length would permit an otherwise
ineligible institution to convert itself into an eligible
institution. Thus, ASA's final argument is without merit.
Accordingly, the Department is entitled to recover funds in the
amount of $695,751.
On the basis of the foregoing findings of fact and conclusions of
law, and the proceedings herein, it is hereby--
ORDERED, that the Academy for Social Action immediately and
in the manner provided by law pay the United States Department of
Education the sum of $695,751.
Allan C. Lewis
Administrative Law Judge
Issued: March 9, 1993
1. At all times relevant hereto, the Academy for
was a non-profit postsecondary institution authorized by the New
York State Education Department to operate as a registered
private business school. (Affidavit of Naftali M. Langsam, ASA
Exhibit 41-1) [hereinafter referred to as "Langsam Aff."].
2. The Academy for Social Action
("ASA") was founded to provide
educational services to a population of recent migrants to the
United States with limited English language skills and in need of
retraining in order to adjust to America, to obtain jobs, and to
become economically self-sufficient. By the Spring 1988 term,
approximately 175 students attended ASA. The age of those
students ranged from 20 to 80 years of age.See footnote
(Langsam Aff., at 41-2-3).
3. At all times relevant hereto, the President of
ASA was Naftali
M. Langsam, who was also a member of ASA's Board of Directors.
(Langsam Aff., at 41-1-2).
4. In 1984, ASA began to prepare the application
obtain a license from the New York State Education Department to
operate in New York as a registered private business school.
(Langsam Aff., at 41-3; Affidavit of Shoshana Grun, ASA Exhibit
42, at 42-1-2) [hereinafter referred to as "Grun Aff."].
Beginning in 1984, ASA hired Shoshana Grun as an educational
consultant and curriculum writer. Mrs. Grun was licensed by New
York City as an Education Administrator with specialization as a
Curriculum Development/Coordination Instruction Specialist and
Staff Development/Training Instruction Specialist. (Grun Aff.,
5. ASA, through its attorneys in Washington D.C.,
Goldstein and Blain B. Butner of the law firm of Dow, Lohnes &
Albertson, obtained for ASA the complete rules, regulations,
handbook, and forms necessary to apply to the New York State
Education Department (NYSED) as a registered private business
school. (Langsam Aff., at 41-3; Grun Aff., at 42-1-2).
6. In its Curriculum Application I, ASA described,
in addition to
business courses such as Typing II, Office Procedures III,
Business Communications I, and Computer Literacy, a number of ESL
(English as a Second Language) courses, as well as courses in
citizenship. (Langsam Aff., at 41-3-4).
7. After submitting Curriculum Application I to
the NYSED, ASA
was informed that Mr. Craig Farley of NYSED's Bureau of Adult
Program Supervision had been assigned to review ASA's
Application. The record does not disclose the NYSED official who
assigned Mr. Farley to ASA. ASA was also told that Mr. Farley
would be ASA's primary contact person with the NYSED, that he had
the authority to review and approve ASA's materials, that he was
to provide guidance to ASA during the application process, and
that he would be NYSED's supervisor for ASA if ASA's Application
received approval. (Langsam Aff., at 41-5).
8. After a series of communications between Mr.
Farley and Rabbi
Langsam concerning the deficiencies in Curriculum Application I,
ASA submitted Curriculum Application II to the NYSED for
approval. (ASA Exhibit 2-1; Langsam Aff., at 41-6; Grun Aff., at
9. Mr. Farley informed Rabbi Langsam that
NYSED's approval of
ASA's revised Curriculum Application II in the form submitted
which included courses in English, Civics, and Citizenship would
mean that the State would require every student to complete every
one of those courses before a student could receive a certificate
of completion from the school. Mr. Farley also informed Rabbi
Langsam that such approval was not required as far as the NYSED
was concerned. Accordingly, Mr. Farley not only recommended to
Rabbi Langsam that ASA separate non-business courses from
business courses, thereby making the required courses for the certificate of completion reflect
only the business courses, but
also stated that it was perfectly permissible for ASA to offer
those non-business courses (electives).See footnote 9
(Langsam Aff., at 41- 7-8).
10. Rabbi Langsam also asked Mr. Farley about
the requirement of
specifying course measurement. Mr. Farley stated that, for
purposes of the State's review of ASA's Application, all courses
must be identified in terms of "instructional hours," defined as
consisting of 50 to 60 minutes of classroom training. (Langsam
Aff., at 41-7-8).
11. Rabbi Langsam had understood this
requirement from the
application materials and had identified each course in
instructional hours on ASA's Curriculum Application. Rabbi
Langsam also asked Mr. Farley whether, in addition to the
instructional hour measurement, ASA could also assign credit
values to each course. Mr. Farley responded to Rabbi Langsam by
informing him that, as long as ASA used the instructional hour
measurement as required by the State, the State did not object to
ASA also measuring each course by credits and describing the
courses listed in the Curriculum Application in that manner in
its materials. (Langsam Aff., at 41-9).
12. Each version of ASA's catalog that was
submitted to the NYSED
described all of ASA's courses in terms of instructional hours
and credit hours. (ASA Exhibits 24-10 et seq., 27-15 et seq., 36-60 et seq., and 41-10).
13. ASA's catalog, in revised form in accordance
suggestions of Mr. Farley, contained a statement on "Requirements
for Graduation" as follows:
Satisfactory completion of all core subjects in the
student's area of specialization (i.e. "C"), and proficiency
in the English language as required by the student's area of
specialization and P in all electives (less one). The
students shall have at least the equivalent of 38 credits in
the core subjects and additional 26 credits in electives and
(ASA Exhibits 24-25 and 36-75).
14. ASA's catalog, in revised form in accordance
suggestions of Mr. Farley, contained a statement on "Satisfactory
A full-time student must earn a grade of "C" or better
(graded courses) or a grade of "Pass" (pass/fail course) in
courses totaling at least nine credits each semester in
order to maintain satisfactory academic progress.
(ASA Exhibits 24-23 and 36-73).
15. ASA submitted a revised Curriculum
Application III) to NYSED in July 1985. (Langsam Aff., at 41-11;
ASA Exhibit 4). ASA removed the specific descriptions of the
English and Civics courses from the list of required courses in
Part II, Section D, Subsections I and II and excluded the
detailed descriptions of those courses in Part II, Section E.
ASA also added an additional course in Business Math as a
required course. (Id.).
16. Through a series of exchanges between ASA
and Mr. Farley, ASA
learned of additional items that were necessary to complete the
application package. (ASA Exhibits 4-1, 5, 6, 7, 8, 10-2, 11,
12-1, and 12-4; Langsam Aff., at 41-11-16; Grun Aff., 42-3).
17. On October 23, 1985, Rabbi Langsam sent
Curriculum Application (Curriculum Application IV) to the NYSED
which was dated stamped by NYSED's Bureau of Adult Program
Supervision as received on October 29, 1985. (ASA Exhibit 13-1).
18. After the issuance of H. Rep. No. 99-383,
99th Cong., 1st
Sess. by the House Committee on Education and Labor, Rabbi
Langsam wrote on November 25, 1985 to ASA's legal counsel, Mr.
Goldstein, concerning ASA's operation in terms of clock hours as
opposed to credits. (ASA Exhibit 15; Langsam Aff., at 41-18).
On January 9, 1986, Mr. Goldstein advised ASA that--
[w]hile the Commissioner's regulations require that
enrollment agreements describe the length of courses and
curricula in terms of instructional hours, measurement by
credits is also permitted. In approving ASA's application,
the New York Education Department approved your use of
credits to measure course weight.
Equally important, and also approved by NYED, is your
catalog statement on satisfactory academic progress, which
provides that a full-time student must earn a passing grade
in courses totaling at least nine credits each term to
maintain satisfactory academic progress. This provision is
also important in awarding federal student financial
In our opinion, NYED has clearly approved your use of
credits as a measurement of enrollment status and course
weight. However, as the Commissioner's regulations also
require the enrollment agreement to measure courses by
instructional hours, we recommend [certain changes in course
(ASA Exhibit 20; Langsam Aff., at 41-20).
19. After further consultation with NYSED and
application package, ASA received four separate letters from Mr.
Farley. In these letters, all dated December 26, 1985, Mr.
Farley stated on behalf of NYSED that ASA'S application had been
approved, which included, inter alia, ASA's catalog. (ASA Exhibits 15, 16, 17, 18 and 19;
Langsam Aff., at 41-17-19).
However, Mr. Farley indicated that while he had the authority to send the December 26, 1985 letters approving these items, the official letter approving the registration for the school must come from Mr. Farley's Bureau Chief. (Langsam Aff., at 41-19).
20. By letter dated February 4, 1986, Mr. Peter
B. Riley, Chief
of NYSED's Bureau of Adult Program Supervision, informed ASA that
it was authorized to operate as a registered private business
school. The letter provided that the school is authorized to
give only such courses as have been properly approved in writing
by the Commissioner of Education and that approval of courses of
study are approved separately from this registration. (ASA
21. ASA also received a letter from Mr. Leonard
Bozza of NYSED's
Bureau of Adult Program Supervision dated February 3, 1986 which
stated that ASA's curriculum of General Office (Core) Word
Processing Machine in the amount of 570 instructional hours had
been approved and that a certificate may be issued upon
completion. (ASA Exhibit 23).
22. After ASA received the official approval of
the State of New
York to operate as a private business school, it then submitted
on April 23, 1986, its application for Pre-Accreditation Status
with the Council for Noncollegiate Continuing Education ("CNCE").
CNCE (now known as the Accrediting Council for Continuing
Education and Training) is a national accrediting body recognized
by the Secretary of Education. (Langsam Aff., at 41-1 and 41-21;
ASA Exhibit 24).
23. On June 24, 1986, ASA submitted to CNCE
an Addendum, portions
of which clarified ASA's catalog and the Pre-Accreditation Report
that ASA had previously submitted to CNCE in support of its
application for Pre-Accreditation status. (Langsam Aff., at 41-
21; ASA Exhibit 25-2-6). The proposed clarification to the
catalog included listing each of the designated "required
courses" (which totaled 38 credits) in terms of the number of
credit hours and instructional hours for each course. For
instance, Typing I was 60 instructional hours and 4 credits. In
addition, ASA proposed a clarification that "[a] certificate of
completion will be granted to student earning 38 credits of Core
Courses." The record does not reflect whether these proposed
changes to the catalog were submitted to NYSED for approval.
24. Effective August 6, 1986, ASA was granted
Status by CNCE. A letter granting Pre-Accreditation Status was
forwarded to ED on August 12, 1985. (ASA Exhibits 26, 28-1-2).
25. Pre-Accreditation Status allowed ASA to
apply to the United
States Department of Education ("ED") for institutional
eligibility to participate in Title IV federal student financial
assistance programs. (Langsam Aff., at 41-21-22). In
anticipation of the CNCE decision, ASA, through its counsel,
submitted on July 30, 1986, its application to ED for
institutional eligibility as an institution pre-accredited by a
national accrediting agency recognized by the United States
Secretary of Education, namely, CNCE. (Langsam Aff., at 41-22;
ASA Exhibit 27). In its application to ED, the school included
the addendum to its catalog purportedly to clarify items raised
by the accrediting agency. The addendum to the catalog
clarifying items raised by the accrediting agency contained only
the first page and one-half of the second page of the five page
addendum submitted to CNCE. The material submitted to ED (points
1 through 4) is identical to the material submitted to CNCE in
all respects including the misspelled word "advisement" on page
one at line 36 except that the page number notations -- "1 of 5"
and "2 of 5" -- are missing. The material omitted represented
points 5 through 11 which appeared on the last half of page 2,
and pages 3 through 5 and, included the following--
5. Catalog Pgs. 12-17 - Curriculum - General Office Core
Required Courses (38 Credits)
Typing 1 4 60
Typing II 4 60
Typing III 4 60
Office Procedures I 4 60
Office Procedures II 3 45
Office Procedures III 3 45
Business Comm. I 2 30
Business Comm. II 2 30
Computer Literacy 2 30
Word Processing 6 90
Business Math 2 30
Machine Transcript 2 30
TOTAL 38 560
Electives: (26 Credits)
Introductory English I 3 45
Introductory English II 3 45
Beginners English I 3 45
Beginners English II 3 45
Intermediate English I 3 45
Intermediate English II 3 45
Advanced English I 3 45
Advanced English II 3 45
Introduction to Citizenship I 3 45
Introduction to Citizenship II 3 45
Beginners Citizenship I 3 45
Beginners Citizenship II 3 45
Intermediate Citizenship I 3 45
Intermediate Citizenship II 3 45
Advanced Citizenship I 3 45
Advanced Citizenship II 3 45
Judaic Culture 3 45
Beginners Culture 3 45
Intermediate Judaic Culture 3 45
Advanced Judaic Culture 3 45
The total hours of required courses reported on catalog pages 12- 17 is 560. This appears to be a typographical error as the sum total of hours represented in that column is 570 hours. (ASA Exhibit 25-3).
26. ASA completed ED Form 1059 entitled
Institutional Eligibility for Programs" on July 28, 1986. (ASA
Exhibit 27-5). ASA's counsel forwarded this form to ED's
Division of Eligibility and Agency Evaluation on July 30, 1986.
(ASA Exhibit 27-1).
27. On Form 1059, ASA measured its academic
in terms of credits. ASA also submitted, at this time, the
catalog approved by NYSED. (ASA Exhibit 24-4, Items 16 and 18d;
ASA Exhibit 27-22, 27-28, and 27-30).
28. Although NYSED required revisions to be
made to ASA's catalog
(ASA Exhibit 8), those revisions did not include removing any of
the references to credits. (ASA Exhibit 27-15 et seq.).
29. The 1985-86 and 1986-87 versions of the
Federal Student Financial Aid Handbook, published by ED, provided in Chapter 2, entitled
"Eligibility and Program Participation Agreements," a
definition of a six-month training program which emulated the
criteria under 34 C.F.R. § 668.8. Likewise, Part IV of ED Form
1059 entitled "Special Terms of the Instruction" adopted the 34
C.F.R. § 668.8 definition of a six-month program to determine
whether an institution constituted an eligible institution. (ASA
30. On September 4, 1986, ED determined that
ASA met the
definition of an eligible institution and that ASA could apply to
participate in Title IV student aid programs. (ASA Exhibit 29-1-
2). This determination was based on ASA's submission to ED that
its program consisted of 64 credits. (ASA Exhibit 27-4, 27-30).
31. On September 9, 1986, ASA, through its
counsel, submitted its
application to ED for certification to participate in Title IV
student aid programs, ED Form 633. (ASA Exhibit 30, 31; Langsam
Aff., at 41-22).
32. On October 1, 1986, ED approved ASA's request for certification to participate in Title IV student aid programs.
(ASA Exhibit 32-1).
33. On April 21, 1988, Mr. William Swift and
Mr. Robert McKiernan
from the Ed's Regional Office in New York came to ASA for the
stated purpose of conducting a routine program review for the
1986-87 and 1987-88 award years. (Langsam Aff., at 41-23-24).
34. On April 25, 1988, ASA received a letter
from Mr. McKiernan
dated April 22, 1988 (ASA Exhibit 34) advising that ASA was being
placed on a system of payment by reimbursement, and that future
federal student aid funds could only be received from ED after
additional documentation had been submitted to ED. (Langsam
Aff., at 41-26; ASA Exhibit 34-1-2). The letter also stated--
During that review we determined that the Academy had
disbursed Pell Grant funds to students enrolled in an
ineligible program during 1986/87. In addition we
found that the Academy had apparently misrepresented
the nature of its educational program to the
(ASA Exhibit 34-1).
35. After consulting with ED, ASA learned that
the basis for ED's
determination that it had conducted an "ineligible program" was
that the school was only approved by NYSED to measure courses in
clock hours and that the institution was limited to seeking
eligibility from ED to participate in Title IV programs based on
clock hours. In ED's view, the minimum duration of an eligible
program in clock hours is 600 clock hours and, therefore, ASA's
program of 570 clock hours did not qualify it as an eligible
institution. (ASA Exhibit 36-1).
36. On May 24, 1988, counsel for ASA provided
to ED's Mr.
McKiernan a detailed written explanation, together with
supporting documentation, of the underlying circumstances
regarding not only the process leading to ASA's registration with
the NYSED and its Title IV eligibility from ED, but also why, in
its view, the assumptions and the conclusions in Mr. McKiernan's
April 22, 1988 letter were not correct. (ASA Exhibit 36).
37. Specifically, counsel for ASA provided ED
written approvals that it had received from the NYSED which
referenced credits as a unit of academic measurement. (ASA
Exhibit 36-1-4). Finally, counsel's letter pointed out that ASA was not aware of any requirement
of ED that a school which is
approved by the State to measure its program in clock hours could
not also measure its program in credits for purposes of receiving
federal eligibility to participate in Title IV student aid
programs. (ASA Exhibit 36-3-4). For these reasons, Mr. Butner
requested that the findings of the program review be dismissed.
(ASA Exhibit 36-4).
38. ASA received a letter dated June 7, 1988
from Ms. Joan Duval,
Director of ED's Division of Eligibility and Certification (ASA
Exhibit 37), which indicated that, as a result of ED's program
review, she had determined that the school was not eligible to
participate in ED's Title IV student financial assistance
programs, and that she was revoking the eligibility of the school
retroactive to September 4, 1986, which was the date ASA was
granted eligibility. (Langsam Aff., at 41-29; ASA Exhibit 37).
39. On June 15, 1988, ED issued its initial final
determination in this case. (ASA Exhibit 38).See
On August 5, 1988, ASA timely filed its request for review of ED's final
program review determination. (Order Striking Evidence, issued
by Administrative Judge Walter J. Alprin on September 22, 1988,
ASA Exhibit 53-1). On September 22, 1988, Judge Alprin granted
ASA's motion to strike three documents purporting to interpret
New York law submitted by ED as untimely filed. (ASA Exhibit 53-
40. On October 14, 1988, ED purported to
"rescind the final
program review determination dated June 15, 1988 ... in part,
because that final program review determination did not include
all of the grounds supporting the return of those Pell Grant
Program funds." (ASA Exhibit 49).
41. On December 3, 1990, ED issued an
amended final program
determination stating that ASA was an ineligible program for
Title IV purposes during the 1986-87 award year based upon the
policy of 34 C.F.R. § 600.3. (OSFA Exhibit G-1-2). OSFA
determined that if a state, such as New York, authorizes clock
hours only for measuring an institution's programs of
postsecondary education, the institution must measure those
programs in clock hours for purposes of determining Pell awards.
Accordingly, ED determined that ASA must refund to ED $695,751 in
Pell Funds disbursed through ASA. (OSFA Exhibit G-6-1-2).
42. On January 16, 1991, ASA timely filed its
request for review
of the December 3, 1990 amended program review determination.
(ASA Exhibit 54).
43. On October 18, 1984, the Deputy Assistant
Higher Education Programs and the Director of the Division of
Eligibility and Agency Evaluation co-signed a "Dear Colleague"
letter which addressed the clock hour/credit hour conversion
procedures. The letter reflected the absence of ED guidance with
respect to clock hour/credit hour conversions--
Our office shares the view that a policy statement is needed
on clock hour/credit hour conversions. However . . . we have determined that the Division of
Eligibility and Agency
Evaluation should not issue a blanket public policy on this
issue at this time. This decision is based on the planned
publication of proposed eligibility regulations, which, when
issued, will provide an opportunity for the public to
comment on all aspects of the proposed eligibility rules,
including the clock hour/credit hour conversion issue. . . .
It is our expectation that the Notice of Proposed Rulemaking
will be issued prior to the end of November [of 1984].
44. While the proposed eligibility rules were
November of 1984, no such action was imminent as of November 1985
which prompted comment by the Committee on Education and Labor--
More than a year ago, the Department [of Education]
announced a "moratorium" on the conversion of course
measurement from clock hours to credit hours. The Committee
appreciates the intent of the Department to be assured that
institutions are properly measuring course units. The
rationale for this "moratorium" expressed in an October 18,
1984 "Dear Colleague" letter . . . seems to be premised upon
the imminent issuance of new proposed eligibility rules.
More than a year has passed and the proposed regulations
have not been issued. The Department's "moratorium" and
inaction on new rulemaking is now unduly intrusive and
In fact, the Committee seriously questions the statutory
authority for such a decision which has a direct impact on
the educational program of many institutions and therefore
seems contrary to the provisions of Section 432 of the
General Educational Provisions Act (GEPA) which explicitly
prohibits the Department from exercising any direct
supervision or control over the curriculum, program of
instruction, or administration of an educational
Therefore, it is the opinion of the Committee that as long
as an educational institution utilizes generally accepted
educational principles in evaluating its units of study or
courses of instruction, it is inappropriate for the
Department to intrude upon this institutional prerogative by
attempting to either deny eligibility to the institution or
program or to lock an institution into a singular system of
unit or course measurement.
H. Rep. No. 383, 99th Cong., 1st Sess. 57-58 (1985).
45. On April 5, 1988, the Secretary published
regulations, effective July 1, 1988, which resolved the clock
hour/credit hour controversy. The preamble purports to clarify
the Secretary's existing policy which precludes the mismatching of clock hours as reported to the
State and credit hours as
reported to ED for Pell funds--
[t]he Secretary has added paragraphs (c) and (d) to § 600.3,
"Special conditions," to clarify the Secretary's existing
policy with regard to the relationship between an
institution being legally authorized to provide a
postsecondary education program in a State and the manner in
which the institution provides that program, i.e., clock
hours or credit hours, in that State.
Some States require a certain type of institution or school
to measure its educational programs in clock hours in order
to be legally authorized in that State to provide a program
of postsecondary education. Therefore, that type of
institution or school located in that State qualifies as an
eligible institution or school under the relevant HEA
statutory definition only if it measures its educational
programs in clock hours. The Secretary has amended § 600.3
by adding paragraph (c), which will take effect July 1,
1988, to make this requirement explicit in the regulations.
Other States require a certain type of institution or school
to use clock hours to measure its educational programs in
order to receive a State license or charter. Some of these
states may then permit an institution or school, once it has
received that license or charter, to measure its educational
programs in credit hours for other purposes. However, for
the purpose of satisfying the statutory definition of an
eligible institution or school under the HEA, the Secretary
considers these institutions or schools to be legally
authorized to provide a program of postsecondary education
in these States only if they provide their educational
programs in clock hours because that was a required element
in receiving a license or charter from the State. The
Secretary has further amended § 600.3 by adding paragraph
(d), which also takes effect July, 1, 1988 to make this
requirement explicit in the regulations.
34 C.F.R. § 600.3 was promulgated, in part, as follows:
(c)(1) If a State requires an institution to measure its educational programs in clock hours in order to be legally authorized in that State to provide a program of education beyond secondary education, the Secretary considers that institution is legally authorized in that State to provide a program of education beyond secondary education only if the institution measures its educational programs in clock hours.
. . . .
(d)(1) If as part of the application process for receiving a license, charter, or other document that demonstrates it is legally authorized to provide a program of education beyond secondary education in a State, the State requires an institution to measure its educational programs in clock hours, the Secretary considers that institution to be legally authorized to provide a program of education beyond secondary education in that State only if the institution measures its educational programs in clock hours.
53 Fed. Reg. 11,208, 11,209, 11,212 (Apr. 5, 1988).
Subsequent to the April 5, 1988 publication, ED received numerous
objections to the July 1, 1988 effective date. As a result, the
Secretary suspended the effective date of paragraph (d) of §
600.3 until July 1, 1989. 53 Fed. Reg. 25,489 (July 7, 1988).
Pub. L. No. 100-369 also suspended the effective date of §
600.3(d) until July 1, 1989. The Secretary further suspended the
effective date of 34 C.F.R. § 600.3(d) until October 1, 1989 "to
permit institutions sufficient time to comply" with the
instructions issued by the Department on July, 28, 1989. 54 Fed.
Reg. 40,388 (Oct. 2, 1989). 34 C.F.R. § 600.3(c)(1) became
effective July 1, 1988.
It is unclear whether the Secretary suspended the July 1, 1988
effective date of 34 C.F.R. § 600.3(c). In any event, the
effective date or dates of 34 C.F.R. §§ 600.3(c) and (d) is after
the 1986-87 award year in issue in this proceeding.
46. The Secretary subsequently submitted a bill
to Congress which
addressed, inter alia, the clock hour/credit hour dispute. The
Secretary urged congressional action to "significantly
diminish" abuse of Title IV funds--
Section 13 of the bill would amend section 481(d) of the
bill to require an institution to measure the length of a
course of study or its academic year for that course of
study on a "clock hour" basis for purposes of title IV, if
the course of study is licensed by the State in which it is
located only on that basis.
(ASA Exhibit 46-36).
47. On April 26, 1989, ED issued a "Dear
Colleague" letter which
addressed the implementation of 34 C.F.R. § 600.3(c) and (d) and
indicated that the effective date was July 1, 1989. The letter
provided that "[t]hese regulations establish the rules and
procedures that the Secretary of Education uses in determining
whether an institution or school qualifies as an eligible
institution under the Higher Education Act of 1965, as amended."
48. Finally, on July 31, 1989, the Director of the
Financial Assistance Program and the Director of Debt Collection
and Management Assistance Service wrote ASA that--
If the institution was required to list its educational
programs in clock hours as a precondition to receiving
a State license, your institution must change to clock
hours from credit hours in order to remain eligible to
participate in student financial assistance program
administered by ED.
(ASA Exhibit 51-2).
Stephen M. Kraut, Esq.
Office of the General Counsel
U.S. Department of Education
Room 4091, FOB-6
400 Maryland Avenue, S.W.
Washington, D.C. 20202
Leslie H. Wiesenfelder, Esq.
Dow, Lohnes & Albertson,
1255 23rd Street, N.W.
Washington, D.C. 20037
On March 9, 1993, a copy of the initial decision was also
Jack C. Reynolds
Director, Institutional Monitoring Division
(formerly Audit and Program Review)
U.S. Department of Education
Room 3923, FOB-3
7th and D Street, N.W.
Washington, D.C. 20202-5254