UNITED STATES DEPARTMENT OF EDUCATION
             WASHINGTON, D.C. 20202

_______________________________________________

In the Matter of                     

Docket No. 98-4-SP

Student Financial Assistance Proceeding

PRCN: 199730914004

Charles P. Nemeth, Esq., Rosslyn Farms, PA, for Respondent.

Pamela Gault, Esq., Office of the General Counsel, United States Department of Education, Washington, D.C., for Student Financial Assistance Programs.

Richard I. Slippen, Administrative Judge

    In its appeal of the FPRD, TDA focuses its challenge upon SFAP's decision to terminate its eligibility. The institution argues that it should have been afforded a Subpart G termination hearing because the denial of its recertification application deprives it of a fundamental property interest. TDA also contends that it does in fact offer eligible graduate or professional programs, that it cannot be categorized as undergraduate, that SFAP acted arbitrarily and capriciously in the termination process, and that the Department retroactively applied its requirements.

    SFAP responds that a truck driving school cannot claim to offer graduate or professional programs within the meaning of the regulations, and that TDA should correctly have categorized itself as an undergraduate institution. However, since its programs would not have met the eligibility criteria for undergraduate training, SFAP claims that TDA's attempt to pass itself off as a graduate institution is little more than a “post hoc rationalization” for its failure to fulfill the clearly written regulatory standards. TDA's arguments against the termination decision are ultimately misplaced, SFAP contends, because this tribunal does not have the authority to hear these issues in a Subpart H proceeding.

    SFAP argues that TDA appealed the FPRD pursuant to 34 C.F.R. § 668, Subpart H, and therefore the institution may only challenge the imposition of liability, not the termination itself. The Subpart H proceeding “applies to any participating institution or third-party servicer that appeals a final audit determination or final program review determination.” 34 C.F.R.
§ 668.111(b). Accordingly, the regulations specifically state that Subpart H does not apply to proceedings governed by Subpart G. 34 C.F.R. § 668.111(c). As TDA appealed the November 19, 1997, FPRD in a timely fashion on December 19, 1997, and entitled its appeal as “Request for Review of a Final Determination Letter,” there can be little doubt that the institution was initiating a Subpart H proceeding. TDA's continued assertions that this tribunal has authority under Subpart G represent a misunderstanding of the applicable regulations.        

    The institution also argues that it has due process rights since the termination of its eligibility denied it “a fundamental property interest.” The Department's refusal to recertify an institution, however, does not constitute the kind of termination which TDA alleges requires full due process. The institution cites Career College Ass'n v. Riley, which specifically distinguished the due process rights necessary for provisional certification from those for termination, a differentiation which does not support TDA's argument. 74 F.3d 1265 (D.C. Cir. 1996). Although Career College addressed termination for excessive cohort default rates, it is worth noting the court's statement that “institutions subject to provisional certification . . . as initial or renewal applications are not entitled to the notice and hearing and the appeal requirements. Such applications are not 'participating' in a Title IV program and do not possess any current 'eligibility' that can be lost.” Id., at 1274. As TDA itself notes, due process requirements for provisional certification are minimal. The very process of applying for recertification suggests that there is no “'entitlement' to certification” or continued eligibility. Id.

    For these reasons, TDA is only entitled to a Subpart H hearing. As jurisdictional authority under Subpart H is limited to the FPRD, this tribunal will make no judgment on the merits of SFAP's decision not to recertify TDA as an eligible institution. The sole issues before me in this proceeding concern SFAP's finding that TDA offered an ineligible program and its subsequent assessment of liability.

    According to SFAP, no plausible reading of the applicable regulations would lead to a definition of TDA's truck driving program as “graduate or professional.” TDA awarded Federal Pell Grants to its students, although Pell Grants may only be awarded to students who have not yet received a baccalaureate or professional degree. 34 C.F.R. § 690.75(a)(2). A graduate or professional student is defined under 34 C.F.R. § 682.200(b) as one enrolled in a program above the baccalaureate level or a program leading to a first professional degree. Such a student also has completed at least three academic years of full-time study at an institution of higher education and is not receiving Title IV aid as an undergraduate during the same period of enrollment. Id. An undergraduate student, on the other hand, has not yet earned a baccalaureate or first professional degree and is participating in an undergraduate course of study. 34 C.F.R. § 690.2. TDA not only stretches credulity by arguing that its truck driving program could fit under these regulations as a graduate program, but it also conveniently ignores the 34 C.F.R. § 690.6 requirement that only undergraduate students may receive Pell Grants.

    Furthermore, as TDA's programs are 16 weeks and 330 clock hours in length, SFAP charges that the institution does not meet the length requirements necessary under 34 C.F.R.
§ 668.8(d)(1) for a vocational program to participate in the Federal Pell Grant program. Since the institution does not meet the requirements of a vocational or graduate training program, it must qualify under the only other remaining category_as a high-performing vocational program, which requires it to present evidence that it has completion and placement rates of at least 70%. TDA, however, failed to conduct a placement study to satisfy this requirement. Moreover, this category only applies to Federal Family Education Loan program participation, as such schools cannot receive Federal Pell Grants, which TDA did in fact receive. 34 C.F.R. § 668.8(d)(3), (f) and (g). SFAP argues that students may only be considered eligible to receive Title IV funds if the institution and its programs are eligible. In a Subpart H proceeding, the institution has the burden of proving that its disbursements of Title IV funds were proper, and SFAP asserts that TDA did not meet this burden. See 34 C.F.R. § 668.116(d).

    TDA, on the other hand, claims that the Department's categorical determination is unnecessarily rigid, that an institution can have programs of “multiple designation.” The institution focuses on SFAP's assertion that it provides vocational, or “undergraduate,” training. TDA argues that because it could not fulfill the threshold requirements for eligibility as an undergraduate program, it must therefore not be an undergraduate program. This is a peculiar leap of logic, for TDA's failure to meet the requirements of one category cannot be used to prove that it does not belong in that category.See footnote 3³ The institution asserts that it chose this designation based on the plain language of the regulation, that it is “clearly . . . a proprietary and vocational school of higher education offering a professional program of study.” (emphasis in original) However, the institution does not explain why this is so obvious.

    TDA seems to suggest that the definitions of undergraduate and graduate study and the requirements included for each should be ignored in favor of a its “good faith interpretation of the regulations.” The institution's acceptance of Pell Grants, however, negates this argument, for § 690.6 is quite clear in stating that “a student is eligible to receive a Federal Pell Grant for the period of time required to complete his or her first undergraduate baccalaureate course of study.” TDA does not address the fact that it accepted Pell Grants, but it could not receive them and yet be a graduate institution.

    The regulations, when read as a whole, do not leave any doubt that TDA did not fulfill the requirements of any of the three program categories. TDA cannot be a graduate or professional program because the institution accepted Pell Grants; it cannot be a vocational program because it does not fulfill the length requirements; and it cannot be a high-performing vocational program because it failed to perform a placement study.
    
    The institution makes a final argument that SFAP has retroactively applied its requirements. According to TDA, the application of the placement study requirement is arbitrary and capricious. TDA does not provide much support for this claim, however, aside from its from its assertions that this tribunal need not be deferential in the face of irrational administrative decisionmaking. As noted above, however, SFAP's attempt to categorize TDA into one of the three regulatory categories does not represent an abuse of discretion. An institution must only conduct a placement study if it wishes to fit within the high-performing vocational school category. Quite simply, TDA did not fulfill the requirements for any of the categories.

    Although TDA did not articulate a clear argument for estoppel, the institution did challenge SFAP's assessment that it is “liable for retroactive sums.” It is therefore worth noting that the Department cannot be estopped from collecting misspent funds. “SFAP is entitled to repayment of Title IV funds if the institution was not eligible to receive those funds regardless of the institution's good faith or lack of notice.” In re Beth Jacob Hebrew Teachers College, Docket No. 96-77-SP, U.S. Dep't of Educ. (March 17, 1997) at 4. Although it is not clear whether TDA's original certification was the result of mistake or negligence, the Department “should never be precluded from enforcing its regulations, even though there may have been gross negligence or a previous lapse in such enforcement.” Id. at 5. See also In re Academia La Danza Artes Del Hogar, Docket No. 90-31-SP, U.S. Dep't of Educ. (May 19, 1992), aff'd by the Secretary (August 20, 1992) at 10. It is also worth noting again that the Department's certification was only provisional. Therefore, I find that SFAP may recover all Title IV funds expended by TDA during the 1995-96 and 1996-97 award years.

2. TDA remains liable for all Title IV funds expended during the 1995-96 and 1996-97 award years.

A copy of the attached initial decision was sent by certified mail, return receipt requested, to the following:

Charles P. Nemeth, Esq.
415 Kings Highway
Rosslyn Farms, PA 15106

Pamela Gault, Esq.
Office of the General Counsel
United States Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110