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The Education Department’s Office of Inspector General wants the agency to claw back $713 million in loans and grants from Western Governors University, claiming that the limited role of faculty in courses makes the online university ineligible for federal student aid.

The recommendation in an audit released Thursday could threaten the future of competency-based education, a burgeoning field that believes students should learn at their own pace and move along as they have mastered the material. Western Governors has been at the forefront of the movement and widely praised by Democrats and Republicans for creating an innovative model. With 83,000 students, the nonprofit university has raised its profile with commercials featuring an owl touting it as a flexible solution for busy adults.

Investigators said that while Western Governors’ online, competency-based courses were accredited as distance education programs, they actually operate as correspondence courses that do not involve significant interaction between faculty and students. The distinction matters because a college cannot receive federal loans and grants if most of its students are enrolled in correspondence courses or if more than half of its classes are offered by correspondence.

According to the audit, 62 percent of the 61,180 students at Western Governors in 2014-2015 were enrolled in one or more courses that did not meet federal standards for distance education. Investigators concluded that at least 69 of the 102 courses the university offered at the time had inadequate involvement from instructors. As a result, the inspector general said the department should force the school to return the millions of dollars it has received in student aid.

“The course design materials for all 69 of these courses described courses that would be self-paced, interaction between the students and instructors that would primarily be initiated by students, and interaction between the students and instructors that would not be regular and substantive,” the inspector general report said.

Because the inspector general’s office lacks enforcement authority, the Education Department is under no requirement to act on its recommendation. Still, the audit has rattled Scott Pulsipher, the president of Western Governors.

He said the inspector general’s report has a “narrow application of the statute and regulatory guidance as well as a misinterpretation of . . . what faculty roles are” at the university. He said the school has disaggregated the traditional role of faculty by having some develop the curriculum, teach courses and evaluate student progress.

“Students at WGU cannot enroll for just a course, they enroll in a program that’s a collection of courses they need to complete a bachelor’s or master’s degree. And because of that design, they are required to work with course faculty, program faculty and evaluation during their entire tenure,” Pulsipher said.

But the inspector general found that model dubious and said only a few faculty could be considered instructors.

Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said the inspector general has good reason to be skeptical of competency-based education.

“By its nature, it’s highly susceptible to waste, fraud and abuse because you’re dispensing with the one rock-solid guarantor of integrity that there is, and that is qualified faculty,” he said.

For years, the inspector general’s office has questioned whether competency-based courses should be eligible for federal financial aid. Thursday’s long-awaited report, some four years in the making, is being perceived as the independent body drawing a line in the sand on the issue. The critical report throws into question the viability of such instruction and could create a chilling effect throughout the industry, said Van Davis, the head of policy at Blackboard, an education technology company.

“Even if the department doesn’t accept the IG’s recommendation, it is something that is going to give a lot of institutions pause because they don’t have the political muscle that Western Governors has,” he said. “It could make a lot of companies skittish.”