No Going Back

Congress may yet block an Education Department rule requiring colleges to obtain state authorization, but the state regulations themselves won’t vanish so easily.
June 24, 2011

WASHINGTON -- Will a House of Representatives bill intended to overturn two of the Education Department’s “program integrity” rules -- one creating a federal definition of a credit hour and another requiring colleges to get state approval to operate -- make it through both houses of Congress? Would President Obama ever sign the legislation into law, undermining his own Education Department?

When it comes to the state authorization requirements, at least, there’s another question: Would overturning the federal rule even make a difference? Probably not, observers say.

The state authorization rule would require colleges and universities to obtain approval from every state in which they operate -- even if "operating" consists only of enrolling students from that state. The rule proved unpopular as soon as it was introduced, drawing protests from across all sectors of higher education. Institutions that offer distance education said the federal regulation would force them to follow state laws and rules that predate online learning and create a nightmare of red tape. The complaints eased only slightly when the Education Department announced it would delay enforcing the rule until 2014.

But in at least one way, the rule has already accomplished the department’s goal of applying more scrutiny to institutions whose students receive federal financial aid. It has drawn attention to state regulations and authorization requirements that were previously overlooked, or ignored, by all parties. Some states have begun to review their authorization process. Even if the federal rule is overturned, those state policies will be part of the regulatory landscape for the foreseeable future.

“This would repeal the rule, but the problem is, it would have no effect on the state regulations,” said Russ Poulin, deputy director of research and analysis of WCET, a cooperative that focuses on technology in higher education. “Those are all still in place, and the states still expect that institutions will be complying.”

The state authorization requirements vary widely. Some require authorization for any institution that enrolls a student from the state. Others require it only if the institution has some kind of physical presence -- which can range from an actual campus to a faculty member or just direct advertising to prospective students. Some requirements are lenient (Hawaii demands only that an institution be regionally or nationally accredited); others are stricter (Minnesota requires an extensive application for any institution serving students in the state).

Fees for the processes vary as well: some states charge no application fee; others charge thousands of dollars, a figure sometimes multiplied depending on how many programs an institution offers.

In the past, many out-of-state institutions were ignorant of the requirements or simply paid them little mind, and the regulators ignored the institutions in turn, Poulin said. The federal rule has done away with any pretense of mutual ignorance.

In its attempt to ensure the integrity of federal financial aid programs, the Education Department has sought to strengthen all parts of the "triad," the combined scrutiny of the federal government, state education departments and accreditors. The focus on states was driven by the collapse of state authorization in California, where in 2008 a law regulating the for-profit sector expired with nothing to replace it. Department officials have argued that the state authorization rule simply reinforces state regulations (rather than creating an additional burden), but that the rule is necessary to make sure that state laws are actually followed. (The policy, like other program integrity rules, is aimed especially at for-profit colleges, but all institutions will have to comply.)

Even if the Education Department’s rule is struck down -- an uncertain prospect in itself -- the only way to return to the status quo would be to encourage institutions to flout state law. That course of action seems unwise, Poulin said. And it might not succeed.

“The state regulators are newly aware that there are loads of institutions operating in their state that they didn’t know about before, and will probably have their antennae up to start looking for more,” he said.

The result is that institutions are choosing whether to comply with what is currently a patchwork system of regulation with uncertain status -- and whether to seek authorization in states with expensive fees or to cut their losses by no longer admitting students who live there.

For now, the majority of institutions are taking a “wait and see” approach, said Richard Garrett, a managing director at Eduventures who leads the consulting group’s Online Higher Education Learning Collaborative. Some are waiting to see the results of the Congressional legislation; others are hoping for changes to state regulations, whether to clarify the requirements or to allow states to cooperate.

Other colleges, though, have already begun to consider what choices they might have to make, Garrett said. They might decide not to market to students in a particular state, if doing so would be a trigger for authorization. For states where employing faculty members is a trigger, institutions might reconsider those employees’ contracts, he said.

For some institutions, particularly those that are large and have enough financial resources to pay the fees to be authorized nationwide, a 50-state presence could become part of a business strategy, he added.

One institution facing such choices is Troy University, a public institution in Alabama with branch campuses in 17 states as well as an online degree program. Troy already has started inquiring into state authorization nationwide, said Deb Gearhart, Troy’s eCampus director. But the institution is waiting until the fall semester begins, when state-by-state enrollment numbers are available, to make decisions, she said.

The expense of state authorization has little impact on some of the admitted target of federal regulations, large for-profit institutions, which can afford to pay the fees, she argued. Instead, it has the biggest impact on community colleges and public institutions, as well as some small for-profits that don’t have the deep pockets of Kaplan Higher Education or the Apollo Group.

“The large for-profits that are bringing in the money, they have the money to pay whatever,” Gearhart said. “It has not been the disincentive that [the Education Department] thought it would be. What it has been is a disincentive to traditional institutions that do small online programs.”

Some relief could come through reciprocity agreements, in which states would agree on a common set of standards and accept authorizations from other states as valid. The Presidents’ Forum, a group of institutions offering online education, is working on such agreements in partnership with the Council of State Governments through an effort funded by the Lumina Foundation for Education. They hope to have agreements completed within two years, before the federal rule would take effect, said Alan Contreras, who retired earlier this year from Oregon’s authorization agency and is participating in the reciprocity working group.

“You could get well over half of the states are going to have standards that are similar enough that they might realistically be expected to participate in such an agreement,” Contreras said. Other states, including those without any standards or those who want to be more stringent, would continue on their own.

The complicated system that exists now is a relic of the days before online education, when it was unlikely that institutions would operate in more than a few states, Garrett said. And despite the current uncertainty, he said whatever emerges after the federal rule is settled and the reciprocity agreements are worked out will be better for it. “We have to go through all this exposure and pain and angst and doubt to come out the other side with a healthier system,” he said.


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