Power Struggle on Online Oversight

Initiative to simplify how colleges become authorized to offer online education outside their home state once again runs into opposition from advocacy groups, this time in New York.

March 21, 2016

Critics of for-profit colleges say an effort to streamline online education regulations will make it easier for bad actors to take advantage of students and harder for states to crack down on them.

SARA, short for the State Authorization Reciprocity Agreement, was designed to ease the regulatory burden on colleges that wish to offer online programs in states other than the one in which they are physically located. Before SARA, colleges had to apply in each individual state, a lengthy process that could cost hundreds of thousands of dollars and even discourage some institutions from enrolling students in certain states.

As states join SARA, they agree to a common regulatory framework. Colleges then apply to join SARA, paying no more than $6,000 a year to be approved to offer online education in every member state.

The initiative has quickly proved popular. SARA signed up its first state, Indiana, in February 2014. By the end of the year, 17 more states had joined. Today, the initiative has 36 members, and most of the remaining states (as well as the District of Columbia and Puerto Rico) are making progress toward joining.

But in New York, a coalition of advocacy groups is mounting a campaign against SARA. In a letter to the state’s education commissioner, the 34 groups said joining SARA would weaken the state’s ability to take on “predatory online education companies based in other states.”

As more states join SARA, the letter continues, those predatory providers will “set up shop in the states with the lowest regulatory standards while broadcasting nationwide.” The groups further urge the commissioner to withhold her signature. The news was first reported by The New York Times.

In an interview, Marshall A. Hill, executive director of SARA’s national council, said the criticism is overblown.

“There is nothing in SARA that reduces the ability of a state attorney general to go after misbehaving institutions that break state consumer protection laws -- absolutely nothing,” Hill said. “SARA provides good state-level oversight for institutions of all types that deliver cross-state distance education.”

SARA responded to the criticism in a letter to the editor, saying a common way of regulating out-of-state online education providers is better than the alternative.

“When education through the Internet became feasible, previous approaches to state regulation and consumer protection became obsolete,” the letter reads. “The then existing patchwork of regulations in 50 states failed to protect students from irresponsible practices. No state, not even New York with a substantial regulatory staff, proved able to regulate all the institutions providing distance education to its citizens. Other states with weak regulatory capacity attracted newly created (or mobile) institutions seeking to avoid regulation. And the cost of complying with multiple, inconsistent state regulations discouraged many well-established public and independent private institutions from offering distance courses."

Members of the New York coalition disagree. Margaret Mattes, a higher education policy associate with the Century Foundation, in a blog post described SARA as a “deal accomplishing the exact goals of the for-profit lobby.”

Mattes pointed to the state of New York’s takedown of Trump University -- the defunct online education company that has once again resurfaced in the news -- as an example of a state taking effective action to protect its residents. If New York joined SARA, she continued, it would “sign away its right to take action against a new threat: out-of-state online schools.”

SARA’s policies, however, prevent online education companies such as Trump University from joining, Hill said. Membership is only open to degree-offering institutions -- certificate, diploma and seminar providers need not apply. The institutions also need to be accredited by one of the organizations recognized by the U.S. Department of Education.

SARA also follows the Education Department’s financial responsibility standards. The department rates colleges and universities’ equity, reserves and net income on a scale of negative 1.0 to positive 3.0, where a composite score of 1.5 is considered the threshold for an institution to be considered financially responsible. Colleges with a score between 1.0 and 1.5 have to appeal to the “SARA portal agency” in their state -- a role normally filled by a board of regents or state department of higher education -- that they are financially stable enough to participate.

Based on the most recent composite scores, eight SARA member institutions fall into that category. Only one is a for-profit institution, Hill said. SARA has 674 members in total, about 40 of which are for-profit institutions. The rest are public or private nonprofits.

This is not the first time SARA’s expansion has been met with resistance from critics of for-profit colleges. Last year in California, a state senator introduced a bill that would enable the state to join. The effort came to a halt after a coalition similar to the one in New York opposed the bill.

Robert Shireman, a former U.S. Department of Education official involved in California and New York campaigns, said his greatest concern about SARA is that states have to rely on other states for regulatory oversight.

“There’s no escape valve,” Shireman said in an interview. “A state has no leverage against an institution or a state that is nonresponsive.”

Some states have also discovered that they can’t add more qualifications on top of the ones SARA requires. The Iowa College Student Aid Commission, the portal agency in that state, was last week told by the SARA national council that it “cannot require the schools to provide any additional documentation,” according to the commission’s executive director.

Shireman, who has been a critic of the for-profit sector, said predatory online education providers could become SARA members by being acquired by institutions that have already been approved to join. Trump University may be an “extreme example,” he said, but similar types of acquisitions may happen. For example, the University of Akron, which has already joined SARA, has reportedly been debating an investment in satellite campuses -- perhaps through a takeover of the for-profit chain ITT Tech’s campuses -- in an effort to expand its reach.

“We certainly hope that an accreditor would not approve a Trump University-type of appendage onto a university, but even for public and nonprofit institutions, the reason they are salivating over the SARA agreement is they want to expand programs for out-of-state students that make money,” Shireman said.

Since it simplifies regulations and saves money, SARA is popular among colleges and universities. The City University of New York, the State University of New York, the Commission on Independent Colleges and Universities and the Association of Proprietary Colleges (groups for the state's private nonprofit and for-profit institutions, respectively) have all spoken out in favor of joining SARA.

“There are so many examples where traditional colleges and universities get excited about reduced regulations and choose to be blind to the loopholes that they are creating for what will become a bad institution, whether or not it is when it joins up,” Shireman said. “That’s the repeated problem that we see with all of these antiregulation efforts.”

Hill said SARA has safeguards in place to weed out good institutions gone bad. In addition to reapplying once a year, he said, colleges also have to self-certify that they meet the Council of Regional Accrediting Commissions’ online education guidelines.

“We’re pretty confident about what we’ve put together,” Hill said. “If a state looks like it’s not paying attention to bad schools, the state will be called on the carpet by its regional [education] compact.”

(Disclosure: Quad Partners, which is an owner of Inside Higher Ed, also owns stakes in the Pacific College of Oriental Medicine and the Swedish Institute, which are members of the Association of Proprietary Colleges.)


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