Federal State Authorization Regulation: It's Baaaack!! (Almost)

November 22, 2013

The Department of Education took the next steps in reinstating the federal regulation requiring institutions to demonstrate that they have the proper authorization to serve distance students in other states. Earlier this week the Department announced in the Federal Register its intent to seat a Negotiated Rulemaking Committee that (among other items) will consider regulations for “state authorization for programs offered through distance education or correspondence education.”

There are also other regulations that will be considered that are of great interest to the distance education community.  WCET testified at a hearing in June 2013 regarding the issues that are under consideration.

A Brief Update and Clarifying Misconceptions

In October 2010, the Department of Education released new regulations included Chapter 34, § 600.9(c), which reads:

“If an institution is offering postsecondary education through distance or correspondence education to students in a State in which it is not physically located or in which it is otherwise subject to State jurisdiction as determined by the State, the institution must meet any State requirements for it to be legally offering distance or correspondence education in that State. An institution must be able to document to the Secretary the State’s approval upon request.”

In subsequent lawsuits, the federal courts vacated that regulation and that ruling was upheld on appeal. Based on that ruling, the Department agreed that it would not enforce the state authorization regulation. It’s important to note a few things from this outcome:

• There is widespread mistaken believe that institutions don’t have to comply with state authorization.  The RULING HAD NO IMPACT ON STATE REGULATIONS. Those regulations are still in effect and states expect you to follow their laws PRIOR TO advertising, recruiting, or serving students in their state. State regulations have been in place for decades and are still in force.
• There is also widespread mistaken belief that there is a federal deadline for compliance with distance education state authorization. Currently, THERE IS NO FEDERAL DEADLINE, but states expect you to be in compliance immediately.
• The courts vacated the regulation on technical grounds because it did not use the proper notification process for a pending rule.  The Department’s right to issue such a regulation was upheld.

[youtube=http://www.youtube.com/watch?v=2w-8Twmg9HQ]

What Does the Current Announcement Mean?
The courts vacated the regulation because the language was not included in previous negotiated rulemaking or public comment processes. By including state authorization for distance education in this rulemaking process, the Department is seeking to remedy the courts objections so that it can reinstate the regulation or some form of it.

The announcement seeks nominations for members of the negotiating committee. WCET and its State Authorization Network will be nominating candidates to serve on this committee.  The deadline is December 20, so if you have suggestions for nominees let me know soon.  It is disappointing that distance education was not considered to be one of the constituency groups since these regulations will have such a great impact on distance education operations.

As for a timeline for the state authorization regulation returning, the Committee they are establishing is scheduled to complete its work by April 25.  After consideration of the outcomes of that work, the Department will post for public comment the regulations it proposes to propagate.  The earliest that they might release new regulations would be next autumn.  It is unclear what new deadline they would set for institutions to be in compliance.  Since this issue has been well-publicized, my guess is that it won’t be a very long grace period after they release the final regulations. But that’s just a guess and will be affected by feedback that they receive.

What Other Distance Education Regulations Will Be Considered?
There is a grab bag of regulations to be considered by the Negotiated Rulemaking Committee, which is a bit of concern since it will be difficult to get negotiators with adequate knowledge of such a diverse set of issues.  Additional issues of concern to distance education are:

• “Cash management of funds provided under the title IV Federal Student Aid programs.” I believe this is a way of saying “financial aid fraud, especially in distance education.” They cite other actions that have been taken by the Department and say: “We believe that these non-regulatory efforts will mitigate the vulnerabilities identified…and will consider their results in deciding whether additional rule changes are needed in the future to address student fraud.” Both good and bad ideas (such as reducing Pell eligibility for distance students) have been put forward to solve fraud.  We need to be vigilant in steering them toward good ideas.
• “State authorization for foreign locations of institution located in a State.” This was announced earlier this year, but I have not been able to get a clear idea from the Department staff about what the real issue is.  I have some suspicions, but we better watch this one.

We’ll continue to keep you informed of new developments. Thank you!

Russ

Russell Poulin
Deputy Director, Research & Analysis
WCET
rpoulin@wiche.edu

*Photo Credit: US Capitol Building by Jonathon Colman on Flickr.