What Can Happen If I Don't Follow State Authorization Regulations?

Those of us in WCET’s State Authorization Network (SAN) and in the State Authorization Reciprocity Agreement (NC-SARA) leadership often get asked the questions:

• “Does anyone really enforce ‘state authorization’ in the U.S.?”
• “Why don’t I read in the higher education news about colleges being fined for ‘state authorization’ violations?”

States are watching, regulating, and taking action.  Before delving into that, let’s start with an example.

University Required to Issue Refund in “Unauthorized” State

This recent action is told in the colorful verbiage of Alan Contreras.  In a previous life Alan was the state regulator for Oregon.  He now works for WCET SAN and NC-SARA.

A public university in the Midwest recently discovered what can happen in a relatively straightforward situation in which the institution failed to get authorization. 

 Institution X enrolled an online student in a state in which state authorization is required, but did not get that authorization.  The student paid only a small part of the tuition due for a course and withdrew late in the term, past the standard withdrawal date. The student therefore owed the institution some money, and the institution requested payment.  The student did not pay and the debt was assigned to a collection agency, as is the institution’s standard practice. When the student heard from the collection agency, the student wrote to the institution and said “this debt is uncollectable because you were operating illegally in my state.” 

At this point the institution’s new compliance officer was served this rat sandwich by the affected department with a request for advice, and called WCET-SAN staff to discuss the issue. In our view, the institution was on shaky ground, so we advised the compliance officer to bring in the institution’s legal staff. 

When the institution contacted the appropriate agency in the student’s state of residence, state officials there indicated that not only was the debt uncollectable, but all of the student’s tuition that had been collected had to be refunded in order to avoid formal action against the provider, which could have included a ban on operating in that state, as the institution had no authority to charge tuition to a resident of that state.

Yes, states really do take action, it just rarely appears in the headlines.  Would you prefer mayonnaise or mustard with that sandwich?

All I can say is “Ouch”!

What Usually Happens When an Institution is Found to be Out-of-Compliance?

Many states will contact the institution to inquire about an alleged infraction.  They usually don’t start with a “cease and desist” letter, but I have heard of some colleges suddenly being surprised with such a notification.  It’s a doubly unhappy day if the letter goes directly to your college’s president, as the president and public relations folks at your institution understand the damage of bad publicity…even if there is no official action, but word leaks out about not following laws.

The goal of the state regulatory agency is to protect students in the state by getting the institution into compliance.  Often one of two paths is followed:

• The institution decides to come into compliance and a process for doing so is negotiated between the institution and the state.
• The institution decides to leave the state and an exit process is negotiated between the institution and the state.

Either way, at the end of the day the institution is following state law by either obtaining the correct approval(s) or leaving the state.  Fines are a threat, but are rarely part of the final equation as both sides seek an amicable solution.

What About Student Actions?

Ah yes.  Students can take matters into their own hands and sue the institution.  This seems to happen most often in cases involving professional licensure.  As you can imagine, a student will be quite upset after spending several years studying with you only to learn that their degree will be worthless in the state in which they are residing.  A few years ago, I wrote about two such students who suddenly found that their program was unrecognized by the Board of Nursing in their home state.  In one case, the institution sought authorization and made things right.  In the other case, it was only under the threat of lawsuit from the student that the institution took action.

I heard a sad case last year in which a student moved to another state to attend face-to-face courses after being told that she could perform all of her practical fieldwork back in her home state.  She quit her job and moved to the institution’s state. Once there, the non-profit institution told her that a new federal law had been passed and that she could not conduct her fieldwork in her home state.  This was completely untrue.  She quit the program before starting it, received a minor refund, and moved back to her home state.  She did not wish to go after the institution and asked me not to reveal the identity of the institution.  That college dodged a bullet.  I was mad at the blatant disrespect and dishonesty demonstrated by this college.

Why Don’t I Read About These Actions?

Since everyone is seeking the best possible outcome, there is no reason for the regulator to embarrass the institution.  The two parties often reach an understanding not to publicize the details of agreements resulting from findings of non-compliance.

This is all very boring to the press.  No conflict.  No story.

In Conclusion…

It often takes more time and effort to fix an unpleasant situation than to just do it right the first time.

The bigger compliance hammer will come if the Department of Education decides to bring back the state authorization regulation for distance education.  The signs point to their planning to do so later this year.   We will keep you updated on that process.

Meanwhile, states still expect you to be in compliance now.

Finally, life is easier if you treat students properly.

Thank you,

Russ

P.S.  WCET’s State Authorization Network membership is now open. To keep updated on state authorization issues, come join us!

Russell Poulin
Director, Policy & Analysis
WCET (the WICHE Cooperative for Educational Technologies)
rpoulin@wiche.edu
Twitter:  @russpoulin

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Photo credits:
Rat trap:  Morgue File.
Police:  Morgue File.