Excited about March Madness? Proposed Section 32 Will Excite Distance Ed Fans

The annual NCAA college basketball tournament, celebrated nationally and called the “Big Dance” or “March Madness,” began last week with great hoopla.

Simultaneously, another form of “competition” occurred – the final week of the U.S. Department of Education Negotiated Rulemaking process. Rulemaking can look like a “Big Dance” with representatives of higher education factions engaged in the negotiation tango. And it can definitely seem like madness with a chaotic race against the clock to quickly assess complex regulatory issues, amend or develop new regulatory language, and drive to reach full agreement before the buzzer on the final day of rulemaking.

Section 32: Proposed Major Changes in Title IV for Distance Ed

Proposals affect institutions enrolling students in other states for:

– Programs leading to professional licensure.

– Institutions participating in a reciprocity agreement.

This rulemaking was virtual, so we watched the rulemaking meetings on our computers via Microsoft Teams. Like a sporting event, we had to reserve tickets in advance to watch the show. Cheryl was armed with Diet Pepsi, large bags of Skinny Pop popcorn, and a bag of gummy bears. We (Cheryl, Russ, and the SAN team) found ourselves shouting at the screen to cheer on great explanations and cried foul at misstatements.

Today we share our postgame analysis and include a special review of the process of rulemaking. Some of the issues were extensively covered by the main press. And, in an unfortunate likeness to the relative invisibility of the women’s basketball tournament, digital learning issues were absent from mainstream reporting.

At the top of the scouting report are two items that will “excite” (as in stirring people to action) the distance and online community. Both of these are in what we have started calling “Section 32.” This section contains some vexing requirements (found in Issue #6 Certification Procedures), which did not come to consensus. Like Tom Brady (yes, we know that’s football), these proposals are not going way. The breakdown includes insight into:

• New financial aid requirements for institutions serving students in programs leading to a professional license, and,
• Institution participation in reciprocity through SARA to obtain state institution approval for interstate activity of the institution.

Federal Rulemaking Process

As we shared in January, the U.S. Department of Education began its second Biden administration rulemaking (see Department’s rulemaking website) at the start of 2022. The December 2021 announcement of the rulemaking, called the Institutional and Programmatic Eligibility Committee, provided the list of the seven issues to be addressed:

• Issue #1: Ability to Benefit.
• Issue #2: Administrative Capability.
• Issue #3: Gainful Employment.
• Issue #4: Financial Responsibility.
• Issue #5: Changes in Ownership.
• Issue #6: Certification Procedures.
• Issue #7: 90/10 Rule.

In Winter 2022, the rulemaking committee, comprised of key stakeholders nominated by the public and then chosen by the Department, met for one week in each month of January through March. Issue papers with proposed language addressing the regulations particular to the issues were released by the Department for purposes of conversation and negotiation. The goal of the rulemaking was to address the proposed language on these issues and develop agreed upon language to address consumer protection for students and protect the integrity of the Title IV Federal Financial Aid process. Each week of rulemaking aimed to drive the negotiators closer to common thoughts on final language for purposes of voting to consensus, which is agreement by all negotiators on all aspects of an issue.

The final week of rulemaking in March was critical as the negotiators provided final comments and questions prior to voting on each issue. The drama played out on our screens as one by one the issues were resulted in “air balls” as each of the first six issues failed to meet consensus (or 100% agreement). As the clock ticked down, Issue #7: 90/10 Rule reached consensus. The negotiators huddled quickly and re-voted on Issue #1: Ability to Benefit and, like a buzzer beater, it reached consensus. Like Russ’s busted basketball bracket the final score was: two issues reached consensus and five issues did not.

Next steps in the regulatory process includes the following:

• For issues that reached consensus: release of the agreed upon language as proposed regulations subject to public comment for at least 30 days.
• For issues that did not reach consensus: release proposed regulations written by the Department for public comment for at least 30 days.
• The Department must and will review all public comments.
• General responses and any changes based upon those comments will be included in an announcement of the final regulations. A preamble will clarify regulatory intent not clearly stated in the regulations themselves.
• If final regulations are released by November 1, 2022, they will become effective July 1, 2023.
• If final regulations are released after November 1, 2022, but by November 1, 2023, they will become effective July 1, 2024.

There is no designated timing on the release of the proposed regulations, but we speculate late spring/early summer for the regulations that came to consensus. Even though several other issues did not reach “consensus,” the Federal negotiator was very clear that the Department expects to put out proposed regulations on these other issues. The Department was also very clear that they would not be accepting public comment on any issues until the NPRM (notice of proposed rulemaking).

The Department was very clear that they will not be taking public comments on these issues until the they release their proposed rules for the purposes of commenting.

Issue #6: Certification Procedures

The Department shared that the “certification procedures” issue focused on the development of a more rigorous process for institutions to become certified to participate in Title IV financial aid programs. To be eligible to participate in Title IV financial aid programs, institutions are expected to follow the provisions of the Program Participation Agreement (PPA). The PPA is an extensive form that provides the terms and conditions for which the institution must meet to begin and continue participation in Title IV financial aid programs. As we talk about professional licensure requirements below, note that this raises the expectations for communications with students beyond the mere notifications that were introduced in the last few years. Meeting the elements of the PPA is a more substantial responsibility of the institution for which there could be stronger consequences if the institution fails to meet any terms or conditions.

During this rulemaking, items were proposed to be added to the PPA. The currently effective regulations that your institution must currently follow are found in 34 CFR 668.14. A new section 32 was proposed to address programmatic accreditation, programs leading to a professional license or certification, and reciprocity. Although the negotiators did not fully agree (reach consensus) on the proposed language, the Department stated that they are heavily leaning toward moving forward with the language we describe below.

A Major Change to Professional Licensure Requirements

In summary, the proposed language of 668.14 (32) indicates that in each state where the institution is located or students enrolled are located at time of initial enrollment, the institution must ENSURE that each program SATISFIES state educational requirements for programs leading to a professional license or certification where the student is located.

Additionally, as a companion regulation, the Department proposed language to modify the public notifications found in 34 CFR 668.43(a)(5)(v). The proposed language would remove the “no determination made” option. Institutions would provide lists of states indicating a determination of the institution curriculum Meets or Does Not Meet state educational requirements. Although a negotiator raised that 34 CFR 668.43(c) exists and no longer makes sense given the Department’s proposed language, there was no further discussion or change regarding the direct notifications.

Professional Licensure

The new proposal:

– Better protects students.

– Requires programs to “ensure” that it meets state educational requirements.

– Leaves institutions adrift as to what to do in states or professions with unclear standards.

– Provides no path for students who have legitimate reasons to enroll in a program even if it cannot “ensure” where that student is currently located.

Core aspects of the proposed language would require that for purposes of Title IV, the institutions must do the following:

• Only be able to disburse Federal aid in programs leading to a license or certification to students located in states where the curriculum meets state educational requirements. We believe that the use of the word “ensure” implies a much higher standard for the institution to possess evidence that it meets those requirements.
• Provide public notifications with lists of states where the curriculum Does or Does Not meet state education requirements leading to a license or certification.

The public policy reasoning behind raising the standard for institutions serving students in other states seems justifiable to protect students who are pursuing their chosen profession based upon the education and training of the institution. However, this one size fits all approach is impossible for all professions in all states and takes away a student’s ability to choose.

If there is a knowable path for the program to be approved by the state and/or meet state educational requirements, institutions should seek that path and obtain that approval. Institutions, however, have shared the varying circumstances for some professions in some states that makes the ability to meet requirements or even know requirements impossible. We strongly object to holding institutions to an impossible standard.

Additionally, there are definite and reasonable circumstances why a student may be willing to attend an institution even though the state educational requirements are not met by the institution’s curriculum. Examples include students temporarily in a location, military students, and students who select the institution for its educational value, or students who intend to pursue a license in a location based upon workforce needs. We believe that students should be afforded the opportunity to choose.

We made remarkable progress communicating with two consumer protection-focused negotiators to develop language that provided protection to students, flexibility in states where pre-approval is unknowable, and provide for informed choice. The approach that we developed with negotiators required the institution to meet state educational requirements where available and provided for case-by-case examples to enroll students in a program that does not meet state educational requirements if the institution obtains written consent from the student who chooses to knowingly enroll in the program. This proposed language was presented by the two negotiators and supported in comments by several other negotiators. The Department rejected the proposal, commenting only they worried that allowing exceptions would lead to abuse and without providing a reason for not adopting the rest of the proposal. We were profoundly disappointed as any rule can lead to abuse, which is why the Department provides “guardrails” in enforcement.

Finally, the modification to the notifications section causes the institution to make a clear decision whether the curriculum does or does not meet state educational requirements. Removal of the “no determination made” will be challenging for institutions. If the regulation becomes effective, institutions will have to make business decisions whether or not to offer programs in certain states.

Early in the negotiated rulemaking process we provided public comment with a three-minute statement at the end of the meeting day. We urged the Department to communicate with professions and learn how requirements and approvals are provided for programs leading to a license or certification. We still maintain that there is a disconnect between professions and higher education that needs to be addressed. We hoped the Department might be willing to serve as a bridge and build regulations that are in line with state regulatory practices.

The Bottom Line

The goal of those proposing the language was to protect students as consumers. Institutions collecting years of tuition and fees for programs in licensure fields should do all they can to assure students that they can proceed in that profession. We are aware of good institutions that have fallen short in meeting that goal and this wording raises the stakes in putting aid disbursement in jeopardy if they do not do a better job.

On the other hand, the language does not account for two realities…

• The proposal does not match current state regulatory realities. Some agencies do not provide clear educational requirements or will not answer questions as to the match between an institution’s curriculum and published requirements. A negotiator stated that they should push states to raise their standards, but a rule aimed at institutions (the Department cannot tell states what to do) will be ineffective in changing agency behavior.
• Some students are disenfranchised. Students have legitimate reasons (serving in the military, living on a border) for enrolling in a program that does not meet the requirements of the state in which the student is located. They should be given the option to make an informed choice. To focus solely on a possible abuse is to punish the innocent for the sins of the guilty.

A Major Change to a “State Authorization Reciprocity Agreement”

This is a big change. Let’s start with some basketball-analogous background…

Every once in a while, there is a team that comes from out of the blue and makes a deep run in the tournament. The reciprocity issue reminds me of just such a story.

An update to the terms of any “state authorization reciprocity agreement” was not in the original notice for the rulemaking and it was not part of the first session of negotiations. The language was introduced between the first and second sessions and was raised only in passing in the second session, as we noted in our blog post update on that session. Therefore, we were surprised to see that the Department of Education accepted the proposed language in its recommendations (Issue Paper 6: Certification Procedures) prior to the third, and final, session.

When the negotiators considered the proposal, there was a great deal of in-depth questions and comments. The conversation was extensive in session three, but this is one of the very few proposals that was discussed in-depth in only one session. Although Cheryl and Russ tried to educate select negotiators in the short time after it was introduced, it appeared that few negotiators had any prior knowledge of the history or workings of the interstate agreement.

Be that as it may, let’s examine what happened.

What Was Proposed Regarding Reciprocity Agreements?

As mentioned above, the Program Participation Agreement is a list of requirements to which an institution agrees to comply to be eligible to disburse Federal financial aid. The following paragraph was added as requirement in the proposed new section 32 (the same section as the professional licensure language mentioned above) that “the institution must ensure that each program” …

(iii) Complies with all State consumer protection laws, including both generally applicable State laws and those specific to educational institutions, except where State requirements for obtaining authorization are inapplicable pursuant to a State authorization reciprocity agreement.

In interpreting this language, it is important to distinguish between:

• “generally applicable state laws” – laws that pertain to any business in a state. Fraud and misrepresentation are common examples of laws that apply to a business whether it is an institution, bank, or used car dealer. States that are members of SARA can enforce these laws on institutions participating in the agreement; and,
• laws “specific to educational institutions” – laws that are specific to those providing postsecondary education in the state. States that are members of SARA agree that institutions participating in the agreement are subject to the provisions of SARA and knowingly agreed to use those provisions in place of state laws.

Reciprocity Agreements

The new proposal:

– Provides the opportunity for better state-by-state protection for students.

– Could limit consumer protections in states relying on SARA instead of local laws.

– Will create an unsettled state as we await decisions by the Department, states, institutions, and those leading SARA.

– Will raise the cost of institutions enrolling students in some other states.

Wait! Doesn’t that “Except Where…” Clause Exempt Institutions Participating in SARA?

No.

We talked about this a quite a bit and sought the counsel of legal and regulatory expertise. Although the wording is slightly confusing, the intent is clear from an explanatory note written by one of the authors of the language. That explanatory text is copied verbatim below. Note that “NC-SARA” (the organization that aligns the core elements and requirements of SARA) is referenced when it is actually SARA (the actual agreement) that contains the cited provisions. It is an important distinction, and many people confuse the two (bolding added for the proposed limits of reciprocity):

This language is proposed to address concerns that NC-SARA, the state authorization reciprocity agreement, currently requires member states to waive enforcement of education-sector-specific consumer protection laws with respect to participating schools that only offer distance education in their state. Examples of state education-sector specific consumer protection laws include: cancellation and refund provisions and student tuition recovery funds. NC-SARA distinguishes these laws from “generally-applicable” state laws, such as laws prohibiting fraud and deceptive practices.

NC-SARA’s requirement that states waive enforcement of education-sector specific consumer protection laws creates a two-tiered system that leaves distance education students with fewer protections than brick-and-mortar students. It also undermines states’ ability to protect students in their state.

The proposed language would address this problem by requiring schools that offer programs in multiple states to comply with all state consumer protection laws in each state where the school enrolls students. Schools would be exempt from compliance with state authorization requirements, such as requirements to submit an application to state authorizing agencies or pay a fee to a state authorizing agency. This would permit reciprocity agreements to fulfill their purpose of reducing the cost and burden on schools to obtain authorization to operate in multiple states, while ensuring that distance education students are afforded the same protections as brick-and-mortar students.

Similar sentiments were expressed in a bipartisan letter from 25 State Attorneys General to the NC-SARA Board last summer. Since the Department of Education staff also agree with the interpretation shared above, then it is our belief that is the interpretation that moves forward.

What is the Impact on Students?

The exact implications depend on several steps taken by states, individually, and SARA members, collectively. We provide some opinions of what could happen.

Proponents of this approach say that students will receive far better protection against institutional misdeeds or oversights. Laws in each state were written to provide specific consumer protections based upon the previous mistreatment of students by other institutions operating in the state. Distance students would be afforded the same protections as any other student in the state.

Opponents of this approach say that some states have stricter regulations and others have minimal or no oversight of institutions serving students at a distance within their borders. Protections could decrease for these students. Improving an existing agreement that serves students everywhere but California is a preferable approach to a piecemeal, state-by-state approach.

What is the Impact on Institutions?

Again, the impact will vary depending upon further clarification of intent by the Department and actions by states, institutions, and those leading SARA. We provide our best forecast, but it is clearly opinion and not certainty.

The future benefits of an institution participating in SARA will likely be more limited than what they now enjoy. The intent is to limit those benefits to the act of applying for authorization and the associated fees. Since “consumer protection laws” is not defined, the decision as to which rules apply and which do not will fall to each state.

With the exception of the state authorization application and dues process, many of the provisions covered in SARA will likely need to be altered or removed so that institutions could remain eligible for Federal financial aid. SARA leadership and states could develop some creative pathways that we are not foreseeing.

As to the impact of states “enforcing” consumer protection laws, here is our analysis using the examples given in the intent wording provided above:

• “cancellation and refund provisions” – A state could have a provision that an institution must use the tuition refund policy of that state. Let’s say that eight states have this requirement. The institution would have to have refund policies compliant with each of those states in which it enrolls students. In this example, an institution would have its own policy, but also eight additional policies if it serves students in all those states.
• “student tuition recovery funds” – Some states collect fees from every institution serving students in the state. Those fees go into a fund that assists students who attend institutions that have closed.

Other requirements that could come into play might include the need to post a bond to serve students in a state, limitations on additional reporting requirements on students in the state, prohibitions on having a faculty person in a state, reviews of faculty credentials, program reviews, states could apply different standards to different sectors of institutions, and others. These requirements vary greatly by state.

As a result, the cost of doing business in some other states will rise if states apply additional requirements to institutions participating in reciprocity.

What Happened to this Proposed Change in this Week’s Rulemaking Session?

This language was part of several provisions in updates to the “Certification Procedures” that are found in the Program Participation Agreement. Consensus (agreement by all the negotiators) was not reached on the proposed language. Therefore, the Department gets to write the regulation that will be published for public comment.

The Bottom Line

The overall impact is still a bit unclear if it is put into regulation intact. There are still several steps before that is a reality and the timeline is described in the next section. Some possible outcomes:

• If this language is implemented (which seems likely), the SARA leadership could decide to change their agreement to conform with this regulation.
• Some states put the current SARA provisions into their legislation that enabled them to join the agreement. State legislation would be required if states want to locally enforce what they define as “consumer protection” laws.
• SARA leadership could decide to work with states to negotiate a new set of benefits for SARA participating institutions.
• One group has proposed the development of an alternate reciprocity agreement.
• Something else completely unexpected will happen.

To be honest, we’re betting that last bullet will definitely happen.

The one sure outcome is that there will be a period of confusion for some time and that there will likely be additional costs for institutions to serve students in other states. Proponents of this new language assert that the additional student protections are worth it.

What’s Next? We Advance to the Next Round…We are through the opening weekend of the basketball tournament and that is the case with rulemaking. To recap the next steps in the process:

• The Department will issue a proposed rule for comment. That could be in late spring, but is more likely to be this summer. There will likely be only 30 days in which to comment.
• The public (that means you!) will comment.
• The Department will respond to comments and issue a final rule:
  • If issued by November 1, 2022, the rules go into effect July 1, 2023.
  • If issued after November 1, 2022, but before November 1, 2023, the rules to into effect July 1, 2024.

Watch for an additional blog post from us this week. We plan to more briefly highlight a few other issues in negotiated rulemaking. Yes, we can hear you thinking: “oh my, what else?” That post will also talk about steps you should be taking.

Also watch on the WCETDiscuss and WCET SAN Network email lists where we will point back to this post and entertain questions from you as benefits of your WCET and/or SAN membership(s).