Colleges Are Slow to Seek Authorization in Other States, Survey Finds

August 18, 2011

A majority of colleges that offer distance-education programs outside their home state have not sought approval to educate students in those other states, a new survey has found.

The survey, conducted in July by the University Professional & Continuing Education Association and the WICHE Cooperative for Educational Technologies, examined how member institutions from those two organizations were responding to the federal "state authorization" rule, which requires colleges to comply with laws in all states where they enroll students to be eligible to receive federal student aid. Although a portion of the rule affecting distance education was recently struck down by a federal judge, state regulations remain in effect.

Of the 215 responding institutions that enroll students in other states, 69 percent said they have not yet applied for approval from those jurisdictions, says a report on the survey, "What Are Colleges Doing (or Not Doing) About State Authorization?" Many of the institutions said that they were wading through the state regulations, but that the high cost of obtaining authorizations and staffing problems were preventing them from submitting formal applications.

The U.S. Department of Education put the state-authorization rule in place last fall, in part to prevent unscrupulous distance-education providers from setting up shop in more-lenient states and hoodwinking students elsewhere into signing up for programs that were not up to their states' and federal standards.

In late July, a federal judge struck down the portion of the rule applying to online programs, saying colleges had not been given adequate time to review the rule and comment on it. But the regulation could be reinstated, the two associations that conducted the survey said, "if the department wins an appeal or addresses the technicality that caused the regulation to be vacated."

"Even without the federal requirement," the two groups said in a written statement, "states still expect institutions to follow their laws."

College officials have argued, however, that the patchwork of laws and policies they have to deal with state by state, and the high application fees that some states charge, are creating extra hurdles that are limiting students' access to online education. The survey confirms those frustrations.

Many of the responding colleges said they were choosing not to seek authorizations in other states. Some of them, about one in five, said they expected the regulation to be repealed, and about 10 percent said they considered their programs to be exempt from the authorization requirement.

Some institutions seem to be ignoring the rule and accepting the risk of pushback from lawmakers. Roughly one in six of the responding colleges said that obtaining state authorizations was not an institutional priority.

Colleges anticipate that the cost of compliance will be high. The median estimate of application expenses was nearly $80,000, not counting the added cost of paying employees to fill out applications and research and manage compliance practices.

Authorization will probably hit smaller colleges the hardest, as the application fees may be too much of a burden for institutions with few students in each state, the report says.

With budgets already strapped, many colleges are thinking strategically about the costs and benefits of maintaining a presence in other states. Fifty-nine percent of the institutions surveyed said they would probably stop enrolling students from states with high compliance costs.

Pulling back from some states, though, could cut into an important source of cash flow. Tuition from out-of-state students makes up an average of 18 percent of the revenue for distance-education programs, the survey found.

Authorization is more than an administrative quibble between college officials and legislators, the report stresses, as thousands of students could be left in the lurch. In total, an estimated 19,000 students would be affected by reductions in availability at the responding institutions.

Further information about the survey will be provided in a Webcast discussion on August 25.