Bismarck State College, a two-year institution located in the capital of North Dakota, offers something few colleges do: online degrees in power-plant technology. Utilities across the country send workers to the community college for specialized training in electric power, nuclear power, and other fields.
“We’re pretty darn unique,” said Larry C. Skogen, the college’s president. “I don’t think we have any competition out there.”
Though other colleges offer similar programs on campus, “we deliver nationwide online,” he said, with students in all 50 states.
That could change soon. Under federal rules that take effect on July 1, Bismarck State will have to seek approval to operate in every state where it enrolls students, or forgo those students’ federal aid. With some states charging thousands of dollars per application, the college is weighing whether it can afford to remain in states where the cost of doing business outweighs the benefits, in tuition terms.
Though the college hasn’t made any decisions yet, “the reality is that if we run into a state where we have few students and it’s expensive [to get approval], it’s probably not going to be cost-effective to continue,” Mr. Skogen said.
Such cost-benefit calculations are being conducted on campuses across the country, as college leaders struggle to make sense of a patchwork of state rules that were written in an era when “college” was synonymous with “campus” and online learning was in its infancy.
Gregory Ferenbach, a lawyer who advises colleges on regulatory compliance, said he has heard from a “couple dozen” colleges, most of them nonprofits, that are considering withdrawing from some states because of the cost or burden of obtaining approval.
Their decisions could have a significant effect on college access. If enough colleges steer clear of states with expensive approval processes, or smaller populations, students living in those states will have fewer educational options. Some students may decide to skip college altogether, reversing recent gains in college-going rates, colleges warn.
For now, the threat is mostly hypothetical. Colleges have until 2014 to come into full compliance with the rules, so hardly any are making decisions yet. Some hope states will standardize their requirements before then; others are counting on Congress to overturn the rule.
But colleges can’t just sit back for the next three years and wait for a reprieve. The Education Department has said that it expects colleges to be making a “good faith” effort to obtain state approval in every state where they enroll students. Institutions that are not taking steps to do so are now in violation of the rule.
Collateral Damage?
The requirement that colleges obtain approval to educate students in other states is not new. For decades, the Education Department has made state approval a condition of receiving federal student aid from that state’s students.
But many colleges have ignored the law, or assumed it applied only to brick-and-mortar campuses, not to online programs. The Education Department has generally looked the other way, allowing colleges to receive federal aid from students living in states where the institutions weren’t authorized. And states have done little to enforce their own rules.
The new federal rule sets a national standard for state authorization and clarifies that colleges must obtain state approval to enroll students through online and distance-education programs if the state requires it.
Education Department officials argue that the rule is necessary to protect students and taxpayers from fraud and abuse. They cite instances in which diploma mills have shopped around for states with weak regulations.
But colleges say the regulation makes it difficult for online educators to operate across state lines. Many administrators at traditional colleges complain that they are being punished for the sins of the for-profit sector.
“If the department developed these regulations to rein in the for-profits, the collateral damage has been done to the public institutions,” said Mr. Skogen.
For some public college systems, the compliance costs could reach into the millions. Gary Langer, executive director of Minnesota’s distance-learning consortium, Minnesota Learning Commons, estimates that it would cost his state’s system $5.5-million to offer online courses nationwide under the rule. The 32 colleges in the state system are now in the process of picking and choosing which states they’ll continue to serve, he said.
In some states, colleges may limit the number of programs they offer rather than withdraw altogether, he said.
Wayne Smutz, executive director of Pennsylvania State University’s World Campus, which has 10,000 students scattered across the country, has hired a part-time employee to help him track state rules and contact all 50 states. He said the university had originally budgeted $1-million for state approval fees but reduced that figure when the department gave schools more time to comply.
Excelsior College, which is working with the Council of State Governments on a common application and model reciprocity agreement, has spent about $300,000 on staff, legal costs, and state fees so far, said John F. Ebersole, the college’s president. He says the expense “will eventually need to be passed on to students.”
Many colleges have been surprised to discover that they are in violation of state laws. For many, the rule came as a “rude awakening,” said Debra B. Jackson, vice provost for academic affairs at Clemson University.
Clemson, which offers roughly 30 online programs, plans to seek approval from Alabama, which charges a half of a percent of the annual gross income a college receives from the states’ students, according to information collected by the Wiche Cooperative for Educational Technologies, but not from Minnesota, which charges between $2,000 and $3,500 per application, plus $500 for each additional degree. That could be just the tip of the iceberg—Ms. Jackson is still sorting out which states require colleges to apply for approval if they have a student working as an intern in the state.
“Most of us were just unaware that state regulations would affect online education,” she said. “So we were merrily going about our way.”
States Are Swamped
The process of applying for state approval differs by state, with some states requiring only a business license to operate, and others requiring hundreds of pages of documentation. Alabama, for example, requires colleges to submit lists of textbooks for every course, along with information on faculty credentials and teaching loads, college lobbyists say. Minnesota requires copies of all advertising and promotional materials, and complete financial statements and budgets.
Some states will accept only colleges that are accredited by one of the six regional accrediting agencies—a requirement that could disqualify institutions that provide niche professional degrees, said George Connick, executive vice president of the American Academy McAllister Institute of Funeral Service.
Registration fees for colleges also vary considerably, from $100 in Alaska and Wyoming to at least $10,000 in Massachusetts. Many states levy an additional fee per program or degree, and several require annual renewals.
Robert W. Mendenhall, president of Western Governors University, an online, nonprofit college, said he expects to spend $650,000 on approvals in the first year, and $300,000 on annual renewals.
Colleges fear their costs will only increase over time, as cash-strapped states raise their fees to cover their increased costs or to plug budget holes in other programs. At least one state—Texas—is already considering doing so; in April, a legislative committee held a hearing on a bill that would triple the base application fee, to $15,000, and add a $10,000 annual renewal fee.
Chris Simmons, a lobbyist for Duke University, said other states will follow suit when they realize what their neighbors are charging.
“If you’re a state without a fee and Massachusetts is charging $10,000, you’re going to ask yourself, Why aren’t we?” he said. “It’s a great way to generate additional revenue.”
State officials, meanwhile, say they’ve been inundated with questions and applications from colleges in recent weeks.
In New Jersey, Iris Duffield, an administrative analyst for the New Jersey Commission on Higher Education, said she has already sent a “couple hundred” replies and has a stack of letters an inch-and-a-half thick that she still needs to answer. As the deadline approached, she was receiving 15 to 20 letters a day.
An official in one small New England state said she was too busy to answer a reporter’s questions and expressed annoyance at being contacted earlier this week.
“You’re calling people today, three days before the deadline, when we’re swamped?” she asked incredulously.
In Florida, officials said they were hearing from roughly 20 colleges a day. Relatively few are seeking approval; they just want confirmation that they’re among the institutions that are exempt from state requirements. But each letter still requires a response.
“I can tell you that the feds have created a lot of work for us,” said Samuel L. Ferguson, executive director of the state’s Commission for Independent Education. “I’m a little concerned that they want us to do their job for them.”
No Going Back
Community colleges are feeling overwhelmed, too. At the same time they’re sifting through 50 state laws, they’re also collecting reams of information about program costs, debt burdens, and program-completion and job-placement rates to meet disclosure requirements under another new regulation, the “gainful employment” rule.
Though those requirements, which take effect on July 1, apply to nondegree programs across the sectors, community colleges account for roughly 60 percent of the programs.
At Piedmont Virginia Community College, it has taken no fewer than nine employees from five departments to gather and post the information on the college’s Web site, said John R. Donnelly, vice president for instruction and student services. He estimates that it has cost the college about $5,500 in wages to comply.
Mark Champion, an information analyst in institutional research and planning at Grand Rapids Community College, said he has spent the last two weeks “doing nothing but this,” and five other employees are also working on the project part-time.
Mr. Champion said the ever-growing demands for data are distracting colleges from their efforts to improve teaching and learning.
“I signed up for institutional research to do research to help students learn better and teachers teach better,” he said, “and what we’re doing is a lot of accountability.” Some Congressional Republicans say that colleges are being overregulated by Washington. They cite regulatory burden as a reason for repealing the other rule, on state authorization.
“Before adding additional layers of regulations, we must carefully review the benefits and costs,” Rep. John P. Kline Jr., the Minnesota Republican who chairs the House of Representatives education committee, said last month at a markup of legislation that would overturn the rule. “Although Washington has a responsibility to protect taxpayers and students from fraud and abuse in the higher-education system, we must be cautious of federal regulations and policies that could create new hurdles for administrators, professors, and students.”
The bill, which Mr. Kline’s committee approved last month, isn’t expected to survive in the Senate. But even if it did, it would have no effect on state-approval requirements, says Russell Poulin, deputy director for research and analysis for the Wiche Cooperative for Educational Technologies. Accreditors will still expect colleges to abide by state laws, and the states—which now know how many colleges have been flouting their rules—will, too.
Diane Goldsmith, executive director of the Connecticut Distance Learning Consortium, said most colleges have accepted that state oversight is increasing, rule or no rule.
“The states have woken up and realized they should be enforcing their laws,” she said. “So it’s not going to go away.”
