The federal government may not be able to enforce a rule requiring colleges to be licensed in every state where they are operating, but that hasn’t stopped states from forging ahead with new regulations for the myriad institutions that enroll students within their borders but may have no physical campus there.
Maryland, for example, has passed a new law requiring all out-of-state colleges that enroll Maryland residents in online programs to register with the state’s Higher Education Commission and pay a $1,000 registration fee.
Other states, such as Minnesota, are going after colleges that are not complying with their authorization rules, sending “cease and desist” letters to institutions that resist the process.
Some states are also trying to make it simpler to authorize online programs, but the complexity and variation in state regulations can make it difficult for colleges to expand their offerings to new areas, said Russell Poulin, deputy director for research and analysis for the WICHE Cooperative for Educational Technologies. (The cooperative, known as WCET, is a membership organization that promotes online education in partnership with the Western Interstate Commission for Higher Education.)
The hurdle is higher for cash-strapped public universities, which can’t necessarily afford the time and staff to manage compliance with other states’ laws, than it is for the large proprietary institutions, Mr. Poulin said. And in some cases, public colleges have simply ignored the licensing requirements in other states, he said.
Rule Gone Awry
States have traditionally had a role regulating the institutions within their borders by providing a measure of consumer protection for individual students. The regulatory picture has been blurred, however, by the proliferation of colleges and programs that operate mostly or entirely online and may have no campus within a state.
Many states have applied their regulations only to colleges that have a physical presence in the state, said Gregory Ferenbach, a lawyer with Dow Lohnes who advises colleges on regulatory compliance.
And some states have ceded their authority by relying on approval by accreditors or the federal government, says a recent report by the education committee of the U.S. Senate.
The federal government tried to strengthen states’ roles with a 2011 regulation known as the state-authorization rule. That rule, which was opposed by lobbyists for colleges, required institutions to be authorized in each state where they were operating as a condition of being eligible to accept federal student aid for students in that state.
A court blocked the rule almost as soon as it took effect, however, and a federal appeals court upheld that decision in June, finding that the U.S. Education Department had not followed proper procedures in issuing the rule. The department has the right to set such a rule, the appellate court’s opinion states, but it will have to reissue the rule under the proper procedures before it can enforce the provisions that apply to online programs.
More recently, the Education Department released a letter saying that it would not enforce the state-authorization requirement, leading to speculation that it would not reissue the rule but perhaps would try instead to insert such a regulation into the next renewal of the federal Higher Education Act.
Pandora’s Box
While enforcement has been suspended, the rule’s existence has had the effect of alerting states to the number of colleges operating within their borders.
In Minnesota, more than 500 colleges contacted the state Office of Higher Education about obtaining authorization, said George R. Roedler, the office’s manager of institutional registration and licensing. “We have our hands full,” he said.
State procedures require the office to review each applying institution’s financial status, the qualifications of its faculty members, and the curricula of its general-education courses.
It costs each institution $7,000 to $10,000, on average, to gain initial approval, Mr. Roedler said, with an annual recurring charge of $2,500.
The agency has managed to register about 50 of those institutions, he said, while others have chosen not to enroll any Minnesota residents in the future. “Some haven’t decided if it is worth the cost,” he said.
And a few institutions have decided to ignore the rules and enroll Minnesota students without obtaining authorization, Mr. Roedler said. In those cases, his agency has asked the state’s attorney general to threaten legal action.
Noncomplying institutions have been identified by student complaints or even by other institutions, Mr. Roedler said. “They’re not above tattling on each other.”
Still, the goal is to get institutions to comply, he said, not to shut them down.
In other states, the rules for authorization can be even more costly and complex. In Arkansas, for example, an out-of-state college seeking approval to offer online degrees is required to list information about each of its faculty members in a specific format, said Mr. Poulin, of WCET. While that might be manageable for a small institution, it creates an administrative burden for a public flagship, he said.
In Massachusetts, an out-of-state college that wants to offer online courses has to pay $10,000 plus $2,000 for each degree it seeks to offer, and the process of licensing can take nine months to a year.
Efforts are under way to standardize the state-authorization process, including a commission organized to study the issue by the State Higher Education Executive Officers and the Association of Public and Land-Grant Universities. But a regional or national approach could take years to accomplish because it will require statutory changes in the states that want to participate.
Despite the difficulties, Mr. Poulin said, the need is there for states to continue to regulate distance and online education. “One thing that I noticed a lot of institutions aren’t aware of, they see what the state regulators do as duplicative and not adding value, but they don’t consider the consumer-protection aspect,” he said.
“Who else is going to protect the individual student?”
