Distance education dominated the discussion on Day 1 of the Education Department’s new round of negotiated rule-making on Wednesday, with panelists discussing how the department could ensure that states do their part to protect students studying online and abroad.
At issue was a 2010 rule that set federal standards for “state authorization” of institutions and clarified that colleges must seek approval from states where they enroll students online. Under the rule, colleges can receive federal aid only for students residing in states where they’re approved to operate.
In 2011 a federal judge tossed out the distance-education portion of the rule, saying colleges had not been given enough time to review it. The Education Department is now revisiting the regulation, as part of rule-making sessions that began on Wednesday and will end in April.
In the years since the state-authorization rule was issued, many states have stepped up their oversight of institutions operating distance-education programs within their borders, adopting new regulations and beginning to enforce existing ones. But state requirements remain uneven, and many colleges with online programs have complained that it is costly and time consuming to seek approval from multiple states.
A Reciprocal Approach
In an effort to streamline the process, a group of higher-education leaders, accreditors, and regulators has offered a plan for interstate reciprocity, based on the voluntary participation of states and colleges.
On Wednesday, Marshall Hill, a negotiator who is executive director of the National Council for State Authorization Reciprocity Agreements, asked the department to recognize his group’s reciprocity agreement as proof of state approval. Several panelists representing colleges endorsed the idea.
But some student and consumer advocates on the panel worried that reciprocity could encourage a race to the bottom, as states with stronger consumer protections ceded oversight to those with weaker ones. Under the terms of the council’s “State Authorization Reciprocity Agreement,” or SARA, states would agree to recognize approvals from an institution’s home state, even if that state’s process was less rigorous than their own.
“This may be a lost opportunity to improve consumer protections,” warned Christine Lindstrom, higher-education program director for the U.S. Public Interest Research Group.
Mr. Hill said states that signed on to SARA would agree to a series of principles that would “elevate the floor.”
“Does it elevate it to the level of Massachusetts or Wisconsin? No,” he acknowledged, “but it is at least at the upper two-thirds of states.” He argued that if the council set the bar for participation too high, states would not sign the agreement.
Concerns About Complaints
Other consumer advocates had concerns about the State Authorization Reciprocity Agreement’s requirement that approving states respond to student complaints from across the country. They asked if aggrieved students might have to travel to pursue a complaint.
“I have clients who have a hard time coming from the other side of Boston,” said Toby Merrill, director of the project on predatory student lending at Harvard Law School. “I can’t imagine them traveling out of state.”
Mr. Hill acknowledged that students might have to travel to pursue a complaint, but he said many complaints could be handled over the phone or by email. He added that the agreement encourages students’ home states to play a role in resolving complaints.
So far, only a handful of states have applied to participate in the agreement, but Mr. Hill said he expected at least 20 to have done so by the end of the summer. He attributed the slow start to the fact that most states have to change their laws before they can sign on. Some 30 bills to allow state participation in SARA are pending in state legislatures, he said.
He predicted that the agreement would catch on even without a federal endorsement, but he said the department “could push it forward by blessing reciprocity.”
As is usual at this early stage of rule making, the department was noncommittal, telling another panelist that the agency was in listening mode and couldn’t say whether it would recognize SARA.
Oversight of Foreign Locations
Later on Wednesday, panel members debated whether the department should extend the broader state-authorization rule to foreign locations of domestic institutions.
Some panelists suggested that the department require institutions to seek approval to operate abroad from both their home state and the host country.
But others were wary of adding more layers of review, saying existing oversight was sufficient.
“I’m not sure it adds value to require registration in a foreign country,” said Joan Piscitello, treasurer of Iowa State University. She called registration a “business process” rather than a consumer-protection one.
Elizabeth Hicks, executive director of student financial services at the Massachusetts Institute of Technology, said she was “very worried about going down the path of requiring licensure in a foreign country,” on top of state approval.
The panel meets again on Thursday and Friday to discuss rules governing college-affiliated debit cards and underwriting standards for Parent PLUS loans. Both topics are expected to be controversial.
