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Last Updated: April 10, 2013 (details at bottom of page).

State Authorization--An Introduction

On October 29, 2010, the U.S. Department of Education (USDOE) released new “program integrity” regulations.  One of the regulations focused on the need for institutions offering distance or correspondence education to acquire authorization from any state in which it "operates.”  This authorization is required to maintain eligibility for students of that state to receive federal financial aid. Institutions have until July 1, 2014, to have obtained the appropriate approvals. Meanwhile, institutions are required to demonstrate a 'good faith' effort to comply in each state in which it serves students. While the regulation has been 'vacated' by court order, we believe it will be reinstated.

State regulations predate the federal regulation and remain in effect. States with regulations expect that institutions already be in compliance with their regulations before serving any students in their state.

History

The federal regulation was brought to light following the Higher Education Opportunity Act (HEOA) of 2008. The following are milestones in the federal regulation:

 

• June 2010 - USDOE releases its original "state authorization" language for comment as part of a required "negotiated Rulemaking" process. This process results in the regulations that USDOE will use in enforcing the language passed by Congress. See the Federal Register beginning on page 34812. Note that there is no language about distance education. If it had been included, the distance education community could have submitted comments to guide the final regulation.
• October 2010 - USDOE releases comments, responses, and final wording. See the Federal Register beginning on page 66858. § 600.9(c) addresses distance education and state authorization. The final complete regulatory language (without comments of how this regulation will be interpreted) can be found in the Electronic Code of Federal Regulations.
• March 17, 2011 - The USDOE releases a Dear Colleague letter with clarifications on the distance education regulation, beginning with question 15.
• April 20, 2011 - The USDOE releases a second Dear Colleague letter. The letter moves the enforcement date to July 1, 2014, but institutions are expected to continue to make "good faith" efforts.
• July 12, 2011 - The United States District Court for the District of Columbia struck down the distance education portion of the USDOE's 'state authorization' regulations. The complete ruling is on the Court's website. The 'state authorization' section begins on page 35. Note, that only 34 C.F.R.  § 600.9(c) was vacated. Read more in the WCET blog post on the court ruling.
• June 5, 2012 - The U.S. Court of Appeals agreed with a lower court ruling to 'vacate' the distance education portion (§ 600.9(c) of the U.S. Department of Education's 'state authorization' regulation. Read more in the WCET blog post on the court ruling.

Requirements for States

The announcement in the Federal Register (p. 66858) reads: “These final regulations do not mandate that a State create any licensing agency for purposes of Federal program eligibility.” State licensure and approval agencies need to:

• Approve institutions to "operate" in the state according to their own regulations, if any.
• Upon request of the USDOE, provide a list of institutions approved to operate in the state by name. 
• Maintain a third-party process to review and address complaints from students attending institutions approved to operate in that state. See SHEEO's Links to Student Complaint Processes.

Requirements for Institutions

Institutions must: 

• Comply with any applicable state approval or licensure requirements in each state in which it ‘operates’ and be approved by that state by name. 
• Provide its students and prospective students with contact information for filing complaints with its accrediting agency and with the appropriate state agency. NOTE: This requirement was NOT vacated by the court and institutions are expected to have been in compliance by July 1, 2011. See our blog posting on this issue.

Getting Started

If you are new to state authorization, the many regulations and processes can be quite daunting. To help you navigate the first steps, Marianne Boeke (NCHEMS) and Sharmila Basu Mann (SHEEO) wrote this blog posting: "10 Steps You Can Take to Begin the State Authorization Process."

Defining 'Operate' and 'Not Physically Located'

The definition of "operating" or "physical presence" in a state is left to the laws and regulations of each state. The definitions vary greatly from state-to-state.

For some states, no (or very few) institutions will need to apply. For a small number of states, almost every institution will need to apply. In the majority of states, the need to seek authorization depends on the specific combination of that state's laws and the activities that the institution is conducting in that state. For some of these states, if you are only offering distance education courses in the state, you will not need to apply. However, if you are also conducting any one of a list of "trigger" activities (i.e., advertising in local media, advertising directly to prospective students, using local proctors, employing faculty or marketers locally), you could be required to apply. The list of "trigger" activities varies by state.

State-by-State Lists of Regulations

The State Higher Education Executive Officers completed its "Compendium of State Laws and Regulations" in October 2011 and is developing plans to further update this listing. WCET, the Southern Regional Education Board, American Distance Education Consortium, and the University of Wyoming created a 'Starter List' of state regulatory agencies and regulations. While this list is dated, we have been told that institutional representatives still find it useful.

Timeline and 'Good Faith' Effort

The original deadline was July 1, 2011, for institutions to have received full authorization in all states in which it operates.

As documented in our January 12 blog entry, WCET worked with USDOE on this timeline. Due to the complexity and length of the approval process in some states, the original deadline was impossible for many institutions to meet. As a result, the March 17 Dear Colleague letter extended the enforcement timeline to July 1, 2012.

In the April 20, 2011, Dear Colleague letter:

• The enforcement date timeline was extended to July 1, 2014.
• The USDOE will not 'initiate any action to establish repayment liabilities or limit student eligibility for distance education activities undertaken before July 1, 2014, so long as the institution is making good faith efforts to identify and obtain necessary state authorizations before that date.'
• The letter includes examples of 'evidence of good faith.' In WCET's opinion, there is still some ambiguity on this issue. We had requested clarification and believe that the Department was working on it when the court ruling was issued.

NOTE: While the enforcement date is extended to July 1, 2014, states still expect institutions to already be in compliance. Given the release of the federal regulation, state regulators now have a heightened awareness of institutions operating in their state without approval.

There has been considerable confusion over the 'extensions' included in the USDOE's regulatory language released in October. Those extensions apply only to the state in which the institution is located. For distance and correspondence education, institutions must follow the regulations of each state in which it 'operates.'

Court Ruling Vacating Distance Ed Portion of State Authorization Regulation

On July 12, 2011, the United States District Court for the District of Columbia struck down the distance education portion of the U.S. Department of Education's (USDOE) 'state authorization' regulations. The decision was a result of a lawsuit brought by the Association of Private Sector Colleges and Universities. The complete ruling is on the Court's website. The 'state authorization' section begins on page 35. Note that only 34 C.F.R. § 600.9(c) was vacated.

On June 5, 2012, the U.S. Court of Appeals agreed with a lower court ruling to 'vacate' the distance education portion (§ 600.9c) of the U.S. Department of Education's 'state authorization's regulation.

What does this mean?

Many hailed the rulings as the death of state authorization. It is not.

• State Regulations Are Still in Place. The state regulations predated federal regulation § 600.9(c). Those regulations are unaffected by the rulings and are still in force. There is now heightened awareness that institutions are operating in states without authorization. WCET advocates that institutions seek approval in states where they serve students regardless of the federal rule being struck down.
• The USDOE is Moving Ahead. In conversations with USDOE personnel, they still plan to enforce the regulation on July 1, 2014 and to check to see if institutions are making 'good faith' efforts before then. They plan to issue another 'Dear colleague' letter outlining their interpretation of the rulings and how they expect institutions to respond.

Student Complaints

That ruling was targeted only at § 600.9(c) of the federal regulations. It has no impact on the remaining regulations including § 668.43 (b) Institutional Information which requires institutions to provide perspective and enrolled students the institutions accreditation information and contact information for filing complaints:

§ 668.43 (b) Institutional Information:  The institution must make available for review to any enrolled or prospective student upon request, a copy of the documents describing the institution's accreditation and its State, Federal, or tribal approval or licensing. The institution must also provide its students or prospective students with contact information for filing complaints with its accreditor and with its State approval or licensing entity and any other relevant State official or agency that would appropriately handle a student's complaint.

For more information about the student complaint expectations, see our blog posting on this issue.

Reciprocal Agreements

From the Federal Register (p. 66867):  “If both States provide authorizations for institutions that comply with § 600.9 and they have an agreement to recognize each other’s authorization, we would consider the institution legally authorized in both States as long as the institution provided appropriate documentation of authorization from the home State and of the reciprocal agreement.”

Reciprocal agreements are the most promising way to ease the burdens of institutional compliance. Several efforts are working together on this issue:

• The Presidents' Forum of Excelsior College and Council of State Governments received funding from the Lumina Foundation to create a model interstate agreement. They released a new draft of the State Authorization Reciprocity Agreement (SARA) in August and are close to completing their work on the model.
• Based on the Presidents' Forum's work, the Western Interstate Commission for Higher Education (WICHE) and the other regional higher education compacts (SREB, MHEC, and NEBHE) are created an implementation version of the State Authorization Reciprocity Agreement (SAR). A new draft of this implementation document was released in late September.
• The Commission on Regulation of Postsecondary Distance Education is a committee formed by SHEEO and APLU to address authorization issues. On February 25, 2013, they released a draft version of their final report for open comment. Their report is based upon the work of both the President's Forum/CSG and WICHE/regional compact efforts.
• Final Reciprocity Recommendations from the Commission April 11, 2013 (large document).

The regional higher education compacts, the Presidents' Forum, the Council of State Governments, and the Commission on Regulation of Postsecondary Distance Education are now all working together on a single reciprocity plan.

Compiled by:

 

NOTE: This information is not endorsed by the U.S. Department of Education. Information and advice provided on these pages is not guaranteed. Given the myriad of regulations and understandings about their meaning, these pages represent our best interpretation of what we have learned. If you see information that appears to be incorrect, we invite you to notify us.

Last Updates:
March 7, 2013: Updated Reciprocal Agreements section.
March 8, 2013: Added Final version of their draft report in Reciprocal Agreements.
March 20, 2013: Added useful links to "What are Institutions Doing..." Survey - 2013 (Press Release). and "What are Institutions Doing..." Survey - 2013 (Full Report).
April 10, 2013: Added Final Reciprocity Recommendations from the Commission April 11, 2013 (large document).