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Last Updated: February 13, 2012 (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

These regulations have their basis in the Higher Education Opportunity Act (HEOA) of 2008. A “Negotiated Rulemaking” process was conducted to create regulations regarding how the USDOE will interpret and enforce the language passed by Congress.

The process included the following steps:

• June 2010 - USDOE releases its original "state authorization" language for comment. See the Federal Register beginning on page 34812. Note that the distance education language is not included. If it had been, the distance education community could have submitted comments to guide the final language.
• October 2010 - USDOE releases comments, responses, and final wording. See the Federal Register beginning on page 66858.
• 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 that was written after the court ruling. See more updates below.

The final complete regulatory language (without comments of how this regulation will be interpreted) can be found in the Electronic Code of Federal Regulations. The USDOE later released two 'Dear Colleague' letters providing clarifications and guidance:

• March 17, 2011, Dear Colleague letter - distance education clarifications begin with question 15.
• April 20, 2011, Dear Colleague letter.

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.

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.'

July 12 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 is 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 page 39 of the ruling is the statement... "The Court will vacate 34 C.F.R. § 600.9(c)."

§ 600.9(c) is paragraph in the regulations released October 2010 regarding distance education's need to seek authorization in each state. The reason for the ruling is that the USDOE did not provide adequate opportunity in the Negotiated Rulemaking Process for institutions to comment. The distance education language was not included in the original language proposed by the USDOE in June 2010 as part of its rulemaking process. The rule appeared in the final 'Program Integrity' regulations released in October 2010.

What does this mean?

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.

State Regulations Are Still in Place

Although the federal state authorization rule has been vacated, the state regulations are still in place, and there is 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.

What will happen next?

We believe that the federal regulation will be reinstated. The U.S. Department of Education has appealed the ruling and next steps will be:

• Both sides in the lawsuit have submitted their briefs to the Court.
• The appeal will be heard on February 21, 2012.
• A ruling will be issued later in the year, maybe by summer 2012.

Even if the U.S. Department of Education loses the appeal, they can reinstate it by including the regulation as part of a new Negotiated Rule Making Process. This would overcome the Court's objections. Alternatively, the Department could use the new "misrepresentation' or other regulations to effectively have the same impact. Under misrepresentation, if you are not informing students that  you are not approved to operate in his/her state, you could be at risk.

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. The Southern Regional Education Board is updating its Electronic Campus agreement so that public and non-profit institutions can operate in the Southern states.

The Presidents' Forum of Excelsior College and Council of State Governments received funding from the Lumina Foundation to create model legislation as part of a proposed state compact. See a guest blog by Paul Shiffman of Excelsior College and their whitepaper with their preliminary plans. (Note: If you have problems downloading the paper, try a different browser.) The timeframe for this agreement is:

• The Drafting Team is currently working on language for the compact. Russ Poulin of WCET is on the Drafting Team.
• A draft for public comment is expected by Spring of 2012.
• The Fall of 2012 will be used to sell the idea to states with action in each state during their 2013 legislative sessions.

 

Advocacy

WCET continues to work with other national higher education organizations, distance education organizations, and the USDOE on this issue. Activities that we are following:

• March 2011 - WCET joined the American Council on Education and almost 60 other organizations in co-signing a letter to Secretary Duncan of the U.S. Department of Education requesting that the 'state authorization' regulation be rescinded.
• April 21, 2011 WCET held conversations with USDOE staff. While supportive of the delay in enforcement, we urged them to better define the timeline and 'good faith' efforts.
• June 6, 2011 - Rep. Foxx (NC) introduces H.R. 2117 to repeal the state authorization and credit hour regulations.
• June 10, 2011 - The American Council on Education and 78 higher education organizations sent a letter to Rep. Foxx thanking her for introducing the bill. WCET is not a co-signer of this letter.
• July 2011 - WCET and UPCEA partnered to develop and administer a survey about how institutions are handling state authorization.
• August 24, 2011 - Opinion piece about how students will be affected by the state authorization regulation by Russell Poulin, WCET, and Jim Fong, UPCEA.
• Fall 2011 - Russ Poulin is participating in the Drafting Team that is creating the initial language for an interstate reciprocity compact as part of the Presidents' Forum/Council of State Governments project funded by the Lumina Foundation.
• Fall 2011 - Working with the Western Interstate Commission for Higher Education on a plan to assist states in the West to improve their regulations and to implement complaint processes.

 

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:
September 23, 2011 - Added WCET Conference Sessions on State Authorization section.
November 23, 2011: Added two-page handout link and updated wording in several sections with special attention to updates on USDOE's appeal of the Court ruling.
December 1, 2011: Added SHEEO link in blue box and minor edits.
February 13, 2011: Added links and date for the USDOE's appeal hearing of the state authorization Court ruling.