New Federal Regulations, Part 2: Addressing Compliance with State Closure Laws and the Impact on Interstate Reciprocity Agreements
Published by: WCET | 10/31/2023
This is the second of our two-part blog post series on the recently released U.S. Department of Education regulations. The first covered new rules regarding programs leading to professional licensure. This one is about institutions complying with closure requirements in each state in which it serves students. We, especially, analyze the impact on the more than 2,000 institutions that serve students through the State Authorization Reciprocity Agreement (SARA).
The U.S. Department of Education (the Department) formally announced the new federal regulations that impact institutions serving students in programs leading to a license or certification and created new institutional closure requirements, which may have an impact on state authorization reciprocity. The Federal Register October 31, 2023 announcement of Financial Responsibility, Administrative Capability, Certification Procedures, Ability to Benefit (ATB) includes the release of the remaining four issues related to the Winter 2022 rulemaking, Institutional and Programmatic Eligibility Committee.
It is the Certification Procedures issue that we followed closely and reported on often during the three months of rulemaking committee meetings and summarized the outcome of the committee soon thereafter. Of utmost concern was that sub-issues of Professional Licensure and Closure/State Authorization that were not announced, but were inserted by negotiators within the Certification Procedures issue without the opportunity to nominate knowledgeable committee members to share invaluable and pertinent information for the committee’s discussions.
This entire package of regulations was released as final on October 31, as well as the Final Regulations for Financial Value Transparency & Gainful Employment released on October 10, 2023. These regulations become effective July 1, 2024.
Note to the reader: This introduction is mostly repeated from the first post.
The Certification Procedures issue focuses on the agreement between postsecondary institutions and the Department that each institution certifies compliance with specific obligations in order to participate in Title IV HEA Programs. The agreement is called a Program Participation Agreement (PPA). The Department’s goal was to strengthen student protections within the PPA. The sub-issues for which we followed were among the new requirements being added to the PPA even though there are Federal regulations that direct institution requirements in these two areas.
You may recall that, when the proposed regulations were released in May 2023, we provided two separate WCET Frontiers posts to share our analysis. Our first post addressed the regulation subsection that appears to require that institutions comply with state consumer protection laws for closure, recruitment, and misrepresentation where the institution is located and where the student is located at time of initial enrollment. The second post addressed the institution’s responsibility to satisfy applicable educational prerequisites where the institution is located and where the student is located at the time of initial enrollment as well as an edit to the currently effective public notification requirements.
The final regulations released have been modified to some degree from the proposed regulations. We believe that the public comments that we all shared with the Department were heard and persuaded the Department to make some changes to the final language. However, we believe there appears to still be some misunderstanding by the Department about the variation of oversight for licensed professions by state and by the specific profession. Additionally, there are lingering questions about the applicability of state consumer protection laws upon institutions that participate in reciprocity.
Please consider sharing your questions with the Department on these areas, especially regarding the challenges of coordination of processes and information with state licensing boards. The Federal Register announcement includes the contact information for the Department staff member addressing this issue. For certification procedures: Vanessa Gomez. Telephone: (202) 987-0378. Email: Vanessa.Gomez@ed.gov.
This is the second of our two posts reviewing the new requirements around state closure laws and the impact and interstate reciprocity agreements, such as SARA. Look for our first post New Federal Regulations, Part 1: Addressing Programs Leading to a Licensure or Certification.
In both posts we will ask the following questions:
*Please note that page numbers in the analysis will refer to the unofficial version of the rules released on October 24 as that document is larger print and easier to direct you to the language of the preamble and regulations.
Certification Procedures — 34 CFR 668.14(b)(32)(iii)
(32) In each State in which: the institution is located; students enrolled by the institution in distance education or correspondence courses are located, as determined at the time of initial enrollment in accordance with 34 CFR 600.9(c)(2); or for the purposes of paragraphs (b)(32)(i) and (ii) of this section, each student who enrolls in a program on or after July 1, 2024, and attests that they intend to seek employment, the institution must determine that each program eligible for title IV, HEA program funds…
(iii) Complies with all State laws related to closure, including record retention, teach-out plans or agreements, and tuition recovery funds or surety bonds…
In the announcement for this rulemaking and the call for negotiators, there was no mention of consideration of rules related to state authorization. Just prior to the second session, we were surprised that a few negotiators proposed requirements for institutions regarding the assurance that they abide by all state “consumer protection” laws. While these proposed rules were not explicitly aimed at the State Authorization Reciprocity Agreement (SARA), it was clear by the proposers, the context, and the brief discussion that the intent was to implement regulations that would have a dramatic effect on SARA. During the second of three sessions in February 2022, the negotiator for the Department pushed back on the introduction of new issues to be considered. Typically, it is against rulemaking protocol to introduce new issues after the agenda is set in the first session. Although it was unclear if it would go forward, we wrote the blog post linked above and reached out to negotiators (including holding calls with some of them) about the possible impact of the proposed language. For the third session, the Department provided its own version of the proposed rule. Nobody liked it and it failed to reach consensus. After the meeting, we wrote about our reactions to the proposal.
When it released its proposed rules for comment in May 2023, the Department tried to limit the impact of the “state consumer protection laws” to only those laws related to closure, recruitment, and misrepresentations. As a result, institutions participating in reciprocity would also need to comply with those rules in each state. Unfortunately, those terms were not defined.
WCET and SAN submitted a public comment focused specifically on the impact on reciprocity for proposed “state consumer protection laws related to closure, recruitment, and misrepresentations. Our main recommendations to the Department were:
We provide a detailed review of the Department’s analysis in our public comment, and included a major concern that the Department was usurping the will of 49 states, the District of Columbia, Puerto Rico, and the Virgin Islands in joining the State Authorization Reciprocity Agreement (SARA). Additionally, we were quite concerned at the late introduction of the topic, the lack of experienced negotiators, and the lack of analysis on the problem to be solved and the impact of the proposed regulations.
Four clarifying questions were posed to the Department related to the proposed language of 34 CFR 668.14(b)(32)(iii):
WCET & SAN provided testimony to the OMB/OIRA meeting, which is the final review prior to the Department’s release of final regulations. We shared our concerns related to federalism as we believe that the Department is creating barriers that overstep the state’s rights to create regulations and decisions to how students are served in their states.
Although we had heard that the review panel rarely asks questions, we were pleasantly surprised that the panel asked many questions and remarked upon the specificity of the issues of concern that we raised.
First, a general comment: In its overall response, the Department consistently confused SARA (the State Authorization Reciprocity Agreement) with NC-SARA (the National Council that runs SARA in partnership with the four regional higher education compacts). This is a very important distinction and goes well beyond a nuance. SARA is an interstate agreement with policies regarding how states and institutions will act within that agreement. NC-SARA is an office with great people facilitating collaboration among the compacts to implement reciprocity among member states. SARA critics will often cite NC-SARA as a method to discredit reciprocity as an entity imposing oversight as an effort done “to” states and not an effort conducted “by” states.
In short, this is unclear.
That is even after the Department tried to answer the question multiple times in their response. See items 5, 11, and 12 above.
Before getting to the details, we thank the Department for the important instances when they considered our recommendations and commented on them. Limiting their new regulation only to the four sets of state laws related to institutional closure (record retention, teach-out plans or agreements, tuition recovery funds, and surety bonds) makes sense. SARA leadership should consider adding these elements into their student protections.
On the other hand, the Department sometimes dismissed real concerns out-of-hand. Their unwillingness to learn about the operations of state regulatory agencies is a bit worrisome.
The big question remains, will institutions need to meet each state’s closure requirements even if they participate in reciprocity? To be clear, ALL institutions are subject to this new rule whether they participate in reciprocity or not. This all hinges on whether the Department finds that the reciprocity agreement’s provisions, as agreed to by each member state, meet the new requirement.
Ok. So that’s confusing.
The bottom line is that, among the two camps, we lean toward the “No” argument. The Department tripped over itself in being clear that it was not regulating reciprocity, it was relying on state laws, and that the terms of reciprocity are to be negotiated in the rulemaking that is tentatively planned for early next year.
Do we agree with the SARA critics that improvements are needed in protections for interstate distance education students? We do, but we think it can be best accomplished through SARA to improve protections nationally in the 52 states and territories not just in states that have applicable rules. Additionally, we do not agree with all the suggestions of SARA critics. The SARA community needs to do more in the coming year and addressing closure requirements is a good start.
We have run into other situations in the past where the Department’s wording did not match its intent. We will ask the Department for clarification, and you should too. See “Next Steps” below on how to request that clarification from them.
Please remember that this is our early analysis of the new final regulations addressing the new closure requirements and the impact on state reciprocity agreements. For institutions, addressing closure requirements appears to have a lesser impact on their additional work than was found for the professional licensure requirements.
All institutions will be subject to this new requirement, regardless of if they participate in reciprocity or not. As previously suggested in the post for programs leading professional licensure, institutions should review and revise their institution process to determine the location of the student at the time of initial enrollment as has been required since July 1, 2020.
The question remains as to “will institutions need to meet each state’s closure requirements even if they participate in reciprocity?” Either way, we expect pushback:
In any case, there are only a few states that have closure requirements for out-of-state institutions. Watch for more updates from us on this issue. Meanwhile, a “quick chart” on state-by-state rules can be found on the State Authorization Network (SAN) website. Watch for applicable closure laws to be added to the chart soon.
Remember that ALL institutions are subject to this new rule. For institutions:
These conclusions come from our early analysis. We still have questions and we’re sure you do too. SAN and WCET will be seeking your input to learn your lingering questions. We maintain that by working together we will develop implementation strategies. SAN is already in process the of reaching out to national associations for licensing boards to inform them of the final regulations. We will also collaborate with NASASPS and the SARA Community to ensure that applicable information is shared. Additionally, we urge you to follow the Federal Register announcement direction to seek more information from the Department staff member addressing this issue. For certification procedures: Vanessa Gomez. Telephone: (202) 987-0378. Email: Vanessa.Gomez@ed.gov .
Look to SAN and WCET for more on these issues in the coming weeks!
Get additional updates, summaries, and analysis of these issues and many more in our upcoming SAN and WCET member-only webcast: “Waze” to Find the Detours and Fast Lanes to Understand New U.S. Department of Education Guidance and Regulations.