ED Publishes Final Rules on State Authorization of Distance Education

By Jill Desjean, Policy and Federal Relations Staff

The Department of Education (ED) published new rules on December 19, 2016, finalizing a Notice of Proposed Rulemaking (NPRM) published on July 25, 2016. The effective date of these final rules is July 1, 2018. This article describes provisions included in the final rule.

Summary of the Major Provisions

The final regulations will:

  • Consider institutions offering distance education programs or correspondence courses in states participating in state authorization reciprocity agreements to have met the legal requirements for offering postsecondary education in those states.
  • Require institutions providing distance education or correspondence courses to document that there is a state process for review and appropriate action on student complaints for each state the institution enrolls students or, where applicable, via reciprocity agreement.
  • Require institutions that offer at least 50% of an educational program at an additional location or branch campus in a foreign country to obtain legal authorization to operate by an appropriate government authority in that country. U.S. military bases, facilities, and areas the foreign country has granted the U.S. military to use are exempt.
  • Add eleven new disclosures for programs offered solely through distance education. The disclosures relate to consumer protection and include: state processes for consumer complaints; state refund policies; adverse actions by states or accrediting agencies; and, for programs intended to prepare students for licensure or certification in a certain field, information about whether the program offers the prerequisites for said licensure or certification in the state the student resides.

Key Changes From the Proposed Rules

The final regulations include the following changes from the proposed rules:

  • The proposed definition of state authorization reciprocity agreement reflected ED’s belief that “a state should be active in protecting its own students, and therefore such agreements should not prohibit a participating State from enforcing its own consumer protection laws.” The final rule expands the prohibition: an agreement does not satisfy the state authorization requirement if it prohibits “any state in the agreement from enforcing its own statutes and regulations, whether general or specifically directed at all or a subgroup of educational institutions.”
  • The exemption to obtaining foreign authorization in 600.9(d)(1)(i) has been expanded to include military facilities as well as areas in which the foreign country has granted the U.S. military usage. Only military bases were included in the proposed rules.
  • 668.50(a) and 668.50(c) were amended to match language from 668.50(b) to remove conflicting information in the proposed rules. In the final rules all three sections state that the relevant disclosures apply to programs that are “provided, or can be completed solely through distance education or correspondence courses”. Also, the final rules add that religious institutions that are exempt from state authorization under 600.9(b) are also required to provide public and individualized disclosures under 668.50(a) and 668.50(c).
  • ED added a new public disclosure, 668.50(b)(1)(iii), to the ten from the proposed rules-- an explanation of the consequences for students relocating to a state where the institution does not meet state authorization requirements or the program does not meet state licensure or certification prerequisites. ED argues in its discussion of this change that the additional disclosure could assuage commenters’ concerns about the overlap between the new state authorization rules and the borrower defense to repayment rules released in November of this year, because a student who received disclosure about the Title IV and licensure ramifications of relocating to a new state would then not have a basis for a borrower defense claim.
  • In the only clear win for institutions from the proposed to the final rules, ED agreed with commenters that the 7-day window for disclosure to students of programs that cease to meet state licensure or certification prerequisites was too short. ED revised 668.50(c)(2)(B) to provide institutions 14 calendar days to disclose any determination by the institution that the program ceases to meet the licensure or certification prerequisites of a state.

Other Items of Note

ED addressed stakeholder comments submitted in response to the July Notice of Proposed Rulemaking (NPRM):

  • ED confirmed, in response to commenters who used as an example the state of California’s Bureau for Private Postsecondary Education (CA-BPPE)-- which neither requires authorization of online-only programs nor accepts complaints against non-authorized programs-- that institutions would be unable to disburse Title IV aid to distance education students living in that state or any state that lacks a complaint process.
  • NASFAA argued in its comments to the NPRM that institutions located in states that have not entered into state authorization reciprocity agreements should not be required to gather and disclose each state’s complaint process, refund policy, and licensure and certification prerequisites, citing the duplicative nature of potentially thousands of institutions collecting the same data, the burden of having to regularly update the data for accuracy, and the risk (especially in light of the November, 2016 borrower defense regulations) of misrepresentation claims arising from unintentional errors in compiling such a large amount of information. NASFAA requested instead that ED maintain this information in a centralized portal, which ED declined.
  • ED declined NASFAA’s request for more specific language regarding state adverse action to be disclosed to students, on the grounds that it would be too difficult to come up with a single definition that covered all states’ processes. However, in their comments they did agree that clarification was necessary and, to that end, added that, “Adverse actions include any official finding for which an institution can appeal an administrative or judicial review, any penalty against an institution including a restriction on an institution’s State approval, or the initiation of a civil or criminal legal proceeding. These actions include anything related to distance programs offered by an institution, as well as actions that apply to the institution as a whole. The Department also considers an adverse action to include any settlement of a legal proceeding initiated by a State entity, regardless of whether the institution had to admit to any wrongdoing”.

While it is impossible to predict what the new administration will do once President-elect Trump assumes office it should be noted that the release date of these rules does make them vulnerable to overturn under the Congressional Review Act which, in short, permits Congress to review any regulation passed in the final 60 days Congress was in session.


Publication Date: 12/21/2016

David S | 12/21/2016 12:59:28 PM

What ED fails to take into account is that obtaining state authorizations can be a very costly and slow process. The goal of these regulations (I was on the Neg Reg committee that deliberated on them) was to enhance consumer protections for dissatisfied students. Thanks to my first point though, the result is instead going to be a lot of online programs advertised with disclaimers that say "program not available in..." followed by a list of states, leaving online students with fewer options. The existing reciprocity initiative between states will never be at 100% buy-in.

And ironically, the online programs who will weather these regulations the best will include those who students have complained about the most, because nationwide/worldwide online enrollment is such a part of their business model that they have the incentive to get authorization from all states, DC and territories.

And of course, the (gulp) Trump Administration and Congress could just throw these regs onto the bonfire anyway.

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