Third Round of Neg Reg Starts With State Authorization Of Distance Ed

By Brittany Hackett, Communications Staff, and Karen McCarthy, Policy and Federal Relations Staff 

Negotiators reconvened Wednesday for the third session of the Department of Education’s 2013-14 Program Integrity and Improvement negotiated rulemaking, where state authorization of distance education programs dominated the conversation.

Previous regulations on the issue specified that institutions offering distance education programs in states other than the state where the institution is physically located, would be required to meet any state requirements in order to legally offer distance education in that state.

However, the U.S. District Court for the District of Columbia in 2011 vacated the regulation on procedural grounds, followed by a 2012 appeals court ruling that the regulation was not a logical outgrowth of ED’s proposed rules. 

The draft regulations presented by ED on Wednesday included several changes from the language presented during the March session, including a provision that would restrict the applicability of the distance education state authorization rules only to institutions that offer 50 percent or more of a program of study through distance education in a particular state. ED also clarified that legal authorization in a state is for the purposes of institutional eligibility for funding under the Higher Education Act (HEA). 

Throughout the discussions, ED emphasized that one of its goals is to strengthen the states’ role in the triad of institutional eligibility consisting of accrediting bodies, ED, and the states. Since ED does not have authority over the states, it is encouraging more state oversight through its regulatory authority on institutions. The proposed regulations establish a minimum “floor” level of state authorization that would be required. If a state chooses not to implement ED’s minimum standards, then students receiving distance education in that state from an out of state institution would not be eligible to receive Title IV funds. The proposed regulations make clear that if a state has requirements above and beyond the “floor” then the institution must meet those additional requirements for legal authorization in that state.

One provision raised particular concern from a majority of the negotiators. The provision states that an institution “is not considered to be legally authorized to offer postsecondary distance or correspondence education in a state for purposes of institutional eligibility for funding under the HEA if it is exempt from state approval or licensure requirements based on accreditation, years in operation, or other comparable exemption.”

This provision means that although exemptions from state approval requirements based on accreditation, years in operation, etc., are allowable in certain circumstances for the state in which the institution is physically located, they would not be permissible for distance education offered in other states. In response to questions, ED clarified that exemptions from state authorization requirements based on a lack of physical presence in a state, which are widely used, would not be permissible. Non-federal negotiators pointed out that approximately 45 states would need to change their state laws to accommodate ED’s proposed rules. 

All of the non-federal negotiators recommended elimination of this paragraph, with the exception of the negotiators representing students, consumers, the legal aid community, and state attorneys general.

David Sheridan, director of financial aid at Columbia University’s School of International and Public Affairs, said that he is concerned about the loss of Title IV eligibility to continuing students and how students would pay for their education in such circumstances, noting that it “would create an environment that is very ripe for predatory student loan lenders.”

“It concerns me when we get to the level of students who rely on Title IV funds to pay for these programs [and] then have to rely on vastly inferior products,” Sheridan said, adding that ED should consider some form of grandfathering for current students if they move forward with the provision.

Elizabeth Hicks, executive director of student financial services at the Massachusetts Institute of Technology, said that she was concerned the provision would result in a loss of engagement in distance education among states and institutions finding the process too cumbersome. “As a nation we’re trying to increase access and affordability … but this seems to work against all of that,” she said. 

However, negotiators representing consumer advocates and student groups said they were in favor of the draft rule, arguing that it provides students with more “front-end protection” and appropriate oversight of the programs.

The committee also discussed proposed changes to draft language regarding state authorization of foreign locations of domestic institutions. ED revised its proposal to limit the applicability of the requirement that an additional location or branch campus be legally authorized to operate by an appropriate government authority in the country to foreign additional locations at which 50 percent or more of the program is offered, or will be offered, and all foreign branch campuses.

ED clarified that the proposed rules do not apply to consortium or contractual agreements commonly used in study abroad programs, nor to foreign institutions. 

The committee began discussion on proposed language regarding several issues of cash management and Title IV disbursement.

ED made significant changes to its cash management proposal after hearing concerns from negotiators during the March session, including removing a proposed prohibition on the use of sweep accounts and co-branded accounts or services. 

Other issues addressed in the proposed language include changes to how information on disbursement options is presented to students, what kinds of fees associated with third-party services are allowed, and whether books and supplies charges can be included as part of tuition and fees. 

Discussion of the proposed changes to the cash management provisions will continue today – stay tuned to Today’s News for coverage of that discussion as well as discussion of ED’s proposed changes to the definition of adverse credit under the PLUS Loan Program.



Publication Date: 4/24/2014

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