Analysis: ED's Final State Authorization Regulations

By Jill Desjean, NASFAA Policy & Federal Relations Staff

Editor's Note: On November 1, the Department of Education (ED) released its final rules regarding accreditation, state authorization of distance education, and student assistance general provisions. The rules become effective July 1, 2020. This article is the first in a series of three analyzing the rules, and will focus on state authorization. 

These rules are the culmination of the work of 2018-19 negotiated rulemaking sessions, which also included discussions on faith-based entities, the Teacher Education Assistance for College and Higher Education (TEACH) Grant program, and distance learning — none of which have seen proposed rules published for public comment. As a reminder, negotiators reached consensus during those rulemaking sessions, which meant that ED was obligated to publish the consensus regulatory language in its proposed regulations, which were released in June. Changes from the proposed rules reflect ED’s incorporation of public comments. See all of NASFAA’s coverage of the rulemaking process. 

Background

The Department of Education’s (ED) final rules for state authorization caps off nearly a decade of negotiations, delays, and lawsuits on the topic, beginning in 2010 when ED first issued rules that defined the minimum requirements under which a state’s authorization for a school to operate within its borders is acceptable for institutional eligibility to participate in Title IV programs. Following implementation delays and court decisions vacating portions of the rules, state authorization was then negotiated in 2014 under the Obama administration and published as part of the 2016 Program Integrity and Improvement rules. Originally set to go into effect on July 1, 2018, ED then announced a delay of certain provisions relating to state authorization until July 1, 2020. Subsequently, a lawsuit brought by the National Education Association against Secretary of Education Betsy DeVos vacated the delay, and the 2016 regulations went into effect by court order on May 26, 2019.

While the official implementation date for these rules is July 1, 2020, all provisions related to state authorization have been set for optional early implementation. Institutions choosing early implementation may implement the new state authorization rules on or after the publication of the rules in the Federal Register on Nov. 1, 2019. 

State Authorization Reciprocity Agreement (SARA)

ED had proposed — and negotiators agreed — to retain the same definition of SARA as the 2016 regulations, which includes the provision that in order to meet the requirements for state authorization for the purposes of Title IV eligibility, a reciprocity agreement cannot prevent a member state from enforcing its own laws. The final rules, however, make a significant change to this provision based on the public comments ED received, and clarify that a reciprocity agreement could only supercede a state’s own state authorization laws and cannot prevent a member state from enforcing its other general-purpose laws, such as those related to consumer protection.

The final rules also swap out the term “residing” for the term “located” in the definition of SARA, when referring to the out-of-state students that reciprocity agreements are intended to protect. The term “residing” was problematic in the 2016 rules because legal residence is not uniformly defined by the states. This matches the language changes in §600.9 relating generally to state authorization of distance education and correspondence courses, which also swaps out language referring to students’ residency in favor of location. Negotiators supported the concept of changing “residence” to “location” throughout the rules.

Determination of a student’s location for purposes of state authorization and reciprocity agreements would have to be made by institutions at the time of initial enrollment as well as upon formal receipt of information from the student that their location had changed.

Religious Institutions

ED made no changes to its proposed language in §600.9(b) regarding state authorization as it relates to religious institutions. While the current regulations include a definition of religious institutions, ED proposed in June to remove the definition. The final rules only retain the language that religious institutions with state exemptions from state authorization are considered legally authorized to offer postsecondary education for Title IV purposes. ED received comments objecting to the removal of the religious institution definition on the grounds that different state definitions of religious institutions could lead to Title IV eligibility for only nominally religious institutions. ED justified its decision to keep a definition out of the regulations on the basis that “for the purpose of state authorization, states have the right to make their own decisions regarding whether an institution is a religious institution or not.”

Student Complaint Process

The final rules remove, as was proposed in June, all existing regulatory language in §600.9(c)(2) tying an institution’s authorization to offer distance education in a state to whether that state had a student complaint process. ED’s rationale for the removal is that §600.9(a)(1) already addresses complaint processes, and the regulations under §668.43(b) already require institutions to disclose the complaint process in each of the states where enrolled students are located. 

The state student complaint process for out-of-state institutions offering distance education became a major issue over the summer for California residents enrolled in distance education, after ED announced that 2016 final rules on state authorization took effect on May 26, 2019, and issued implementation guidance detailing state student complaint processes. Because California had no complaint process for its residents enrolled in out-of-state distance education programs and was not part of a reciprocity agreement, California residents were not eligible for Title IV aid for distance education programs offered by out-of-state institutions. The issue was eventually resolved with a stopgap measure by the state of California that ED accepted “to avoid the disruption in educational programs for California students adversely affected by the 2016 regulations and so as to provide a bride for institutions serving these students to the new 2019 regulations.”

The new final rules, by entirely removing the regulations relating to a state student complaint process for out-of-state distance education providers, fully resolve the issue for California students immediately, due to the early implementation provision.

Stay tuned to Today’s News in the upcoming days for further coverage on these new final rules.

 

Publication Date: 11/5/2019


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