Financial Advice

Education Department Announces Final Rule on State Authorization of Postsecondary Distance Education, Foreign Locations

The U.S. Department of Education today released final regulations to improve oversight and protect more than 5.5 million distance education students at degree-granting institutions including nearly 3 million exclusively online students by clarifying the state authorization requirements for postsecondary distance education.

To ensure that institutions offering distance education are legally authorized and monitored by states, as required by the Higher Education Act, the final regulations clarify state authorization requirements for institutions to participate in the Department’s federal student aid programs. The regulations also address state and federal oversight of American colleges operating in foreign locations worldwide.

“We’re proud that these regulations build on good ideas from stakeholders across the nation that balance accountability and flexibility for institutions as they seek to better serve students and taxpayers,” said U.S. Under Secretary of Education Ted Mitchell.

In 2006, Congress abolished a rule restricting access to federal student aid for distance education programs. Since then, the number of students enrolled in online degree programs has significantly increased.  By 2014, more than half of students at for-profit institutions were enrolled in exclusively distance education courses, compared with an estimated 9 percent of students in public institutions and 15 percent of students in private nonprofit institutions.

State authorization is a longstanding requirement in the Higher Education Act that requires institutions to be authorized in the state in which they are located as a condition for eligibility to receive Title IV Federal student aid.  While all higher education institutions must have state authorization in the states in which they are physically located, there are no federal regulations for distance education providers in states where the institutions are not located. 

The final regulations close this loophole by:

  • Requiring institutions offering distance education or correspondence courses to be authorized by each state in which the institution enrolls students, if such authorization is required by the state. The regulation recognizes authorization through participation in a state authorization reciprocity agreement, as long as the agreement does not prevent a state from enforcing its own laws. 
  • Requiring institutions to document the state process for resolving student complaints regarding distance education programs.
  • Requiring public and individualized disclosures to enrolled and prospective students in distance education programs, including adverse actions taken against the school, the school’s refund policies, and whether each program meets applicable state licensure or certification requirements.  The regulation will also require schools to explain to students the consequences of moving to a state where the school is not authorized, which could include loss of eligibility for federal student aid.
  • Requiring that foreign branch campuses or locations be authorized by the appropriate foreign government agency and, if at least half of a program can be completed at the foreign location or branch campus, be approved by the accrediting agency and reported to the state where the main campus is located.

The Department received 139 comments from postsecondary institutions and associations, distance education advocates, student and consumer advocacy groups, and State attorneys general.  These comments concerned various provisions in the proposed rule (e.g., state authorization reciprocity agreements, state authorization, consumer complaint systems, and consumer disclosures), and the final rule reflects consideration of these comments and perspectives. 

The Department previously regulated on state authorization of both physical locations and distance education in 2010, but a federal court vacated the distance education portion of the rule on procedural grounds in 2011.  The other portions of the 2010 state authorization rule relating to physical locations were implemented last year.  Similar to the final rule, the 2010 physical locations rule also required institutions to be authorized by states having a state-based consumer complaint system.

These final regulations further a longstanding regulatory effort by the Department to support state oversight of schools that offer distance or correspondence education and protect students in those programs.

The final regulations will be published in the Federal Register on Dec. 19.

This article was distributed by the Personal Finance Syndication Network.

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