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State Authorization for Institutions Offering Distance Education to Out-of-State Students

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by Christine Mullins
Executive Director, Instructional Technology Council
202.293.3110, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Jan. 24, 2011

“If an institution is offering postsecondary education through distance or correspondence education to students in a State in which it is not physically located, the institution must meet any State requirements for it to be legally offering postsecondary distance or correspondence education in that State.  We are further providing that an institution must be able to document upon request by the Department that it has the applicable State approval.”

—Oct. 29, 2010 Amendments to the Higher Education Act, Program Integrity Issues, State Authorization, Section §600.9.  See http://edocket.access.gpo.gov/2010/pdf/2010-26531.pdf .

According to this federal regulation, in-state and out-of-state institutions that offer postsecondary education to a state’s residents (face-to-face or online) must comply with applicable state approval and/or licensure requirements and be “authorized by name.”

Fred Sellers, senior policy analyst at the U.S. Department of Education, says that approval or licensure requirements for the out-of-state institutions, from which their residents take their online courses, are up to the state.  The Department is not mandating that states create or even have such a requirement – and many states do not have them (ex. New York if an institution only offers online coursework to NY residents) – in which case the institution doesn’t have to do a thing.  States do not have to create any new licensing agencies.

The U.S. Department of Education is basically reinforcing the idea that if a state requires an institution that offers online courses to its residents to do X, Y or Z – the institution must do so, for the designated time period (ex. one time, annual renewals, etc.).  And institutions must be able to cough up the documentation that shows it has approval from the out-of-state government to teach the out-of-state residents online – if the Department of Education asks for it.

Federal higher education institutions (ex. National Defense University), tribal colleges, and qualified religious institutions (which are owned, controlled, operated, and maintained by a religious organization and only awards religious degrees or certificates) are exempt from these requirements.  However, religious institutions (ex. Georgetown or Catholic Universities) that offer non-religious programs are not exempt.

Sellers says that states have always had the authority to regulate the higher education institutions that teach their residents through distance education or correspondence study – what is new is the federal requirement that those out-of-state institutions that teach their residents must document that they have state authorization if the state requires it.  The Department can revoke an institution’s ability to offer its students in a state federally-funded financial aid if it does not produce the necessary documentation from that state.  If state authorization is not forthcoming, any Title IV student aid disbursed to out-of-state students is an institutional liability, for which the Department may request repayment and may subject the institution to further adverse actions regarding the institution’s eligibility.

When asked why the Department created this new rule, Sellers explained that these regulations provide students accountability – to offer some protection against fraud and abuse by rogue institutions.  For example, a Wisconsin resident who is enrolled in an online course with an institution in Colorado can complain to the state of Wisconsin if the Colorado institution does not deliver on its obligations to him or her as a student.  Who could he or she complain to before this regulation?  The state of Wisconsin is out of the loop, the state of Colorado doesn’t care about students who live in Wisconsin, and the student has no viable recourse.

For an institution to meet the federal state legal authorization requirements, the institution’s state must have a process, applicable to all institutions in the state, to review and address complaints directly or through referrals as determined by the state.  This applies to religious, but not tribal or federal, institutions.  However, tribal governments must have a process to review and respond appropriately to complaints from students who attend their colleges.

Sellers says that the Department’s decision to impose the regulations related to distance education and correspondence study originated in the nearly 1,200 comments it received during the 47-day comment period that pertained to student financial aid concerns in the Higher Education Act reauthorization – which started in mid-June 2010 and ended in August.  The Department of Education released the final regulations on Oct. 29, 2010.

Unanswered Questions

As with most regulations, the Department still has a lot of questions to answer about how this regulation will work in practice.  For example, from which state does an institution have to get authorization to teach students in the military?  From the state where he or she is stationed?  Pays taxes?  Is registered to vote?  Has a driver’s license?  What if he or she is deployed abroad?  Do institutions need authorization from students who live in the US territories?

What obligation does an institution have to identify where a student resides and seek approval before enrolling him or her?  Should institutions list the states that approve their online courses on their Web site – to catch students before they enroll in their programs?  What about students who move from one state to another during the academic year?  What if a state ignores an institution’s request for authorization?

Sellers says that the Department of Education will probably write a “dear colleague” letter, which will hopefully answer some of these questions for colleges, accrediting agencies, and state higher education offices.

Future Directions

States are likely to take action to reduce the burden on themselves if they choose to require out-of-state institutions to get approval to offer courses to their residents.  Several consortia are considering approaching other states to get approval to teach their residents – on behalf of the colleges that are members of the consortium.  States might find that the easiest solution would be to give blanket approval – such as to all institutions that are regionally accredited by the accrediting agencies recognized by the U.S. Department of Education.

On December 9, Excelsior College announced on that it received a $300,000 grant from the Lumina Foundation for Education to collaborate “with the Council of State Governments to develop a model interstate compact that provides a basis for more rational and efficient state approval of online programs, protects consumers and addresses barriers to student success. A common set of rigorous standards also would support the national agenda calling for increased degree completion among adults.”

These final rules go into effect on July 1, 2011.

For brick-and-mortar locations, the Department will provide for extensions if the state from which the institution is interested in obtaining approval is not ready by July 1, 2011.  An institution may request one-year extensions for the 2011-12 and 2012-13 award years.  The institution’s state has until July 1, 2013 to make any needed adjustments to assure that institutions in the state may meet the new regulatory requirements.  This extension does not apply to the provisions related to distance education and correspondence study (paragraph (c) of §600.9 of the final regulations) as there is no need for any state to make any changes in their current requirements for institutions to be able to comply with the regulations.

Colleges Need to Start Planning Now

In the meantime, colleges that serve students who reside in other states should contact the out-of-state higher education office to see if there are regulations with which they must comply and obtain the necessary documentation that gives them the “proper” approval – the Department of Education might ask for it after July 1, 2011.  Colleges that are located near state borders – and probably serve lots of out-of-state residents -- should pay particular attention.

WCET has created a wonderful Web site which includes links to a Web cast presentation Fred Sellers made on this issue on Dec. 7, 2010 and other resources.

Stay Tuned!!