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

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

July 22, 2016

The U.S. Department of Education today proposed regulations that seek 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 proposed regulations clarify state authorization requirements for institutions to participate in the Department's federal student aid programs. The proposed regulations also address state and federal oversight of American colleges operating in foreign locations worldwide.

"These proposed regulations achieve an important balance between accountability and flexibility, and in so doing create better protections for students and taxpayers," said U.S. Under Secretary of Education Ted Mitchell. "Additionally, these regulations promote and clarify state authorization procedures, further strengthening the integrity of federal financial aid programs."

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 requirements for distance education providers in states where the institutions are not located.

The proposed 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 proposed 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 consumer 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.
  • 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 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 proposed rule, the 2010 physical locations rule also required institutions to be authorized by states having a state-based consumer complaint system.

The Department held three sessions of negotiated rulemaking on this issue in 2014, but the negotiating committee did not reach consensus. These proposed regulations are a result of that process and 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 proposed regulations will be published in the Federal Register on July 25, and the public comment period will end August 24. The Department expects to publish a final regulation before the end of the year.