DOE Doubles Down on State Authorization: 25x increase in regulatory language

Now that the Kabuki Theatre of the Department of Education’s negotiated rulemaking process has finished its penultimate act, can we all act surprised that the likely result includes the proposed State Authorization regulations growing by a factor of 25 with no comments allowed by one of the groups most affected?

The gist of State Authorization is to force distance education and correspondence programs to comply not only with their home state regulations but to also comply with regulations for any state of residence for students. The proposed regulations from 2010 (struck down by courts in 2011) came in at 75 words:

§600.9(c) If an institution is offering postsecondary education through distance or correspondence education to students in a State in which it is not physically located or in which it is otherwise subject to State jurisdiction as determined by the State, the institution must meet any State requirements for it to be legally offering postsecondary distance or correspondence education in that State. An institution must be able to document to the Secretary the State’s approval upon request.

The most recent submission from DOE comes in at 1,912 words. You can read the full text here. This growth in regulatory language will have real costs. Today the president of Saint Leo College described how much of the administrative bloat in campuses is due to increasing federal regulations.

Let me be clear, not all of the increases in college tuition and administrative bloat are caused by regulation, but some are—and far more than you think.

The reason that the 2010 language was struck down by the courts was described in a WCET post:

As we’ve noted before, the distance education language was not included in the original language proposed by the USDOE in June 2010 as part of its rulemaking process.  The rule appeared in the final ‘Program Integrity’ regulations released in October 2010.  As a result, the court seems to have agreed that the USDOE did not follow proper procedures in implementing the rule.  If the language had been included in the June 2010 proposed rules, WCET and the distance education community could have provided comments to improve the final regulation.

What is disconcerting now is that once again the DOE has not included a major stakeholder group that will be directly impacted by the new regulations, in this case state regulators. I described in a previous post how the new regs would dramatically increase federal control over distance education and would significantly increase the required oversight by state regulators. It is this issue that appears to have been the breaking point in current negotiations, per the Chronicle today:

On state authorization, the department and several negotiators representing student and consumer groups remained insistent that distance-education programs could be eligible for federal student aid only if they were approved by a state with an “active process” for authorizing them—a process that went beyond passively approving programs merely if they were accredited or had been operating in the state for a long time.

“We’re not willing to walk away” from that position, said Pam Moran, representing the department.

And what do the state regulators have to say in this process?

Elizabeth Hicks, executive director of student financial services at the Massachusetts Institute of Technology, was one of several negotiators who asked the department to hold off on issuing a state-authorization rule until it could consult with state regulators, who were not represented among the 31 negotiators from outside the department.

“Many of us feel you are trying to leverage institutions to regulate states,” said Ms. Hicks. “That’s disingenuous.”

What do you get for this massive growth in regulatory language? Russ Poulin from WCET, who was one of the negotiators and has provided great insight into the process, stated in a comment to the Chronicle article:

The objection of most negotiators was not bureaucracy, but meaningless bureaucracy. The Department’s proposal would have forced institutions to lobby states (in which they serve students) to change their approval processes to a process that would not be substantially different than what they do now. This would not improve consumer protection. It would throw the status of hundreds of thousands of students into question while states decide if they would make the necessary changes and what changes they would make. Yes, there was a roll-out period, but uncertainty would remain. Why disrupt the lives of students to implement a process that would result in the same approval outcome?

I am sure that many individuals within the DOE truly wanted to reach consensus within negotiated rulemaking, but the process for doing so was flawed from the beginning. The process worked as designed, and no consensus was reached. Now the DOE has the discretion to introduce the proposed language it wants or even to drop the subject.

The shame of this is that there really is a problem to be addressed. eCampusNews described today how Ashford University agreed to a $7.25 million settlement and revise marketing practices based on a state of Iowa lawsuit. One former student commented:

Pat Kean, a military veteran from Madrid and former Ashford College of Education student, said he used higher education funds earned through his service to pay for online classes, only to discover in his final days as a student that his teaching degree wasn’t valid and his credits weren’t transferrable. Even the land-based campus in Clinton wouldn’t accept his credits, he said.

Students do need to have pathways, including via states, to address misleading marketing practices and poor quality. The process seems to have worked here, even without State Authorization, partially as students in the Ashford home state of Iowa complained. But where would students in Oregon complain? This is the rationale for State Authorization.

Despite the exclusion of state regulators in the negotiated rulemaking process and the last-minute changes to requirements on state regulators, the DOE has actually been forthright in their intention to force states to ramp up “active” oversight. From the Federal Register in 2010 (see page 34813, left column):

Upon further review, we believe the better approach is to view the State approval to offer postsecondary educational programs as a substantive requirement where the State is expected to take an active role in approving an institution and monitoring complaints from the public about its operations and responding appropriately.

In other words, there is a problem to be solved, and the intent to place new regulatory requirements on the states themselves has been known. What is unfortunate is the process that A) grew regulatory language by a factor of 25, B) still excluded key input from affected parties, and C) predictably failed to reach consensus.

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About Phil Hill

Phil is a consultant and industry analyst covering the educational technology market primarily for higher education. He has written for e-Literate since Aug 2011. For a more complete biography, view his profile page.
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