Briefing: Recent State
Authorization Issues
Gregory Ferenbach, Dow Lohnes, PLLC
Overview
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The Federal State Authorization Rule(s)
Related Provisions and Enforcement Methods
Upcoming Negotiated Rulemaking
The “On-Ground Rule” Controversy
Reciprocity Agreements
THE FEDERAL STATE
AUTHORIZATION RULE(S)
Background – The Department’s State
Authorization Rules
• State authorization is a condition to Title IV eligibility
• Traditionally, Department of Education only required
state authorization by the state in which an institution is
physically located
• In 2010, 14 new “program integrity” rules, including
several provisions relating to state approvals
– 75 Fed. Reg. 66832-66975 (Oct. 29, 2010)
• The new rules apply to all types of educational
institutions – public, for-profit and private non-profit
• Two parts—the distance education rule and the “onground” rule
The Now Infamous “Distance
Education Rule” (Vacated)
• 34 CFR 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 distance or correspondence education in
that State. An institution must be able to
document to the Secretary the State's approval
upon request.“ (emphasis added)
APSCU v. Duncan
• June 12, 2011 – US District Court in District of
Columbia vacated new section 600.9(c) on
procedural grounds (lack of prior notice)
• June 5, 2012 – Court of Appeals for DC Circuit
upheld lower court – 600.9(c) vacated again
• But holding makes clear that Department has
clear statutory and constitutional authority to
issue state authorization rules
– Career Coll. Ass’n v. Duncan, 796 F. Supp. 2d 108,
134 (D.D.C. 2011) aff’d in part, rev’d in part sub
nom. Ass’n of Private Sector Colls. & Univs. v.
Duncan, 681 F.3d 427, 463 (D.C. Cir. 2012)
RELATED PROVISIONS
AND ENFORCEMENT
MECHANISMS
Related Provisions
• The Student Disclosure Rule
– Section 668.43(b) – All institutions must disclose
to all students, or prospective students, the
complaint agency in all states where students
reside
– May be posted on your website
– May link to a third-party list. See DCL GEN-12-13
– Note – must also make state approval documents
available “on request” to students (and ED)
Related Provisions
• Enhanced Federal Misrepresentation Rule
– 34 CFR 668.71 – Exceptionally broad and vague
rules ban any form of “misrepresentation”
– Rule mostly upheld by Court of Appeals
– Specifically references state authorization or
accreditation of a program. 34 CFR 668.72.
– Sanctions include possible loss of Title IV
– Some accreditors/states have followed suit
– Disclosure of any state and programmatic
authorizations must be 100% accurate
Alternate Enforcement – the States
• Underlying state authorization requirements
unaffected by recent court decisions
• Most states require licensure where “physical
presence;” some states even without a presence
• Federal actions and related publicity energized
many states
• State regulators appreciate their role in “triad”
more than ever
• State law continues to evolve rapidly
Alternate Enforcement – State Boards
• Professional Licensure
– Separate approval required state by state
– May trigger institutional authorization
(“presence”) in some states
– Additional risk of misrepresentation claims
• Examples:
– Teacher Education
– Nursing Education
UPCOMING NEGOTIATED
RULEMAKING
Upcoming Negotiated Rulemaking
• Announced on April 16, 2013
– 78 Fed. Reg. 22467 (Apr. 16, 2013)
• Initial Public Hearings held in May 2013
• Department seeks comment on vacated 600.9(c)
(the Distance Education Rule)
– ED also plans a discussion regarding the authorization
of foreign locations of US institutions
– May also be a chance to revise 600.9(a) (the OnGround Rule)
Upcoming Negotiated Rulemaking
• Negotiation sessions not yet scheduled
– Earliest likely timeframe is November 2013 –
January 2014; could be later
• Due to ED’s “Master Calendar” restrictions, the
earliest a new Distance Education Rule is likely to be
in effect is July 2015 (See 20 U.S.C. § 1089(c))
• Possible overlap with HEA reauthorization
THE “ON-GROUND” RULE
The On-Ground Rule
• “On-Ground Rule” defines minimum state requirements for
valid Title IV state authorization. See 34 C.F.R. 600.9(a).
• Until recently, not a concern except in a very few states
• State must have a process for state oversight over student
complaints
• Confusing Home State Authorization Standards
– Institutions may be established “by name” as educational institutions
• May be exempted from state requirement due to accreditation or
years in operation
– Institutions may also be established as businesses or charitable
organizations
• May not be exempted due to accreditation or years in operation
The On-Ground Rule – Controversy
• Spring 2013 – ED staff apparently interprets the “by name”
provision as applying only to public institutions, in their home
state
• No official guidance issued; informal response to Florida law
• Under this interpretation, no private institutions may be
exempted from state authorization requirements
• This interpretation contrary to the plain language of the rule
– Rule permits state authorization “by name” through “charter… or
other action” of any institution
– Interpretation also contrary to Preamble. See 75 Fed. Reg. 66862.
– In FLA, ED decided licensure “by means of accreditation” did, in fact,
constitute valid authorization of a private institution, based on what
state required (really a “facts and circumstances” test)
The On-Ground Rule – Controversy
• Doubts remain about the sufficiency of the authorization
processes in numerous states
• Any institution that holds an “exemption” or abbreviated
approval based on its accreditation or years in operation in
a state where it has a physical location is at risk
– States that may have a noncompliant process under the current
ED interpretation: Alaska, California, Georgia, Hawaii, Montana,
New Mexico, Oregon, South Dakota, Texas, and Utah
• Still no official guidance!!!
• ED staff taking ad hoc “case by case” approach
• Shouldn’t all similarly situated institutions in a state be
treated the same way?
• Absent guidance, how do institutions in a state even know
they may be at risk of a loss of Title IV?
The On-Ground Rule – Extension
• Enforcement initially stayed until July 1, 2013 to allow
states time to become compliant
– 75 Fed. Reg. 66863
• Last month, ED issued guidance extending the stay for an
additional year, until July 1, 2014
– 78 Fed. Reg. 29652
• Institutions lacking sufficient authorization must obtain a
letter from the state indicating how an additional year
will allow the state to become compliant
• But compliant with what? Absent coherent guidance,
how do you know if your state is compliant?
The On-Ground Rule – Ongoing
Controversy
– The Western Association of Schools and Colleges (WASC)
recently issued an advisory to member institutions in
California:
• “[W]e do not believe that your representatives in
Sacramento and Washington are sufficiently aware of the
challenges that state authorization is presenting to WASC
accredited institutions.”
– ED holding school re-certifications in Utah (and possibly
other states) based on alleged insufficient authorization–
even after the extension.
– APSCU v. Duncan be damned!
RECIPROCITY
Reciprocity
• Model State Authorization Reciprocity
Agreement (SARA)
– Participating States
– Eligible Institutions
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Accredited by a US DOE-recognized accreditor
Degree-granting
Public, non-profit, and for-profit
Offering distance education
Reciprocity
• How Will SARA Work?
– “Home” state maintains jurisdiction
– Set of common state standards, including
definition of “physical presence”
– Managed by regional compact organizations (e.g.,
WICHE)
– Overseen by a national governing board
– Does not address professional licensure
Reciprocity
• Current Status of SARA
– Regional organizations currently developing their
own standards
– National board and staff (in place by Fall 2013)
– Likely requires legislative changes in most states
• Some states unlikely to join in the foreseeable future
– Current Draft:
• http://www.wiche.edu/sara
Resources
• NACUA Resources Page: State Authorization Rule
– http://www.nacua.org/lrs/NACUA_Resources_Page/StateAuthorizatio
nRule.asp
• “Status of Federal Regulation of State Authorization,” Gregory
Ferenbach and Matthew Johnson, NACUANOTES Vol. 11, No. 8
(Mar. 29, 2013)
– http://www.nacua.org/nacualert/docs/StateAuthorization.asp
• SHEEO State Authorization Survey
– http://www.sheeo.org/node/434
• Western Interstate Commission for Higher Education – SARA
– http://www.wiche.edu/sara
Questions?
Gregory Ferenbach
gferenbach@dowlohnes.com