U.S. Focused on Consumer Protection, Accountability in Rules Overhaul

The Education Department wants greater oversight over colleges and universities and the entities that oversee them, and it’s eyeing a number of ways to make that happen.

With proposed changes to the rules for accreditation, distance education and some financial aid policies, the department is aiming to further reshape how the federal government holds colleges accountable and add additional consumer protections for students—building on the Biden administration’s efforts over the last three years.

“The department is inserting itself more deeply into higher education than it previously has been,” said Jan Friis, senior vice president for government affairs at the Council for Higher Education Accreditation.

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The department will review proposals for six topics over the next three months with an advisory committee tasked to weigh in and reach consensus on specific regulatory text as part of a process known as negotiated rule making. The first round of monthly talks begins Monday and will continue through Thursday. If the committee doesn’t reach consensus by March, the department is free to draft its own regulations, which will be subject to public comment. Regulations that come out of this rule making could take effect as early as July 1, 2025.

The department offered hints at the changes it wants to make to the rules for accreditation, state authorization, distance education and cash management in a series of issue papers released earlier this week. The docket for this rule making also includes federal TRIO programs, which help underserved student groups get to and through college, and a policy known as Return to Title IV, which requires colleges and universities to return students’ federal financial aid if they withdraw before the end of an academic term. (Title IV of the Higher Education Act authorizes federal financial aid programs.)

“They’ve done a lot here to think about the most important protections to put into place that will improve the value of higher education and will lead more students to get a valuable educational experience,” said Clare McCann, a higher education fellow at Arnold Ventures, a philanthropic group, and a former Education Department official during the Obama and Biden administrations.

Some of the initial proposals are more sweeping than others, but experts caution that the issue papers are just a starting point for discussion. Negotiators also will be able to make their own proposals.

“What we see in the issue papers may look very different from what we see the negotiators voting on in March,” said Cheryl Dowd, senior director of the state authorization network and policy innovations at the Western Interstate Commission for Higher Education’s Cooperative for Educational Technologies, or WCET. “So we’re going to see the unfolding of all of this over the next three months.”

Regulating the Watchdogs

The bulk of the discussions in this negotiated rule making are likely to focus on the rules for accreditation and state authorization—two of three prongs of the so-called triad that includes the federal government and is responsible for overseeing colleges and universities.

The department said in a news release that its proposals on accreditation would increase the rigor of the system. Consumer protection advocates and some higher education experts have argued for years that the Education Department should do more to hold accrediting agencies accountable and that the accreditors are failing in their oversight role. Institutions have to be accredited in order to access federal financial aid.

“The reality is that we’re coming from pretty far behind on some of these issues,” said McCann. “Our accreditation system is not doing enough to ensure quality. Our state authorization system is not doing enough to oversee institutions. The changes are a really good starting point for getting us back on track on that.”

McCann said “there’s a lot to like” in the department’s proposals on accreditation, including the reversal of some changes made during the Trump administration that took effect in 2020—including those that gave accreditors more flexibility in approving innovative programs. The department also is looking to codify its August guidance on how accrediting agencies should review complaints in a timely, fair and equitable manner.

“Name of the game with this rule making is consumer protection,” McCann said. “The department is clearly looking for ways to strengthen the triad to make sure that accreditors and states are pulling their weight and fulfilling their obligations under the Higher Education Act.”

On some of the thorniest accreditation issues, the department held back on making specific proposals. Instead, it wants to hear feedback from the committee about the use of student achievement data in accreditation reviews—a long-running issue—and how to respond to recent laws in Florida and North Carolina that require public universities to change accreditors regularly. The Trump accreditation rules eliminated the regulatory distinctions between regional and national accreditors, meaning that a college could shop around for a different accrediting agency; that paved the way for state lawmakers to mandate a switch.

“While the department supports the goal of institutional choice in choosing an accrediting agency that best fits an institution’s mission and has the potential to improve quality, we remain concerned that forced switching undermines a key pillar of the federal triad, hinders accreditation’s ability to foster continuous improvement and hold institutions accountable, and places unnecessary costs on institutions which can be passed on to students,” agency staff wrote in the issue paper.

Some of the changes are policy shifts that happen with each change in administration, Friis said. “There are good reasons to do some of these things and good reasons not to do some of the changes,” he said, adding some of the proposals seem like “a solution in search of a problem.”

The department is looking to reassert its authority over the process involved when institutions want to add a program or degree level or make other so-called substantive changes. Under the initial proposal, colleges or universities on probation will face a stricter review when they want to make a fundamental change. The department also plans to end a provision, put in place during the Trump administration, that allowed agency staff to sign off on some of the changes.

“The reason that that became part of the regulation was it was taking so long for agencies to approve substantive change that it was hurting students,” Friis said. “So we’re gonna go back to long durations where an institution proposes a substantive change, and a year later it gets approved for it.”

Meanwhile, the department raised broad concerns about state oversight of higher education and reciprocity agreements, which allow colleges and universities to enroll online students outside the state the institution is located in and bypass some laws. Without reciprocity agreements, institutions would have to seek authorization from each state where students they want to enroll are located and meet a variety of requirements.

But the department said in an issue paper that the current reciprocity agreements fail to protect students and taxpayers and limit states’ ability to oversee institutions. Their concerns are centered on the governance of the agreements and how they report student complaints to state agencies.

Forty-nine states or territories, including the District of Columbia and Puerto Rico, have signed on to the voluntary agreement overseen by the National Council for State Authorization Reciprocity Agreements (NC-SARA), which sets the standards for postsecondary distance education.

“The department is also concerned that the current reciprocity system is influenced by regulated entities, allows manipulation to evade state rules, and prioritizes administrative convenience over student and taxpayer protection,” the issue paper says, specifically mentioning NC-SARA.

The department wants to limit the governing board that oversees the reciprocity agreements to state employees such those who serve on regulatory bodies, work in enforcement agencies or in the offices of attorneys general.

“They want to make sure that reciprocity agreements are in fact run by states,” McCann said. “State authorization is meant to be a state process. It’s not meant to be self-governance by colleges.”

A spokesperson for NC-SARA said the organization is reviewing the issue papers and will be listening to the negotiations.

Dowd at WCET said that state authorization reciprocity is an agreement between states, so she’s concerned about federal intervention into that contract.

Russell Poulin, who leads WCET, said he’s not sure if the department understands that states are in charge of state authorization.

“I think they’re on the right path with part of what they have for the board, but their coming through and directing it seems problematic,” he said. “I see the same thing with accreditation as well as that. In trying to get things right for federal financial aid, there are times where they’re overly directive there as well.”

The department’s initial proposal did not get into what will likely be a key issue for the committee: how states can enforce their consumer protection laws. Institutions subject to a reciprocity agreement are exempt from some of those laws.

“That is a massively important question,” McCann said. “Hopefully this is another area where the department’s looking to gather some feedback, but they’re still planning to move forward on a stronger proposal for the second session.”

‘Fishing Expedition’ on Distance Education?

The department’s initial set of proposals regarding distance education would add new requirements on institutions to collect data about students enrolled in all-online programs.

McCann said the department’s data-collection proposals would allow the agency to better track how students fare in fully online programs—closing “a pretty gaping hole in the data.” To do that, the department wants to create a virtual location for institutions that would include the students “who are being instructed primarily through distance education,” according to the issue paper.

But Poulin said the “devil is in the details” with how students will be sorted into that virtual location. He noted that the distinction between distance education students and those who are studying on a campus in person isn’t as clear as the department seems to think. Students can take classes face-to-face, in a hybrid format or all online.

The department won’t count asynchronous instruction in the required number of clock hours for noncredit distance education programs—rolling back yet another Trump-era change. The agency said this shift will help it better monitor these types of programs, which tend to be focused on workforce training.

“This will strengthen the department’s ability to monitor clock-hour programs offered via distance education, including the department’s ability to protect students from, and keep taxpayer funds from going to, programs failing to provide the required training,” the agency wrote in an issue paper.

Poulin at WCET, which is focused on digital learning in higher education, said all-asynchronous distance education programs are pretty rare given that workforce training classes tend to have hands-on learning components. With the change, he said, “the ones who are going to suffer are going to be students who are looking for a workforce-facing program in cybersecurity, IT or [something] like that that could be taught at a distance in an asynchronous fashion.”

Poulin, who has served on previous rule-making committees, said that in his opinion, the committee lacks subject matter experts on distance education, since just two negotiators have a background in distance education. He worries that could lead to problematic policies.

“Distance ed is different from what they think it is,” he said.

Van Davis, chief strategy officer for WCET, said the department’s distance education proposals seem to imply that fully online programs are “more problematic than face-to-face” instruction.

“We know that there’s all sorts of factors that impact how a student does in an academic program, and modality is not called causality,” he said.

With the push for more data, he said that he’s worried the department is on a “fishing expedition.”

“That makes me very concerned about what they’re fishing for and for future negotiated rule making and how we might see more restrictive regulations around distance education in the future,” he said.

More Financial Protections for Students

Changes to policies that govern how colleges manage federal financial aid could help students stay out of debt and keep more of their money, experts and advocates said.

Mike Pierce, executive director of the Student Borrower Protection Center, said the department’s proposed changes to the policy known as Return to Title IV are “genuinely exciting.”

Under that policy, colleges and universities are required to return a student’s unused financial aid to the federal government when that student withdraws. Typically, students are then charged for the returned funds and end up in debt to their institution. Because of that debt, institutions have withheld transcripts from students or prevented them from reregistering for classes. The department banned transcript holds in most cases last fall.

The department is now proposing revisions to help students who never attended college but incurred student loan debt—students who registered for classes, qualified for financial aid and then withdrew after the aid was disbursed but before classes began, for example. It also wants to simplify the way institutions calculate how much money should be returned, among other changes.

“While the department does not have the authority to prohibit an institution from collecting a debt owed by a student, we seek to incentivize institutions to not collect debts resulting from a student withdrawal by providing flexibility in conducting R2T4 calculations,” agency staff wrote in an issue paper.

That department would do that by exempting institutions that have “generous tuition refund policies” from making the calculation if they treat a student who withdraws as never having attended, refund all the institutional charges, return the federal financial aid for that payment period and cancel any debt owed as a result of sending back the Title IV funds.

“It’s sort of, if you don’t charge the students, then you don’t have to go through this tedious return-of-funds calculation,” said Jill Desjean, senior policy analyst at National Association of Student Financial Aid Administrators. “You don’t get to keep anything. It’s as though it never happened as opposed to moving these small amounts of dollars back and forth.”

Pierce said the proposals on Return to Title IV are a continuation of that effort to address the root causes driving transcript holds.

“What we’re seeing here is a chance to actually rewrite the rules that drive a lot of people into debt to the schools,” he said.

A March 2022 study of California students who owed money to the state’s public institutions found that the largest source of that debt stemmed from students being charged for returned Pell Grants.

“This isn’t an overhaul of Return to Title IV,” Desjean said. “It is tweaking some small things that could have some significant impact. They’re looking to make a couple of things more student friendly and, in some cases, reduce institutional burden as well.”

Under the cash management regulations, which encompass the rules institutions must adhere to when requesting, maintaining, disbursing and managing Title IV funds, the department wants to make changes aimed at ensuring that students receive the aid they are entitled to, according to a news release.

Those include provisions that would require colleges to return any unused meal plan funds that were paid for with federal student aid dollars and prevent them from charging students for books and supplies as part of their tuition and fees.

“This is a greatest hits of practices that should not be allowed,” McCann said.

However, the initial set of proposals does not address the agreements colleges reach with banks to disburse financial aid to students in the form of prepaid credit cards or bank accounts. The Consumer Financial Protection Bureau has said these agreements steer students toward more expensive financial products, like a college-sponsored deposit account that charges higher-than-average fees.

Pierce said that’s a missed opportunity. “These back-room deals between banks and schools remain out of control,” he said. “We have this president who is really deeply committed to fighting back against junk fees … But for whatever reason, the Cardona Education Department doesn’t seem interested in carrying that fight forward.”

But because the department is opening up the cash management regulations, negotiators on the committee can push for other changes beyond what’s in the issue paper, he noted.

“It seems totally reasonable for any of the negotiators that are there to speak for students to put on the table stronger guardrails for deals between schools and financial institutions around campus banks,” he said.