Reminding States to Regulate

After years of delays spurred by concerns from states and colleges, a new federal requirement that colleges obtain authorization from regulators in each state in which they are physically located is finally due to take effect.

The U.S. Education Department on Friday issued a Dear Colleague letter reminding institutions and state regulators of the looming July 1 effective date for the so-called state authorization regulation for on-ground campuses (which is distinct from a parallel rule about online programs, which is in a holding pattern because of legal challenges).

The rule, which imposes requirements on states and college alike, is aimed at setting some minimum standards for how a state approves colleges operating within its borders. In addition to requiring institutions to have legal authorization from every state in which it physically operates a postsecondary program, the rule requires states to have a process for considering student complaints about a college, and sets out the conditions under which state regulators can use an institution’s accreditation or business licenses as a substitute for a more intensive approval process.

The regulation, originally drafted in 2010 to take effect in 2013, has been delayed twice amid colleges' complaints that the rule is confusing, particularly for independent nonprofit and for-profit institutions, unlike public colleges and universities that are almost automatically considered to be authorized because of their direct state ties.

In an interview Friday about the Dear Colleague letter, Education Department officials said they believed the delays in implementation gave most states and institutions time to work their way through any major problems with meeting the state authorization requirements. The government will review colleges' compliance with the state approval rule when it recertifies an institution's eligibility to award federal financial aid funds (a process that occurs every three to six years) or when a college triggers another federal review, such as when it seeks approval for a new program or undergoes a program review.

"To be eligible during this past year, an institution had to demonstrate that it was either compliant or working toward compliance -- that it was along a pathway" toward meeting the regulation's requirements, said Jamienne S. Studley, a deputy under secretary of education. And states that didn't have a complaint system in place, she said, "had to show that they had it underway."

Jeff Appel, the department's other deputy under secretary, said the agency had another motivation beyond reminding colleges and states of a pending obligation that most of them have under control.

The recent collapse of Corinthian Colleges and the potential federal bailout of borrowers' student debt from that and other troubled colleges has led to intensified scrutiny of whether the three-headed framework for regulating higher education (the federal government, state governments and the accreditation system) is up to the task.

"This is a good time to highlight the original rationale for the [state authorization] regulation back in 2010 -- to highlight the important role that states have, in addition to the department and accreditors, in serving as gatekeepers to colleges' access to federal financial aid coffers," Appel said. "It's important to emphasize that there is a shared responsibility for the federal government, states and accreditors in terms of protecting students and taxpayers."

College officials agreed with Studley and Appel that institutions are unlikely to need the reminder that the state authorization rule is about to take effect. But that doesn't mean, they said, that college and university leaders fully understand what's expected of them under the regulation, despite the department's efforts to clarify the requirements.

"It concerns colleges when they think they are in compliance, have made a good-faith effort and find out they are not considered in compliance," Sarah Flanagan, vice president for government relations at the National Association of Independent Colleges and Universities, said via email. "But that doesn’t happen until someone goes through the recertification process and gets dinged. Until then, it is the uncertainty that gnaws at institutions."

The department's Dear Colleague letter signals, though, that the agency may be flexible in dealing with institutions that struggle in the first year to show compliance with the state authorization rule. "Institutions located in states where agencies are still putting in place a sufficient state authorization process may have their current status continued for a reasonable period of time," the letter states.