The summer of 2016 has been remarkable in the world of higher education regulation. On May 13, the U.S. Department of Education and the Department of Justice issued a joint Dear Colleague letter concerning civil rights protections for, and best practices regarding transgender individuals on campus, guidance it appears may now be reviewed by the Supreme Court. And on June 16, the Department released its proposed “borrower defense” rule, a sweeping, regulatory opus with proposals of significance for all institutions of higher education. At the same time, the Department is seriously considering whether to revoke the recognition of a prominent national accreditor, and continuing to put significant regulatory pressure on select institutions, at times with dramatic consequences.

Given the number of significant events that have transpired, it comes as no surprise that the new state authorization rules proposed by the Department on July 25 have garnered only modest attention. We highlight them here, however, because they are likely to have broad and immediate impact once they go into effect. Though the Department once again appears to be targeting for-profit colleges, the proposed regulations apply to all institutions of higher education. And the rules are potentially onerous, including new requirements for state authorization of online or distance learning programs, and for state authorization of branch locations in foreign countries. The proposed rules also would require schools to provide to students and prospective students a number of disclosures regarding their online or distance learning programs.

Despite the long and convoluted road that led to the issuance of the proposed rules, which began more than four years ago, the Department has limited the comment period for its proposed rules to 30 days, meaning that all comments had to be submitted by August 24, 2016. This relatively short comment period was likely a result of the Department’s desire to have the final rules issued before November 1 of this year, which would allow the rules to go into effect by July 1, 2017. Though the comment period has closed, we note that concerned institutions still have time to voice concerns to their associations and lobbyists in D.C., as well as to their representatives in Congress. With this having been said, let’s review the key elements of the Department’s proposal.

State authorization of distance learning programs

Under the proposed rules, all institutions that participate in federal student aid programs would need to meet any state requirement for offering distance education programs in each state in which such programs are offered. State authorization could be shown in one of two ways — either through actual authorization for the program at issue or through documentation showing that the state in which the distance learning program is offered has signed a state authorization reciprocity agreement that covers the institution and (under the new definition of “state authorization reciprocity agreement”) does not prohibit a state from enforcing its own consumer protection laws. In either case, the proposed rules would require that institutions be able to document state authorization upon request from the Department.

State complaint processes

The proposed rules would require institutions to document for each state in which students of distance learning programs reside the process for the submission and resolution of student complaints in each such state. Again, this requirement could be met through an applicable state authorization reciprocity agreement, provided that the agreement designates for the purpose of resolving student complaints either (1) the process of the state in which students reside or (2) the process of the state in which the institution’s main campus is located.

Disclosure requirements for distance learning programs

The proposed rules would require institutions to make a number of disclosures about their distance learning programs – some of which would be provided publicly and some of which would be provided to individual students.

As to the first category, schools would have to provide publicly (i.e., post on their websites) the following information for each program:

  • Whether the institution is authorized to provide the program by each state in which students enrolled in the program reside, or whether the institution is authorized through a state authorization reciprocity agreement;
     
  • A description of the process for submitting student complaints in the state in which the institution’s main campus is located or, if the institution is subject to a reciprocity agreement, the process established in the agreement;
     
  • A description of the process for submitting consumer complaints in each state in which the program’s enrolled students reside;
     
  • Any adverse actions initiated by a state entity related to the distance learning program within the five years preceding the disclosure;
     
  • Any adverse actions initiated by an accredited agency related to the distance learning program within the five years preceding the disclosure;
     
  • Refund policies with which the school is required to comply by any state in which students reside; and
     
  • For distance learning programs that lead to professional licensure or certification, the applicable educational prerequisites for licensure or certification in any state in which enrolled students reside or any other state for which the school has made a determination regarding prerequisites. Schools must also disclose whether the program satisfies the educational prerequisites for licensure or certification in a state or, if the school has not made a determination as to the whether its program satisfies the prerequisites for licensure or certification, a statement to that effect.

In addition to these public disclosures, the proposed rules also would require institutions to make “individualized disclosures” about the following:

  • To prospective students, prior to enrollment, any determination by the school that a program does not meet licensure or certification prerequisites in the state of the student’s enrollment (the school must also receive acknowledgement of such a disclosure from any prospective student who receives it);
     
  • To enrolled and prospective students, any adverse action initiated by a state or accrediting agency relating to the distance learning program at the school within 30 days of the school becoming aware of the action;
     
  • To enrolled and prospective students, any determination by the school that the program no longer meets licensure or certification prerequisites of a state within seven days of the school making that determination.

State authorization of foreign locations or branch campuses

In addition to the new requirements for state authorization of distance learning programs, the proposed rules also include new rules for the authorization of schools that have additional or branch locations located in foreign countries. More specifically, under the proposed rules, locations or branch campuses in foreign countries at which 50% or more of an educational program is offered would have to be authorized by an appropriate government authority in the country where the additional location or branch is located. They also would have to be approved by the institution’s accrediting agency and subject to any limitations placed on them by the state in which the school’s main campus is located. Institutions would have to be able to provide to the Department upon request documentation showing that the foreign government authority is aware that the additional location or branch campus provides postsecondary education and that the government authority does not object to those services. Finally, additional locations at which less than 50% of an educational program is offered would have to meet any requirements for legal authorization established by the foreign country in which the additional location is located.

Beyond these requirements for authorization, the proposed regulations also provide a number of other rules related to the operation of additional locations or branches in foreign countries. First, the proposed rules would require institutions with foreign locations or branches to disclose to students information regarding student complaint processes. Second, the proposed rules provide that, if the state in which a school’s main campus is located excludes from its authorization foreign branches or locations, such branches or locations would not be considered to be authorized. Finally, under the proposed rules, additional locations or branch campuses located on U.S. military bases would generally be exempt from the authorization requirements set forth in the rules.