The U.S. Department of Education ("DOE") published a notice on June 24, 2014, delaying the Department's implementation of the "State Authorization" requirement by one year. State Authorization requires certain educational institutions to be sufficiently authorized, as defined by the DOE, in their home states and in each state in which they are physically located. The purpose of State Authorization is to set minimum standards for how a state approves educational institutions that operate within that state's borders.
The notice is of particular importance to private postsecondary institutions in California that have been exempt from state oversight under California law so long as they are accredited by a regional accrediting agency. The DOE's regulations no longer consider an institution eligible to participate in Title IV programs (federal financial aid) if the institution is exempt from state oversight based on its accreditation status.
The new deadline for compliance is July 1, 2015. To receive an extension until July 1, 2015, an institution that cannot presently meet the State Authorization requirement due to lack of a state oversight program that meets federal requirements must obtain a written statement from the state describing steps the state is taking to bring its postsecondary oversight program into compliance. The institution must provide a copy of the statement to the DOE upon request.
Title IV requires an institution to be "legally authorized" to provide education "in the state in which it is located." Title IV does not define "legally authorized." This lack of statutory definition has meant that, for virtually all of the Act's history, each state has determined for itself the method of authorizing schools operating in the state. To participate in Title IV programs—i.e., to be able to accept federal funds, including financial aid—a postsecondary educational institution must satisfy requirements specified in regulations are issued by the DOE.
In 2009, based on experiences that it had faced in administering Title IV programs, the DOE concluded that the existing regulations covering the state authorization requirement were too lax. The DOE was apparently concerned that the absence of federal regulation had contributed to the lapse in the existence of California's Bureau for Private Postsecondary and Vocational Education ("BPPE").
A sunset provision in the California Private Postsecondary and Vocational Reform Act took effect in 2007, leaving California without any regulatory body overseeing private postsecondary educational institutions. In 2009, the California Legislature enacted the Private Postsecondary Education Act, which exempts institutions accredited by regional accreditation agencies such as the Western Association of Schools and Colleges ("WASC") from regulation by the state.
In 2010, the DOE issued regulations specifying "State Authorization" requirements for institutions to meet the "legally authorized" requirement in Title IV. The State Authorization requirements specify that states must take an active role in licensing and in investigating and acting on student complaints.
In December of 2013, the California Legislative Analyst's office issued a report finding that the BPPE has not met its statutory responsibility to regulate and oversee postsecondary institutions. Moreover, the legislation authorizing the BPPE is set to sunset on January 1, 2015. The Department's extension provides the California legislature with additional time to implement legislation to establish an oversight structure that permits institutions operating in California to meet the federal State Authorization requirement.