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State Authorization of Distance Education Vacated by U.S. District Court

NAICU Washington Update

July 13, 2011

On Tuesday, the U.S. District Court for the District of Columbia vacated a Department of Education regulation that requires any institution of higher education offering distance education to students outside its home state to obtain authorization from any state regulating distance education offered to its residents.  The regulation went into effect July 1, although institutions were given until July 1, 2014, to work towards full compliance. (See 5/2/11 Washington Update)

The District Court ruling came as part of a larger suit brought by the for-profit sector's Association of Private Sector Colleges and Universities (APSCU) against new departmental regulations.  The suit challenges Department requirements on incentive compensation, misrepresentation, and the full range of state authorization requirements beyond the area of distance education.

Most news sources are reporting the ruling as a victory for the for-profits.  However, the court fully backed the Department's actions on the incentive compensation and misrepresentation rules, and generally supported a wide authority for the Department to regulate in these areas. 

The Court did not address points raised about the general state authorization rules, which prescribe how states must authorize institutions located in their states.  The Court's position is that APSCU lacked the legal standing to challenge a requirement imposed on a state.  (The general state authorization rules remain a serious concern for NAICU, however, and we are continuing to work with others in the higher education community to promote legislation to repeal those rules.  See related story.)

On the distance education piece, though, the Court ruled that the Department had violated the Administrative Procedures Act by failing to include the distance education requirements in the proposed regulations made available for public comment.  The decision noted that a final rule may vary from a proposed rule only if it is a "logical outgrowth" that could be anticipated and responded to during the public comment period. The Court went on to note that questions raised during the comment period about the applicability of the proposed rule to distance education offerings weren't sufficient grounds for a final regulation that departed substantially from prior Department requirements.

So, what does this all mean?

1. There is still a lot we don't know - with the biggest unknown being whether or not the Department will decide to appeal the ruling.  This is a district court ruling, not the end of the judicial road.  Until that decision is made, colleges would be wise continue on a pathway to full compliance by 2014.
   
   
2. Even if this ruling stands, it won't negate existing state laws and regulations on distance education.  These now exist as a confusing patchwork of requirements based on such factors as the type of institution, or the location of students, faculty, and facilities. 
   
   
3. A byproduct of this regulatory process is a growing awareness that colleges haven't necessarily been complying with existing requirements.  The process also has reminded states of their opportunity to regulate, collect fees, and the like in this area.  Some states are already charging extremely high fees - as much as $10,000 - as part of their approval process, and laws in this area are changing frequently.
   
   The increased attention given this topic will likely accelerate these state-law changes. As a result, colleges likely will still need to identify their online students' states of residence, and then determine and comply with each student's home-state requirements.  

Contact

• Susan Hattan
  susan@naicu.edu