Issue Briefs

About

Established to ensure better oversight of distance education providers, the regulations governing state authorization of distance education and foreign branch campuses have a long and convoluted history. The rules were originally proposed in 2010, but after a decade of legal challenges, several changes of presidential administrations, and revisions made during multiple negotiated rulemaking sessions, the regulations finally became effective on July 1, 2020.

In order to receive Title IV aid, an institution that offers postsecondary education through distance education to students located in a state in which the institution is not physically located must be authorized to operate in that state. Institutions generally obtain this authorization in one of two ways: by seeking approval on a program-by-program basis in each of the states in which the programs are offered or by exercising a regulatory exception available to institutions in states that participate in a state authorization reciprocity agreement. Under that exception, institutions that offer distance education in a state that participates in a state authorization reciprocity agreement are considered to meet that state’s requirements regarding postsecondary distance education.

The state reciprocity exemption emerged when the new distance education regulations exposed the broad, confusing, and highly burdensome patchwork of state authorization laws that institutions would have to navigate to seek approval for each of their distance education programs. Ultimately, the new rules led to the development of a national state reciprocity agreement, the National Council for State Authorization Reciprocity Agreements (NC-SARA).

NC-SARA

The burdensome nature of the regulations and the confusing array of state laws regarding authorization for distance education programs eventually led to the creation of NC-SARA. Institutions that are located in states that participate in NC-SARA and that offer distance education in other states that participate in NC-SARA are considered to be in compliance with that state’s requirements regarding postsecondary distance education. As a result, NC-SARA offers a welcome shortcut for institutions seeking to gain authorization for out-of-state online programs.

One complication that has emerged, however, is that NC-SARA maintains its own institutional eligibility rules that operate independently of federal regulations. In particular, NC-SARA uses the Department’s financial responsibility composite scores as a threshold for participation in the reciprocal agreements. The use of the scores further compounds the negative impact of the flawed formula. NAICU has urged NC-SARA to decouple passage of the federal test from their eligibility criteria for participation in the state distance education compact, but NC-SARA has declined to do so.

In response to the complexity of the state authorization of distance education regulations, 49 states, and over 2,400 institutions, have joined NC-SARA as a means to ease compliance with the regulations.

History

The state authorization of distance education programs was originally part of a broad package of program integrity regulations issued in 2010 by the Department of Education.  Due to various legal and operational roadblocks, final regulations governing state authorization of distance education programs did not go into effect until July 1, 2020.

In 2011, the distance education piece of the regulations was struck down by a federal judge because the Department had failed to include the distance education requirements in the overall state authorization regulations made available for public comment. The court’s ruling forced the Department of Education to return to the negotiated rulemaking table in order to develop regulations related to the state authorization of distance education, which it did in March 2014.

Citing the complications associated with the development and implementation of the distance education regulations, however, the Department hit pause on developing new regulations until, after a two-year hiatus, the agency published final regulations in December 2016. The regulations were scheduled to go into effect on July 1, 2018, but the Trump Administration delayed implementation of the distance education portion of the regulations until July 1, 2020. (The regulations regarding state authorization of foreign branch campuses were not subject to this delay and went into effect on July 1, 2018.) However, litigation over the delay forced the Department to implement the Obama-era regulations, which retroactively became effective as of May 26, 2019.

The retroactive implementation of the Obama-era regulations – specifically, the requirement that institutions offering distance education must document a state complaint process – caused significant problems for online students in California, who were suddenly at risk of losing federal financial assistance because California lacked the required process for handling student complaints against out-of-state institutions. After a period of uncertainty, the Department granted conditional approval to California’s plan based in part on the fact that the state’s process complied with the Trump Administration’s regulations that were about to take effect.

Meanwhile, several months before the court ruling, the Department established a negotiated rulemaking committee to revise the regulations governing state authorization of distance education programs.  Based on the consensus reached during negotiated rulemaking, the Department published final rules that became effective on July 1, 2020. As a result, the 2016 Obama-era regulations, which were in effect for just over a year, were replaced by the Trump Administration version of the rules.

In 2024, the Biden Administration launched another round of negotiated rulemaking involving state authorization of distance education.  The Department's proposed amendments would have, among other things, placed deeply concerning limits on institutions’ ability to rely on reciprocity agreements for state authorization of their distance education programs. Citing stakeholder concerns, the Department ultimately terminated the negotiated rulemaking on state authorization of distance education without making changes, leaving the current regulations intact.