Has your unit budgeted for the costs of complying with the 2010 Federal Regulations on State Approval of Out-of-State Providers?

I will admit up front that these new regulations, which emerged from the rule-making process for the reauthorization of the Higher Education Act, caught me completely unawares. Pat Book, past UPCEA president and Assistant Vice President at the University of Northern Colorado, took out the baseball bat and increased my awareness of the significance of this regulation. I’ve asked Pat to join me in writing this blog post to make sure I get it right. Also, many thanks to Russ Poulin at WCET, Bob Larson at NDUS, and Sarah MacDonald at JMU for their help with this post.
An overview:
On October 29, 2010, the U.S. Department of Education (USDOE) released new “program integrity” regulations. One of the regulations focused on the need for institutions to acquire authorization from any state in which it “operates.” In a December 2010 webcast on this issue, Fred Sellers of the USDOE said that: “Under the Higher Education Act, for an institution in any State to be eligible to participate in Federal programs, it must be legally authorized by the State to provide postsecondary education.” Note that, in this case, the term “Federal programs” applies to any federal funding, including federal financial aid programs. An added dimension of this new rulemaking is the federalization of the regional accreditation process as they are being asked to ensure that institutions comply with these rules as directed by the federal government.
In order to get a handle on these new regulations, the WICHE Cooperative for Educational Technologies, Southern Regional Education Board, American Distance Education Consortium, and the University of Wyoming formed a partnership and developed the following draft: State Approval Regulations for Distance Education: A Starter List. Bob Larson, Director of North Dakota University System Online, drafted an analysis of the potential costs for one institution; his analysis calculates the fees associated with seeking authorization in each state where North Dakota currently has online students, based on each state’s particular requirements. The total amount of possible fees to be assessed was $159,800, for a total of approximately 600 students in other states. While we can’t claim to be experts in this issue, one person who has been following this is Russ Poulin with the WICHE Cooperative for Educational Technologies (WCTE) and we encourage you to visit Russ’ blog site http://wcetblog.wordpress.com/.

What you can do now?
What does this mean for continuing and professional education units? WCET has suggested some steps for moving forward:
1. Decide Who Is Going to Be Your “Go-To” Person on This Issue—this is going to take time and someone needs to be assigned to the task.
2. Review Your Enrollment History
In what states have you served students at a distance? Review the Starter Lists noted above and determine which states you need to address first.
3. Review Regulations In-Depth for One or Two States
Some states have no requirements. Some states will expect every institution to seek approval. For the vast majority of states, it will depend on what you are doing in the state. For the short term, decipher the regulations of one or two states. This effort will give you a sense of the type of language that is used before you venture onto the other states.
4. Engage Your Leadership
Inform the key campus players (distance education leadership, provost, chief financial aid officer, and attorney) of this issue and that you are planning to address this issue. This could have major implications on budget (fees to states), personnel (this will take time), service area (do you have to pull back from some states?), and exposure to risk.
5. Create Short Profiles
Create a short profile of your institution describing what you are doing in a particular state,send it to the state approval officer to determine whether you need to complete the full application process. Included in the profile would be:
• Name of institution.
• Type of institution (public, for-profit, religious-based, etc.).
• Programs and degree levels in which you previously, currently, or plan to enroll students in the state.
• Related activities in that state that could trigger a review (you maintain a local mailing address or phone number in the state, you advertise in local media, students take proctored tests, you have recruiting officers or faculty resident in the state). See the Dow Lohnes survey from 2006 for a good list of these.
• Your contact information.
6. Seek Partner Institutions
Explore ways to share the work with similar institutions in your local area. You might be able to split states and help each other respond.
7. Document What You Do
Keep good records of your efforts to seek approval activity in seeking state approvals.
In sum, what does this mean for continuing education? It means identifying each state in which your distance learners reside, determining what their regulations are, and if necessary, applying for permission to serve them in that state. Presently, this must be done by July 1, 2011. If a good faith effort is not documented in this regard, the respective regional accrediting body must report this to the U.S. D.O.E. The cost of being authorized in each state from which potential online students might enroll will vary, depending on the state and the number of students.

Some resources for further exploration:
Complete list of resources, including related blog posts, legislation, FAQs, and more.
Requirements for States
The announcement in the Federal Register (p. 66858) reads: “These final regulations do not mandate that a State create any licensing agency for purposes of Federal program eligibility.” State licensure and approval agencies need to:
• Approve institutions to “operate” in the state.
• If not an institution, approve the entity to offer postsecondary education in the state. “In the case of an entity established as a business or nonprofit charitable organization, i.e., not as an educational institution, the entity would be required to have authorization from the State to offer educational programs beyond secondary education.” (Federal Register p. 66858) Some states require entities to have a business license, but this seems to require that states also approve the entity to offer postsecondary education.
• Upon request of the USDOE, provide a list of institutions approved to operate in the state by name.
• Maintain a process to review and address complaints from students attending institutions approved to operate in that state.
December 7, 2010 Webcast with Fred Sellers, USDOE:
• Webcast Archive.
• Slides from Webcast.
• Links and Resources.
Chat Log.

These rules:
• Are effective July 1, 2011.
• Provide for extensions if an institution’s state cannot provide the necessary authorization for in-state institutions by July 1, 2011. An institution may request one-year extensions for the 2011-12 and 2012-13 award years. The institution’s State has until July 1, 2013 to make any needed adjustments to assure that institutions in the State may meet the new regulatory requirements.
• There are no extensions for distance education institutions operating in other states. Institutions are expected to comply by July 1. Institutions that apply in a state by July 1 will have demonstrated a ‘good’ effort to comply with the regulations.
Financial Reality Check
The following analysis was conducted by Bob Larson, Director of North Dakota University System Online, to explore how these regulations might affect a single institution.
“Given the multiple requirements and/or lack of requirements from state to state, I thought it would be helpful to see the implications for a single institution in the North Dakota University System. The institution selected has an online presence in 49 states in the present term.
• The first column is a list of the states,
• The second column indicates if distance education is regulated in that state.
• The third column identifies if a fee is assessed in order to be regulated.
• The fourth column is a classification created by Eduventure in a similar study released in January 2011.
• The fifth column indicates the number of students served by this institution in each state.
• The sixth column identifies the fee(s) if assessed by the state.
• The seventh and final column is the per student cost if there is a fee assessed.
The second page of the document provides additional background plus a summary of the data from the first page.
It is important to note that the identified fees for this institution are presently NOT being assessed. With the further definition of online delivery particularly a new understanding of ‘physical presence,’ the possibility of having the fees become a reality is a concern.”
State costs summary (Excel)

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