By Dan Brozovic

On Friday, November 1, 2019, the U.S. Department of Education officially released its long-awaited final rule on accreditation and state authorization issues, the culmination of a multi-year negotiated rulemaking process.  Most of the wide-ranging regulatory changes in this package—including the accreditation provisions summarized in our prior post—will take effect on July 1, 2020.

However, of immediate impact to schools with distance education programs, the Department is permitting early implementation of its changes to the state authorization rule and related disclosure requirements. These changes include numerous common-sense improvements, including to aspects of the current rules that could be quite burdensome to schools with large distance education populations.

This does not mean that early implementation will be right for all institutions.  Of particular significance, some revised disclosure requirements will extend for the first time to residential (on-ground) programs—not solely to those offered by distance education—and ED will expect early-implementers to demonstrate immediate compliance.  This post summarizes the changes that, in our view, are most important for institutions to keep in mind when deciding whether to early-implement, and discusses the process for early implementation.  Of course, if you elect not to early-implement, continued compliance with the current regulations is expected.

Please do not hesitate to contact a Powers Education professional if you need assistance understanding the latest changes, effecting an early-implementation, or designing a compliant disclosure process.

Key Changes to State Authorization and Related Disclosure Requirements

We summarize below the most salient of ED’s changes.  While not a comprehensive summary, these are some of the more important issues that institutions will want to consider—and discuss with their legal counsel and other advisors—when making a decision regarding early-implementation.

  • Disclosure of Professional Licensure & Certification Requirements. Under requirements that took effect earlier this year, for any distance education programs designed to lead, or are marketed as leading, to professional licensure or certification, schools must determine and disclose the applicable licensure or certification requirements in every state in which they have any distance student(s) enrolled. Direct disclosures must be given to prospective students in states where these requirements are not met, among other circumstances.
    • Going forward, schools will have the option of deciding in which states they can and should make this determination. In other cases, prospective students may simply be informed that no determination has been made for their state (a direct disclosure to the relevant students would be required).  While ongoing disclosure requirements will still apply to enrolled students, these also are more streamlined than under the current rule.
    • However, these disclosure requirements will now expand to cover on-ground programs in addition to distance education programs. Students in on-ground programs will be entitled to disclosure if their program does not meet licensure requirements in the state in which they are “located”—or if the institution has not made a determination for that state—and while most in-person students are located in the same state as their institution, this issue could be relevant to schools near a state line.  Schools with numerous on-ground licensure or certification programs may need to delay implementation in order to prepare new disclosures for these programs.
  • Other Disclosure Requirements. The Department made a number of other common-sense improvements to the disclosure requirements, including with respect to state complaint processes and past adverse actions against the institution.  However, schools considering early-implementation should again be mindful that going forward, these disclosures will apply to all programs, not solely distance programs.  Key changes to disclosure requirements for distance and on-ground programs include:
    • Significantly reduced obligations to disclose adverse government agency actions (e.g., mere “investigations” would no longer be subject to disclosure). However, the disclosures will, for the first time, cover actions that relate to an institution’s on-ground programs. An institution will also need to disclose if an accrediting agency has required it to maintain a teach-out plan, and the reason for such requirement.
    • Expanded disclosures regarding acceptance of transfer credit, including (i) any types of institutions or sources from which the institution will not accept transfer credit (e.g., a regionally-accredited school that refuses transfer credits from nationally-accredited institutions), (ii) a description of criteria used to award credit for prior learning experience (e.g., military service, paid or unpaid employment, or other demonstrated competency or learning), and (iii) strengthened disclosure, on a program-specific basis, of written arrangements with other institutions and providers.
  • Distance State Authorization. While schools will remain required, as a condition of disbursing Title IV funds, to comply with any state requirements for out-of-state institutions where their distance education students are located, the Department addressed two aspects of the former rule that were of major concern to the postsecondary distance education community:
    • Rather than having to ensure they hold appropriate authorization in every state where a distance education student “resides”—a legal concept that varies by state and may not match a student’s true location—schools will be able to rely on the student’s actual location in complying with the rule. Schools’ obligation to become aware of changes to student location also will be reduced.
    • The Department clarified in the definition of a “state authorization reciprocity agreement” that while states always remain free to enforce their generally-applicable consumer protection laws, a reciprocity agreement must be permitted to place postsecondary oversight in the hands of a single home state. Many felt that the former rule left open a contrary interpretation that would have negated many benefits of reciprocity.
  • State Complaint Processes. The Department is eliminating the requirement that a state complaint process be available to distance education students in their state of residence as a condition of Title IV eligibility, as long as the school’s home state complaint process would be available to those students.  While this had become largely a moot point for schools participating in NC-SARA (public and non-profit schools with California students might disagree!), it remains a potential challenge to others.  Non-SARA-participating institutions may benefit from early-implementation if they enroll a significant number of distance students from states lacking a clear complaint process.
  • Religious Institution Qualification. Finally, the changes will simplify the definition of a religious institution for state authorization purposes.  Currently, an institution that is exempt from state regulation due to its religious nature can participate in the Title IV programs only if it meets a narrow federal definition of a “religious institution” (or was able to obtain a state license despite being exempt).  The new rules will remove the federal definition, requiring an institution to meet only its home state definition(s) of a religious institution.
Early Implementation Process

In the final rule, Secretary DeVos exercised her authority under the Higher Education Act to designate the following updated provisions for early implementation “beginning on November 1, 2019,” at the discretion of each institution:  34 CFR § 600.2 (definition of state authorization reciprocity agreement), § 600.9 (state authorization and complaint process requirements), and §§ 668.43 and 668.50 (disclosure requirements).

The Department has not published guidance instructing schools on how to conduct an early implementation.  In a recent but separate context, ED advised early implementers to “document [their] early implementation internally,” and to make such documentation available to the Department upon request.  While this internal documentation need not be elaborate, we believe it should at least state the effective date of the school’s decision, be signed by an appropriate institutional official, and be disseminated to the appropriate internal personnel.  The documentation need not be made public, but should be preserved in the institution’s records.

Absent any further guidance from ED, we expect many institutions to take a similar approach here.  Again, we believe the more important consideration is this:  if you do elect to early-implement, ED and compliance auditors will expect immediate compliance with the new requirements.


Read other blog posts from our series on the Department of Education’s final rule:
  1. Department of Education’s Accreditation Rule Eases Process for New Accrediting Agencies Seeking Recognition by Katherine Demedis
  2. Institutions Subject to Adverse Actions Have Opportunity to Change Accreditors Under the Department’s New Rule by Katherine Demedis