Negotiated Rulemaking Committee Fails to Reach Consensus

The negotiated rulemaking on Program Integrity and Institutional Quality failed to reach consensus during its third and final session last week. Because negotiators failed to reach consensus, the Department of Education may rewrite the regulations as it wishes, and it is not bound by language proposed by the committee.

The Department is expected to publish the proposed regulations by October for public comment. The final regulations could go into effect as early as July 1, 2025, but are more likely to take effect on July 1, 2026.

At stake during the rulemaking process are several issues of fundamental importance to private, nonprofit institutions. Of the six issues the committee considered – accreditation, state authorization, distance education, cash management, return of Title IV funds (R2T4), and TRIO – the committee reached agreement only on language that would make changes to the TRIO programs. These changes would broaden eligibility for TRIO programs to any student who has or is seeking to enroll in a high school in the United States or its territories.

During the session, negotiators agreed on a number of non-controversial changes to various regulatory requirements. Nevertheless, negotiators were deeply divided on some of the more concerning provisions, many of which had the support of the Department and consumer advocates. Below is a summary of the issues NAICU considers to be most problematic for private, nonprofit colleges and universities and the reasons why it is concerned.

State Authorization

Negotiators were deeply divided regarding the Department’s proposed amendments to state authorization regulations, which would profoundly affect both out-of-state and in-state authorization.

With respect to out-of-state programs, the Department’s proposal would, among other things, require that distance education reciprocity agreements such as NC-SARA allow states to enforce their own applicable general purpose laws and regulations outside of initial approval for state authorization of distance education and to revoke the authorization of any institution that fails to comply.

Additionally, the proposal would require that the governing board of any entity that oversees a state reciprocity agreement include representation only from state regulatory and licensing bodies, enforcement agencies, and attorneys general offices. The proposal would also prohibit institutions from being authorized via reciprocity in any state where it enrolled more than 500 distance education students in the two most recently completed award years.

NAICU is deeply concerned that these proposed changes could impose a significant burden on institutions, negate the current benefits of participating in a reciprocity agreement, and limit the input of distance education stakeholders.

With respect to in-state authorization, which applies to an institution’s home state, the Department had proposed to eliminate current regulations that allow states to exempt institutions from state authorization or licensure requirements if: 1) the institution is established by name as an educational institution by a state through a charter, statute, constitutional provision, or other state action; and 2) state law provides an exemption to institutions based on an institution’s accreditation by an accreditor recognized by the Secretary of Education or based on the institution being in operation for at least 20 years. NAICU estimates this proposal would affect half the states or more, meaning institutions in those states would no longer meet basic Title IV state authorization requirements.

After NAICU raised significant concerns about this proposed change, negotiators, including the Department, appeared to agree on restoring some of the exceptions in modified form. Specifically, the final proposal the Department offered before negotiated rulemaking concluded would fully retain the exception for being established by name as an educational institution by a state through a charter, statute, constitutional provision, or other state action (including participation in a state student grant program). It would sunset the exception based on accreditation status or years of operation by 2030 but would provide an exception for institutions that have been exempted by state action and were in operation on or before the enactment of the Higher Education Act of 1965, as long as they have not undergone a change of ownership.

Accreditation

As with state authorization, negotiators were unable to reach consensus on proposed changes to regulations governing accreditation. Some of the more contentious proposals included provisions that would: 1) require accreditors to establish and enforce student achievement standards that, to the extent feasible, establish minimum expectations of performance based on certain metrics; 2) limit the proportion of accrediting agency board members who are executive officers or board members of institutions the agency accredits; 3) require accreditors to act more quickly to address areas of non-compliance; 4) establish new requirements around teach-out plans and agreements; 5) increase the number of actions subject to substantive change review; 6) require accreditors to conduct site visits to a minimum number of additional locations and branch campuses every accreditation cycle; 7) require accreditors to confirm that institutions have certain transfer of credit policies in place; and 8) add new requirements to ensure that an institution’s choice of accreditor remains voluntary.

NAICU is concerned that some of these changes may impose unnecessary burdens on institutions or involve unwarranted federal interference with the accreditation process.

Distance Education

The Department proposed very limited changes to institutional distance education regulations. However, because one of the changes would eliminate the ability to offer asynchronous clock hour distance education programs, negotiators did not reach consensus on the distance education provisions.

Return to Title IV (R2T4)

The lone issue of contention in the Department’s R2T4 issue paper was the proposal that would require institutions to take attendance for courses delivered entirely through distance education, except for dissertation research courses. Negotiators were unable to reach consensus on this proposal due to concerns the proprietary institutions’ negotiator raised about the proposal not excluding direct assessment programs.

Cash Management

Negotiators failed to reach consensus on the Department’s cash management proposals. The two proposals that generated the most discussion were the removal of the provision allowing schools to provide reduced cost books and supplies to students by including them in their tuition and fees, unless the student is incarcerated, and the requirement that schools refund any funds on students’ cash-value or flex accounts within 14 days of the end of the payment period.

For the books and supplies proposal, the Department’s position was that, while students have always had the ability to opt out of these programs, some students have reported difficulties doing so and, if a school wanted to offer such a program in the future, it could only do so if a student affirmatively opted in each academic term. Negotiators argued that this change would eliminate the ability to negotiate current discounts with publishers and would lead to higher prices for students. Negotiators also noted that when these programs were solely opt-in models, students would more frequently decide not to purchase books.

For the cash-value account refunding proposal, the Department’s position remained that institutions must refund any remaining cash-value funds to the student. The Department held this position even as negotiators pointed out that these programs are not run to make a profit and the loss of these funds would need to be offset, or services be reduced, with likely increased costs elsewhere for students.

Contact: Jody Feder

Contact: Justin Monk