Issue Briefs

State Authorization of Distance Education

Colleges and universities that offer instruction outside of the state in which they are located must comply with federal regulations governing state authorization for distance education in order to participate in the Title IV student financial aid programs. The rules are intended to improve the integrity of the Title IV programs by ensuring 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, a change of presidential administrations, and revisions made during multiple negotiated rulemaking sessions, the regulations finally became effective on July 1, 2020.

Under current regulations governing state authorization of distance education,  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.  However, there has been controversy about the scope of reciprocity since the regulations were established.

Originally, the Obama-era regulations contained language that seemed to suggest that states could continue enforcing statutes and regulations beyond general purpose laws, including those specifically pertaining to distance education.  Advocates for reciprocity noted that such language seemed to undermine the purpose of reciprocity agreements.  In 2019, the Trump Administration issued regulations that deleted the language and clarified that such agreements “cannot prohibit any member State of the agreement from enforcing its own general-purpose State laws and regulations outside of the State reciprocity agreement.”

In 2024, the Biden Administration launched another round of negotiated rulemaking involving state authorization of distance education.  Consumer advocates, who had strongly opposed the previous expansion of the scope of reciprocity, persuaded the Department to adopt draft language restoring reciprocity limits.  Although the regulations are currently on hold until next year, the Department's proposed amendments 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.

About

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.  The intent of the regulations was to crack down on unscrupulous higher education providers.

The rules exposed the broad and confusing patchwork of state requirements for authorization for institutions outside of each state’s geographic area.  This led to the development of a national state reciprocity agreement, NC-SARA, which set up its own rules and regulations.  To add to the confusion, the initial distance education regulations have been through a series of court challenges and regulatory rewrites, making this regulation one of the most onerous regulations ever imposed on institutions. 

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 the National Council for State Authorization Reciprocity Agreements (NC-SARA). Because institutions that offer distance education in a state that participates in NC-SARA are considered to be in compliance with that state’s requirements regarding postsecondary distance education, 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. 

History

The regulation of state authorization of distance education programs was originally included in the Obama Administration's 2010 program integrity regulations. Due to various legal and operational roadblocks, final regulations governing state authorization of distance education programs have been delayed multiple times over the years.

In 2011, the distance education piece of the regulations was struck down by a federal judge. The Court ruled that the Department had violated the Administrative Procedure Act by failing to include the distance education requirements in the overall state authorization regulations made available for public comment. The action was upheld on appeal in June 2012.

As a result, the Department of Education was forced 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, Under Secretary Ted Mitchell announced in June 2014, that the Department of Education would “pause” on the state authorization rule on distance education.

After a two-year hiatus, the Department of Education released a new set of proposed regulations in July 2016. The final regulations, which were published in December 2016, 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 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 complies 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 a proposed rule in June 2019. The final rules 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 held a new negotiated rulemaking that once again considered amendments to the regulations governing state authorization of distance education.  The proposed changes, however, are currently on hold, and it's not clear when - or if - new regulations will be issued. 

Legislation to repeal the regulations related to state authorization of distance education has been introduced repeatedly in recent years but has not been enacted.

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 rules.

  • Determine whether your institution is located in a state participating in the State Authorization Reciprocity Agreement (SARA) and decide if you wish to become a participating institution, if located in a covered state.
  • If not in a SARA state, review your student profiles to determine whether or not you need to be authorized in another state.

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