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How The Regulatory Trifecta is Wrapping Higher Ed in Red Tape

A Regulatory Trifecta: State Authorization, Gainful Employment and the Credit Hour
As regulation and authorization requirements mount, higher education institutions are left footing the bill and scrambling to pay.
State authorization, gainful employment and the credit hour; these three regulatory areas are the focus of the Department of Education’s so-called “Program Integrity” regulations.

Issued together in 2010, these three rules have had a major negative impact on colleges and universities. While intended to focus on the Title IV and federal financial aid eligibility, the consequences have gone well beyond.

Of the three new regulations, State authorization has created the most immediate pain. It requires educational institutions to obtain “authorization” to operate within a state other than its own if it’s serving another state’s citizens. Compliance is a condition of extending federal aid under Title IV (i.e. Pell grants, Stafford loans) to students across state lines. Thus, an online college now faces the possibility of needing authorization in 53 jurisdictions (49 states other than their own, 3 territories and the District of Columbia) in order to operate. As a result, colleges are finding that some states — regardless of the fact that there’s no “physical presence” by the institution (the former standard for seeking state approval) — are now requiring “registration” (a separate process) as well.

For instance, some states require that programs related to professional licensure (i.e. nursing) be “registered” with their state’s licensing body as a condition of authorization. In addition to the paperwork involved (the application for a single program in one state was more than a foot thick and required notarized signatures from more than 1,000 adjunct faculty). Another state requires a $40,000 registration fee for the institution, as well as separate fees for each program to be offered. This same state also requires a weeklong site visit by a multi-disciplinary team, at the institution’s expense. Another requires the issuance of individual identity cards for admissions staff who are thousands of miles away and have only telephone contact with in-state students. Some require modifications to degree curricula to include state-mandated subject matter, thereby adding to degree length and cost.

The gainful employment rules have yet to take effect, due to a lawsuit by for-profit institutions. However, the federal government has left no doubt it intends to put a requirement in place that will call for heretofore uncollected data on the following items, among many others:

  1. Student income, pre- and post-program;

  2. The cost of the program;

  3. Transferability of credits earned;

  4. Average income for those entering the field for which credentialed (in the region of the student); and

  5. Employment rates (also in the region)

This rule also requires that the Secretary of Education to approve any new certificate offerings by an institution, in advance. While initially interpreted as requirements that would only apply to for-profits, closer reading now reveals they will apply to all institutions seeking Title IV eligibility. At least one state has already mandated data collection and reporting requirements that rivals the expected federal rules.

Finally, the credit hour rule continues to tie financial aid payment to the number of hours of instruction received, rather than to the learning outcomes that both the department and regional accreditors require. This input measurement has historically been the “measuring stick” for financial aid and class scheduling. Forty-five hours of instruction has typically been the basis for three semester hours of credit. Two such courses, in a term, serves as the basis for a determination of part-time study and eligibility to federal aid.

The focus on seat time over validated learning outcomes is a particular problem for online students who may in fact spend much less than forty-five hours on a computer to achieve an equivalent level of learning. The Veterans Administration now requires institutional certification that a GI Bill-entitled student has spent a minimum of nine hours per week online as a condition of satisfactory progress.

Compliance, including new reporting requirements, has required additional staffing and, in some cases, specialized expertise. For my college, the cost of compliance with the state authorization rules alone runs well over $300,000 per year. With both state and federal requirements now on the horizon for gainful employment, as well as new “authorization” requirements, it’s expected that the data collection, analysis and reporting will add a further $200,000 in direct and indirect expenses.

All of this is justified as providing “good stewardship” for the government’s tax dollars and as supporting consumer protection. Unfortunately, these rules and hundreds of others put in place since 2008, when the Higher Education Act was last renewed, are also adding millions of dollars in new costs for American colleges and universities. With roughly 5,000 nationally or regionally accredited colleges and universities awarding degrees under Title IV, we see significant new costs being placed on institutions and their students (as most are tuition dependent). Let’s do the math:

  1. $500,000 in combined costs (does not include the Veterans Administration monitoring requirement)

  2. Five thousand participants under Title IV

  3. Eighty percent participation in online program delivery

$500,000 x (5,000 x .80) = $2 billion

As former Senator Everett Dirksen might say, “A half a million here, a half a million there, pretty soon you’re talking real money.”

These regulations have been the subject of institutional concern for the last few years. Yet the Department continues to add new ones on a regular basis — additional requirements are being proposed for the states to toughen state oversight of online providers, as well as new rules around financial aid fraud prevention and student authentication. While not Education Department legislation, the proposed Campus Safety and Accountability Act may soon require institution-wide training, student surveying and expansion of support services for those who are victims of sexual assault without regard to whether an institution has a physical campus or resident students.

The cost of all this will undoubtedly be passed on to the institutions and, ultimately, students, at a time when the President is asking higher education to reduce costs and hold the line on tuition and/or fee increases. “Mr. Right Hand, may I introduce you to Mr. Left Hand?”

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