Published on 2014/08/29

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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Readers Comments

Chuck Dull 2014/08/29 at 8:32 am

I’ve been saying since this started, ED went fishing for for-profit schools, a few congresspeople joined the trip and when they missed the fish they wanted they found the fish they caught were the schools doing good work. Of course now that good work will cost the school more in operating dollars. Maybe we need Dept of Ed integrity in doing something to actually help with higher ed rather than adding. Also, states have always been responsible for even online programs, physical presence made authorization more complex as you now have 50 + 7 territories and 300 ways to interpret. State Authorization under ED woke states up to their constituent requirements. It is not new, just made aware. What is more alarming is under the new requirements states not only authorize but have to do it the way ED says or it is not an accepted authorization.

Miguel Gomez 2014/08/29 at 12:28 pm

These new regulations are an example of when state intervention is unnecessary and actually a hindrance to institutional operations. It’s like these decisions were made in a vacuum without any awareness of institutions’ contexts, or consultations with those most affected. Disappointing.

Dr. Antony Parker 2014/09/02 at 9:49 am

I think the intentions of state authorization, gainful employment and the credit hour are good, but they could be implemented with more nuance. We’re in an era where the public and governments are demanding greater accountability on the part of higher ed institutions, partly because many of them receive public funding, but also because their effectiveness (or lack thereof) is reflected in marketplace outcomes. That’s a good thing. But any attempts to hold institutions accountable must be flexible about the differences among them. Not all institutions can be assessed by the same measures.

Dwayne P. 2014/09/05 at 10:45 am

I think everyone is getting a little too upset about this, without thinking of the necessity of these regulations. First, people tend to paint protectionism of state institutions in a negative light but you know what? It’s necessary. Some people may be able to afford to enrol in distance education programs with out-of-state providers, but many people can’t. Those are the people state institutions must serve, and without additional enrolments from students who have choice, those institutions would close. Ultimately, reducing these protections would lead to a significant reduction in access to four-year education for poorer students. Second, these regulations are critical to keeping predatory institutions off the map. It improves the quality of education on offer. It ensures that states have well-educated people for the workforce.

Everyone collectively bend your noses back into shape: we’re better off with the regulations than without them.

David M. Grossman 2014/09/08 at 6:29 pm

My old boss used to say that the reason we have dumb rules and regulations is that someone has done something dumb. Well, there are a lot of dumb things going on in higher education today. The proliferation of for profit and private institutions offering varieties of degrees that are either bogus or of dubious value and at the same time encouraging students to load up on financial debt is astounding. The willingness of respectable institutions to ramp up tuition–or certainly not make any effort to contain costs for students–simply to take advantage of the plentitude of federal funds for loans and other forms of financial aid is outrageous. The failure of the whole higher education community to police itself, fearful of the simplest of regulations to weed out the bad actors lest those regulations be applied to all, is tragic. The ridicule heaped on higher education by national comics such as John Oliver is entirely justified. My friend,President Ebersole,is rightly concerned with the costs of regulation but how else is government and society to reign in a higher education industry–for profit, private, and public–that is entirely out of control. Two billion for regulations is a great deal of money, but it pales in comparison to the trillions of dollars that are dragging our youth, our succeeding generations, and the country into unbelievable permanent indebtedness. The time has come to end dumb behavior, eliminate these bogus institutions, restore meaningful accreditation criteria, and make tuition reflect the true costs of college education. If President Lyndon Johnson who set us on this course of government subsidy for higher education could see what has transpired in the past 50 years he would be doing the proverbial cartwheels in his grave!

John Ebersole 2014/09/10 at 4:14 pm

I know of no one who supports the idea of giving diploma mills a bye, allowing prospective students to be mis-lead or defrauded, is willing to overlook coerse of our military (active or veteran), or thinks it is ok to raid the federal coffers yo pay for sub-standard or non-existent credentials. What needs to be understood, however, is that there are ways of dealing with all of these abuses that DO NOT require placing onerous regulations on nearly 5000 institutions, at a cost of billions of dollars – largely to be paid for by student tuition. ED has a regulatory “hammer” and sees every problem as a “nail.” This, despite the President’s call for a stop to spiraling higher education costs.

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