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Thou Shalt Register With the State!

The issue of state regulation over distance learning programs is beginning to complicate the delivery of higher education across state lines, and it is becoming increasingly evident that—whether protectionist or not—such activities are significantly limiting access to higher education for people across the United States.

Now that some of the concern over the federal mandate to register distance programs in every state where they have a “presence” has subsided, I’d like to share some thoughts on the topic.

To me, the entire registration issue seems based on a highly questionable premise — that enrolling a distance student means an institution has some kind of “presence” in the state where the student lives. In addition, there is an assumption that the state housing the student has control over the ability of an out-of-state institution to serve students within its borders.

This isn’t the case in online commerce, where sales tax (another hotly debated topic) isn’t due on sales unless the vendor has a physical location in the state. Of course, this is a “watch this space” topic in its own right. But which state wants to be the first to assert that they can control whether Amazon can sell books, DVDs, or other merchandise to their residents? That makes as much sense to me as controlling whether “Old State U” can enroll a student (read: sell a course to a student) who happens to live in your state.

The federal registration requirement has now been delayed for an unspecified period, but institutions are still responsible for registrations with individual states. Some states are decent about this and require minimal process to register; other states, however, appear to be protectionist, and are essentially using complex registration processes and high fees to obstruct the entry of other institutions into their geographic space.

These protectionist policies actually hurt a state’s residents by restricting their choice. One way to interpret convoluted processes and high fees is to see them as a state’s way of saying “you stay out, we only want institutions in the state to teach our residents.” Never mind if the in-state offerings don’t meet their citizens’ needs; the supplementary menu is limited to what is allowed across the border.

It is debatable whether this is protectionist or not. It is beyond argument, however, that creating barriers to courses and degrees from outside the state results in fewer choices and less access to high quality education that doesn’t happen to originate in-state.

The impact is three-fold: first, high registration fees gouge out-of-state institutions for the privilege of enrolling students in the state. Second, convoluted registration processes (which are not well-defined in some states) set up procedural barriers which restrict the educational choices of citizens. Third, these regulations increase the administrative cost of offering online programs by setting up structures which cost institutions as much hundreds of thousands of dollars a year to comply with on a nationwide basis.

Minnesota recently became the poster child for protectionist NIMBY-ism (Not In My Back Yard). They require only that there be “educational activity” in the state to require registration. As a result, Minnesota recently and rather famously decreed that even participation in a free MOOC qualified as educational activity, and that any entity offering a MOOC would have to pay fees and register if only one person in Minnesota enrolled in the MOOC. Under the glare of widespread publicity and ridicule, the state quickly backed off this declaration, but it served as an eye-opener for just how far this stance could be taken.

In the Fall 2012 edition of the UPCEA INFOCUS newsletter, Michael Goldstein, co-leader of the higher education practice at D.C. law firm Dow Lohnes PLLC, addressed this situation at length; Goldstein points out that the most aggressive for-profit institutions have been first in line to pursue state authorizations. In my opinion, that’s a great way to assure that student debt goes up,as these programs are already known for their high tuition. “What’s more,” Goldstein goes on, “many of the private institutions are the ones which these laws are designed to protect against” (reference here). These institutions are making money, so they can afford to add staff and pay big fees, which public institutions may not be able to do. The very nature of the remedy seems designed to keep the better institutions out while the problem ones, who can afford it, are free to enter.

Goldstein mentions that there are three initiatives aimed at solving this mess. One, titled the State Authorization Reciprocity Agreement (SARA), would provide reciprocal access rights to institutions that meet certain criteria and testing standards. Unfortunately, this requires individual action by each state legislature, so Goldstein notes that it is not a short-term fix. The Western Interstate Commission for Higher Education (WICHE) is leading a second effort which is regional in scope, and the Association of Public and Land-grant Universities (APLU) is behind a third.

The bottom line which Goldstein emphasizes is that regardless of frustrations, institutions need to work within the (sometimes silly) framework of laws that exist, and also become players in shaping and adopting rational, manageable ways to approve cross-border educational programs.

For now, all institutions need to determine which states they can afford to do business in. At the same time, citizens, higher education administrators and our legislative contacts should do all we can to reduce educational balkanization and promote the initiatives that will increase access, hopefully with more reciprocity between states, and with updated laws that make it more difficult for the charlatans to do business. One way to do that might be to limit access for institutions in which the percentage of federal funding provided to students exceeds 50 percent or 60 percent of the institutional budget. That would eliminate many of the institutions with high dropout rates, and provide good choices for students who badly need access to a full slate of distance education programs.

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