State Authorization and Title IV Compliance: Why You Need to Act

The federal government's attention to the state authorization rule -- requiring colleges and universities delivering online education to obtain authorization in states from which they enroll students -- has received a lot of attention over the past couple of years. Yet the level of urgency required from postsecondary institutions and the potential liabilities involved have not always been immediately clear to institution leaders.

We spoke recently with John Ebersole, president of Excelsior College, and Paul H. Shiffman, executive director of the President's Forum and assistant vice president for strategic and governmental relations at Excelsior College. Ebersole and Shiffman spoke with us at length about recent developments that affect the enforcement of the state authorization rule.

A Quick Review: Recent Developments

Most significantly, there have been three recent federal court rulings against the Department of Education, halting federal enforcement of the state authorization rules: the department lost in a lawsuit alleging that the department failed to use the negotiated rule-making process in good faith, the department appealed that decision and lost, and finally, the department lost in an additional suit against the "gainful employment" rule.

Finally, last week, the Department of Education issued a statement that it would not enforce the state authorization requirement.

"These recent developments can make it appear as though state authorization is in limbo or as though the requirement is no longer relevant," Ebersole remarks, "but Paul and I would be the first to tell you, 'Not really.'"

"Even though the federal government cannot enforce state authorization, they continue to require it. But more importantly, state authorities have now awakened to the fact that they have hundreds, if not thousands, of academic institutions doing business in their state; many are now issuing cease-and-desist orders to those not in compliance. Now, it's an issue of compliance with state law."
John Ebersole, Excelsior College

The Big Picture, at a Glance

The reality is that institutions still need to take a hard look at the cost of compliance, the cost of non-compliance, and the cost of violation.

To walk you through the big picture, Academic Impressions created the following infographic:

State Authorization Rule: Infographic

That is the situation -- and its costs -- in a nutshell. Even if there is no federal enforcement of the state authorization rules, Ebersole and Shiffman emphasize that your institution faces significant risk from non-compliance:

  • First, the likelihood of a cease-and-desist order, and of not being able to serve students in a particular state.
  • Second, if you are administering Title IV aid to out-of-state students without being in compliance with state law, your Title IV is still at risk.

"This is a case of being caught between the devil and the deep blue sea," Ebersole concludes, urging institutions of higher education to take action now to ensure that they can demonstration a "good faith" effort to attain authorization in each jurisdiction in which they have some activity.