• Overview: Federal Regulations and Requirements on Selected Issues
    July 2014


    By MWW Group Vice President Ellen S. Smith and Vice President Alanna Suda


    Task Force on the Government Regulation of Higher Education

    In 2013, the Senate appointed a Task Force on the Government Regulation of Higher Education. The task force has developed a draft matrix of items currently under discussion for inclusion in their report. It is being revised constantly based on feedback from task force members, campuses, and others. The task force is being facilitated by the American Council on Education (ACE) and is co-chaired by the Chancellor of Vanderbilt University and the Chancellor of the University of Maryland System. Members include:

    William E. Kirwan, co-chair
    Chancellor, University System of Maryland

    Nicholas Zeppos, co-chair
    Chancellor, Vanderbilt University (TN)

    William Armstrong
    President, Colorado Christian University

    Bruce D. Benson
    President, University of Colorado

    Molly Corbett Broad
    President, ACE

    Thomas V. Chema
    President, Hiram College (OH)

    Margaret L. Drugovich
    President, Hartwick College (NY)

    Dana L. Gibson
    President, Sam Houston State University (TX)

    Brice W. Harris
    Chancellor, California Community College System

    Jonathan Kaplan
    Chief Executive Officer, Laureate Online Education (MD)

    Cornelius M. Kerwin
    President, American University (DC)

    J. Michael Locke
    Vice Chairman, Rasmussen College (IL)

    Harold L. Martin, Sr.
    Chancellor, North Carolina Agricultural and Technical State University

    Claude O. Pressnell, Jr.
    President, Tennessee Independent College and University Association

    Thomas W. Ross
    President, University of North Carolina

    Robert G. Templin, Jr.
    President, Northern Virginia Community College

    The task force has not yet finalized how the information in the matrix might appear in a final report or list of recommendations, i.e. whether to identify a “top 10” or include a broader/longer list, so it is entirely possible that some of these recommendations will not be included in a final report. They will hold their third meeting in the fall, and the report is tentatively scheduled for a February 2015 release.

    Department of Education Regulations State Authorization:

    The Department of Education and stakeholders involved in this year’s negotiated rulemaking failed to reach consensus on the draft rule on state authorization with regard to online programs.

    The Department’s final proposal was significantly more expansive that what was included in the original two-sentence regulation that was struck down in court in June 2012. The proposal introduced a completely new requirement (applicable to both distance and on-the-ground programs) that an institution assure that an occupation-related program meets all requirements for graduates to receive certification or sit for licensure or certification exams, unless the institution obtains written acknowledgement that a student understands the program will not fulfill the necessary requirements or that other requirements (if applicable) must be fulfilled to obtain certification or sit for exams.

    Additionally, the original regulation was intended to assure that institutions were in compliance with applicable state laws with respect to distance education. The new proposal, on the other hand, would vastly expand the reach of the federal government in this area by requiring all states to establish an “active process” to examine an institution and its programs. Currently, approximately 45 states offer exemptions from regulation for certain institutions based on things such as accreditation or years in operation. They would no longer be able to offer this or any other exemption from regulation.

    Their proposal would also create difficulties for the State Authorization Reciprocity Agreement (SARA), in that procedures dealing with the handling of student complaints would need to be revised to reflect the proposed federal requirement that both the home state and the state in which a student is receiving online education would be responsible for resolving any complaints. Currently, SARA assigns responsibility for complaint resolution to the “home state” of the institution participating in the agreement.

    Last month, Department of Education officials announced that they would be pausing action on the proposed state authorization rule regarding online programs so the regulations will not be published as a final rule by November 1, 2014, as initially anticipated. Given the complexity of the issues, Department officials said that they hope a timeout will allow the government and stakeholders to “get the regulations right.”

    Gainful Employment: ACE was among the many organizations weighing in May 27, 2014, on the Department of Education’s (ED) proposed rules on gainful employment, the latest move in the Obama administration’s effort to ensure that individuals who enroll in career training programs will earn enough money to repay their student loans.

    The regulations, which would take effect in 2015, are extremely technical and are 845 pages long. The basic provisions include:

    • Programs would be flagged as weak if the average loan payments of graduates consumed 8 percent or more of total earnings or 20 percent or more of discretionary earnings.
    • Programs also would be flagged if the loan default rate for former students exceeded 30 percent.
    • Programs must satisfy the requirements of both tests or ED can refuse to extend financial aid to their students.

    ACE submitted comments on behalf of 17 higher education groups. The comments expressed strong support for the goals of the gainful employment rules including helping potential students make prudent decisions about which higher education programs to pursue, and assure those students a valuable educational experience. The groups believe the proposed rules fall short of these goals, and will impose a cost burden that will be felt most strongly at institutions with the fewest financial resources, especially community colleges.

    Among the areas of concern the groups identify are:

    • That the proposed regulations are not well-targeted and provide no reasonable safe harbors for institutions operating in good faith within the system,
    • And that the proposed metrics are too weak to be effective against underperforming programs.

    “While we strongly share the department’s goal of protecting students and better serving taxpayers, the regulations need substantial revision along the lines we have proposed in order to meet those aims,” the groups write. “It will not benefit students, policymakers, or institutions to produce confusing and misleading data at great cost to all institutions with gainful employment programs while not adequately addressing the real problem of underperforming programs that represent a real risk to students.”

    Final gainful employment regulations have been in process, and controversial, for a number of years. In 2012, a federal judge blocked elements of the final rule put forward by the department of education, which would have taken federal student aid from career education programs whose graduates had high debt-to-income ratios and low student loan repayment rates.

    The department’s appeal of that ruling was denied in March 2013, and it declined further judicial actions, deciding instead to convene another negotiated rulemaking panel to craft a new set of rules. However, that panel failed to reach a consensus in December, leaving it up to ED to move forward with its favored approach.

    Final regulations are expected to be released by November 1, 2014.


Overview: Federal Regulations and Requirements on Selected Issues