Debate over the Education Department’s proposed "state authorization" rule officially ended on Wednesday, with negotiators divided over how far the federal government should go in its effort to compel state scrutiny of online programs.
It’s unclear if the department will revise its proposed rule before May, when negotiators are set to vote on the measure. But the panel is not scheduled to revisit the rule at that session, which will focus on PLUS loans.
Under the controversial draft rule, colleges would have to seek approval to operate in every state where they enroll students online. They could receive federal aid only for students residing in states where they were approved to operate.
The rule would also set a floor for adequate oversight, requiring states to have in place a process for handling student complaints against online programs, and the ultimate authority for resolving them.
In the fall of 2012, more than 2.6 million students were enrolled exclusively in distance-education courses, while 2.8 million others were taking some distance-education courses, according to Education Department data.
Student and consumer representatives strongly support the proposal, saying it would protect students from shoddy programs and ensure that states didn't shirk their oversight duties. During several hours of debate on Wednesday, they urged department officials to stick to their guns.
But colleges complained that the rule would place an undue burden on institutions and states, and would lead to reductions in access to online education. They repeated their request that the department allow states to exempt institutions based on accreditation or years in operation, as many currently do.
Russell Poulin, a member of the negotiating panel who is deputy director for research and analysis at the Western Interstate Commission for Higher Education’s Cooperative for Educational Technologies, said as many as 45 states now exclude programs from their purview based on such exemptions. He warned that the proposed rule's ban on the practice would cause "major disruptions in distance education" as states scrambled to overhaul their laws and programs reapplied for approval.
‘Exemption Is Not Oversight’
Chuck Knepfle, director of financial aid at Clemson University, argued that the approval process could become a "cash cow" for the states, with the cost of compliance passed on to students.
But Sophia McArdle, a negotiator for the department, held firm on the plan. "Exemption is not oversight," she told the panel. "It is not an active role."
Christine Lindstrom, higher-education program director for the U.S. Public Interest Research Group, praised the department’s resolve, urging officials not to "cede authority" to states with lax oversight.
In an attempt at compromise, she suggested that the department limit the required approvals to states where programs enroll some minimum number of students online, "as a way to ease the burden" on states and colleges.
Other student and consumer advocates on the panel said they were open to the idea and would support "grandfathering in" students already enrolled, an idea suggested by David Sheridan, financial-aid director for Columbia University’s School of International and Public Affairs.
Mr. Sheridan warned that the rule was "ripe for abuse by private lenders," which might prey on students who had lost access to federal loans. He suggested that the department allow students enrolled in programs that become ineligible under the rule to continue to receive federal loans, "so they’re not left high and dry."
Department officials said they would consider the proposals. Even so, it's doubtful the changes would be enough to persuade colleges to support the measure, making consensus on the rule unlikely. If negotiators fail to reach agreement on the rule, and several others it is considering, the department will be free to issue whatever package of rules it wants, without regard to the panel’s preferences.
Negotiations over the remaining rules will continue on Thursday and Friday, with the panel set to discuss the department’s plan to regulate college-affiliated debit cards and its revised underwriting standards for PLUS loans.