Alerts and Updates

Education Institutions Prepare for Department's Final Rule on State Authorizations, Consumer Disclosures

June 15, 2020

It is particularly important that institutions develop policies that adhere to the timing and distribution requirements for the consumer disclosure requirements for programs leading to professional licensure or certification.

On November 1, 2019, the U.S. Department of Education published a final rule regarding state authorization. The new rule is effective July 1, 2020. This Alert highlights required changes for state authorization and consumer disclosures, some of which apply to institutions offering on-ground programs. Key changes include: modification of Title IV state authorization requirements; a new definition regarding student location for state authorization purposes; new consumer disclosure requirements for programs that prepare students for professional licensure; and significant new and amended consumer disclosure requirements.

Institutions should carefully review the changes made by the new rule and prepare to amend their consumer disclosures to comply with the new requirements by July 1, 2020. It is particularly important that institutions develop policies that adhere to the timing and distribution requirements for the consumer disclosure requirements for programs leading to professional licensure or certification.

State Authorization – 34 CFR 600.9(c)

The final rule leaves unchanged the requirements in Section 600.9(a), including that for an institution that has physical presence in a state, that state must offer a process to review and appropriately act on complaints concerning the institution, including enforcing applicable state laws, for the institution to meet the state authorization requirements. The final rule removes the requirement that institutions demonstrate the availability of a student complaints process in each state and, rather, requires institutions to provide students with contact information for filing complaints with its state licensing agency under 668.43(b).

The final rule makes the following additional changes:

  • Section 600.9(c) mandates that “An institution that offers postsecondary education through distance education or correspondence courses to students located in a State for which the institution is not located must meet state requirements in that state or participate in a state authorization reciprocity agreement.” Institutions must satisfy these requirements as a condition of Title IV eligibility.
  • Section 600.9(c)(1)(ii) provides that an institution covered by a reciprocity agreement is considered to meet state requirements for it to be legally offering postsecondary distance education or correspondence courses in the state. The State Authorization Reciprocity Agreement (SARA) currently includes 49 states (all except California) plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands as members. Institutions must be able to document the state approvals or the coverage by a reciprocity agreement to the Secretary of Education.
  • Regarding reciprocity agreements, the Department clarified that states retain the authority to enforce “general-purpose” consumer protection laws against institutions operating in their jurisdiction under a reciprocity agreement as long as those laws are not specific to out-of-state education providers.

Student Location and Determinations of a Student’s Location

Importantly, the final rule changes the determination for state authorization to the student’s location rather than the student’s residence. Section 600.9(c) requires an institution to have policies and procedures in place to determine a student’s location at the time of initial enrollment and when the institution receives formal notice that the student has changed location to a new state. The final rule does not require an annual determination of a student’s location. The Department further notes that institutions may develop procedures for determining student location that are best suited to their organization and the student population they serve and may make different determinations for different groups of students, such as undergraduate versus graduate students. Institutions must document the change of address monitoring process and consistently apply their policies and procedures regarding student location to all students, including students enrolled in on-ground programs.

Disclosure for Programs Leading to Licensure or Certification

Regulations 34 CFR 668.43 (a) (5) (v) and 34 CFR 668.43 (c) require disclosures by institutions regarding educational requirements for programs leading to professional licensure or certification, which applies to both online and on-ground programs. 34 CFR 668.43(a)(5)(v) requires an institution to make readily available to enrolled and prospective students whether programs leading to professional licensure or certification meet educational requirements. The regulation requires the following:

  • A list of all states for which the institution’s program curriculum meets state educational requirements for professional licensure or certification;
  • A list of all states for which the institution’s curriculum does not meet state educational requirements for professional licensure or certification; and
  • A list of all states for which the institution has not made a determination of whether the curriculum meets educational requirements.

A direct disclosure to prospective students is required by 34 CFR 668.43(c) if the institution has determined that its program’s curriculum does not meet the state educational requirements for professional licensure or certification in a state in which a prospective student is located, or if the institution has not made such a determination. This direct notification (including email or letter) must occur prior to the student’s enrollment in the program.

Alternatively, for a student enrolled in the program, if the institution makes a later determination that the program does not meet educational requirements for licensure or certification in the state where the student is located, the institution must provide notice directly to the student in writing (including email or letter) within 14 calendar days of making that determination.

These disclosure and notice requirements apply to all institutions and to all programs, irrespective of the mode of delivery, where professional licensure or certification is required by a state for employment in the field.

Religious Institutions

The Department amended Section 600.9(b) to eliminate certain requirements regarding the eligibility of religious institutions. The Department emphasized its belief that states should determine which institutions are considered religious institutions and how such institutions are to be authorized to operate within their borders. The revised Section 600.9(b) makes clear that the Department considers an institution to be authorized to operate for Title IV purposes if it is exempt from state authorization as a religious institution.

Institution Disclosures

The final rule imposes significant new and amended disclosure obligations on institutions. New disclosures include requirements regarding transfer of credit policies, graduate placement results and pending legal or regulatory actions that could adversely impact an institution’s continuing operations. Disclosure requirements under Section 668.43(a) require that institutions make disclosures readily available to enrolled and prospective students. In the preamble to the rule, the Department recognizes that greater clarity is necessary, but provides no additional guidance regarding how an institution must make these disclosures. Many institutions meet these requirements by including these disclosures on their website or in their catalog. Disclosure requirements under Section 668.43(a) include:

  • A description of transfer of credit policies:

(i) Any established criteria the institution uses regarding the transfer of credit earned at another institution and any types of institutions or sources from which the institution will not accept credits;

(ii) A list of institutions with which the institution has established an articulation agreement; and

(iii) Written criteria used to evaluate and award credit for prior learning experience including, but not limited to, service in the armed forces, paid or unpaid employment, or other demonstrated competency or learning;

  • A description of any written arrangements the institution has entered into, including:

(i) The portion of the educational program that the institution that grants the degree or certificate is not providing;

(ii) The name and location of the other institutions or organizations that are providing the portion of the educational program that the institution that grants the degree or certificate is not providing;

(iii) The method of delivery of the portion of the educational program that the institution that grants the degree or certificate is not providing; and

(iv) Estimated additional costs students may incur as the result of enrolling in an educational program that is provided, in part, under the written arrangement:

  • The percentage of those enrolled, full-time students at the institution who are male/female, Pell eligible and are self-identified as a member of a racial or ethnic group;
  • The institution’s placement rate, if the institution publishes or uses such rate in advertising, or if the institution’s accrediting agency or state requires the institution to calculate and report a placement rate;
  • The types of graduate and professional education in which graduates of the institution’s four-year degree programs later enroll;
  • The fire safety report prepared by the institution pursuant to Section 668.49;
  • The retention rate of certificate or degree-seeking, first-time, full-time, undergraduate students entering the institution;
  • Institutional policies regarding vaccinations;
  • Whether the institution is required to maintain a teach-out plan by its accrediting agency and the reason why such a plan is required;
  • The institution’s refund policy;
  • Contact information for filing complaints with the institution’s accreditor and state authorization agency; and
  • Notice of any enforcement actions or prosecutions brought against the institution by a state or federal law enforcement agency in any matter where a final judgment against the institution, if rendered, would result in adverse action by an accrediting agency, revocation by the state authorization agency, or limitation, suspension or termination of eligibility under Title IV. Investigations that have not reached enforcement action or prosecution do not need to be disclosed.

For More Information

If you have any questions about this Alert, please contact Kristina Gill, Katherine D. Brodie, any of the attorneys in the Higher Education Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.