State Authorization…Once More
By D. Sherwin Hibbets, Director of Regulatory Affairs, FAME
The time for the State authorization regulation enforcement is upon us. Oh, but wait. “JK!” (That is “Just kidding!” in social media lingo.) But, it seems like we have heard “State authorization” before. Actually, we have heard it before. More than once! Maybe it is time for the enforcement? What is the scoop on State authorization?
Regulatory Deadline Extensions
The enforcement of the regulation in 34 CFR 600.9 and the explanatory dialog in the preamble to these October 29, 2010, Program Integrity regulations were to be effective July 1, 2011. However, a stay of enforcement on this requirement was allowed until July 1, 2013, for those schools in States* that could not implement the changes in the regulations by July 1, 2011. Subsequently, an additional extension was granted to allow for delayed enforcement of the regulation until July 1, 2014. This was due to several States notifying the U.S. Department of Education (ED) that they needed additional time to develop or complete processes necessary for compliance with the regulation.
Now, on June 24, 2014, ED published in the Federal Register one more extension of the enforcement of this provision of the State authorization regulation. The extended deadline for compliance is July 1, 2015. However, the extension is not a blanket delay in enforcement for all schools. There are certain conditions for the postponement to apply. Otherwise, the regulations stipulate that a school must be authorized by the State in which it is operating and the State must have a process for receiving and acting upon complaints about a school.
Criteria for Regulatory Deadline Compliance Extension
The latest update on State authorization in the Federal Register (and previously delineated in Dear Colleague Letter GEN-14-04) details the circumstances for which a school may receive the deadline extension. Specifically, the Department highlights the two basic requirements for an institution being legally authorized by a State for Title IV purposes. Those two requirements include the State authorizing an institution by name to operate educational programs beyond secondary education in that State; and, the State must have a process applicable to all institutions (except tribal and federal institutions) to review and appropriately act on complaints concerning the institution, including enforcement of applicable State laws. ED makes a point of emphasizing that these two requirements are separate and distinct. That is, a school may be authorized by the State, but the State may not have a complaint process to use in considering any complaints against the school. Both components of the State authorization must be met for the school to be considered Title IV eligible in that State. In an application to participate in Title IV, or in a recertification of eligibility to participate, the school must be able to identify and describe to ED the complaint process for the State in which it desires eligibility.
Steps Toward Compliance and Use of the Deadline Extension
Therefore, a school must ensure that the States in which it operates locations have a complaint process in place and the school must make students and prospective students aware of that process. If the State is still working to develop such a process, the school must:
• Obtain from the State an explanation of how an additional one-year extension will permit the State to finalize its procedures, which the school may then publicize to its students and prospective students. This may include such things as a list of steps the State is taking to develop a process for receiving and reviewing complaints, and a timeline for expected completion and implementation of the process.
• Maintain the explanation and data received from the State to document to ED that the school was authorized to utilize the additional one-year extension of the regulatory requirement until July 1, 2015. The explanation and data received from the State do not have to be provided to ED unless it is requested by ED staff.
So that the criteria for meeting State authorization may be seen in a graphical format, we have included the below chart that ED developed. It illustrates the various processes applicable to different types of institutions.
How different types of schools meet State authorization requirements
Legal Entity Entity Description Approval or Licensure Process
Institution A public, private nonprofit, or for-profit institution established by name through a charter, statute, articles of incorporation, or other action issued by an appropriate State entity as an educational institution authorized to operate educational programs beyond secondary education, including programs leading to a degree or certificate. The institution must comply with any applicable State approval or licensure process and be approved or licensed by name. It may be exempted from such requirement based on its accreditation or being in operation at least 20 years.
Business A for-profit entity established by the State on the basis of an authorization or license to conduct commerce or provide services. The State must have a State approval or licensure process, and the institution must comply with that process and be approved or licensed by name to offer postsecondary education. An institution in this category may not be exempted from State approval or licensure based on accreditation, years in operation, or a comparable exemption.
Organizations A nonprofit entity established by the State on the basis of an authorization or license for the public interest or common good.
Notes: The chart does not apply to federal, tribal, and religious institutions, which are exempt from these requirements, or to distance education programs offered out of state. A State must have a process to review and address complaints directly or through referrals; this applies to all institutions except tribal and federal institutions. For tribal institutions, the tribal government must have a process to review and appropriately act on complaints concerning them and to enforce applicable tribal requirements or laws.
Source: 2013-2014 Federal Student Aid Handbook, page 2-6.
The regulation that requires State authorization is a crucial one. A school’s compliance with this regulation is a part of the criteria used to determine the institution’s overall ability to participate in the Title IV Federal Student Aid programs. Each school is encouraged to:
• Review its status of State authorization for each State in which a location is operated that allows a student to complete 50% or more of an eligible educational program. (Note: At present, the State authorization requirement does not apply to distance education programs offered out of State.)
• Ensure that it has written documentation (e.g., a letter or certificate from the State and/or evidence of the school being listed on the State’s Web site as an institution authorized, by name, to operate educational programs beyond secondary education, including certificate and degree programs.
• Verify the State has an official process for receiving, reviewing and acting upon complaints, as highlighted above.
• Demonstrate that the school has established information dissemination policies, procedures, and practices related to making the State’s complaint process known to students and prospective students in accordance with 34 CFR 668.43(b). This information dissemination must include providing contact information for filing complaints with the State.
The State authorization requirement appears to be here to stay. Although there have been several delays in the enforcement of the requirement, it is not likely that there will be another beyond the current extension to July 1, 2015. And, again, the extension is only for those who follow the guidance ED stipulated and that is outlined above. Make sure your school is ready. Then, the next time you see something about State authorization, you can send your own text message: “LOL.” (As in the social media jargon: “Laugh out loud!”, as if to say, “I am ready for whatever the next State authorization announcement may bring.”)
*Note that the term “State” is defined in 34 CFR 600.2. For Title IV Federal Student Aid purposes, “State” includes the 50 United States and, also, American Samoa, Puerto Rico, the District of Columbia, Guam, the U.S. Virgin Islands, and the Northern Mariana Islands.