California Students’ Access to Title IV Aid

As you probably know, the U.S. Department of Education (ED) on July 22 provided guidance on the eligibility for federal Title IV student assistance programs of California students enrolled via distance education in out-of-state institutions.  

There's a long, tangled history to this issue. The basics:

• ED issued amended language to its State Authorization Rule at 34 CFR 600.9 (c)  in December 2016 (originally set to become effective in July 2018), requiring institutions serving Title IV students in other states via distance education to be able to document: 1) their authorization to do so by each state in which they were enrolling students, or 2) their participation in a state authorization reciprocity agreement covering the states in which they enrolled such students.
• Those rules also required institutions serving out-of-state students via distance education to provide students information about lodging complaints with either the state in which the student is located or through a reciprocity agreement in which the institution participates.
• Implementation of those rules was delayed until July 2020 by the current administration and the rules were part of negotiated rulemaking sessions held earlier this year.
• Consensus was reached during rulemaking, and proposed new rules (eliminating the complaint notification requirement) were released for public comment. This proposed new language reached during 2019 rulemaking sessions would be effective July 2020, subject to any modifications made as a result of submitted comments. The comment period closed on July 12.
• Meanwhile, ED was sued by several groups concerned about ED's delay of the December 2016 rules. A judge earlier this summer ruled in their favor and compelled ED to make the 2016 rules effective as of May 2019.
• Through their participation in SARA, SARA institutions offering distance education in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands can satisfy the requirement to notify students in those states about lodging complaints.
• The troublesome wrinkle to the 2016 rules effective as of May 2019: California requires only out-of-state for-profit institutions enrolling California students to register with the state's Bureau of Private Postsecondary Education (BPPE). California students of those institutions can lodge complaints through BPPE. There is no provision for California students to lodge complaints within the state about out-of-state public and non-profit institutions. Because of that omission, California students studying via distance education with out-of-state public or non-profit institutions are ineligible for Title IV aid.

How many students could be affected?

The algorithms are complex, but our analysis of enrollment information provided by SARA participating institutions in spring 2018 indicates that there could be as many as 80,000 California students enrolled in out-of-state public and non-profit SARA institutions studying via distance education. Those students are at risk of losing Title IV student assistance funds, along with an untold number who are studying at out-of-state public and non-profit institutions that do not participate in SARA or for-profit institutions not registered with BPPE.

Possible avenues of relief

Several actions by various parties could theoretically provide relief:

• California could join SARA.
• California could expand the institutional sectors for which BPPE would resolve complaints.
• ED could de-emphasize enforcement.
• ED could possibly make new rules that eliminate the notification requirement come into effect earlier than the “normal process” date of July 2020.
• A court could intervene with a temporary solution.
• The California Attorney General could agree to handle student complaints for affected students.
• Other approaches could be developed.

None of these avenues are straightforward or quick to develop. Indeed, NC-SARA and other organizations have numerous times over the past several years pointed out this particular “California problem,” with no resolution yet developed.

What should institutions be doing?

Right now, we are in a “wait and see” situation, with everyone waiting for more direction. In the meantime, make sure your institution’s legal counsel and its leadership are aware of ED’s guidance so they can decide how to move forward.  Non-Title IV students are not affected, nor are students of out-of-California for-profit schools registered with BPPE. Each institution will need to take steps that it feels are the most appropriate, as determined by the institution’s leadership.

Other views

• https://www.insidehighered.com/digital-learning/article/2019/07/24/dispute-over-federal-rules-state-authorization-imperils?utm_source=Inside+Higher+Ed&utm_campaign=b81adb744f-DNU_2019_COPY_01&utm_medium=email&utm_term=0_1fcbc04421-b81adb744f-199401873&mc_cid=b81adb744f&mc_eid=db90f2ac82  
• https://ed.cooley.com/2019/07/23/department-announces-california-residents-at-out-of-state-public-and-nonprofit-institutions-ineligible-for-federal-student-aid/

We will continue to monitor this issue, of course, and let you know of further developments.

Marshall A. Hill
President & CEO
NC-SARA
July 24, 2019