When a student lives in, say, Ohio and is attending an online college based in Arkansas, which state agency has the responsibility for such things as investigating misleading claims by the college, or enforcing rules about tuition refunds in the case of the college’s sudden closure? As it turns out, it’s complicated. Without some type of reciprocity agreement between the two states, a student attending an online program based in another state may not have the same consumer protections that they would have if they attended a college in their own state. Reciprocity arrangements between states can help to clarify these types of jurisdictional issues. But even reciprocity agreements can be problematic—in higher education, the current multistate reciprocity arrangement for online college programs, the State Authorization Reciprocity Agreement (SARA), lacks important safeguards for students.
Legislation advancing in the California State Legislature could lead to significant improvements in consumer protections for online students across state lines. California’s leverage comes from the fact that it is the only state not participating in SARA. The California legislation, SB 790, lays out the key consumer protections that must be part of any reciprocity agreement that the state joins. This means that SARA either needs to be improved to match the California bill’s standards, or California may join a new alternative agreement. The latter is becoming more viable, as some states in SARA are frustrated that the compact’s weaknesses are not being addressed.
For the past few years, consumer protection organizations, state attorneys general, and at least one SARA member state have been raising concerns about SARA’s deficiencies. The problems include:
- SARA sets an extremely low bar for consumer protection and also prohibits SARA member states from enforcing many of their own state consumer protection laws, such as laws related to sudden closures, with respect to out-of-state SARA schools. For states that have strong consumer protections, this creates a two-tiered system in which students living in the state who are enrolled in online programs at SARA schools based outside the state are afforded less protection than students attending schools based in the state.
- SARA prohibits member states from acting on most categories of complaints by students until the student has exhausted their schools’ procedures for complaint resolution. This can delay or prevent state regulators from learning about a problem at a college.
- SARA states do not have full control over setting SARA’s consumer protection standards. The board of directors, which includes representatives of regulated institutions and others who are not accountable to member states, has veto power over all proposed changes to SARA policy, including efforts to strengthen consumer protection standards.
Over the past few years, consumer protection organizations and other stakeholders have been seeking repairs to SARA under a new process set up to address the growing concerns. However, while the organization that administers SARA has taken positive steps to create a more transparent and open mechanism for initiating SARA policy changes, actual progress has been extremely limited.
SB 790 takes a productive next step by laying out the specific conditions under which California could join a reciprocity agreement. This would arm California to pursue a stronger, alternative reciprocity agreement, or could help persuade SARA stakeholders to move more quickly to improve its policies.
Some of the most important elements of the legislation, which was introduced by State Senator Christopher Cabaldon, are described below.
The California bill would limit eligibility to public and nonprofit schools.
The California legislation recognizes the consumer protection benefits of public and nonprofit control of an institution. The bill would permit nonprofit and public out-of-state institutions to obtain authorization from California to enroll students residing in California pursuant to a reciprocity agreement, but would require for-profit out-of-state institutions to continue to register with the California Bureau for Private and Post-Secondary Education (BPPE). That is, the reciprocity-based exemption from registration requirements allowed under the bill would be available to public and nonprofit institutions, but not to for-profit colleges.
Limiting the reciprocity exemption to nonprofit and public institutions is appropriate, given the greater hazards posed by for-profit institutions. For-profit colleges are profit driven and owner and investor controlled. Owner and investor control of faculty, curriculum, advertising, and recruitment has repeatedly led to predatory abuses, low investment in teaching and learning, higher rates of student loan default, worse labor market outcomes, and deceptive enrollment practices by for-profit colleges. Contrary to the self-serving claims of for-profit lobbyists, it is not invidious “discrimination” against for-profit colleges to recognize how financial interests can drive leadership decisions and behavior.
Some lobbyists have falsely implied that SB 790 would prevent for-profit institutions from being able to enroll Californians. Nothing could be further from the truth. The bill does not limit for-profit institutions from enrolling California residents, nor does it impose any new requirements on such schools. Under SB 790, out-of-state for-profit companies would continue to enroll California students as they do today, by registering with the BPPE as they already do.
The California bill provides an important “escape hatch” for state regulators.
For state regulators and state attorneys general offices, one of the most worrying things about SARA is that once a state has joined, the state must rely on a college’s home state to address concerns about the way it is treating students. That means that even after a state identifies problems at an out-of-state SARA institution, state regulators have limited options for protecting online students in their state from the school’s misconduct. Theoretically, a state could withdraw from reciprocity in such situations, but this is unrealistic because that would mean that every college in the state would need to re-engage with multiple states’ authorization requirements to continue to enroll students in other states.
SB 790 addresses this problem by ensuring that if California joins a reciprocity agreement, California would retain the ability to require an out-of-state institution that was operating pursuant to a reciprocity agreement to become subject to registration requirements in California, with three months notice, “in order to protect students, prevent misrepresentation to the public, or prevent the loss of funds paid from public resources or student tuition.” (SB 790, Article 3, Section 66920(a)(3).) At its most effective, this provision would rarely be triggered: in the case of a state that is not doing a proper job of oversight, this provision would give California a tool to elevate its concerns, by informing the institution and the state it is located in that California is considering triggering the provision. This provision provides an important escape hatch to California to ensure that in an emergency, the state retains the ability to take action to protect California students.
The California bill would ensure that California can investigate student complaints.
Some of the most problematic components of SARA are those that place shackles on state law enforcement agencies. As noted above, SARA prohibits states from enforcement of some state consumer protection laws, and requires agencies to defer to schools—to exhaust the school’s own procedures—before investigating complaints. (See SARA Policy Manual 25.1 Section 4.5(a).) The prohibition on regulators acting on complaints that have not already gone through the school puts predatory for-profit school operators and their hired recruiters in the driver’s seat, giving them the power to prevent or delay state agency investigations of potentially serious violations. While the complaints requirement has a fraud exception, students would not know what does or doesn’t fit into this exception. SB 790 would ensure that California would not join any reciprocity agreement that places these types of restrictions on the California attorney general, BPPE, or other California SARA-portal agency regarding acting on complaints.
The California bill does have some shortcomings.
The new bill, while a largely positive step, is not perfect. There are at least two significant flaws in the legislation:
- The bill would leave some California students—that is, those enrolled at out-of-state schools operating in California pursuant to a reciprocity agreement—without access to the California’s Student Tuition Recovery Fund, which provides for restitution in the event of fraud or sudden school closure. While the SARA Policy Manual includes a requirement that SARA member states “make every reasonable effort to assure that students receive the services for which they have paid or reasonable financial compensation for those not received,” fewer than half of SARA member states have a student tuition recovery fund, and none of these provide as broad relief as California’s Student Tuition Recovery Fund.
- The bill does not adequately protect against institutions that have managed to secure a “public” or “nonprofit” label but are subject to excessive control by profiteers, either through contracts or conflicts of interest in governance. To address this, the bill should provide that where a state regulator finds that a purported nonprofit or public institution is operated as a for-profit, that institution is not eligible for the exemption from registration requirements afforded to schools that participate in reciprocity.
California legislators should consider addressing these shortcomings via amendments to the bill or through future legislation.
The California bill could spur nationwide reforms.
The California bill is just one of several recent developments that demonstrate that there is a growing consensus on the need for reforms or alternatives to the current reciprocity agreement. For example, Washington State recently passed a law that provides that if SARA does not make policy changes that would permit Washington to enforce more of its own consumer protection laws with respect to out of state SARA schools by July 2028, Washington may leave the agreement, or Washington may seek to enter into an alternative reciprocity agreement.
In addition, a recent proposal to the SARA Policy Modification process from W-SARA Regional Compact Steering Committee (representing SARA member states in the Western region of the country) proposed to modify existing SARA policy to permit member states to enforce certain state consumer protection laws against out-of-state SARA schools under narrow circumstances. These developments, together with the California reciprocity bill, demonstrate an expansion of calls to reform or replace SARA to enable states to adequately protect online students.
Tags: california, online education, SARA
California Bill Is a Step Forward for Online College Oversight
When a student lives in, say, Ohio and is attending an online college based in Arkansas, which state agency has the responsibility for such things as investigating misleading claims by the college, or enforcing rules about tuition refunds in the case of the college’s sudden closure? As it turns out, it’s complicated. Without some type of reciprocity agreement between the two states, a student attending an online program based in another state may not have the same consumer protections that they would have if they attended a college in their own state. Reciprocity arrangements between states can help to clarify these types of jurisdictional issues. But even reciprocity agreements can be problematic—in higher education, the current multistate reciprocity arrangement for online college programs, the State Authorization Reciprocity Agreement (SARA), lacks important safeguards for students.
Legislation advancing in the California State Legislature could lead to significant improvements in consumer protections for online students across state lines. California’s leverage comes from the fact that it is the only state not participating in SARA. The California legislation, SB 790, lays out the key consumer protections that must be part of any reciprocity agreement that the state joins. This means that SARA either needs to be improved to match the California bill’s standards, or California may join a new alternative agreement. The latter is becoming more viable, as some states in SARA are frustrated that the compact’s weaknesses are not being addressed.
For the past few years, consumer protection organizations, state attorneys general, and at least one SARA member state have been raising concerns about SARA’s deficiencies. The problems include:
Over the past few years, consumer protection organizations and other stakeholders have been seeking repairs to SARA under a new process set up to address the growing concerns. However, while the organization that administers SARA has taken positive steps to create a more transparent and open mechanism for initiating SARA policy changes, actual progress has been extremely limited.
SB 790 takes a productive next step by laying out the specific conditions under which California could join a reciprocity agreement. This would arm California to pursue a stronger, alternative reciprocity agreement, or could help persuade SARA stakeholders to move more quickly to improve its policies.
Some of the most important elements of the legislation, which was introduced by State Senator Christopher Cabaldon, are described below.
The California bill would limit eligibility to public and nonprofit schools.
The California legislation recognizes the consumer protection benefits of public and nonprofit control of an institution. The bill would permit nonprofit and public out-of-state institutions to obtain authorization from California to enroll students residing in California pursuant to a reciprocity agreement, but would require for-profit out-of-state institutions to continue to register with the California Bureau for Private and Post-Secondary Education (BPPE). That is, the reciprocity-based exemption from registration requirements allowed under the bill would be available to public and nonprofit institutions, but not to for-profit colleges.
Limiting the reciprocity exemption to nonprofit and public institutions is appropriate, given the greater hazards posed by for-profit institutions. For-profit colleges are profit driven and owner and investor controlled. Owner and investor control of faculty, curriculum, advertising, and recruitment has repeatedly led to predatory abuses, low investment in teaching and learning, higher rates of student loan default, worse labor market outcomes, and deceptive enrollment practices by for-profit colleges. Contrary to the self-serving claims of for-profit lobbyists, it is not invidious “discrimination” against for-profit colleges to recognize how financial interests can drive leadership decisions and behavior.
Some lobbyists have falsely implied that SB 790 would prevent for-profit institutions from being able to enroll Californians. Nothing could be further from the truth. The bill does not limit for-profit institutions from enrolling California residents, nor does it impose any new requirements on such schools. Under SB 790, out-of-state for-profit companies would continue to enroll California students as they do today, by registering with the BPPE as they already do.
The California bill provides an important “escape hatch” for state regulators.
For state regulators and state attorneys general offices, one of the most worrying things about SARA is that once a state has joined, the state must rely on a college’s home state to address concerns about the way it is treating students. That means that even after a state identifies problems at an out-of-state SARA institution, state regulators have limited options for protecting online students in their state from the school’s misconduct. Theoretically, a state could withdraw from reciprocity in such situations, but this is unrealistic because that would mean that every college in the state would need to re-engage with multiple states’ authorization requirements to continue to enroll students in other states.
SB 790 addresses this problem by ensuring that if California joins a reciprocity agreement, California would retain the ability to require an out-of-state institution that was operating pursuant to a reciprocity agreement to become subject to registration requirements in California, with three months notice, “in order to protect students, prevent misrepresentation to the public, or prevent the loss of funds paid from public resources or student tuition.” (SB 790, Article 3, Section 66920(a)(3).) At its most effective, this provision would rarely be triggered: in the case of a state that is not doing a proper job of oversight, this provision would give California a tool to elevate its concerns, by informing the institution and the state it is located in that California is considering triggering the provision. This provision provides an important escape hatch to California to ensure that in an emergency, the state retains the ability to take action to protect California students.
The California bill would ensure that California can investigate student complaints.
Some of the most problematic components of SARA are those that place shackles on state law enforcement agencies. As noted above, SARA prohibits states from enforcement of some state consumer protection laws, and requires agencies to defer to schools—to exhaust the school’s own procedures—before investigating complaints. (See SARA Policy Manual 25.1 Section 4.5(a).) The prohibition on regulators acting on complaints that have not already gone through the school puts predatory for-profit school operators and their hired recruiters in the driver’s seat, giving them the power to prevent or delay state agency investigations of potentially serious violations. While the complaints requirement has a fraud exception, students would not know what does or doesn’t fit into this exception. SB 790 would ensure that California would not join any reciprocity agreement that places these types of restrictions on the California attorney general, BPPE, or other California SARA-portal agency regarding acting on complaints.
The California bill does have some shortcomings.
The new bill, while a largely positive step, is not perfect. There are at least two significant flaws in the legislation:
California legislators should consider addressing these shortcomings via amendments to the bill or through future legislation.
The California bill could spur nationwide reforms.
The California bill is just one of several recent developments that demonstrate that there is a growing consensus on the need for reforms or alternatives to the current reciprocity agreement. For example, Washington State recently passed a law that provides that if SARA does not make policy changes that would permit Washington to enforce more of its own consumer protection laws with respect to out of state SARA schools by July 2028, Washington may leave the agreement, or Washington may seek to enter into an alternative reciprocity agreement.
In addition, a recent proposal to the SARA Policy Modification process from W-SARA Regional Compact Steering Committee (representing SARA member states in the Western region of the country) proposed to modify existing SARA policy to permit member states to enforce certain state consumer protection laws against out-of-state SARA schools under narrow circumstances. These developments, together with the California reciprocity bill, demonstrate an expansion of calls to reform or replace SARA to enable states to adequately protect online students.
Tags: california, online education, SARA