For the second year in a row, proposals to remedy key consumer protection flaws in the State Authorization Reciprocity Agreement (SARA)—which governs state oversight of online colleges—failed to advance in the agreement’s internal policy modification process. This repeated failure underscores the need for alternative avenues for change to strengthen consumer protections for online students. Without these consumer protections, students may find themselves without remedy in the face of misconduct or sudden closure by their school.
How SARA Is Administered
SARA governs state oversight of colleges that enroll online students in multiple states. All states except for California currently participate in SARA. SARA has some upsides—it lowers schools’ administrative costs, making it easier for colleges to expand online. However, it has a critical flaw—SARA prohibits member states from enforcing many state consumer protection laws to protect residents enrolled in online programs run by out-of-state SARA schools. This creates a two-tiered system of protections in states that have robust consumer protection laws, with students at brick-and-mortar schools and residents enrolled at in-state online programs benefiting from that state’s strong protections while residents in programs run by out-of-state SARA schools are essentially rolling the dice when it comes to risk. In fact, SARA actually creates an incentive for schools offering online programs to locate in states with weaker consumer protections, allowing them to access markets in multiple states without having to comply with those states’ stricter consumer protection requirements. And to make matters worse, SARA does not include adequate baseline consumer protections for students enrolled in SARA-participating schools that could take the place of strong state consumer protection laws. This leaves many online students without adequate protections.
SARA is administered by a nongovernmental organization, the National Council for State Authorization Reciprocity Agreements, or NC-SARA. This year marked the second cycle of NC-SARA’s policy modification process, which provides a yearly opportunity for the consideration of proposals to change SARA policies. The policy modification process is carefully designed to enable strong public engagement by permitting stakeholders of all kinds to propose policy changes and comment on proposals. It also provides a high level of transparency: policy proposals, comments, and voting results are all posted on a public portal. However, despite these important positive aspects, the process has so far produced little in the way of significant remedies to SARA’s consumer protection deficiencies.
To advance, policy modification proposals must be approved by all four of the Regional Compacts (RCs), which are the nongovernmental organizations formed by a specific geographic region of states which are the parties to SARA. Proposals that are approved by all four RCs are then advanced for consideration by the NC-SARA Board. As was the case in last year’s cycle, while a number of proposals survived the RC votes, none of those address the significant consumer protection flaws in SARA.
Another Year without Progress from NC-SARA
For the second year in a row, NC-SARA’s policy modification process led to few meaningful changes in SARA policy. Several minor policy proposals were approved by all four RCs and will advance to a vote by the NC-SARA Board in late October 2024. The successful proposals would not be steps backward, but they are pretty trivial: for example, a requirement that SARA-participating schools provide SARA student complaint resolution policies on their website; a provision clarifying the existing requirement that states that lose SARA participation must meet state-specific authorization requirements; and a requirement for public sharing of the reason a SARA school is placed on provisional status.
Meanwhile, numerous proposals that were aimed at addressing some of the most glaring consumer protection problems with SARA failed to advance to a Board vote after being rejected by at least one of the RCs. The rejected proposals included, for instance, two proposals (a proposal submitted by the New England Board of Higher Education Regional Compact Steering Committee [NEBHE RSC] and a similar proposal submitted by the TCF team) to fix the the SARA policy that requires states to rely on a school’s self-attestation of compliance with SARA requirements and prohibits states from requesting evidence of compliance before accepting a school into SARA. Unfortunately, both of these proposals were rejected by at least one RC, and so failed to advance to a vote by the NC-SARA Board.
Two RCs also rejected a proposal that was jointly submitted by TCF, the Western Interstate Commission for Higher Education (WICHE), and the State Authorization Network (SAN) and WCET, which would have permitted states to accept SARA student complaints without first requiring the student to wait for their school to resolve the complaint. Current SARA policy requires member states to accept SARA complaints only after the student has exhausted the complaint process at their institution. This policy has prevented students from submitting complaints to states, as evidenced by the fact that over an eight-year period, twenty-five states participating in SARA report never receiving a single SARA complaint over the entire ten-year period of SARA’s existence. States that have never received a single SARA complaint include Arizona, where there are over 300,000 online students enrolled in more than thirty schools. SARA’s complaint policy creates a barrier for students and hampers states regulators’ ability to learn about institutional misconduct through student complaints.
The RCs also rejected a proposal submitted by the TCF team that would have changed SARA policy to permit states to enforce their own state consumer protection laws to protect students enrolled in out-of-state SARA schools. Under current policy, states with strong protections, such as refund and cancellation requirements, teach-out requirements, record retention laws, performance standards, or disclosure requirements, for example, are prohibited from applying these laws to protect residents enrolled online at out-of-state SARA schools. In addition, SARA does not include baseline protections to make up for any deficits, leaving some online students without adequate protections in the event of sudden school closures or engages in certain types of misconduct.
In addition, three separate proposals (submitted by the WICHE Regional Compact; the North Carolina State Education Assistance Authority [NCSEAA] and the UNC System Office; and TCF, respectively) that would have ensured that authority to make changes to SARA policy is reserved to the member states failed to advance. The proposals from WICHE and NCSEAA/UNC System Office were withdrawn by the submitters prior to the RC votes, while the proposal submitted by TCF was rejected by the RCs (including WICHE). These proposals would have addressed concerns about SARA’s delegation of decision-making authority to entities that are not the member states. Under current SARA policy, all changes to SARA policy, including proposals to strengthen student protections in SARA, are subject to veto by the NC-SARA Board. The NC-SARA Board includes representatives of member states, as well as representatives of regulated institutions and other non-state actors who may have a conflict of interest, and regardless, are not accountable to state regulators. The proposals would have ensured that SARA states, rather than regulated entities or other non-state actors, set consumer protection standards for regulated institutions.
Two RCs also rejected a TCF proposal to clarify SARA policy to ensure that states retain their right to revoke SARA participation for institutions in their state that engage in illegal conduct such as deceptive practices. The lack of clarity in SARA policy on this point is troubling, creating a risk that SARA states may feel constrained from taking action in the face of illegal conduct by SARA institutions that are physically located in their state, leaving online students vulnerable to abuses from such schools in all SARA states.
This repeated failure by NC-SARA to improve consumer protections underscores the need for alternative avenues for change. For example, one promising avenue is rulemaking by the U.S. Department of Education. Earlier this year, the department held a negotiated rulemaking to consider changes to the regulations governing state oversight of colleges that participate in the federal financial program, including reciprocity agreements for such institutions. During the negotiated rulemaking sessions, the department proposed a number of potential rule changes that would address some of the most serious deficiencies in SARA.
The U.S. Department of Education Should Step In
In the absence of progress from NC-SARA, the U.S. Department of Education should address SARA’s consumer protection flaws through strengthening federal rules governing reciprocity agreements. In January 2024, the department launched a series of negotiated rulemaking sessions to consider changes to federal rules governing state oversight of colleges that participate in federal financial aid. During the final negotiated rulemaking session in March 2024, the department provided a proposal for discussion that included several rule changes to the rules governing reciprocity agreements. The department has not yet released a formal proposed rule for public comment, but the department has indicated that the rule will likely be released by next year.
The department’s latest proposal at the negotiated rulemaking session preserves key aspects of the reciprocity model while effectively addressing some of the most glaring consumer protection deficiencies in the current system. Under the proposal, reciprocity agreements would be required to permit states to enforce at least some types of state consumer protection laws within the confines of reciprocity. Specifically, in addition to laws of general application (such as those related to fraud), states would have the option of enforcing laws related to college closures with respect to all schools operating in their state, including out-of-state SARA schools. For example, states would have the option of enforcing laws that protect students affected by abrupt school closure, such as requirements related to student tuition recovery funds, surety bond requirements, record retention requirements, or requirements related to teach-out plans or agreements. This would address some (but not all) of the consumer protection shortcomings of SARA, and would substantially improve online students’ protections.
The department’s proposal would also require institutions that enroll a substantial number of online students in a state to seek direct authorization in that state, rather than authorization through a reciprocity agreement. This proposal would require institutions that exceed a certain threshold of online enrollment in a state—proposed at 500 students from the state—to obtain authorization directly from such states rather than relying on participation in a reciprocity agreement. This proposal would preserve the overall structure and many of the benefits of the reciprocity agreement for the vast majority of institutions, while also ensuring that institutions that present a higher risk due to their larger enrollment are subject to that state’s oversight.
This approach would continue to provide the convenience and cost-saving benefits of reciprocity for institutions that enroll a small number of students in multiple states. Schools pose a lower risk to students and taxpayers in states where they only enroll a small number of students, because school misconduct or sudden closure would affect only a few students in those states. In addition, schools that enroll only a handful of students in multiple states may be less likely than schools with large footprints to have the resources to devote to the administrative requirements associated with obtaining authorization in multiple states. For institutions with a small footprint in multiple states, it would not be worth the cost of pursuing direct authorization in those states. In contrast, where an institution enrolls hundreds, or even thousands, of students in a state, the school receives significant revenue through those enrollments, making it more financially worthwhile for the institution to allocate resources toward meeting that state’s direct authorization requirements. In addition, institutions that enroll hundreds or thousands of students in a state present larger consumer protection risks to that states’ students, since misconduct or sudden closure would affect hundreds or thousands of residents.
In addition, the proposal to limit authorization through reciprocity to “small footprint” schools would have the effect of leveling the playing field between in-state and out-of-state institutions in SARA states. In states with robust consumer protections, SARA currently provides a competitive advantage to out-of-state schools, which are subject to fewer consumer protection requirements and in some cases pay lower authorization fees than in-state schools. Requiring large-footprint schools to obtain direct authorization would remedy this problem and would ensure that in-state schools do not face as much of a competitive disadvantage relative to out-of-state SARA schools.
Finally, the department’s proposal regarding small and large-footprint schools would help ensure that SARA states have adequate funding for oversight activities. Under the current system, SARA schools pay fees to NC-SARA, the organization that administers SARA, but schools do not pay fees to states where they operate online via the reciprocity agreement. Under the department’s proposal, schools would be required to pay authorization fees directly to all of the states where they operate with a large footprint, rather than to NC-SARA, ensuring that the states have additional resources for oversight activities.
The department’s 2024 proposal also includes a provision that makes it explicit that states that are members of a reciprocity agreement must be able to revoke authorization for in-state schools where an institution violates the state’s general-purpose laws, such as laws prohibiting fraud and deceptive practices. This clarifies existing law and empowers states to act to protect students against egregious misconduct.
In addition, the department’s 2024 proposal partially addresses the issue of delegation of decision-making authority to non-state actors, an issue with NC-SARA’s governance that the RCs declined to correct in this year’s policy modification process. The department’s proposal provides that if a reciprocity agreement is administered by an organization, the governing body of the organization must consist solely of representatives from state regulatory and licensing bodies, enforcement agencies, and attorneys general offices. This provision is intended to address concerns that SARA delegates authority to set consumer protection standards, in part, to the NC-SARA Board, which includes representatives of regulated institutions and other non-state actors who may have a conflict of interest and are not accountable to state officials or taxpayers.
While the department’s proposal would address concerns about delegation to the NC-SARA Board, the proposal does not address delegation of standard-setting authority to any other entity. It would be more effective to prohibit delegation of standard-setting authority to any non-state actors, rather than to limit the prohibition to the NC-SARA Board. The department’s proposal would not, for example, address SARA’s delegation of standard-setting authority to Regional Compact Steering Committees, which in some cases, also include representatives of regulated entities and other individuals who may have conflicts of interest.
Finally, the department’s proposal includes several provisions aimed at strengthening complaint handling in the context of reciprocity agreements. This includes a provision that would require reciprocity agreements to permit states to accept complaints about an institution that have not yet been submitted to and resolved by the institution of higher education. As noted above, current SARA policy requires member states to accept SARA complaints only after the student has exhausted the complaint process at their institution, and the RCs rejected a proposal to open up this process. This policy hampers state regulators’ ability to learn about institutional misconduct through the submission of student complaints.
The department’s proposal would go a long way toward remedying the consumer protection gaps in SARA and strengthening protections for online students.
Tags: online college, online learning, Student protections
State Oversight of Online Colleges Needs an Overhaul
For the second year in a row, proposals to remedy key consumer protection flaws in the State Authorization Reciprocity Agreement (SARA)—which governs state oversight of online colleges—failed to advance in the agreement’s internal policy modification process. This repeated failure underscores the need for alternative avenues for change to strengthen consumer protections for online students. Without these consumer protections, students may find themselves without remedy in the face of misconduct or sudden closure by their school.
How SARA Is Administered
SARA governs state oversight of colleges that enroll online students in multiple states. All states except for California currently participate in SARA. SARA has some upsides—it lowers schools’ administrative costs, making it easier for colleges to expand online. However, it has a critical flaw—SARA prohibits member states from enforcing many state consumer protection laws to protect residents enrolled in online programs run by out-of-state SARA schools. This creates a two-tiered system of protections in states that have robust consumer protection laws, with students at brick-and-mortar schools and residents enrolled at in-state online programs benefiting from that state’s strong protections while residents in programs run by out-of-state SARA schools are essentially rolling the dice when it comes to risk. In fact, SARA actually creates an incentive for schools offering online programs to locate in states with weaker consumer protections, allowing them to access markets in multiple states without having to comply with those states’ stricter consumer protection requirements. And to make matters worse, SARA does not include adequate baseline consumer protections for students enrolled in SARA-participating schools that could take the place of strong state consumer protection laws. This leaves many online students without adequate protections.
SARA is administered by a nongovernmental organization, the National Council for State Authorization Reciprocity Agreements, or NC-SARA. This year marked the second cycle of NC-SARA’s policy modification process, which provides a yearly opportunity for the consideration of proposals to change SARA policies. The policy modification process is carefully designed to enable strong public engagement by permitting stakeholders of all kinds to propose policy changes and comment on proposals. It also provides a high level of transparency: policy proposals, comments, and voting results are all posted on a public portal. However, despite these important positive aspects, the process has so far produced little in the way of significant remedies to SARA’s consumer protection deficiencies.
To advance, policy modification proposals must be approved by all four of the Regional Compacts (RCs), which are the nongovernmental organizations formed by a specific geographic region of states which are the parties to SARA. Proposals that are approved by all four RCs are then advanced for consideration by the NC-SARA Board. As was the case in last year’s cycle, while a number of proposals survived the RC votes, none of those address the significant consumer protection flaws in SARA.
Another Year without Progress from NC-SARA
For the second year in a row, NC-SARA’s policy modification process led to few meaningful changes in SARA policy. Several minor policy proposals were approved by all four RCs and will advance to a vote by the NC-SARA Board in late October 2024. The successful proposals would not be steps backward, but they are pretty trivial: for example, a requirement that SARA-participating schools provide SARA student complaint resolution policies on their website; a provision clarifying the existing requirement that states that lose SARA participation must meet state-specific authorization requirements; and a requirement for public sharing of the reason a SARA school is placed on provisional status.
Meanwhile, numerous proposals that were aimed at addressing some of the most glaring consumer protection problems with SARA failed to advance to a Board vote after being rejected by at least one of the RCs. The rejected proposals included, for instance, two proposals (a proposal submitted by the New England Board of Higher Education Regional Compact Steering Committee [NEBHE RSC] and a similar proposal submitted by the TCF team) to fix the the SARA policy that requires states to rely on a school’s self-attestation of compliance with SARA requirements and prohibits states from requesting evidence of compliance before accepting a school into SARA. Unfortunately, both of these proposals were rejected by at least one RC, and so failed to advance to a vote by the NC-SARA Board.
Two RCs also rejected a proposal that was jointly submitted by TCF, the Western Interstate Commission for Higher Education (WICHE), and the State Authorization Network (SAN) and WCET, which would have permitted states to accept SARA student complaints without first requiring the student to wait for their school to resolve the complaint. Current SARA policy requires member states to accept SARA complaints only after the student has exhausted the complaint process at their institution. This policy has prevented students from submitting complaints to states, as evidenced by the fact that over an eight-year period, twenty-five states participating in SARA report never receiving a single SARA complaint over the entire ten-year period of SARA’s existence. States that have never received a single SARA complaint include Arizona, where there are over 300,000 online students enrolled in more than thirty schools. SARA’s complaint policy creates a barrier for students and hampers states regulators’ ability to learn about institutional misconduct through student complaints.
The RCs also rejected a proposal submitted by the TCF team that would have changed SARA policy to permit states to enforce their own state consumer protection laws to protect students enrolled in out-of-state SARA schools. Under current policy, states with strong protections, such as refund and cancellation requirements, teach-out requirements, record retention laws, performance standards, or disclosure requirements, for example, are prohibited from applying these laws to protect residents enrolled online at out-of-state SARA schools. In addition, SARA does not include baseline protections to make up for any deficits, leaving some online students without adequate protections in the event of sudden school closures or engages in certain types of misconduct.
In addition, three separate proposals (submitted by the WICHE Regional Compact; the North Carolina State Education Assistance Authority [NCSEAA] and the UNC System Office; and TCF, respectively) that would have ensured that authority to make changes to SARA policy is reserved to the member states failed to advance. The proposals from WICHE and NCSEAA/UNC System Office were withdrawn by the submitters prior to the RC votes, while the proposal submitted by TCF was rejected by the RCs (including WICHE). These proposals would have addressed concerns about SARA’s delegation of decision-making authority to entities that are not the member states. Under current SARA policy, all changes to SARA policy, including proposals to strengthen student protections in SARA, are subject to veto by the NC-SARA Board. The NC-SARA Board includes representatives of member states, as well as representatives of regulated institutions and other non-state actors who may have a conflict of interest, and regardless, are not accountable to state regulators. The proposals would have ensured that SARA states, rather than regulated entities or other non-state actors, set consumer protection standards for regulated institutions.
Two RCs also rejected a TCF proposal to clarify SARA policy to ensure that states retain their right to revoke SARA participation for institutions in their state that engage in illegal conduct such as deceptive practices. The lack of clarity in SARA policy on this point is troubling, creating a risk that SARA states may feel constrained from taking action in the face of illegal conduct by SARA institutions that are physically located in their state, leaving online students vulnerable to abuses from such schools in all SARA states.
This repeated failure by NC-SARA to improve consumer protections underscores the need for alternative avenues for change. For example, one promising avenue is rulemaking by the U.S. Department of Education. Earlier this year, the department held a negotiated rulemaking to consider changes to the regulations governing state oversight of colleges that participate in the federal financial program, including reciprocity agreements for such institutions. During the negotiated rulemaking sessions, the department proposed a number of potential rule changes that would address some of the most serious deficiencies in SARA.
The U.S. Department of Education Should Step In
In the absence of progress from NC-SARA, the U.S. Department of Education should address SARA’s consumer protection flaws through strengthening federal rules governing reciprocity agreements. In January 2024, the department launched a series of negotiated rulemaking sessions to consider changes to federal rules governing state oversight of colleges that participate in federal financial aid. During the final negotiated rulemaking session in March 2024, the department provided a proposal for discussion that included several rule changes to the rules governing reciprocity agreements. The department has not yet released a formal proposed rule for public comment, but the department has indicated that the rule will likely be released by next year.
The department’s latest proposal at the negotiated rulemaking session preserves key aspects of the reciprocity model while effectively addressing some of the most glaring consumer protection deficiencies in the current system. Under the proposal, reciprocity agreements would be required to permit states to enforce at least some types of state consumer protection laws within the confines of reciprocity. Specifically, in addition to laws of general application (such as those related to fraud), states would have the option of enforcing laws related to college closures with respect to all schools operating in their state, including out-of-state SARA schools. For example, states would have the option of enforcing laws that protect students affected by abrupt school closure, such as requirements related to student tuition recovery funds, surety bond requirements, record retention requirements, or requirements related to teach-out plans or agreements. This would address some (but not all) of the consumer protection shortcomings of SARA, and would substantially improve online students’ protections.
The department’s proposal would also require institutions that enroll a substantial number of online students in a state to seek direct authorization in that state, rather than authorization through a reciprocity agreement. This proposal would require institutions that exceed a certain threshold of online enrollment in a state—proposed at 500 students from the state—to obtain authorization directly from such states rather than relying on participation in a reciprocity agreement. This proposal would preserve the overall structure and many of the benefits of the reciprocity agreement for the vast majority of institutions, while also ensuring that institutions that present a higher risk due to their larger enrollment are subject to that state’s oversight.
This approach would continue to provide the convenience and cost-saving benefits of reciprocity for institutions that enroll a small number of students in multiple states. Schools pose a lower risk to students and taxpayers in states where they only enroll a small number of students, because school misconduct or sudden closure would affect only a few students in those states. In addition, schools that enroll only a handful of students in multiple states may be less likely than schools with large footprints to have the resources to devote to the administrative requirements associated with obtaining authorization in multiple states. For institutions with a small footprint in multiple states, it would not be worth the cost of pursuing direct authorization in those states. In contrast, where an institution enrolls hundreds, or even thousands, of students in a state, the school receives significant revenue through those enrollments, making it more financially worthwhile for the institution to allocate resources toward meeting that state’s direct authorization requirements. In addition, institutions that enroll hundreds or thousands of students in a state present larger consumer protection risks to that states’ students, since misconduct or sudden closure would affect hundreds or thousands of residents.
In addition, the proposal to limit authorization through reciprocity to “small footprint” schools would have the effect of leveling the playing field between in-state and out-of-state institutions in SARA states. In states with robust consumer protections, SARA currently provides a competitive advantage to out-of-state schools, which are subject to fewer consumer protection requirements and in some cases pay lower authorization fees than in-state schools. Requiring large-footprint schools to obtain direct authorization would remedy this problem and would ensure that in-state schools do not face as much of a competitive disadvantage relative to out-of-state SARA schools.
Finally, the department’s proposal regarding small and large-footprint schools would help ensure that SARA states have adequate funding for oversight activities. Under the current system, SARA schools pay fees to NC-SARA, the organization that administers SARA, but schools do not pay fees to states where they operate online via the reciprocity agreement. Under the department’s proposal, schools would be required to pay authorization fees directly to all of the states where they operate with a large footprint, rather than to NC-SARA, ensuring that the states have additional resources for oversight activities.
The department’s 2024 proposal also includes a provision that makes it explicit that states that are members of a reciprocity agreement must be able to revoke authorization for in-state schools where an institution violates the state’s general-purpose laws, such as laws prohibiting fraud and deceptive practices. This clarifies existing law and empowers states to act to protect students against egregious misconduct.
In addition, the department’s 2024 proposal partially addresses the issue of delegation of decision-making authority to non-state actors, an issue with NC-SARA’s governance that the RCs declined to correct in this year’s policy modification process. The department’s proposal provides that if a reciprocity agreement is administered by an organization, the governing body of the organization must consist solely of representatives from state regulatory and licensing bodies, enforcement agencies, and attorneys general offices. This provision is intended to address concerns that SARA delegates authority to set consumer protection standards, in part, to the NC-SARA Board, which includes representatives of regulated institutions and other non-state actors who may have a conflict of interest and are not accountable to state officials or taxpayers.
While the department’s proposal would address concerns about delegation to the NC-SARA Board, the proposal does not address delegation of standard-setting authority to any other entity. It would be more effective to prohibit delegation of standard-setting authority to any non-state actors, rather than to limit the prohibition to the NC-SARA Board. The department’s proposal would not, for example, address SARA’s delegation of standard-setting authority to Regional Compact Steering Committees, which in some cases, also include representatives of regulated entities and other individuals who may have conflicts of interest.
Finally, the department’s proposal includes several provisions aimed at strengthening complaint handling in the context of reciprocity agreements. This includes a provision that would require reciprocity agreements to permit states to accept complaints about an institution that have not yet been submitted to and resolved by the institution of higher education. As noted above, current SARA policy requires member states to accept SARA complaints only after the student has exhausted the complaint process at their institution, and the RCs rejected a proposal to open up this process. This policy hampers state regulators’ ability to learn about institutional misconduct through the submission of student complaints.
The department’s proposal would go a long way toward remedying the consumer protection gaps in SARA and strengthening protections for online students.
Tags: online college, online learning, Student protections