Today, millions of students attend college online, including millions enrolled in online programs offered by colleges that are physically located in another state. These online students may assume that they are protected by the same basic consumer protection laws that cover brick-and-mortar students in their state, such as refund and cancellation rights, and tuition reimbursement funds that help students when schools close abruptly. In reality, the current online college oversight system leaves many online students unprotected. A national agreement between states—the State Authorization Reciprocity Agreement (SARA)—prohibits states with strong consumer protection laws from enforcing many of their own state laws to protect students at out-of-state SARA member schools. In lieu of these strong state laws, SARA provides only a set of minimum standards that schools must meet in order to participate, leaving students at out-of-state SARA schools inadequately protected.

This year, the entity that administers SARA, the National Council for State Authorization Reciprocity Agreements (NC-SARA), unveiled a new process for setting consumer protection standards for SARA schools. NC-SARA’s new process provides an important opportunity for reforms that elevate consumer protections for SARA students.

SARA enables schools that meet minimum standards to operate in all member states without having to apply for authorization in each state. SARA effectively lowers barriers for schools to offer online programs in multiple states, easing the way for institutions to expand the reach of their online programs. SARA’s impact is immense—almost 6 million students were enrolled in SARA-participating schools in fall 2020, including more than 1.5 million students enrolled in online programs based outside of their state.1 Every state except for California is a SARA member.2 However, the agreement’s standards set an extremely low bar for consumer protection, leaving millions of online students vulnerable to abuse by unscrupulous schools.

SARA’s impact is immense—almost 6 million students were enrolled in SARA-participating schools in fall 2020, including more than 1.5 million students enrolled in online programs based outside of their state.

SARA schools are subject to two sets of requirements: any requirements applied by the state where the school has a physical presence for in-state institutions, and the standards for participation in SARA. State requirements for in-state school authorization vary widely. Some states have almost no requirements at all, while others have many, particularly regarding for-profit schools. And so while some state standards may robustly protect in-state students, the standards required for participation in SARA offer inadequate protection to over a million online students.

Compounding the problem, SARA prohibits member states from enforcing stronger state consumer protection requirements with respect to out-of-state SARA schools operating in their state. For states with strong consumer protection laws, this creates a two-tiered system in which online students at SARA schools based outside the state are afforded significantly less protection than students attending schools based in the state. Because the SARA requirements are so minimal, and SARA prohibits states from enforcing their state requirements with respect to out-of-state SARA schools, states with stronger regulations are forced to leave online students vulnerable to out-of-state schools based in low-regulation states.

Furthermore, while predatory behavior in higher education historically has been the domain mostly of for-profit schools, recently, public universities have begun to follow similar practices, having purchased or partnered with for-profit institutions to offer online programs, which pose higher risks to students.3 This development poses a problem, because many states’ consumer protection mechanisms for public institutions are minimal. States understandably rely on state control of their own public institutions for oversight, and therefore the state’s laws are not structured to apply the state’s private or for-profit college oversight requirements to any of their public institutions that now may have essentially for-profit arms. But states do not have even this modicum of control over out-of-state public institutions that participate in SARA. Low SARA standards mean that out-of-state public institutions that participate in SARA can potentially prey on students in other states without adequate oversight.

Another significant problem with SARA is that member states do not have full control over setting or changing SARA’s standards. Although recent changes have made the SARA policy-modification process more transparent and elevated involvement by the regional compacts that represent states, the NC-SARA Board of Directors retains veto power over all proposed changes to SARA policy. States do not hold the majority of positions on the board, and therefore lack control over the board’s decisions. In fact, the NC-SARA Board of Directors includes representatives of regulated institutions, representatives of accreditors, and various other individuals.4 States’ lack of control over the board raises concerns that the board could veto states’ efforts to improve consumer protections for SARA institutions. Authority over setting policy for a reciprocity agreement should be reserved to the member states or their representatives, the regional compacts, not to regulated institutions.5

Finally, SARA has no mechanism to assure member states have adequate resources to properly oversee SARA institutions and enforce SARA standards in their states. States need to have sufficient staff to review institutions’ applications for authorization, investigate and resolve complaints about SARA schools, monitor schools’ ongoing compliance with SARA standards, and take action, when necessary, to enforce the standards. When any member state lacks such capacity, students in that state and all other SARA member states are at risk.

The solution to these problems is for SARA member states and NC-SARA’s governing board to strengthen consumer protection standards for participating SARA schools, modify NC-SARA’s governance structure so that states are in control of setting such standards, and take steps to ensure SARA member states’ enforcement capacity. Each of these goals can be addressed in NC-SARA’s new policy modification process.

NC-SARA’s New Policy Modification Process

In June 2022, the NC-SARA Board of Directors adopted a revised process for making decisions about proposed changes to SARA policy.6 This month, NC-SARA issued a call for policy proposals.7 The deadline for submitting proposals is February 3, 2023.

The new policy modification process provides a mechanism for states, regional compacts, consumer advocates, regulated institutions, oversight agencies, accreditors, and members of the public to provide proposals for new policies or modification of existing policies. To promote transparency and public engagement, the proposals are posted on the NC-SARA website.8 NC-SARA will hold a series of public forums to provide opportunities for public comment on the proposals. Proposals will then be voted on by each of the regional compacts that represent states. Proposals that are approved by all four regional compacts will advance for consideration by the NC-SARA Board of Directors. Proposals that are approved by the board will then be enacted.

This new policy process provides a critical opportunity to strengthen the consumer protection standards in SARA. The Century Foundation, together with a number of other consumer advocacy organizations, has submitted several proposals for elevating consumer protection standards.9

What Additional Consumer Protections Are Needed to Protect SARA Students?

Outside of SARA, many states have different standards and different oversight regimes for public, private nonprofit, and for-profit schools. These different standards or processes reflect states’ recognition of the different levels of risk to students posed by the different types of institutional control. SARA policy, however, prohibits member states from recognizing and acting on these different risks in their oversight.10 As long as SARA continues to include for-profit institutions or institutions with essentially for-profit divisions, SARA’s standards must be strong enough to counter the financial incentives for misconduct found in the for-profit school sector.

To adequately protect online students, including those enrolled in higher-risk for-profit programs, SARA must, at minimum, add these six important provisions:

  1. permit states to enforce state-level consumer protection laws with respect to out-of-state SARA member schools;
  2. ensure that SARA states control standard-setting for participating institutions;
  3. ensure that SARA students are protected in the event of an abrupt closure;
  4. remove barriers to filing consumer complaints about SARA schools;
  5. ensure that SARA students are protected by an adequate refund requirement; and
  6. ensure that SARA states can deny or revoke participation for schools that pose a risk to students.

Importantly, adopting higher consumer protection standards for SARA schools would not require member states to enact new state laws or regulations. Rather, member states would simply incorporate the higher standards into SARA’s requirements for institutional participation.

1. SARA must permit states to enforce state consumer protection laws.

While a reciprocity agreement necessarily requires some exemptions from state laws for participating schools, SARA’s blanket prohibition on enforcement of education-specific or sector-specific consumer protection standards11 is not necessary and undermines states’ ability to protect online students in their state. In states with strong consumer protection laws, SARA students at schools based out of state are left without the protections afforded to other online and brick-and-mortar students. The requirement to waive state protections also significantly limits state regulators’ oversight tools with respect to out-of-state SARA schools. And because there are few protections included in the SARA policies, students deprived of state protections are not afforded comparable protections under SARA.

The rule requiring states to waive enforcement of education-specific and sector-specific consumer protection laws, which is included in the Unified State Authorization Reciprocity Agreement (USARA)12 as well as the SARA Policy Manual, also creates uncertainty for both schools and state regulators concerning which state laws apply, and which state laws are waived, with respect to out-of-state SARA schools. States should be permitted to enforce critical state consumer protection laws, such as prohibitions on typical types of misconduct; cancellation and refund requirements; disclosure requirements; and other protections. SARA states should be required to waive only those state requirements that directly relate to the procedures for institutional authorization, such as application or fee requirements. Moreover, to address uncertainty concerning which state laws apply and which laws are waived, SARA member states should be required to publicly declare which state laws are waived with respect to out-of-state SARA schools.

2. States must be in control of setting and changing consumer protection standards.

SARA standards for participating institutions must be established by the member states. Although recent changes to the policy modification process have given a greater voice to the states through empowering states’ representatives, the regional compacts, NC-SARA’s Board of Directors retains veto power over all proposed changes to SARA policy. The board’s veto power is problematic because the board is not controlled by the member states—states do not hold the majority of positions on the board, and therefore lack control over the board. The board is composed of representatives of regulated institutions, representatives of accreditors, and other individuals, as well as representatives of member states and regional compacts.13 Under the new policy modification procedure, the board has authority to veto proposals, even if the regional compacts have all reached a consensus in favor of the proposal.14 The board’s veto power creates the risk that the board could veto states’ decisions to improve consumer protections or to make other critical changes. Authority over setting standards for institutional and state participation in a reciprocity agreement should be reserved to the member states or their representatives and should not be shared with regulated institutions or other entities. Accordingly, all members of the NC-SARA Board of Directors should be member states or their representatives, the regional compacts. At minimum, the majority of positions on the board should be reserved for member states or their representatives, particularly representatives of state regulatory and enforcement agencies.15

Authority over setting standards for institutional and state participation in a reciprocity agreement should be reserved to the member states or their representatives and should not be shared with regulated institutions or other entities.

3. SARA must ensure that students are protected in the event of an abrupt closure.

SARA states are required to have a process to deal with unanticipated closures of in-state schools and are required to make “every reasonable effort” to assure that students affected by abrupt closures receive compensation.16 But SARA does not include a requirement that all SARA schools post a bond, pay a surety, or contribute to a student tuition reimbursement fund, raising the risk that students will not be compensated after a closure.17

Moreover, the Unified State Authorization Reciprocity Agreement, which states enter into to join SARA, explicitly prohibits states from applying any state requirements to provide refunds to students to out-of-state SARA schools.18 Yet SARA itself fails to establish any alternative, SARA-wide refund requirement, and furthermore, SARA does not even require member states to have refund policies for in-state SARA schools.19 This leaves SARA students vulnerable to abuse.

SARA does not specifically require that participating schools pay into a tuition recovery fund or that schools at high risk of closing (indicated by having a low financial responsibility composite score or other indicia of risk) provide other protections. SARA should establish requirements that provide a stronger assurance of refunds to students affected by precipitous closures. This could be done by either imposing a requirement that all SARA-participating schools pay into a SARA-administered tuition reimbursement fund. Alternatively, or in addition, schools with indicia of risk could be required to provide SARA-administered protections, such as a letter of credit, surety, or other form of protection.

4. SARA must remove barriers that prevent students from filing consumer complaints.

SARA’s current complaint process is significantly flawed and may impede member states’ ability to learn of schools’ misconduct. The process requires that student complaints related to SARA policies must first be directed to an institution for resolution before they can be appealed to the state regulator. This creates unnecessary hurdles for students and impedes state oversight agencies’ ability to learn about problems at schools. This is evident in the extremely low number of complaints reported for SARA institutions. For example, in Arizona, where there are over 300,000 online students enrolled in thirty-six SARA schools,20 SARA’s website reports that there were no SARA consumer complaints at all for all of 2021.21

The requirement that students first attempt to resolve a complaint with their school before they can appeal it to the state creates the risk that some important information will never get to regulators. Consumer complaints are one of the only ways for regulators to find out about deceptive or abusive practices, and requiring students to go through their school before they can submit a complaint means that regulators may not learn of institutions’ misconduct, or will be delayed in their ability to act against the misconduct.

Under the current SARA complaints system, there is also a lack of transparency about the content and disposition of the complaints. There are also concerns that states may not receive complaints about out-of-state member schools operating in their states. SARA complaint policies should permit students to make complaints directly to the state in which they reside. SARA should also make sure that complaint data is transparent—prospective and current students should be able to visit the SARA website to see how many complaints have been received for their school in the last year, and whether the complaints were resolved.

To correct the flawed complaints process, SARA must amend both the SARA Policy Manual and the Unified State Authorization Reciprocity Agreement, which provides that complaints must first go through an institution’s internal process before being investigated or resolved by the SARA member state.22

5. SARA must implement a refund policy for unprotected students.

As noted above, the Unified State Authorization Reciprocity Agreement, which SARA member states enter to join SARA and which serves as the basis for SARA’s policy, explicitly prohibits states from applying any state refund requirements to out-of-state SARA schools.23 However, SARA does not establish any alternative, SARA-wide refund requirement, and further, SARA does not require member states to have refund policies for in-state SARA schools.24 This leaves some SARA students vulnerable to abuses by schools.

6. SARA member states must have the authority to deny or revoke participation for schools determined to pose a risk to students.

SARA policy and procedures must ensure that institutions that pose a risk to students face tangible, mandatory consequences. However, the current SARA policy manual does not explicitly state that member states may deny or revoke participation in SARA by home state schools based on evidence that the school has engaged in deceptive, abusive, fraudulent, or otherwise illegal conduct.

Looking Ahead

These proposed changes to SARA policy would go a long way in improving oversight of online college students and protecting online students from abuses. Stakeholders have an opportunity to submit comments on these proposals to NC-SARA, or to propose alternative approaches. Proposals must be submitted by February 3, 2023. NC-SARA will be holding a series of public forums starting in March 2023 to solicit feedback on the proposals. Individuals who submitted proposals will be permitted to speak at the forums. The deadline for registering for the first public forum is February 10, 2023.25

NC-SARA’s new policy modification process opens the door for substantial reforms to oversight of online programs. The process is an opportunity to significantly improve SARA’s consumer protection standards and to ensure that member states, not regulated entities, control standard-setting for regulated schools. However, if the policy modification process does not yield substantial improvements to consumer protections and state control of standard-setting, NC-SARA may face federal action to impose such reforms. Last month, the U.S. Department of Education announced that it plans to launch a new rulemaking effort that will address the regulations related to state authorization of Title IV schools.26 This federal rulemaking effort may include new requirements for reciprocity agreements, including a requirement that member states must be permitted to enforce education-specific and sector-specific consumer protection laws, a requirement that reciprocity agreements include minimum consumer protections, and/or requirements related to state control over standard-setting. The department’s launch of a new rulemaking effort addressing reciprocity agreements suggests that no matter the outcome of NC-SARA’s new policy modification process, change may be coming to NC-SARA.

Notes

  1. See “Fast Facts,” NC-SARA, https://www.nc-sara.org/fast-facts.
  2. Ibid.
  3. For example, in 2020, the public University of Arizona acquired Ashford University, which was facing allegations of egregious misconduct, and entered a long-term contract with the for-profit owner that provided that the company would help run the school as a “nonprofit” carrying the public institution’s name, the University of Arizona Global Campus. See Robert Shireman, “How For-Profits Masquerade as Nonprofit Colleges,” The Century Foundation, October 7, 2020, https://tcf.org/content/report/how-for-profits-masquerade-as-nonprofit-colleges/. Other examples include Purdue University, which purchased the for-profit Kaplan University and rebranded it as Purdue University Global, and the University of Arkansas, which purchased for-profit Grantham University.
  4. See “NC-SARA’s Board of Directors,” NC-SARA, https://nc-sara.org/nc-saras-board-directors.
  5. In addition, SARA’s policies give the president of the relevant regional compact and the president of the NC-SARA authority to overrule decisions by member states about in-state schools’ provisional authorization status. See SARA Policy Manual 22.1 § 3.2(d)(3) and (4). SARA’s policies should not permit non-state actors to have veto power over state agencies’ oversight actions with respect to schools located in their state.
  6. See “SARA Policy Modification Process,” NC-SARA, https://www.nc-sara.org/sara-policy-modification.
  7. See “SARA Policy Modification Process Is Open for 2023,” NC-SARA, https://www.nc-sara.org/news-events/sara-policy-modification-process-open-2023.
  8. See “Policy Proposals: Active Proposals,” NC-SARA, https://nc-sara.force.com/Policy/s.
  9. See “Proposal to Elevate SARA’s Consumer Protection Standards,” available at https://nc-sara.force.com/Policy/s/policy-modification-proposal/a36Du0000000SgUIAU/pmp0340-enforcement-of-state-consumer-protection-laws?tabset-1bd29=abf4e.
  10. SARA Policy Manual 22.1 § 2.5(b).
  11. SARA policy provides that member states must agree not to apply state standards for authorization to out-of-state SARA schools operating in their state. SARA Policy Manual 22.1 § 2.5 (k). Member states further agree to waive enforcement of state laws that pertain specifically to colleges or to particular sectors of colleges (i.e., for-profit colleges), with respect to out-of-state SARA schools operating in their state, but “continue to have authority to enforce all their general purpose laws” (emphasis added) against out-of-state schools providing distance education in their state. SARA Policy Manual 22.1 § 2.5(l). A “general purpose law” is defined in the SARA Policy Manual as one that applies to all businesses, not one that applies only to educational institutions. See SARA Policy Manual 22.1 § 2.5(l), footnote 6, https://www.nc-sara.org/sites/default/files/files/2022-08/SARA_Policy_Manual_22-1_6-27-2022.pdf. Accordingly, member states retain the ability to enforce laws prohibiting fraud and unfair and deceptive practices where such laws apply to all business, but waive enforcement of any consumer protection laws that are specific to the education sector or that apply to a particular subcategory of higher education institutions, such as for-profit colleges.
  12. See Unified State Authorization Reciprocity Agreement (USARA), December 1, 2015, at §§ 5.1.5 and 5.1.6. Accordingly, changes need to be made to both the USARA and the SARA Policy Manual to address this problem.
  13. See “NC-SARA’s Board of Directors,” NC-SARA, https://nc-sara.org/nc-saras-board-directors.
  14. SARA Policy Manual 22.1 § 8.2(f)(6).
  15. The NC-SARA Bylaws would need to be amended to reflect this change. See National Council for State Authorization Reciprocity Agreement Bylaws, NC-SARA, https://nc-sara.org/sites/default/files/files/2019-07/NC-SARA_Bylaws_revised_08MAY19_FINAL.pdf.
  16. SARA Policy Manual 22.1 § 2.5(h)(2). The Unified State Authorization Reciprocity Agreement includes stronger language, requiring member states to have “processes to ensure that students receive the services for which they pay, or reasonable financial compensation for those not received. This may include tuition assurance funds, surety bonds, teach-out provisions or other practices deemed sufficient to protect consumers.” However, this language is not included in the SARA Policy Manual.
  17. Examples of SARA schools that have closed abruptly include Stratford University, which closed in 2022, and Stevens-Henagar, which closed its campuses in 2020 and 2021. See “Stevens-Henager College (SHC) Closure: Frequently Asked Questions,” Idaho State Board of Education, https://boardofed.idaho.gov/resources/stevens-henager-college-shc-closure-frequently-asked-questions/.
  18. Unified State Authorization Reciprocity Agreement (USARA), § 5.1.5.
  19. Ibid.
  20. See Data Dashboards,https://www.nc-sara.org/data-dashboards.
  21. See Complaint Reports,https://www.nc-sara.org/complaint-reports.
  22. USARA § 5.1.4.
  23. USARA § 5.1.5.
  24. Id.
  25. See 2023 SARA Policy Modification Process Calendar, https://nc-sara.org/sites/default/files/files/2022-12/2023%20SARA%20Policy%20Modification%20Process%20Calendar.Table_.12.20.22.pdf.
  26. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202210&RIN=1840-AD83

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