Ruling on State Authorization Regulations Upheld

June 28, 2012

The United States Court of Appeals for the District of Columbia upheld a lower court ruling that struck down part of the state authorization requirement in the Department of Education's program integrity rules. The original rule had required institutions to obtain authorization for distance education programs from states in which students reside, if required by state law, to remain eligible for Title IV student assistance.

Last year, the Association of Private Sector Colleges and Universities (APSCU) challenged three parts of the 2010 program integrity rules: incentive compensation, misrepresentation, and state authorization. While the court upheld the incentive compensation and misrepresentation rules, it said that ED had not followed proper procedures when it added the provisions relating to distance education to the state authorization regulations when the final rules were published. APSCU had argued that state authorization rules were not consistent with the conversations held at negotiated rulemaking sessions and were not included in the proposed rules. Both sides appealed the decision in February.

The U.S. Court of Appeals' ruling, issued in June, upheld the lower court's decision on state authorization and distance education, saying that the regulation "is not a logical outgrowth of the Department's proposed rules." The ruling also remanded two aspects of the incentive compensation rules to the lower court for further clarification. Additionally, the court stated that the misrepresentation regulations exceeded the Higher Education Act's limits and also sent them back for clarification.

Any revisions to the regulations would have to go through the formal negotiated rulemaking process. The Department plans to hold rulemaking sessions later this year on fraud, disbursements, and the campus-based programs. While it would be possible to include changes to the misrepresentation and incentive compensation regulations on that agenda, ED has not indicated that it intends to do so.

Even without the provision on distance education programs in the state authorization regulation, however, state laws are still on the books and remain in force in a number of states. A group has been working to draft model reciprocity agreements that states could adopt to acknowledge other states' work and decisions in regard to institutional authorization.