Anatomy of an Attack on Reciprocity, Part Deux

ED's proposal to change reciprocity is best understood by following the historical threads

Author

Phil Hill
May 31, 2024

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In Wednesday’s post I described how the justifying story for the US Department of Education (ED) proposal to gut reciprocity agreements (and specifically the State Authorization Reciprocity Agreement, or SARA) is simply wrong. Independence University’s (IU) in SARA did not prevent Colorado from taking any consumer protection action, it is because of SARA that Colorado was able to get a detailed list of IU students and further student information, and the issue did not begin when this administration’s ED “heard reports about one for-profit college that was accused of fraud and was in the process of closing.”

I closed that post with a hint for this one.

This story of IU is not actually the driver of proposed changes.

The Real Justification

It turns out there are other reasons why ED wants the changes in reciprocity, and Colorado AG Phil Weiser’s role in the IU case gives us insight. But I am going to tackle that in another post.

And no, longtime readers of this newsletter should not be surprised where this leads us.

Background

This story starts 15 years ago. Well, the threads begin before 2009, but let’s stick to direct connections.

Bob Shireman moved from The Institute for College Access and Success (TICAS) into a role in the Obama Administration’s ED in 2009, where he led efforts to crack down on the for-profit sector. During the early 2010s, for-profit institutions were viewed (accurately) as multi-campus systems working across state lines, with online education dominated by the sector. A coalition developed that included ED, several activist groups such as TICAS, and several state attorneys general (AGs), pulled together to rein in these for-profit schools. And the coalition was quite effective.

Overlapping with Bob Shireman at ED as the Deputy Under Secretary was James Kvaal. He was directly involved in these efforts and the developing coalition approach.

Also during the 2010s, three parallel and interdependent trends developed alongside the crackdown on for-profits. 1) We began to see a shift away from the dominance of online learning by for-profits toward a stronger role by nonprofits in the online space to the point where they now are a much bigger presence than for-profits. 2) The Online Program Management (OPM) market further developed, particularly based on the 2011 Dear Colleague Letter that solidified tuition revenue sharing for bundled services. 3) Nonprofit conversions, where for-profit chains and institutions changed ownership structures and attempted to change their sector definition to be private nonprofit.

The best way to understand how the ED / activist / AG coalition viewed these three trends can be seen in a 2019 Century Foundation article on dealing with college closure. As a cancer that has metastasized. The coalition’s role is to remove the cancer to save the higher education body, in all of the cancer’s forms. 2019’s article by New America’s Kevin Carey, “The Creeping Capitalist Takeover of Higher Education” is an excellent example of this thinking but without the same metaphor. But let’s stick with the timeline.

In 2012, the Center for Excellence in Higher Education (CEHE) bought CollegeAmerica, Stevens-Henager College, Independence University (the online unit of SHC), and California College San Diego. CEHE is a nonprofit group, it attempted to a nonprofit conversion, but ED slow-rolled that approval and rejected it in 2016. The Colorado AG office sued CollegeAmerica in 2015, and CEHE sued ED in 2016 based on this action.

Leading these efforts at the Colorado AG office was Libby DeBlasio Webster. Independence University got pulled into the Colorado portion of the story due to its CEHE ownership and nonprofit conversion attempt.

I don’t have time in this post to go into the he said / she said aspects of this history. For now, it doesn’t matter if you side with the Hatfield or the McCoys, but to understand the 1888 massacre, it does matter to understand the quarter-century dispute.

Two of the key regulatory efforts by the Obama Administration’s ED to rein in for-profits was the introduction of Gainful Employment rules and to a lesser degree the introduction of State Authorization. For the latter, the effort began in 2010, with negotiated rules set in 2016, with implementation in 2019. These rules set minimum standards for states to authorize higher education institutions that could accept Title IV federal financial aid. For the purposes of online and multi-campus education, State Authorization required institutions to become authorized in each state where students resided.

SARA came into effect in 2015 as a way to streamline the bureaucracy of institutions becoming authorized to accept students residing in other states, and to clarify the student protection processes. With the upcoming State Authorization rules, large chains (particularly for-profits) had armies of personnel to handle compliance in multiple states, but for smaller, emerging nonprofit institutions, SARA was a way to reduce the barrier to entry into the online market. Within the first year, 18 states became members of SARA.

But Trump!

By 2016, there were two threats to the actions of the coalition - the election of President Trump which would change the ED leadership, and the success of SARA. The common state standards method of dealing with student complaints and closures as part of SARA was seen as a pathway for metastasis - a way for the for-profit cancer to take over formerly healthy parts of the body.

In particular, SARA would streamline how to handle compliance and legal actions for state-based higher education rules. Part of the SARA policy is that the student complaint process starts with the institution and then goes to the home state of the institution. For the coalition, this removes a mechanism for AGs where out-of-state students are located to take action on the cancer.

In the case of Colorado and CEHE, it meant that the actions were primarily targeted at CollegeAmerica (located in Denver) and not for Independence University, SHC, etc.

The coalition did not want this restriction to hold back state AGs.

In 2017 the locus of the coalition was shifted accordingly away from ED as the hub and towards activist nonprofit groups along with state AGs.

The Pivotal Year

By 2018, 49 states (all but California), the District of Columbia, Puerto Rico, and the US Virgin Islands had joined. The effort to keep California out of the agreement was fierce, and the state elected to not join. Other activist groups joined the fray, with The Institute for College Access and Success (TICAS) taking the lead in writing “Going the Distance: Consumer Protection for Students Who Attend College Online.”

That report’s recommendations represented the clearest position yet from the coalition on wanting to keep SARA from prohibiting states where the institution was not located from applying state-specific education-specific rules.

Allow states to retain the authority to enforce their own state laws on higher education-specific consumer protections.

The problem with this proposed redefinition of SARA is forcing institutions with online programs to comply with potentially dozens of different education-specific student complaint processes. With SARA, there are minimum standards, and states have to comply with the specific process of home states. For example, if you run a university in Pennsylvania and you want to admit students from fifty miles away in Ohio, you will need to comply with the complex patchwork set of complaint processes in Ohio and all the other states and territories you hope to admit students from. This is untenable for all but the biggest programs.

In addition, by gutting SARA, the net effect would be reduced protections. A recent public letter to ED from UPCEA, WCET, Quality Matters, Online Learning Consortium, NACUBO, and the American Association of Community Colleges called out the likely harm of current proposals [emphasis added].

Negative Impact on Students – Marginalized communities may be the most affected by increased costs and reduced program availability.

Unfunded State Responsibilities – Increased administrative processes and tasks will require additional funding and state staff to manage effectively.

Institutions Facing Significant Additional Compliance Requirements – Heightened financial pressures due to increased compliance costs will require resources that could otherwise be directed toward student support and educational innovation, and could lead to institutions being discouraged from serving students.

That TICAS report thanked Bob Shireman among others as experts sharing their time for input, but the key contributors included James Kvaal, who became president at TICAS at the beginning of 2018.

The other aspect that made 2018 the pivotal year is that this was when Arnold Ventures began its massive funding of the coalition, and adding its leadership and guidance on how to directly impact education policy.

The current Under Secretary of Education leading the charge to gut SARA had significant funding by Arnold Ventures from the time he joined TICAS. Specifically to lobby for these issues at the federal level and in California.

In other words, the Arnold Ventures coalition - including James Kvaal - were actively leading efforts by activist organizations to redefine SARA.

Ironically, note how these efforts by activists backfired briefly in 2019, when California lost the right for its students to receive financial aid as the state did not have the required consumer protection processes in place.

But Biden!

When President Biden was elected at the end of 2020, what I now call the Arnold Ventures coalition was ready to change its locus of control again and center it in the government, primarily but not exclusively at ED. But the work by state AGs continued, in coordination with ED and activists.

Phil Weiser became Colorado’s Attorney General in January 2019. The long-running efforts by Libby DeBlasio Webster continued in the Colorado AG’s office, but with Weiser’s election it picked up steam.

Weiser’s more public entry into the arguments around dismantling SARA came in August 2021 with a letter co-signed by 25 state Attorneys General. In that letter was the key proposal that is relevant to these two posts - essentially the same proposal as described by TICAS under James Kvaal.

As a reminder, NC-SARA is the nonprofit group National Council for State Authorization Reciprocity Agreements that helped create and administer SARA.

POLICY MANUAL CHANGE: Alter NC-SARA Policy Manual Section 2.5(l) to allow NCSARA member states to enforce all education-specific consumer protection laws.

The ED official helping to coordinate the August 2021 AG letter was none other than Clare McCann, now Director of Higher Education at Arnold Ventures. In fact, the AG Letter to NC-SARA was directly cc’d to McCann at ED. This letter roughly coincided with the August 2021 closure of Independence University and its sister CEHE-owned schools.

Six months after the IU shut down, DeBlasio Webster left the Colorado AG’s office and moved to the National Student Defense Legal Network, a lobbying group that is almost entirely funded by Arnold Ventures.

The Current ED Proposal

Now let’s look at 2024. One of the primary negotiators in the negotiated rule making sessions was Carolyn Fast from the Century Foundation, the group that had been the leading activist group in the coalition and the entry point for initial Arnold Ventures funding in this area in 2016 (before the spread to broader coalition funding in 2018).

The Fast Proposal is the basis for what ED is basing its proposed regulatory changes upon.

The proposed change to add “or education-specific” would ensure that States maintain authority to enforce State education-related consumer protection laws, at their discretion, regardless of whether they choose to enter into a reciprocity agreement with other States to streamline initial/renewed authorization.

The coalition now organized and funded by Arnold Ventures has been pushing for state AG actions against for-profits for at least 15 years, and directly pushing to change or gut SARA since 2017. And that effort includes James Kvaal’s active support in the Obama Administration’s ED, while at TICAS, and in the Biden Administration’s ED. And under Kvaal’s current leadership, ED deliberately made the selection of negotiators for the early 2024 rule making sessions. It was not coincidence that Carolyn Fast from the Century Foundation was chosen.

Understand the History

Two of the themes from private conversations and social media comments that I often receive include essentially 1) why can’t ED leadership see what’s really happening with activists? and 2) why does ED leadership still have the decade-plus outdated view that for-profits dominate online learning?

For people with those views, it is easy to understand the frustration at what I consider bad policy activities by ED, including the proposed gutting of SARA. But if you understand the relevant history, it can better explain why ED is making regulatory actions that will harm online education writ large (nonprofit and for-profit and OPM-based). The metastasized cancer needs to be removed, even if the chemotherapy and radiation treatments will harm the higher education body in the process. In the coalition’s mindset, this is necessary treatment for a disease with a shared for-profit starting point.

As for the specific topic of Kvaal’s public justification story on redefining and gutting SARA, he must know what is really driving the changes, as it appears he has been a key participant in the movement against SARA for at least six years.

This long-running coordinated campaign held together by the Arnold Ventures is the driver for the ED proposal to gut SARA. Not a false justifying story about Independence University’s closure.

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