Anatomy of an Attack on Reciprocity, Part One

The closest justification for gutting SARA is misleading, at best

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This year it has become increasingly apparent what Morgan described in January with “Online Is The Target.”

2023 was a heck of a year for those interested in online learning in the US, with all kinds of new regulations and executive actions (and newsletter posts) coming out to fundamentally impact the delivery of online learning. But 2023 was just a warmup, a sideshow. This is because OPMs and for-profits are not necessarily the core focus of the Department of Education (ED) and its aligned activist organizations seeking to shape higher education. What is becoming more clear is the focus is online learning itself.

The centerpiece of this regulatory effort is ED’s proposed plans to gut reciprocity, the process by which states agree to honor state authorization for distance education providers to enroll students in other states. Think of it like a driver’s license in Nebraska that allows you to drive in Iowa while complying with Iowa’s speed limits and stop signs. Relevant to this post:

SARA member states assume the principal responsibility of ensuring that SARA policies are followed by the institutions they approve to participate in SARA

What has been frustrating is that during negotiated rule making sessions, ED has not shared actual evidence that the State Authorization Reciprocity Agreement (SARA) is harming consumers and in need of fundamental change or elimination. SARA is a voluntary agreement among 49 states (all but California), the District of Columbia, Puerto Rico, and the US Virgin Islands.

The closest explanation we have is Under Secretary of Education James Kvaal’s public descriptions of why ED thinks reciprocity is harming students. But if you look into the details, Kvaal’s justifying story is just plain wrong - either deliberately misleading or based on a misunderstanding.

The Story

I have heard Kvaal share the same story twice this year when asked about why ED is moving to fundamentally change reciprocity. The first time was at the Post OPM conference, referring to the National Council for State Authorization Reciprocity Agreements (NC-SARA), the nonprofit that coordinated the states’ implementation of SARA. Both quotes below have been slightly edited for clarity.

For example, there was a college in one state that was being sued by an attorney general in another state. And there were extensive findings of wrongdoing. But the second state was unable to take any action to protect its students, to set aside tuition refunds, to secure transcripts, to require teach out agreements. Because that was all prevented by the rules of NC-SARA, and no action was being taken by the institutions or the state.

Last week at Instride’s Impact conference, I heard the same story from Kvaal.

We heard reports about one for-profit college that was accused of fraud and was in the process of closing. And the attorney general investigating it could not take steps that he felt were necessary to secure transcripts, to secure teachout agreements, to set aside refunds, because it was regulated by a different state through NC-SARA.

After hearing this story twice, I decided to look into the details.

The Reference

While Kvaal did not mention the school name, it is not too hard to figure it out. There are only so many for-profit schools that have recently closed that were participating institutions in SARA, and for which one state’s Attorney General was pursuing action against the home state of the institution. I am 90% sure that the reference is to Independence University, the online branch of Stevens–Henager College (SHC), the for-profit system that was headquartered in Utah before closing.

And the story of what happened with Independence University contradicts Kvaal’s justification story in several key aspects, undercutting the only real justification from ED on its proposed changes.

Prior to its 2021 closure, Independence University (IU) was accredited by the Accrediting Commission of Career Schools and Colleges (ACCSC), which represents one of the three key requirements for SARA membership (having an ED-recognized accreditor).

A further requirement is “an institutional federal financial responsibility composite score of 1.5 as indicative of sufficient minimum financial stability to qualify for participation in SARA.” ED’s Financial Student Aid office (yes, the one behind FAFSA) maintains this list, and as of the latest data from December 31, 2018 (the most recent prior to IU’s and SHC’s closure in 2021), Stevens Henager’s score was 2.6 out of a maximum 3.0. The third requirement is being domiciled in a member state (Utah).

In 2018, ACCJC placed Independence University and its sister colleges on probation due to “a serious focus on consumer concerns such as misleading advertising and recruitment as well as outcomes like academic performance.”

To get the story of what happened next, I talked to Cynthia Grua, Assistant Commissioner, Academic Affairs and Utah SARA State Portal Entity (SPE) under the Utah System of Higher Education. Below is an edited version of the email interview about the IU case.

In April 2021, ACCSC gave notice of intent to withdraw accreditation; however, ACCSC confirmed for the Utah SPE that Independence University would remain accredited through an appeals period and could have remained accredited during an arbitration period, given the appeal was unsuccessful, which could have lasted months. In fact, ACCSC did not send formal notice of withdrawal of accreditation until October 2021, two and a half months after closure.

Grua then described the challenge Utah faced and the role of SARA.

At the time of closure, Utah’s regulator, the Utah Department of Commerce Division of Consumer Protection (DCP) had no statutory authority to compel IU to tender student records or notify students of the current situation or impose penalties. However, the Utah SARA State Portal Entity (SPE) had the authority to set conditions IU must meet to remain a SARA institution. When the Utah SPE learned ACCSC had notified IU of its intent to withdraw accreditation, the Utah SPE sent notice to the institution president that IU must:

* cease enrolling students under SARA;

* notify all students enrolled under SARA of the ACCSC action- directly and on the website;

* submit further student correspondence for SPE review before distributing to IU students;

* provide a detailed list of current students to the SPE; and

* provide student records to the SPE.

IU was informed that failure to meet these conditions by deadlines set by the Utah SPE would result in immediate expulsion from SARA.

In this particular closure, SARA was an essential element, not a barrier, for student consumer protection. Of significance:

* Because it desired to remain in SARA, IU complied with all conditions set by the Utah SPE;

* The Utah SPE received current and historic student transcripts for IU and for Stevens-Henager College; and

* NC-SARA staff distributed the UT SARA SPE communication to SPEs in all SARA states. As a result, other states were given the opportunity to request records for their residents. A number of states requested and received records.

An abrupt closure like this one, where programs have not been taught out, where students did not have the benefit of time to receive meaningful advice on transfer, is never a good outcome. But whatever the reason(s), IU’s desire to remain in SARA allowed us to keep communication open, to influence student consumer communication to address transfer and teach out, and to secure student records.

The Record Correction

Let’s go back to Kvaal’s justification story and its central claim.

But the second state was unable to take any action to protect its students, to set aside tuition refunds, to secure transcripts, to require teach out agreements. Because that was all prevented by the rules of NC-SARA, and no action was being taken by the institutions or the state.

The second state was Colorado with its Attorney General Phil Weiser. There are three fundamental problems here.

First, the SARA rules explicitly state that states do not give up all consumer protection abilities (page 41).

g. No SARA member state, gives up its ability to investigate misrepresentation, fraud or other illegal activity by institutions based in other states, including SARA-participating institutions.

h. SARA member states retain the ability to use any of their general-purpose criminal or consumer protection laws against an institution that violates those laws. State oversight of distance education delivered by a SARA-participating institution to students in any SARA member state is centralized by SARA policy in the college’s home state.

Since Kvaal references “extensive findings of wrongdoing”, it would appear that Colorado’s AG had plenty of options to take action against Independence University. It is true that membership in SARA means that states resolve education-specific disputes through the home state of the institution, but that is not what is being alleged.

Second, as described by Grua, it is because of SARA that Colorado was able to get a detailed list of IU students and further student information, including transcripts.

Third, ED has described its fear in the negotiated rule making that SARA will lead to a “race to the bottom”, with schools shopping for the most permissive states in which to base operations. And Grua describes the weakness of Utah’s statutory authority in 2021.

In an interesting postscript, the state of Utah has recently fixed this loophole, partially based on the Independence University / Stevens-Henager experience, with the Utah Postsecondary School and State Authorization Act enacted January 1, 2024. Furthermore, Utah has advanced its processes for approving institutions to participate in SARA. One could argue that instead of a “race to the bottom” we actually are seeing a “rising tide lifting boats” scenario.

In a nutshell, Kvaal’s justification story is being used for proposals to gut SARA and impact the requirements for all online programs enrolling out-of-state students. All in the name of consumer protection, when in fact it was the SARA agreement and rules that helped students in this unfortunate case. 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.

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