UPDATE: Aug. 5, 2019: The U.S. Department of Education signed off on California's effort to comply with recently enforced rules on how the state handles complaints by students enrolled online in out-of-state nonprofit and public colleges. The move returns financial aid eligibility to around 80,000 California residents, with the decision backdated to May 26, the point at which California was deemed out of compliance.

In a letter Friday, Ed Department Principal Deputy Under Secretary Diane Auer Jones told the state's Department of Consumer Affairs (DCA) that its solution is technically not in compliance with the new rules — which were finalized in 2016 and delayed until recently — because it doesn't refer students to an agency that can enforce state law. Instead, it refers students to their institutions' accreditors or an agency of the state in which their institutions are located

Although that "presents compliance challenges" under current rules, she wrote, the proposal complies with more flexible rules on state authorization that the department will publish for early implementation "as soon as possible." As such, Auer Jones wrote, "the Department will assume that California will modify its plan" for the time being. 

Dive Brief:

• California's DCA announced last week that it developed a formal complaint process for residents attending nonprofit private and public online colleges located out of state.
• Those students' access to federal aid lapsed as a result of a court decision earlier this year that the U.S. Department of Education must implement a 2016 federal rule that pertains to state authorization requirements for distance education providers. 
• Some 80,000 students were affected.

Dive Insight:

How quickly the Ed Department can get its state authorization rules published is another matter. Comments closed on July 12; the rules got around 200 new comments during that time, which must be considered before a final rule is issued. 

"Best case scenario, you assume agencies can do this in about 60 days," said Terry Hartle, senior vice president for government and public affairs at the American Council on Education (ACE), in an interview with Education Dive. That would put the new rules out in early-to-mid September. 

Hartle said the Ed Department would likely give states the authority to implement the rules immediately, something Auer Jones reinforced in her Aug. 2 letter to California's DCA.

The situation came to a head in July after the outcome of a lawsuit brought by the National Education Association (NEA), a teacher's union, forced the Ed Department to implement the 2016 rule retroactively to May 26. The rule intends to raise consumer protection standards for online education providers that enroll students in states in which the institution is not physically located. The department said it was holding back because California had not yet set up a system to comply with the rule.

To comply, states could either join a reciprocity agreement or develop their own way for students to file complaints against those schools.

California is the only U.S. state that has not joined the main agreement, NC-SARA (National Council for State Authorization Reciprocity Agreements). It was not expected to join in part because its residents are still reeling from the impact of several predatory colleges, and it didn't want to give up oversight abilities.

The Ed Department's approach to implementing the rule was also a factor, said Debbie Cochrane, executive vice president at The Institute for College Access And Success, in an interview with Education Dive.

"The short answer is that it should have (set up its own system)," she said. "But there was some understandable confusion given the way the department has implemented the rule."

Upon finalizing the rule, the Obama administration's Ed Department said it would work with schools to determine whether they were in compliance as they conducted program reviews or addressed complaints. The Trump administration's Ed department delayed the rule, and as a result of a lawsuit, the implementation has been sudden. 

"It's clearly a very different tack," she said.

The situation is complex, involving different sets of regulations, a lawsuit and two cabinet-level agencies, Hartle said. In a July 25 letter, ACE urged the department to offer an expedited version of its final state authorization rule to resolve the issue.

The Ed Department, meanwhile, has pushed NEA to drop the lawsuit. 

"It's a fairly complicated, muddied situation that everyone would like to have resolved immediately but that I expect is going to take a little while to sort itself out," Hartle said.

It extends beyond California. In a May 6 letter to the Ed Department and the U.S. District Court, Northern District of California, representatives for the WCET State Authorization Network wrote that "thousands more students will suddenly become ineligible for federal financial aid" as a result of the rule change in "7-10 states and territories" that don't have compliant processes set up for institutions that don't participate in SARA.

Yet a quick response is critical as students and institutions approach the start of the fall semester. 

Western Governors enrolls nearly 11,000 students in California, though not all use Title IV aid. "We encourage the administration to work with California to make sure a permanent solution is implemented immediately and is retroactive to May 26, 2019, allowing students to continue their education uninterrupted and without financial duress," the university said in a statement emailed to Education Dive early last week.

Southern New Hampshire University said in a statement to Education Dive last week that it "is working with other universities to respond to the new ruling and is working to find a solution for our students."

In a statement provided to Education Dive when California's proposal was announced, Russ Heimerich, deputy secretary of communications for California's Business, Consumer Services and Housing Agency, said the state's DCA is "working with colleges around the country to encourage (the Ed Department) to come to a speedy resolution so that students can continue to receive important federal financial aid resources."

"We appreciate California's effort to try and come into compliance with the 2016 Obama-era regulation," an Ed Department spokesperson said in an email early last week. "We will continue to work with them in order to protect students.