Tuesday, May 10, 2011


Interstate Protectionism

The Department of Education has passed a rule requiring colleges that offer online courses to be licensed in every state in which they operate, if they want students to be eligible for financial aid.

This is one of those cases in which a twenty-first century technology gets cut off at the knees by a twentieth- (or eighteenth-) century political structure.

Like many colleges, mine offers a healthy and growing selection of online credit-bearing courses. Although the vast majority of the students who take them live in-state – in fact, the majority of them also take onsite classes – we do have some from several other states, both contiguous and non-contiguous. A strict reading of the new rule suggests that if we get a single student signing up for an online course with us from, say, Fresno, then we have to go through the licensing process for the state of California.

This is nonsense on stilts.

We already charge out-of-state tuition for out-of-state students, so there's no issue of local taxpayers sponsoring somebody else's free ride. And we're regionally accredited, so there's no issue of suspect quality. Our courses transfer there, so quality control is not the point.

The new rules don't even allow for reciprocity between states that use the same regional accreditor. Illinois and Michigan both use North Central, but they can't just agree to honor each other's colleges. Each individual institution has to apply alone.

The logic behind the rule, to the extent that I can suss it out, is to put the brakes on unscrupulous for-profits. But this rule doesn't necessarily achieve that, and it creates a host of pointless additional costs for legitimate nonprofits.

It doesn't achieve the stated goal because certain regional accreditors – cough North Central cough – have allowed for-profits to purchase accreditations of small struggling colleges like taxi medallions. They're supposedly stopped doing that now, but as far as I know, the previously-purchased ones have been grandfathered in. Some skepticism of the integrity of those credentials is clearly in order, but this rule doesn't address that.

The paperwork requirement for community colleges is significant. Until now, we've had to keep our regional accreditor and our home state happy. Add 49 states to that, and we'll have to hire more administrators to keep up with the paperwork. (You know who already has the administrative infrastructure to handle this? The big national for-profits. I’m just sayin’...) Either that, or we'll just stop offering classes in most states.

Which, to be honest, may be the point of the rule. The only reason I can imagine to add all those approval hoops is to reduce the number of approved programs. Simply put, it enables interstate protectionism. A state with relatively permissive licensing rules will put its own institutions at a competitive disadvantage compared to those from more difficult states; over time, the competitive pressure will be in the direction of isolationism. If, say, North Dakota is permissive and South Dakota strict – I'm just making that up – then South Dakota colleges will be able to compete in North Dakota, but North Dakota colleges won't be able to compete in South Dakota. Expect ND colleges to start lobbying hard to 'level the playing field.' Before long, the promise of equal access to all over the intertubes is lost to eighteenth-century boundaries.

This is idiocy. Interstate commerce is supposed to be the domain of the federal government. A student in California paying tuition to an online program in Florida is engaging in interstate commerce. This simply cannot be left to the states. The whole point of the federal government is precisely to prevent state vs. state protectionism. Why that logic wouldn't apply to higher ed simply eludes me.

(Interestingly, Western Governors University doesn’t seem at all deterred. Instead, it’s going ahead and getting “co-branded” by states that would rather not pay for their own instruction. If site-based colleges are effectively squeezed out of the marketplace by onerous regulations, but co-branded enterprises like this are not, I can predict the outcome pretty confidently...)

I know that federal oversight of higher ed isn’t exactly on the radar these days, but the interwebs are forcing the issue. When instruction was place-bound, there was a practical -- even if not a theoretical -- justification for state-by-state licensing. (Even then, one could make arguments about correspondence schools, but the general point still stands.) But in the age of Moodle, insisting on the sanctity of state lines is anachronistic at best, if it isn’t actively protectionist. This regulation has to go, and it has to go now.

This might be a question so dumb it needs stilts all of its own, but if "the age of Moodle" really has rendered traditional structures of local protectionism moot, does this also apply at the international border? Perhaps among the really big changes coming -- somewhere beyond the bubble and above the cloud -- is the challenge that the for-profit online course providers represent to the protection of higher education systems in smaller economies, where a viable local higher ed sector can play a key part in sustaining global cultural diversity. I don't like slippery slope arguments, but is it conceivable this this could be one?
Dean Dad: Do you also support allowing people to purchase health insurance across state lines? Careful here -- you're trending deeply into the education analogue of conservative Republicans' health policy proposal.
Gotta love them bureaucrats. They are so clever about enlarging their spheres of influence.
My first thought is that this would be especially harmful to those in the military. It will affect me personally, but I see the potential hit to those in the armed forces as more concerning.
This may sound like splitting hairs, but what precisely does the DOE mean by "in"? I mean, how do they define which state a student is "in"?

Take, for example, the student who attends a college in Indiana, but whose parents live in Illinois (and thus her "home" state, for in-state tuition purposes, is Illinois). She's doing a summer internship in New Jersey, and taking an online class at her college in Indiana. In which state(s) would her college need to be licensed? How would this change if her "home" state were Indiana? Or New Jersey?
Nice article, thanks for the information.
Do you have a link to the rule?
I'll take Pelligrino's 9:11AM observation one step further: What if she has to be home in Illinois for one semester to help with a sick relative and is continuously enrolled -- but taking only on-line classes -- at the college in Indiana?

Some formats are potentially even more interesting. Perhaps the class is web based (no classroom meetings) but the exams are given on campus. The student could live in Illinois and simply commute to Indiana to take exams a few times each semester. [Not far fetched, if you know where Evansville or Notre Dame are located. Some students commute 50 miles to my CC.] And then uses a proctor to take a makeup for one of the exams. Do you lose financial aid in that case?

What determines "where" the class takes place? What if a college outsources its server, so on-line classes taken locally are run from a computer in another state or even another country, taught by an adjunct or full-timer living in a third place? Again, not so far fetched, since I have no idea where C*** C*** or web**** are actually located and I know faculty who teach f2f on campus some semesters and on-line from an Undisclosed Location some other semesters.
If the student uses an in-state proxy server to log in to the online course, how could the school even hope to identify the location of the student? This seems like either a workaround or an even bigger mess waiting to happen.
You didn't mention the districts and territories as well - it is 64 by our count, not 49.

In addition, our counsel have noticed that some states require the programs from an institution to register if the program enrolls students in the state. So for our large R1 with many online programs, we could be looking at registering 15 programs in at least five states, and then registering the institution in the other 59 states and territories.

Not only is this an administrative requirement for our institution, but for our state government too. Right now our state has one mid-level bureaucrat who handles this issue - he is looking at a huge workload increase.
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