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The U.S. Department of Education (ED) has sent an announcement to be published in the Federal Register that announces that the effective date of the State Authorization regulations is May 26, 2019.  These regulations were originally published in the Federal Register on December 19, 2016.

ED alerted the postsecondary education community of this retroactive effective date on Monday, July 22, 2019, in its Electronic Announcementposted on the Information for Financial Aid Professionals (IFAP) website (https://ifap.ed.gov ).

Although these regulations were originally set to be effective July1, 2018, ED had delayed their effective implementation until July 1, 2020.  (See the FAME “Did You Know?” article posted July 3, 2018.)  However, due to the Court case of NEA v. DeVos, (Case No. 18-cv-05173-LB in U.S. District Court for the Northern District of California), the regulations are now declared effective May 26, 2019.

Along with the general announcement of the effective date of the State Authorization regulations, ED provided a Question and Answer (Q&A) document as an attachment to the Electronic Announcement.  The essence of that Q&A attachment (which at the moment only has one question and answer) states that ED has been informed that the State of California has a registration process for out-of-state for-profitinstitutions that provide distance education programs, but:

“…under the 2016 regulation now in effect, students residing in California receiving distance education or correspondence courses from out-of-state public or non-profit institutions are ineligible for title IV programs until such time as the State of California provides those institutions with an appropriate complaint process or enters into a reciprocity agreement.”

ED did state in its “answer” to the Q&A that it hopes to “seek and obtain protection for students in California.”  But, in the meantime, unless and until such occurs, affected institutions and students should be aware that students residing in California who are enrolled in distance education programs from public or non-profit institutions outside of California are not eligible for Title IV.

It should be remembered that ED has proposed new regulations based upon consensus reached in the negotiated rulemaking earlier this year that eliminates the complaint documentation requirements.  See the Electronic Announcement dated June 12, 2019, that made the public aware of the Notice of Proposed Rulemaking (NPRM).

In the meantime, unless and until ED’s efforts to seek and obtain protection for California students are fruitful, and/or the referenced NPRM becomes final with the elimination of the documentation requirements, affected institutions and students should be aware that students residing in California who are enrolled in distance education from public or non-profit institutions outside of California are not eligible for Title IV Federal Student Aid.

Public and non-profit institutions outside of the state of California with students who reside in California who are enrolled in distance education programs should implement immediate steps to ensure adjustments are made to students’ awards and/or accounts to prevent disbursement of Title IV aid to now ineligible students.

We are aware of one expressed view on the impact of the retroactive effective date of the regulations’ implementation.  In one opinion on the status of the impact of the retroactive effective date of the State Authorization regulations, the Career Education Colleges and Universities (CECU) has stated in an e-mail earlier today that “(s)ince the State of California has a registration process for out-of-state for-profit institutions that provide distance education programs, the state complaint process issue should not adversely impact for-profit institutions that enroll students residing in California.”

FAME’s initial reading of ED’s announcement and its Q&A would lead us toward concurrence with CECU’s opinion.  Note, however, that FAME does not offer legal counsel or advice.  Institutions who believe they will not be affected by the immediate retroactive effective date of the State Authorization regulations due to such registration process that California has for out-of-state for-profit institutions that provide distance education programs should contact their legal counsel for advice in this regard.

Should you have any additional questions regarding this topic, please feel free to contact FAME Customer Service through the Client Solution Center.