Eduventures Official Statement on the July 12th 2011 DC Court Judgment

Eduventures is continuing its work with clients on compliance with state regulations pertaining to delivery of distance education across state borders, even in light of the recent announcement that the DOE’s requirement in this area was vacated by a DC court. As WCET and several schools have also pointed out, state enforcement remains a significant business risk to school’s online operations, even if federal action and prospective loss of Title IV eligibility are now in question. Many states have explicit requirements that distance education providers enrolling students or otherwise judged present in their state must first obtain authorization, and states have had these requirements for several years. Although many schools were unaware of these requirements, and others did not pay heed to them, states have the right to enforce their regulations at any time.

When the Department of Education’s Program Integrity rules required school compliance with respect to this rule by 2014, and a good faith effort in the meantime, it was reasonable for states to sit back and be patient while schools worked to comply with the state’s regulations. There is the possibility, with DOE enforcement now uncertain, that states might feel obligated to pursue enhanced enforcement on their own, knowing that ignorance among the schools is no longer an excuse for noncompliance, and concerned that lack of enforcement could be perceived by schools as a free pass.

It is also important to note that the DC court ruled against the DOE on lack of due process, and did not address the substance of the DOE’s position on state regulation and distance learning. The DOE may appeal the ruling, either making a case for its responsiveness to sector concerns, or establishing a formal consultation. The fact that the court upheld the DOE’s stance on incentive compensation, misrepresentation and other aspects of state authorization, suggests that the DOE is in a strong position to reassert its case. This court ruling is unlikely to be the end of federal involvement on this issue.

Eduventures is still advising its clients to carefully assess their regulatory exposure in states where they enroll students through distance education, or engage in related activities under state jurisdiction, and to take the necessary action to come into compliance. It is most important for schools to come into compliance in those states where directives are very clear, and where penalties for noncompliance are significant. Not all states require action/approvals, others have requirements but minimal penalties, and some cite penalties of $500/day per violation. Regardless of the next step in resolving the role of the DOE in requiring compliance with state regulations, schools with a significant investment in distance learning, and in particular states, should still move quickly to come into compliance in those states where the need for authorization is clear. Eduventures has developed expertise and economies of scale in this area, and can help schools achieve compliance quickly and cost-effectively.

For more information on Eduventures work in this area, please contact your account manager, or Laura Boothroyd, Director of Consulting Services- lboothroyd@eduventures.com