Editor's pick: Originally published Jan. 15.
Distance learning, where students attend class while sitting in front of a computer, is higher ed's fastest growing segment according to a 2014 Senate Health, Education, Labor and Pension committee report. Some observers also fear that they operate in uncharted—and unregulated—waters, where students are vulnerable to scams.
That's because distance learning or online schools are allowed to set up shop in states, where they have no physical presence. Through deals made with state legislators, they avoid regulations that must be observed by schools that do teaching in a classroom, according to a December 14 report last month from the National Consumer Law Center (NCLC).
"Most states either exempt such schools from state oversight or have signed toothless state reciprocity agreements that prevent states from enforcing for-profit school consumer protection laws," said Robyn Smith, Los Angeles-based Of Counsel for NCLC. 34 states have used these agreements, called State Authorization Reciprocity Agreements, or SARAs, that exempt schools from complying with state consumer protections aimed at preventing for-profit college fraud.
When states sign SARAs, students are denied reimbursement from the state for economic losses due to a sudden shutdown of a school or program, full refunds for withdrawal before the first day of class, private student loan refunds following withdrawal before graduation and the right to file complaints with state oversight agencies. The online schools engaged in these practices are owned by for-profit colleges facing state and federal lawsuits. The schools include the University of Phoenix, which is facing six separate lawsuits and investigations, along with Ashford University, facing four lawsuits, and Kaplan University, facing three.
SARAs, and their implementation, are supported by the National Council for State Authorization and Reciprocity Agreements found at SARA.org. Funded by the Lumina Foundation and the Bill and Melinda Gates Foundation, the group says its goal is to regulate distance learning. Critics say that this is precisely what SARA.org is trying to avoid.
The distance learning industry has already circled the wagons in response to the federal government's attempt to make regulations. ED announced last year that regs that were supposed to roll out in November. In a June 14 letter to then-Secretary of Education Arne Duncan, the Online Learning Consortium, the University Professional and Continuing Education Association and the Western Co-operative of Educational Telecommunication expressed concern about ED's proposal to look into distance learning at the state level. Undersecretary of Education Ted Mitchell was identified as a supporter of the industry's objections. Duncan’s departure last month may have been a complicated matters.
The appeal of online higher ed isn't hard to understand. Education Connection, an aggregator for online schools, puts it this way: "Attending college online may be perfect for people who have busy lives. Many people have children, a demanding job, or both. If this sounds like you, then online learning could be right for you."
While new regulation is invariably a burden, these schools are vulnerable to good old fashioned fraud.
A February 2014 audit report on Title IV higher ed programs from the Department of Education's Office of the Inspector General said that distance education "creates new opportunities for fraud, abuse and waste in the Title IV programs." Title IV of the Higher Education Act is where money for federal student loans and aid originates.
The OIG report stated, "These problems are increasing as schools deliver more courses though (online) distance education and more students enroll in programs offered entirely through distance education."
OIG also addressed fraud perpetrated by students. ”Current regulations are not sufficient to mitigate the risk of Title IV funds being paid to students who fraudulently enroll and do not intend to complete a course or program,” the OIG continued. “The Department could reduce the likelihood of fraud schemes being successful by revising the regulations and requiring schools to use smaller, more frequent (loan and aid) disbursements."
Meanwhile, ED does not seem close to issuing regulations. "We conducted a negotiated rulemaking two years ago that included discussion of state authorization of distance programs," said an ED spokesperson who discussed the matter on background. "We did not reach a consensus and are still considering how to move forward."