Washington
Under a new interpretation by the Education Department of its "state authorization" rule, many colleges around the country could risk losing their eligibility to receive federal student aid.
Under the federal regulation, colleges must receive authorization from the states in which they enroll students before they may receive federal student-aid funds. The department is currently interpreting a portion of the regulation in a way that would disqualify institutions that achieved state approval based on their accreditation status. That interpretation could affect hundreds of colleges that are licensed through this process—and thousands of students who receive financial aid at those colleges—in 10 states, according to Gregory Ferenbach, a lawyer at Dow Lohnes who specializes in state education regulations.
If those institutions don't resolve the issue by July 1, they will lose their eligibility to receive federal financial aid. Although the rule took effect in 2011, the department said states would have until June 30, 2013, to amend their laws to comply with it.
The problem stems from the part of the definition of the "on-ground" provision of state authorization that requires colleges to be "sufficiently authorized by a state" in order to receive federal aid funds.
Under the department's unofficial interpretation, institutions that received state licensure by means of accreditation—which enables an institution to avoid the standard state-approval process by citing its accreditation status—would be disqualified.
The department issued letters to several Florida colleges in February, for example, warning them that their state approval did not comply with the federal regulation because it believed that the licensure-by-means-of-accreditation process provided such institutions with an exemption from the ordinary licensing procedure.
A spokeswoman for the department declined to comment on the Florida cases or broader questions of its interpretation of the rule.
But Florida's process does not actually exempt institutions from the licensure procedure, according to Samuel L. Ferguson, executive director of the state's Commission for Independent Education. The colleges must still apply for state approval, but they may submit the same information used in the accreditation process, so as not to double up on paperwork, as long as the state commission has found the accrediting agency to "meet or exceed" state requirements, Mr. Ferguson said.
Though the department resolved the dispute over Florida's licensure procedure on Tuesday, Mr. Ferenbach said that interpretation of the rule could have significant consequences for institutions in 10 other states.
According to Mr. Ferenbach, Alaska, California, Georgia, Hawaii, Montana, New Mexico, Oregon, South Dakota, Texas, and Utah have similar processes and may not meet the federal regulation.
"The issue revolves around the fact that some states just simply accept accreditation," Mr. Ferguson said. "And that doesn't meet the federal requirement."
A big concern, Mr. Ferenbach said, is that states may have to scramble to amend their laws to comply with the federal regulation by the July 1 deadline, should the department find their laws to be insufficient. When the department first issued the state-authorization rule, in late 2010, states were responsible for determining whether they did or did not have to amend their laws, he said.
"From the state perspective, that was the end of it," Mr. Ferenbach said. "To be second-guessed a couple years later is a bit of a surprise."
