Education Department Rule Could Deny California Students Access to Financial Aid
Published: July 29, 2019

The Department of Education (ED) announced last week that Californians enrolled in online programs at nonprofit colleges and universities located outside the state, both public and private, became ineligible for federal financial aid following a court decision in May. The move has the potential to impact tens of thousands of California students and institutions across the country. 

ACE Senior Vice President Terry Hartle sent a letter July 25 to Secretary of Education Betsy DeVos outlining possible courses of action and affirming that ACE is eager to work with the department on a solution. As he notes, the department’s notice comes roughly one month from the start of the traditional academic year, which makes a quick resolution critical.

Beyond students losing eligibility for Title IV aid going forward, it appears the federal financial aid disbursed to these students from May 26 onward is retroactively considered to have been improperly awarded. It is unclear at this time exactly how the department intends to address this issue.

Background: Last year, the Trump administration delayed implementing the Obama administration’s 2016 state authorization regulation to 2020, as they worked on developing a new version. A new rule was agreed upon this spring by a negotiated rulemaking committee as part of a package of accreditation regulations. This regulation is not yet in effect.

Following a lawsuit by the National Education Association challenging ED’s delay, Judge Laurel Beeler of the U.S. District Court for the Northern District of California ruled in April against the department and ordered it to immediately implement the 2016 rule. The rule links financial aid eligibility to individual states having either 1) a process for online students to submit complaints about their institutions to a state agency in the state where they live, or 2) a reciprocity agreement with other states addressing avenues for consumer complaints, such as the National Council for State Authorization Reciprocity Agreements (NC-SARA).

California has not had such a process in place for out-of-state nonprofit institutions. It also is the only state that is not participating in NC-SARA, which would relieve it of the responsibility of having its own complaint process. Inside Higher Ed reported this afternoon that officials in California believe they have solved the problem by activating a new process through which such students can submit complaints about their out-of-state online providers. But the IHE story said ED officials could not confirm whether the state's changes would resolve the situation.

Under the guidance ED issued July 22, the department noted that the new regulations it will soon publish would solve the problem, because that version would not require states to have a complaint process. However, until then, California residents enrolled in online programs at institutions outside California are ineligible for Title IV programs.

In addition to the possibility of California moving to establish a complaint process, there are two other possible solutions. The Trump administration can finalize and issue the new state authorization regulations, or it can file an appeal with the U.S. Court of Appeals for the Ninth Circuit Court requesting the district court judge’s order in the case National Education Association v. Betsy DeVos be stayed because of the immediate harm to students.

Hartle urged the department to immediately pursue both courses of action.