Federal Aid Freed for Online California Students Enrolled at Out-of-State Institutions
Published: August 09, 2019

Federal financial aid dollars are once again available to tens of thousands of California students enrolled in online programs at nonprofit out-of-state colleges and universities.

The Department of Education (ED) last month announced that an estimated 80,000 California online students were ineligible for federal financial aid because the state did not have a process in place for students to submit complaints about their institutions. That provision was part of the so-called state authorization rules—regulations aimed at overseeing federal aid for distance learning—that the department began enforcing in May.

Officials in California proposed to solve the problem by launching a new complaint process, and in a letter Aug. 2, Principal Deputy Under Secretary of Education Diane Auer Jones deemed that process acceptable.

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, although ED is working to finalize it more quickly than normal, as ACE urged in a letter to Secretary Betsy DeVos last month.

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. ED appealed the ruling to the 9th Circuit Court but announced today that it was dropping the appeal.

That 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). Up until now, California has not had such a process in place. 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.

In her letter, Jones noted that “although the State of California's proposed plan presents compliance challenges,” the department’s 2019 negotiated rulemaking process rule will provide more flexibility to the complaint process. Therefore, ED is considering California “to have had an acceptable plan in place dating back to May 26, 2019” when it began enforcing the state authorization rule and, most importantly, “no student will experience an interruption in his or her education or federal student aid.”