UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

Issue Paper 2: State Authorization

Session 1: January 8-11, 2024

Issue: Complaint System and Governance in State Authorization

Statutory cites: § 101(a) of the Higher Education Act of 1965, as amended (HEA)

Regulatory cites: 34 CFR 600.2 and 600.9

Summary of issues:

States, along with accreditors and the Department of Education (Department), play a critical role in the 

higher education program integrity triad. Under the HEA, for an institution in any State to be eligible to 

participate in Federal programs, it must be legally authorized by the State to provide postsecondary 

education. State oversight, through the initial approval to offer postsecondary education and through 

the ongoing activities of State regulatory agencies, plays an important role in protecting students. The 

Department proposes changes to the current regulations regarding State approval and licensure and 

State authorization reciprocity agreements.

State Approval and Licensure (600.2)

The Department is concerned that existing State authorization regulations, which allow States to exempt 

certain institutions from State approval and licensure requirements if the institution is accredited by an 

accrediting agency recognized by the Secretary or if the institution has been in operation for 20 years, 

do not ensure sufficient State oversight of those institutions. State exemptions of certain categories of 

institutions from approval could weaken the program integrity triad for institutions that want to 

participate in the Federal student aid programs, making students and taxpayers vulnerable. The 

Department is also concerned that States may have limited complaint processes that rely upon other 

entities without adequate monitoring by the applicable State.

State authorization reciprocity agreements (600.2 and 600.9)
State Authorization 2 

States may participate in reciprocity agreements, where two or more States enter into an agreement 

that authorizes an institution located and legally authorized in a State covered by the agreement to 

provide postsecondary education through distance education or correspondence courses to students 

located in other States that are covered by the agreement. However, the Department is concerned that 

these agreements have shortcomings that fail to protect students and taxpayers and that reduce States’ 

oversight of institutions. Additionally, we are concerned that some States are deferring all, or nearly all, 

of their oversight responsibilities to other States and the governing bodies that oversee these 

agreements for approval of educational institutions. The Department’s concerns are primarily related to

two areas: complaints and governance.

Current State authorization regulations require that States in which institutions are located have a 

process to review and appropriately act on complaints concerning the institution, including enforcing 

applicable State laws. However, this means that States that have entered into a reciprocity agreement 

likely do not know about such complaints related to students in their State and do not monitor if their 

students are protected by the agreement in which the State is participating. This makes it difficult for 

States to make informed decisions when entering into or renewing agreements. 

The Department is also concerned that the current reciprocity system is influenced by regulated entities, 

allows manipulation to evade State rules, and prioritizes administrative convenience over student and 

taxpayer protection. For example, the National Council for State Authorization Reciprocity Agreements 

(NC-SARA), in partnership with regional compacts made up of States, oversees the State authorization 

reciprocity agreements. However, the NC-SARA Board is composed not just of States and regional 

compacts of States, but also of representatives of accrediting agencies, and other stakeholders, 

including even institutions themselves. Furthermore, NC-SARA’s Board, under current policy, has veto 

power over any proposed changes to SARA policy – potentially further stifling States’ ability to improve 

consumer protections for SARA institutions. This means that the State role in the program integrity triad 

is being overseen by entities other than just States, including the regulated institutions the agreements 

are supposed to govern.

Proposal:

We propose to amend regulations related to State authorization reciprocity agreements (§§ 600.2 and 

600.9) in two ways:

1. We propose requiring reciprocity agreements to require institutions to have a system to 

report student complaints to the State in which the student resides. Such a system could be 
State Authorization 3

operated by the administrators of the reciprocity agreement, but the institution would 

ultimately be responsible for ensuring that the complaints reach their students’ States. The 

Department is also interested in feedback on how to improve compliance and complaint 

reporting, including reporting to NC-SARA or a similar entity overseeing a reciprocity agreement, 

the Department, the State where the institution is located, and the institution’s accreditor.

2. We propose that Department regulations governing State authorization reciprocity 

agreements require that the governing board of any entity that oversees a State authorization 

reciprocity agreement only include representation from State employees – including 

regulatory bodies, enforcement agencies, attorneys general, and licensing bodies – and

members of the public. Institutional representatives would be prohibited from serving on the 

governing board. Public members would be required to be independent from institutions and 

could include students, higher education experts, and advocates. We are interested in the 

committee’s feedback on this proposed requirement. The Department is considering a minimum 

number or percentage of representatives from each group.

Questions for discussion: 

Under § 600.9, State authorization:

Issue:

Currently, States can exempt an institution from State authorization requirements if the institution is

accredited by one or more accrediting agencies recognized by the Secretary or if the institution has been 

in operation for at least 20 years.

1. How can the Department ensure that State authorization is serving its intended purpose in the 

regulatory triad? 

2. In what instances are exemptions from the State approval requirement appropriate or 

warranted? Is accreditation and/or length of time in operation sufficient for an exemption from 

the State approval requirement? 

3. What factors should the Department consider as necessary for State authorization? 
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Proposed Regulations Redline: 

§ 600.2 Definitions. 

State authorization reciprocity agreement: An agreement between two or more States that authorizes 

an institution located and legally authorized in a State covered by the agreement to provide 

postsecondary education through distance education or correspondence courses to students located in 

other States covered by the agreement and cannot prohibit any member State of the agreement from 

enforcing its own general-purpose State laws and regulations outside of the State authorization of 

distance education. If a State authorization reciprocity agreement is administered by an organization, 

the governing body of such organization must consist solely of representatives from States, including 

regulatory bodies, enforcement agencies, attorneys general, and licensing bodies, and members of the 

general public. Public members must be separate from and independent of States, institutions, and 

accrediting agencies, and must not be:

(1) A current or former employee of, member of the governing board, owner, or shareholder of, or 

consultant to, an institution or program that is subject to the State authorization reciprocity agreement; 

(2) A current or former member of any trade association or membership organization related to, 

affiliated with, or associated with an institution or program that is subject to the State authorization 

reciprocity agreement; 

(3) A current or former employee of or consultant to an accrediting agency that accredits an 

institution or program that is subject to the State authorization reciprocity agreement; or

(4) A current or former employee of member of the program integrity triad other than States 

including the Department of Education and accrediting agencies); 

§ 600.9 State authorization.

(a) 

(1) An institution described under §§ 600.4, 600.5, and 600.6 is legally authorized by a State if 

the State has a process to review and appropriately act on complaints concerning the 

institution, including enforcing applicable State laws, and the institution meets the provisions of 

paragraphs (a)(1)(i), (a)(1)(ii), or (b) of this section. 

(i) 

(A) The institution is established by name as an educational institution by a 

State through a charter, statute, constitutional provision, or other action issued 

by an appropriate State agency or State entity and is authorized to operate 

educational programs beyond secondary education, including programs leading 

to a degree or certificate. 

(B) The institution complies with any applicable State approval or licensure 

requirements, except that the State may exempt the institution from any State 

approval or licensure requirements based on the institution's accreditation by 
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one or more accrediting agencies recognized by the Secretary or based upon the 

institution being in operation for at least 20 years. 

(ii) If an institution is established by a State on the basis of an authorization to conduct 

business in the State or to operate as a nonprofit charitable organization, but not 

established by name as an educational institution under paragraph (a)(1)(i) of this 

section, the institution— 

(A) By name, must be approved or licensed by the State to offer programs 

beyond secondary education, including programs leading to a degree or 

certificate; and 

(B) May not be exempt from the State's approval or licensure requirements 

based on accreditation, years in operation, or other comparable exemption. 

(2) The Secretary considers an institution to meet the provisions of paragraph (a)(1) of this 

section if the institution is authorized by name to offer educational programs beyond secondary 

education by— 

(i) The Federal Government; or 

(ii) As defined in 25 U.S.C. 1802(2), an Indian tribe, provided that the institution is 

located on tribal lands and the tribal government has a process to review and 

appropriately act on complaints concerning an institution and enforces applicable tribal 

requirements or laws. 

(b) An institution is considered to be legally authorized to operate educational programs beyond 

secondary education if it is exempt as a religious institution from State authorization under the State 

constitution or by State law. 

(c) 

(1) 

(i) If an institution that meets the requirements under paragraph (a)(1) or (b) of this 

section offers postsecondary education through distance education or correspondence 

courses to students located in a State in which the institution is not physically located or 

in which the institution is otherwise subject to that State's jurisdiction as determined by 

that State, except as provided in paragraph (c)(1)(ii) of this section, the institution must 

meet any of that State's requirements for it to be legally offering postsecondary 

distance education or correspondence courses in that State. The institution must, upon 

request, document the State's approval to the Secretary; or 

(ii) If an institution that meets the requirements under paragraph (a)(1) or (b) of this 

section offers postsecondary education through distance education or correspondence 

courses in a State that participates in a State authorization reciprocity agreement, and 

the institution is covered by such agreement, the institution is considered to meet State 

requirements for it to be legally offering postsecondary distance education or 

correspondence courses in that State, subject to any limitations in that agreement and 

to any additional requirements of that State not relating to State authorization of 
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distance education. The institution must, upon request, document its coverage under 

such an agreement to the Secretary.

(2)

(i) For purposes of this section, an institution must make a determination, in accordance 

with the institution's policies or procedures, regarding the State in which a student is 

located, which must be applied consistently to all students. 

(ii) The institution must, upon request, provide the Secretary with written 

documentation of its determination of a student's location, including the basis for such 

determination. 

(iii) An institution must make a determination regarding the State in which a student is 

located at the time of the student's initial enrollment in an educational program and, if 

applicable, upon formal receipt of information from the student, in accordance with the 

institution's procedures, that the student's location has changed to another State.

(3)

(i) A State authorization reciprocity agreement must include a process for 

communicating information received on complaints regarding institutions or programs 

subject to the State reciprocity agreement to the State in which a student is located at 

the time of the student’s initial enrollment, as determined in accordance with paragraph

(c)(2) of this section.

(ii) If a State authorization reciprocity agreement is administered by an organization, the 

agreement must require that complaints received by States from institutions subject to 

the State reciprocity agreement are communicated to the organization. The 

organization must make information received on complaints public at least annually, 

including but not limited to the number and type of complaints by institution that is 

subject to the State reciprocity agreement.