California finds solution to save distance learners’ financial aid

July 28, 2019

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Tens of thousands of online California students are no longer at risk of losing federal financial aid after the state moved quickly to create a new system for addressing complaints from students against out-of-state colleges and universities.

At least 60,000 Californians were affected by a new federal rule, which the U.S. Department of Education began implementing July 22. That rule requires the state to have a complaint process for students living in California and enrolled in out-of-state, online degree or certificate programs at public and private nonprofit colleges. Without such a process, students would have lost access to federal aid such as Pell Grants, loans and work-study.

Earlier last week, the Trump administration notified out-of-state online providers and the state that these students would lose federal aid because California doesn’t have a system for handling student complaints.

Consumer advocates claimed that the Trump administration delayed implementing the rule to cut back on regulations affecting colleges.

The 2016 Obama-era rule requires the state to have such a system if students enrolled in these out-of-state online programs receive financial aid. The administration attempted to delay implementing the regulation, but a judge ruled in April they could not.

The California Department of Consumer Affairs responded by creating a complaint system for those students. The department already has a process for receiving complaints from students enrolled in for-profit colleges and universities.

“We received their plan over the weekend and are in the process of reviewing it,” said Liz Hill, a spokeswoman for the education department, in an email. “We appreciate California’s effort to try and come into compliance with the 2016 Obama-era regulation. We will continue to work with them in order to protect students.”

The new set-up satisfies federal requirements, said Russ Heimerich, deputy secretary of communications for the state Business, Consumer Services and Housing Agency, which oversees the consumer affairs department, in an email. “This will be our permanent solution.”

The department will launch an information campaign starting Monday so students know how to use the complaint system if they needed it.

Students attending these out-of-state institutions can file those complaints online at or call toll-free 833-942-1120, Heimerich said. These complaints could be academic or financial, but they allow students to address concerns and resolve issues related to their educations. The complaint system can also help the state identify any predatory, fraudulent or misleading practices at colleges.

More than 300,000 California residents enroll in online college programs. A third of them take courses from out-of-state institutions, according to The Institute for College Access and Success (TICAS).

Approximately 40,000 of those students in out-of-state programs are enrolled in for-profit institutions and nearly 60,000 in private and public colleges and universities.

The dispute does not affect California students enrolled in the state’s for-profit or public university or community college systems.

A spokesperson from Southern New Hampshire University, a private nonprofit institution which in 2016 had a robust out-of-state, online program of 56,000 students, said they were monitoring the situation.

“This new measure impacts thousands of our students in the state, as well as tens of thousands of others enrolled in other online programs,” the university said in a statement to EdSource. “They all rely on federal dollars to complete their education.”

The education department began enforcing the rule this week after a federal judge ruled in April that Education Secretary Betsy DeVos and the department illegally delayed its implementation. The Trump administration initially attempted to eliminate the rule and later delayed implementation until July 2020 in hopes of coming up with a different rule, according to the court ruling.

The Obama administration put the rule in place in 2016 and it was scheduled to go into effect by July 2018. The rule is intended to give students consumer protection by requiring their resident state to address complaints and concerns about the college they attend, regardless of where that college is located. It also allows states to have more oversight of out-of-state colleges enrolling students who live in those states.

In proposing the rule, the Obama administration cited the experience of a California student. The woman was enrolled in an online program offered by an institution in Virginia, but later informed the institution of her decision to cancel her enrollment agreement, according to the Federal Register. Four years later, she was told her wages would be garnished if she didn’t begin to make monthly payments on her student debt to the Virginia institution, which she never attended. California has a cancellation law that could have applied to the student but didn’t because the institution was out-of-state. And the student wasn’t able to file a complaint, or have it resolved by California because the Virginia institution was “exempt from oversight by the appropriate state oversight agency.”

The National Education Association and the California Teachers Association, both teachers unions, sued DeVos and the department to lift the delay and implement the rule. They claimed that the administration had failed to put the delay through the government’s rule making process.

Debbie Cochrane, TICAS’ executive vice president, said the judge’s ruling and the notice that many public and nonprofit colleges were out of compliance, “came as a shock to many after years of delays and confusion.”

Although a San Francisco judge had already ruled, on Monday DeVos called for the NEA to drop the lawsuit.

“This is just one of many consequences of the previous administration’s flawed state authorization rule that we worked to help students avoid,” DeVos said, in a news release. “But the NEA has chosen to try and score political points rather than put students first. I urge the NEA to do the right thing and stop blocking the department’s efforts to delay … the regulation.”

NEA President Lily Eskelsen Garcia said the department is trying to use California’s students as pawns.

“The state took action to ensure its students’ critical loans and Pell Grants aren’t put in jeopardy,” she said, in a statement. “So clearly, either DeVos didn’t do her homework or she is seeking to mislead the public. But either way, once again she is showing the nation just how unqualified she is to lead the Department of Education.”

California residents were especially affected because it is the only state that has not joined the National Council for State Authorization Reciprocity Agreements, or SARA, Cochrane said. Those agreements allow states to recognize each other’s authorization process for colleges and universities and reduce the amount of oversight by the state where the student lives.

“California doesn’t participate because the agreement they would have to sign onto doesn’t have strong enough consumer protections,” she said.

The state has a long history of enforcing regulations on institutions, such as for-profit colleges, that have harmed California students, Cochrane said. The state and former Attorney General Kamala Harris placed stricter regulations on the for-profit Corinthian Colleges. Corinthian eventually collapsed, in part, because of those regulations and lawsuits from Harris.

The lack of a central higher education authority is another reason why Californians were affected by the rule. Most states have a coordinating entity, Cochrane said.

“There is a lot of talk within the higher education community about creating an oversight coordinating entity,” Cochrane said.

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