Bad Deal on Online Education Would Leave New Yorkers Unprotected

By Margaret Mattes

This post originally appeared on TCF.org.

It is a credit to the State of New York that in 2005, when Trump University first started marketing itself, state officials cried foul, demanding that the company — which was based in New York — cease and desist. New York’s insistence on protecting its residents against misrepresentation was an important preventative measure — and that’s why it is so disturbing that the state agency responsible for protecting students is now poised to sign away its right to take action against a new threat: out-of-state online schools.

Right now, New York State education commissioner MaryEllen Elia is moving toward approving an interstate compact — the State Authorization Reciprocity Agreement, or SARA — that would allow schools based in other states to enroll New York residents online without abiding by New York’s standards.

And the reason this is happening, perhaps unsurprisingly, is greed. Not only the monetary greed of for-profit colleges that have lobbied for this bad deal, but also the institutional greed of New York’s public and nonprofit universities that, in the hope of gaining easier access to online students living in other states, are all too willing to leave New Yorkers without adequate protection against potentially predatory out-of-state colleges.

There is growing opposition to this deal, however. As reported in the New York Times today, more than thirty legal aid and consumer organizations are urgingCommissioner Elia to reject the current draft of the compact, and develop a better approach. Many of these organizations work directly with the victims of fraud in higher education, observing firsthand the tremendous cost of failing to adequately protect consumers from schools and for-profit companies too focused on money rather than education.

SARA, as currently drafted, requires online schools to abide only by the requirements of the state in which they are based, not where the students reside. While out-of-state schools are currently not regulated by New York, the state’s ability to step in has kept the schools operating in New York in check. SARA would prohibit the state from taking even the most basic corrective action. By ceding its regulatory authority, New York would be issuing an open invitation for bad actors to prey on New Yorkers without any ability for the state to take action.

With this agreement in place, online colleges — especially those run by for-profit companies — could adopt the practices of credit card companies, relocating to the state with the lowest set of regulatory requirements, while continuing to operate nationwide. This could precipitate a race-to-the-bottom regarding educational quality. And New York (and other signatory states) would be unable to respond to the complaints and concerns of its own residents, and would instead be forced to simply refer these grievances to the state in which that particular institution is based — and hope that the other state is responsive. Even if a school were to be placed on probation by an accreditor, or otherwise found to be engaged in shoddy behavior, New York regulators’ hands would be tied.

While many traditional public and private nonprofit schools — such as Columbia University, SUNY, and NYU — are asking Elia to join the interstate agreement, the pact is, in the words of a Wall Street analyst, the real for-profit growth plan, a deal accomplishing the exact goals of the for-profit lobby.

For example, for-profit colleges have used a variety of methods to hide fraud from regulators. SARA would actually lock in a requirement that complaints must go through schools before being handled by a state, the precise strategy used by fraudulent institutions to prevent regulators from learning about their misdeeds in a timely manner.

The current version of SARA goes so far as to prohibit states from drawing policy distinctions between for-profit and nonprofit schools. Abolishing the ability to of states to recognize that for-profit institutions operate under different, more hazardous financial incentives ignores the well-documented history of abuse and misrepresentation by these schools. As a result, New York would be unable to regulate for-profit, nonprofit, and public schools differently.

While SARA is primarily about online education, it also would weaken current New York regulations on short courses or seminars offered in New York — like the introductory sessions offered by Trump University. Under the current system, providers of these courses must be registered to operate in the state; under SARA, they would avoid this oversight. In effect, the agreement invalidates regulations established by the state to protect consumers and replaces them with a pact written by out-of-state schools and for-profit companies.

New York schools understandably like the idea of being able to bypass other states’ regulators in signing up online students. But their convenience comes at a price: opening up New Yorkers to abuse from predatory institutions. An interstate approach to regulating online education is a worthwhile idea. But New York can do better than SARA. Commissioner Elia should convene all stakeholders — schools as well as representatives of past victims and of consumers — to to develop an approach that makes online education work better for the people of New York.


Margaret Mattes is a policy associate at The Century Foundation where she researches higher education.