Title of Regulation: 8VAC40-31. Regulations Governing Certification of Certain Institutions to Confer Degrees, Diplomas and Certificates (adding 8VAC40-31-125).

Statutory Authority: § 23.1-215 of the Code of Virginia.

Public Hearing Information: No public hearing is currently scheduled.

Public Comment Deadline: April 1, 2022.

Agency Contact: Beverly Rebar, Senior Associate for Academic and Legislative Affairs, State Council of Higher Education for Virginia, 101 North 14th Street, 9th Floor, Monroe Building, Richmond, VA 23219, telephone (804) 371-0571, or email beverlyrebar@schev.edu.

Basis: Section 23.1-215 of the Code of Virginia authorizes the State Council of Higher Education for Virginia (SCHEV) to adopt, pursuant to the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia), such regulations as may be necessary to implement the provisions for standards for certain private and out-of-state institutions of higher education. Section 23.1-215 of the Code of Virginia authorizes the State Council of Higher Education for Virginia to adopt, pursuant to the Administrative Process Act, such regulations as may be necessary to implement the provisions of Chapter 2 (§ 23.1-200 et seq.) of Title 23.1 of the Code of Virginia.

Purpose: This regulation is essential to protect the welfare of citizens who are enrolled in programs by out-of-state distance education providers. The national education landscape has changed such that online education programs have proliferated. While it may once have been a common operational model to offer distance learning through telecommunications equipment that was located at a site within the state, technological advancements have rendered that model obsolete. Out-of-state postsecondary schools can and do conduct business with Virginia citizens from locations entirely outside of Virginia. Those citizens are entitled to the same protections afforded to Virginia students enrolled in Virginia schools through SCHEV certification processes.

The regulation will not have any effect on institutions that are members in good standing of the National State Authorization Reciprocity Agreement (NC-SARA) it imposes no certification requirements on State Authorization Reciprocity Agreement (SARA) members from other states. The NC-SARA framework ensures adequate consumer protections for students of SARA schools nationwide. Certification for schools that are not members of NC-SARA is more complex and will require a separate process that has been outlined in the proposed language.

Substance: The regulation will provide that any degree-granting postsecondary school providing distance learning to residents of the Commonwealth from a location outside of the Commonwealth shall be certified to operate in the Commonwealth or shall be a participant in a reciprocity agreement to which the Commonwealth belongs. Schools that are members of the NC-SARA reciprocity agreement are not subject to the regulation as according to NC-SARA, Virginia reciprocally honors their home states' authorization.

The regulation provides criteria that must be fulfilled by schools that are not members of NC-SARA in order to be certified to operate, addressing (i) aspects of the school's current status, such as accreditation, being in good standing in its home state, and providing certain disclosures to the public and (ii) the school's obligations to the Commonwealth regarding maintenance of student records and payment of fees.

Issues: The primary advantage to the public and the Commonwealth is that SCHEV will be able to protect Virginia citizens who are enrolled in out-of-state postsecondary schools in distance education programs. There are no disadvantages to the public or the Commonwealth from the regulation.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapter 380 of the 2020 Acts of Assembly, the State Council of Higher Education for Virginia (SCHEV) proposes to add certification requirements for out-of-state schools offering distance learning in Virginia. Out-of-state schools that are members of the National Council for State Authorization Reciprocity Agreements (NC-SARA) would be exempt from these certification requirements. The proposed amendments would require out-of-state schools that are not members of NC-SARA to: (i) apply for SCHEV authorization by demonstrating authorization and good standing in the state where the school has legal domicile, (ii) provide certain disclosures to Virginia students seeking to enroll in a distance learning program, and (iii) pay a certification fee.

Background. Chapter 380 of the 2020 Acts of Assembly added a definition of "distance learning" and amended § 23.1-219 of the Code of Virginia to add: Any degree-granting postsecondary school providing distance learning to residents of the Commonwealth from a location outside of the Commonwealth shall be certified to operate in the Commonwealth or shall be a participant in a reciprocity agreement to which the Commonwealth belongs for the purpose of consumer protection.¹ Accordingly, out-of-state schools that are part of NC-SARA would not require certification. Schools that do require certification would have to demonstrate that they meet the following criteria: (i) the institution is authorized to operate by the appropriate entity in the state where the institution has legal domicile, (ii) the institution is accredited by an accrediting body approved by the U.S. Department of Education with a scope of authority that includes distance learning, (iii) the institution is in good legal standing, including having no current or pending show cause or probationary actions against it, and (iv) the institution demonstrates minimum financial stability to qualify for certification.

Upon receiving certification, out-of-state schools seeking to enroll Virginia students would be required to provide prospective enrollees with a notification that the school is certified, a notification outlining the procedures a student may follow to file a complaint against the school, including contacting SCHEV as a last resort, and a notification stating that the transferability of credits earned at the school is at the sole discretion of the receiving institution. Further, institutions offering programs leading to professional licensure would be required to provide prospective students with a notification regarding whether completion of the program would be sufficient to meet licensure requirements in Virginia. Lastly, the institution would be required to inform SCHEV and enrolled students in Virginia of "any adverse action by the U.S. Department of Education or by its accrediting agency that threatens a disruption of the operation of the institution and/or exposes students to a loss of course or degree credit or financial loss."

Institutions would have to pay SCHEV a nonrefundable initial and renewal authorization fee as provided in 8VAC40-31-260.² The proposed amendments include a requirement that applications for annual renewal be submitted at least 90 days prior to the expiration date specified on the certificate of authorization.

Estimated Benefits and Costs. The proposed changes to fees would increase costs for out-of-state institutions providing distance learning programs in Virginia while providing greater protections to students in Virginia seeking to enroll in distance learning programs from out-of-state institutions. As long as the demand for distance learning programs from out-of-state schools remains robust, these institutions would most likely absorb the costs of the application and renewal fees. Schools may also pass on all or part of these costs to students, either spreading out the cost across all students, or specifically across Virginia residents. Out-of-state schools that choose not to apply for certification would have two options: they may join NC-SARA instead of going through the certification process, or choose not to enroll students from Virginia.³

Virginia students and their families would benefit from greater oversight of distance learning programs, particularly those not part of NC-SARA. In particular, the proposed amendments would require that distance learning programs provide notifications to prospective students regarding the certification status, transferability of credits, and if applicable, whether the program meets licensing requirements in Virginia. Students and families would benefit from greater transparency and SCHEV could take action if certified schools are found to not provide these notifications. However, such consumer protection benefits would be limited if uncertified schools are able to enroll Virginia students undetected, and if students and their families are unaware of the certification and notification requirements.

Businesses and Other Entities Affected. The proposed amendments would not impact any postsecondary educational institutions in Virginia; they apply only to out-of-state schools that do not participate in NC-SARA. The number of such schools is unknown. Virginia students seeking to enroll in distance learning programs would benefit from greater oversight of out-of-state schools' distance learning programs.

An adverse impact is indicated if there is any increase in net cost or reduction in net revenue for any entity, even if the benefits exceed the costs for all entities combined. The proposal would increase costs for out-of-state schools offering distance learning in Virginia that are not members of NC-SARA. Thus, an adverse impact is indicated.

Small Businesses⁴ Affected. The proposed amendments would not affect small businesses in Virginia.

Localities⁵ Affected.⁶ The proposed amendments do not introduce new costs for local governments and are unlikely to affect any locality in particular.

Projected Impact on Employment. The proposed amendments are unlikely to affect employment in Virginia since they only apply to certain out-of-state schools.

Effects on the Use and Value of Private Property. The proposed amendments increase costs for out-of-state private schools offering distance learning in Virginia that are not members of NC-SARA. The value of such private schools may be modestly reduced. Real estate development costs are not affected.

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¹See https://lis.virginia.gov/cgi-bin/legp604.exe?201+ful+CHAP0380+hil.

²In a separate regulatory action, SCHEV has set the initial fee and renewal fee at $10,000. See https://townhall.virginia.gov/l/ViewAction.cfm?actionid=5391 for details.

³This applies for schools with legal domicile in 49 states (all but California), the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. California schools would not have the option of joining NC-SARA since their state is not party to the agreement. See https://www.nc-sara.org/sara-states.

⁴Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

⁵"Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

⁶§ 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

Agency's Response to Economic Impact Analysis: The State Council of Higher Education for Virginia concurs with the economic impact analysis submitted by the Department of Planning and Budget.

Summary:

Pursuant to Chapter 380 of the 2020 Acts of Assembly, the proposed amendments require out-of-state postsecondary schools offering distance education to Virginia citizens to be certified by the State Council of Higher Education for Virginia or be participants in a reciprocity agreement to which the Commonwealth belongs. This action establishes certification requirements for schools that do not participate in a reciprocity agreement.

8VAC40-31-125. Certification required for schools offering distance learning in Virginia.

A. Any degree-granting postsecondary school providing distance learning to residents of the Commonwealth from a location outside of the Commonwealth shall be certified to operate in the Commonwealth or shall be a participant in a reciprocity agreement to which the Commonwealth belongs, in accordance with council's authority pursuant to § 23.1-211 of the Code of Virginia, for the purpose of consumer protection.

B. Any degree-granting postsecondary institution seeking initial or renewal authorization to offer distance education programs or courses to residents of the Commonwealth from a location outside of the Commonwealth that is not a participant in a reciprocity agreement to which the Commonwealth belongs must demonstrate that it meets the following eligibility criteria:

1. The institution is properly authorized to operate by and in good standing with the appropriate entity in the state where the institution has legal domicile.

2. The institution is a United States degree-granting institution that is accredited by an accrediting agency that is recognized by the U.S. Department of Education with a scope of authority, as specified by the U.S. Department of Education, that includes distance education.

3. The institution is in good standing, including having no current or pending show cause or probation actions against it.

4. The institution demonstrates minimum financial stability to qualify for certification defined as a federal Financial Responsibility Composite Score of 1.5 or better.

C. An institution certified pursuant to this section shall provide proof of the following disclosures to Virginia residents:

1. A notification that the school is certified to operate by council.

2. A notification outlining the procedures a student may follow to file a complaint against the school. The disclosure must include a statement that if the complaint is not resolved to the student's satisfaction, the student may contact the council as a last resort. The school must provide contact information for council and must ensure that the student will not be retaliated against for filing a complaint.

3. A notification stating that the transferability of credits earned at the school is at the sole discretion of the receiving institution.

4. For institutions offering programs or courses leading to or advertised as leading to professional licensure, a notification regarding whether completion of the program is sufficient to meet licensure requirements in Virginia. If the institution is unable to determine whether a program will meet the professional licensure requirements in Virginia, the notification shall provide current contact information for any applicable licensing boards and advise the student or applicant to determine whether the program meets requirements for licensure in Virginia prior to enrollment.

D. An institution certified pursuant to this section shall pay a nonrefundable initial and renewal authorization fee as provided in 8VAC40-31-260.

E. An institution certified pursuant to this section shall immediately inform the council and current enrolled students who are residents of the Commonwealth of any adverse action by the U.S. Department of Education or by its accrediting agency that threatens a disruption of the operation of the institution or exposes students to a loss of course or degree credit or financial loss.

F. The certificate of authorization for an institution certified pursuant to this section shall expire on the stated expiration date. Applications for annual renewals must be submitted to council at least 90 days prior to the expiration date of the current authorization.