Consumer advocates, legal aid organizations and labor unions are urging New York State’s education commissioner not to sign an interstate agreement that they say would expose students to harm at the hands of online colleges and universities.
The agreement, the State Authorization Reciprocity Agreement, creates a shared system for regulating online higher education programs. Public and private, nonprofit colleges and universities in New York have been aggressive in lobbying for the commissioner, MaryEllen Elia, to sign the agreement, saying it is critical to their ability to compete in the rapidly expanding online-education market.
But the groups calling on Ms. Elia not to sign the agreement, which include the New York Public Interest Research Group, the Institute for College Access and Success, the Consumers Union, and the National Consumer Law Center, say it would put poor students at serious risk from for-profit schools, which have played an outsize role in the increase in both student debt and student loan defaults over the past 15 years, according to a recent analysis.
The agreement, known as SARA, is meant to remove a significant obstacle to the expansion of higher education online: the patchwork of state regulations that required schools to go state by state to seek approval for enrolling students. States that sign the agreement essentially agree to let a college’s home state regulate it, whether it is public, private or for-profit.
In a letter they sent to Ms. Elia on Wednesday, the groups said the agreement provided too little oversight, especially of for-profit schools.
“Historically, New York has been a national leader in protecting its citizens from unfair business practices,” the groups wrote. By signing the agreement, “New York would formally agree to the weaker oversight of out-of-state online schools, effectively ceding the ability to guard its citizens against abusive practices.”
“We’re basically leaving our most vulnerable students open to being scammed,” said Evan Denerstein, a senior staff attorney at MFY Legal Services Inc., an organization in New York that provides free legal services to people who have defaulted on their student loans.
The agreement was drawn up by an organization called the National Council for State Authorization Reciprocity Agreements, or NC-SARA, whose board comprises representatives of public, nonprofit and for-profit colleges, as well as some government officials. Among the issues of concern to consumer advocates is that the agreement appears to let the national council retain a powerful role in dictating what participating states can and cannot do.
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So far, 36 states have signed onto the agreement, but there have been some notable holdouts, including California, Connecticut, Massachusetts and Wisconsin. Regulators in Connecticut and Wisconsin have expressed concern about the risks to students if their states were to join the shared system. In Minnesota, which has signed on, the state attorney general has described the agreement as “an excuse to protect the industry by claiming that the state cannot regulate how online schools treat Minnesota students.”
In New York, the State Legislature passed a bill last year authorizing the education commissioner to enter into the agreement, and Gov. Andrew M. Cuomo signed the legislation.
Ms. Elia, who was not available for comment, is expected to sign the agreement soon.
The state’s deputy education commissioner for higher education, John D’Agati, said in an interview that he did not understand the advocates’ concerns. Currently, he said, the Education Department does not regulate online programs based in other states at all, because the agency does not have the legal authority or the resources to do so.
“There seems to be this, y’know, ‘I want you to put up a wall to not allow Phoenix or Kaplan or whatever to come into New York,’” Mr. D’Agati said, referring to two for-profit colleges, the University of Phoenix and Kaplan University. But, he added, “They’re here already.”
Robert Shireman, a senior fellow at the Century Foundation, a liberal think tank, and a former deputy undersecretary in the federal Education Department who signed the letter opposing the agreement, said that though New York did not currently regulate out-of-state online colleges, it could in the future. By signing the agreement, he said, the state would lose that option.
“They shouldn’t give up that right until we’ve got an agreement that will work,” he said.
The New York attorney general, Eric T. Schneiderman, declined to comment on the agreement, but his office has in the past used the state’s education laws to bring cases against colleges, something critics say would no longer be possible with colleges in other states if New York agreed to participate in the shared system.
Another problem cited by consumer advocates is the agreement’s requirement that complaints first go through an institution or company’s own complaint-resolution process. Students who felt they did not receive the education that was advertised; who were unhappy with seemingly exorbitant or unfair fees; or who were surprised to learn they could not transfer credits would first have to bring complaints to the college. If students were not satisfied with how the college resolved the issue, they could take the matter to regulators in the college’s home state, but only within two years of whatever prompted the complaint.
Marshall A. Hill, executive director of NC-SARA, said that requiring students to take complaints to their colleges first was “common practice throughout all of higher education.”
As for the two-year limit, Mr. Hill said that everything in the agreement was “a negotiated compromise” between colleges, which want as little oversight as possible, and regulators, who “want to regulate a lot.”
Mr. Shireman, of the Century Foundation, said that forcing students to go through an institution’s complaint process first could keep patterns of misbehavior out of the public eye.
That, he said, was the primary method by which some for-profit colleges had prevented fraud from being detected, “because they basically keep it all internal and confidential.”
Mr. Hill said that colleges would have to meet standards to become SARA-approved, and that the most problematic schools would be kept out. He cited Corinthian Colleges, which closed and filed for bankruptcylast year amid widespread charges of fraud, as an example of a college that would not have been approved. Corinthian’s low financial responsibility score — a figure the federal government uses to assess a university’s financial health — would have kept it out of the SARA system, he said. For many years, however, Corinthian’s financial responsibility score would have been high enough for approval.
According to the agreement’s policies and standards document, states can approve colleges for participation “on provisional status” if they are either on probation from an accrediting entity or “the subject of a publicly announced investigation by a government agency.”
The University of Phoenix, whose graduates, according to one analysis, have the most outstanding student federal debt of any United States college — $35.5 billion — and whose owner is being investigated by the Federal Trade Commission for possibly engaging in deceptive advertising, has been approved for participation in the system. So has Colorado Technical University. In 2013, Mr. Schneiderman’s office reached a $10.25 million settlement with the university’s parent company, Career Education Corporation, for inflating its graduates’ job-placement rates.