Recalibrating Regulation of Colleges and Universities

Recalibrating Regulation of Colleges and UniversitiesIn the Fall of 2013, a bipartisan group of U.S. Senators (Lamar Alexander, R-Tenn., Barbara Mikulski, D-Md., Richard Burr, R-N.C. and Michael Bennet, D-Colo.) established a task force of college and university presidents to examine federal regulation of higher education and to identify and recommend potential improvements. The task force subsequently examined the process by which higher education rules are developed and implemented and also proposed changes for improvement in that area. It requested ongoing support from the American Council on Education.

The task force’s report introduced the following set of Guiding Principles intended to assist the Department of Education whenever it proposes, drafts, or implements new rules and regulations:.

  • Regulations should be related to education, student safety, and stewardship of federal funds.
  • Regulations should be clear and comprehensible.
  • Regulations should not stray from clearly stated legislative intent.
  • Costs and burdens of regulations should be accurately estimated.
  • Clear safe harbors should be created.
  • The Department should recognize good faith efforts by institutions.
  • The Department should complete program reviews and investigations in a timely manner.
  • Penalties should be imposed at a level appropriate to the violation.
  • Disclosure requirements should focus on issues of widespread interest.
  • All substantive policies should be subject to the “notice-and-comment” requirements of the Administrative Procedure Act.
  • Regulations that consistently create compliance challenges should be revised.
  • The Department should take all necessary steps to facilitate compliance by institutions.

The report states that in 2013-14, the Department of Education disbursed more than $160 billion in grants and loans to low- and middle-income families, a one hundredfold increase since 1970-71. The task force acknowledged that increased federal support likely warrants thoughtful stewardship and oversight, while expressing concern at the corresponding increased cost and compliance burdens for colleges and universities. The task force stipulated that federal regulation should facilitate, not impede, institutional productivity and innovation.

The task force noted the fact that both the Higher Education Act and Code of Federal Regulations contain 1,000 pages of regulations, and the Department of Education’s sub-regulatory guidance, such as the 1,050 page Federal Student Aid Handbook, numbers thousands more. These regulations and associated guidance do not exist independently, and, together, they often create additional compliance costs to determine the effect of interplayed regulatory requirements. For a variety of practical reasons, there have been few attempts by the Department of Education or individual academic institutions to quantify compliance costs. A 1997 Stanford University initiative quantified approximately $29 million in annual compliance costs, which represented approximately 7.5 percent of tuition, a figure that is likely higher today. In addition, a 2014 Vanderbilt University study estimated that compliance costs represented approximately 11 percent of its 2013 expenditures. By the way, percentages of expenditures should not be considered equal to percentages of tuition because research universities have many other sources of revenue and expenses and some may have a positive operating margin from undergraduate operations that is applied to other areas of operations.

The task force also identified several regulations that actually have little or nothing to do with higher education, and but rather the federal government’s desire to implement by means of colleges and universities. Such examples include Selective Service and voter registration, peer-to-peer file sharing and foreign gift reporting.

The task force specifically questioned the growth in Department of Education regulations during the past five years, a period in which Congress has otherwise passed relatively few regulatory changes. It cited the creation of a federally- defined credit hour and gainful employment as regulations undefined by Congress and previous departments but which the current department decided to regulate. In regard to credit hour definition, there was nearly unanimous opposition to the rule from colleges and universities. In the case of gainful employment, the task force writes that the department “used the regulatory process to set its own policy agenda in the absence of any direction from Congress and in the face of clear opposition to that policy from one house of Congress.” Sub-regulatory guidance is another process that the task force cited as being removed from public scrutiny and comment, and not necessarily reflecting Congressional intent.

Timeliness of action was another concern of the task force, since the Higher Education Act requires all legislation to have final rules in place within 360 days of enactment – a provision that the Department of Education rarely meets. Other regulations can act as barriers to innovation, and the task force cited the department’s definition of a credit hour using “seat time” as a basic construct, thereby making innovative programs like competency-based education more difficult, if not impossible or impractical to implement. The department’s state authorization regulations are another example of those that have blocked institutions from offering distance education programs to students who reside outside the institutions’ home state borders.

Most troubling to the task force was what it perceived as the department’s apparent indifference to problems created by some of its regulations. For example, the department estimates its Dec. 3, 2014 proposed rulemaking for teacher education programs to cost $42 million over 10 years. According to the report, California State University estimated its cost for complying with this regulation at approximately $312 million over 10 years, adding that the data system required to track compliance will cost the state of California $233 million. There is clearly a substantial disparity between these estimates and those of the department and this example represents but a single university system from a single state. Incredibly, the task force has been unable to locate an academic official or consultant who has ever been contacted for advice on estimating the costs of any proposed regulation. The task force recommends that Congress ask the Government Accountability Office to review the department’s methodology for estimating institutional costs for meeting its proposed regulations and make remedial recommendations.

Negotiated rulemaking, the process for issuing new regulations, is severely criticized by the task force for how the department’s redesign of the process has effectively created inherent conflict among representatives of the interested parties, thus ensuring discord, and allowing the department to implement the regulations however it chooses. The task force recommends that the department return to its previous fair practices of seeking consensus wherever possible, and implementing any consensual provisions rather than invoking an “all-or-nothing” approach. A White Paper appended to the report further discusses this situation.

The task force also proposed that the department not exceed legislative language or Congressional intent when issuing regulations. It cites the arbitrary credit hour definition and gainful employment regulations as two egregious examples of overreaches by the department in pursuit of an agenda not embodied in legislation, or reflective of Congressional intent. Another overreaching regulation mentioned by the Task Force was the extension of Cleary Act reporting to overnight trips sponsored by institutions.

The task force recommended that the department use the notice and comment process for all regulations, including the extensive sub-regulations it has issued in recent years without any meaningful engagement with colleges and universities, and/or thoughtful consideration of public input from other interested parties.

In order to improve regulatory enforcement, the task force recommended that the department recognize when institutions are acting in good faith. It cites a few noteworthy examples of fines and proposes that both Congress and the department consider voluntary programs similar to those of the Internal Revenue Service and the Securities and Exchange Commission by which the regulated entities identify and self-report any instances of non-compliance. The same discretionary forgiveness of fines and penalties extended to the Secretary of Education for K-12 education is recommended by the task force to include higher education. The task force also proposed that Congress consider implementing risk-informed regulatory approaches, treating institutions that exhibit positive performance metrics with correspondingly less regulatory oversight than those less successful in fulfilling their mission.

The final report encompasses 42 pages, not including the appendices, and the task force’s bipartisan composition and inclusion of presidents from all higher education sectors suggests that the development of the report reflected more collaboration than did any regulations issued by the department since 2010. I hope that Congress seriously considers the merits of the task force’s perspectives and incorporates its recommendations in enacted legislation. Our Nation’s educational objectives and challenges are significant enough that we need cooperation and collaboration between all higher education institutions, policymakers, other interested parties and the Department of Education. Additional regulations that stifle innovation and have not been equitably vetted do nothing to advance those objectives or overcome the challenges.

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