Making State Authorization Reciprocity Agreements in Higher Education Work for Students

States are an essential part of higher education oversight and key to the regulatory “triad” of the federal government, states, and accreditors.¹ Federal oversight comes from the U.S. Department of Education, which is charged by Congress to implement and enforce the Higher Education Act. Accreditors are made up of institutional representatives who are meant to provide peer review and determinations of academic quality.² State oversight is intended to provide consumer protection to students and to allow states to step in when things go wrong. A purported benefit of states overseeing consumer protection is that they can provide closer and more timely oversight than could regional or federal regulators.³

To address the complexities of differing state regulations, state authorization reciprocity agreements were introduced. These agreements are often heralded as promoting increased access to higher education for students through distance education—that is, education and training courses in which students and instructors are separated by physical distance and instruction is delivered through modes such as the internet, video conferencing, or other digital platforms. The argument is reciprocity agreements streamline the interstate business operations of higher education institutions.⁴

Although this narrative focuses on the benefits to students, the reality is a double-edged sword: By facilitating easier entry for out-of-state providers into local markets, these agreements inadvertently intensify competition within the home state. This heightened competition can disadvantage local institutions, which may find themselves ill-equipped to contend with the broader array of options available to their potential student base.⁵ In theory, increased choice spurs competition and incentivizes schools to offer higher-quality options. That rarely plays out in education, as other factors, such as resource disparity, a focus on short-term adjustments over long-term improvements, program closure, and a lack of quality assurance, are more likely to confound the situation.⁶

The consequences of this competition can be detrimental to community colleges and other local institutions that are most in tune with local and state workforce development needs—and more importantly, what those needs mean for students, who despite appearing to have more options, will find themselves reliant on weakened local institutions. In short, strong education systems and institutions have positive effects on students, their families, and their communities; local colleges that are pulled into competing against well-resourced, outside providers will be less likely to maintain those positive impacts. Meanwhile, students enrolled in out-of-state online programs have less consumer protection than their peers who opt to study locally.⁷

With the backdrop of recent federal regulatory negotiations and ongoing debate, this report examines how distance education reciprocity agreements can better serve their intended purpose without compromising the educational experience.⁸

Education programs offered across state lines in the United States are facilitated through regional compacts, or agreements between states meant to increase cooperation between state regulators.⁹ Most regional agreements formed in the mid-20th century.¹⁰ In 2013, the National Council for State Authorization Reciprocity Agreements (NC-SARA) emerged with the aim of uniting the regional education compacts. NC-SARA created a standardized set of guidelines that member states—and, by extension, their institutions—would agree to follow for addressing issues related to distance education.¹¹ This arrangement simplified the process for institutions to offer online education across member states, ensuring adherence to a consistent set of quality and oversight standards. Currently, every state except California participates in NC-SARA.¹²

Before the emergence of reciprocity agreements, states doing business across state lines had to seek authorization from the respective regulatory agency—such as a board or commission for higher education. States join NC-SARA and, in return, their participating institutions have a streamlined ability to enroll out-of-state students. To be clear, distance education existed long before NC-SARA appeared in 2013; states were wrestling with how to regulate correspondence schools a century ago.¹³ By the late 1970s the vast majority of states had set up agencies to regulate and approve higher education providers operating within their borders.¹⁴ However, the need for more expansive and sophisticated oversight came with the proliferation of diploma mills in the 1990s and, eventually, internet-based fraudulent providers that supercharged the number of students enrolling in distance education programs offered by out-of-state schools.¹⁵

NC-SARA requires the home state of the institution, rather than the state where the student resides, to handle complaints, including those related to fraud.¹⁶ For instance, a student in Illinois enrolled in an online program offered by a Georgia institution would need to navigate Georgia’s complaint resolution process, potentially creating a barrier to effective redress. Not only might this approach dissuade students from pursuing grievances due to unfamiliarity with another state’s processes, but the reciprocity agreement would prohibit the student’s home state of Illinois from enforcing its education-related consumer protection laws. For example, NC-SARA member states are currently prohibited from enforcing their laws related to refund or cancellation rights, disclosures, enrollment contracts, transcript withholding, outcome requirements, and student tuition recovery funds with respect to out-of-state NC-SARA schools operating in their state.¹⁷

NC-SARA includes states as members under its current configuration, but member states’ ability to set the standards of the agreement is hampered by the fact that NC-SARA’s board of directors has veto power over any proposed changes. This wouldn’t be a problem if the board’s composition were congruent with the organization’s purpose; instead, a mix of institutions, accreditors, and other individuals hold final decision-making power.¹⁸ This structure flies in the face of the purpose of state oversight of higher education, which means students’ needs as consumers are not prioritized.

As NC-SARA has taken the place of state authorizers and overseers of these programs, critics have voiced concerns that to facilitate interstate higher education business in a way that truly eases administrative burden, the organization ends up basing its standards on the least stringent among participating states.¹⁹ This raises concerns about the potential impact of NC-SARA—and indeed any reciprocity agreement—on consumer protection.²⁰

California is a member of the Western states’ compact but does not participate in NC-SARA or any other nationally organized reciprocity agreement, in part out of concern that participation would undermine the state’s student-consumer protection efforts.²¹ As a result, institutions based in California that wish to offer distance education to students in other states typically must navigate each state’s authorization processes.²² This entails seeking direct authorization from the respective state’s regulatory bodies where the California institution intends to operate, which can vary in requirements and complexity. Conversely, for out-of-state institutions aiming to serve students in California, the process is governed by California-specific regulations, which may differ from standards outlined by NC-SARA.

The economic and fiscal implications of reciprocity agreements extend beyond the convenience of cross-state educational offerings and touch on the broader aspects of economic development as well as the sustainability of local institutions. One challenge is ensuring that reciprocity agreements do not inadvertently disadvantage local institutions by funneling students—and, consequently, financial resources—away to out-of-state online programs. This dynamic could lead to a competitive imbalance, where local colleges and universities find themselves struggling to compete with institutions operating nationwide under the aegis of reciprocity agreements. Many argue in favor of letting the market work this out or letting students vote with their tuition dollars, but local educational institutions play a key role in regional workforce development and economic growth. By welcoming financially powerful online schools and programs that have the dollars to attract students via massive marketing campaigns, states could hamstring the financial viability of their local institutions, which would have numerous effects downstream.

Although it depends on the circumstances, states generally have the power to enforce their laws against out-of-state entities under a concept called “long-arm jurisdiction.”²³ Reciprocity agreements are used in many contexts to ease interstate dealings. In licensed professions such as teaching, nursing, and law, the agreements facilitate the mutual recognition of licensure and qualifications across different jurisdictions to streamline the process for professionals moving between states or wishing to practice in multiple states. For example, the Uniform Bar Examination for lawyers is meant to promote workforce mobility and ensure a consistent level of competency nationwide. Similarly, the Nurse Licensure Compact allows nurses to practice in multiple states with one license, which is meant to improve health care access across regions, especially in times of crisis or disaster.²⁴ Similarly, in teaching, interstate agreements seek to simplify the certification process for educators moving to different states, although teachers—and the aforementioned other professionals—often face additional hurdles such as supplementary exams or coursework.

Reciprocity agreements are also used in other industries, such as financial services and technology, where firms and professionals would otherwise have to navigate state-specific regulations to offer services across state lines. The amount to which a reciprocity agreement eases administrative burden varies by sector. Financial advisers, for example, must comply with both federal and state regulations, which can vary in their requirements for practice.²⁵ In response, some industries have pushed for national standards or licensing to reduce barriers to interstate practice, although these efforts are balanced against the need to respect state autonomy and the localized nature of certain regulations.

It is difficult to strike the right balance between facilitating cross-state educational opportunities and preserving each state’s ability to uphold its own standards and regulatory mandates. That balance is particularly significant for programs that lead to professional licensure, where the implications of educational quality extend beyond the classroom into areas of professional practice and public safety.

Ensuring quality through distance education reciprocity agreements presents additional challenges, especially when private institutions seeking operational authority in a state are not federally recognized or accredited. This situation primarily applies to schools that offer nondegree or noncredit-bearing courses, such as boot camps or other programs that offer microcredentials or digital badges, especially those offered by organizations or companies that are not otherwise recognized as learning institutions. In that realm, the onus falls heavily on state regulators not only to safeguard consumer protections but also to ensure that educational programs meet certain quality standards. This dual responsibility underscores the importance of the state in vetting and monitoring the quality of education within its jurisdiction, regardless of federal recognition status. To its credit, NC-SARA requires participating institutions to be accredited, though this is more a function of it facilitating reciprocity for degree-granting distance education programs than for quality assurance.²⁶

Despite efforts to ease the burden of doing interstate business via reciprocity agreements, every industry faces challenges because of variations in state requirements. It may not be possible to balance national uniformity with state-specific needs. When that balance cannot be struck in the higher education context, policymakers must tilt the scales in favor of students, because a balanced agreement would work out in favor of students. Otherwise, distance education reciprocity agreements do more for generating business across state lines than for protecting students.

To strike the right balance, the ability of states to act on behalf of their resident-students, no matter where they are enrolled, must be restored.

Consumer protection

Reciprocity agreements supersede state consumer protection laws related to education.²⁷ During regulatory negotiations earlier this year, the Department of Education proposed that reciprocity agreements explicitly permit states to enforce any applicable laws against out-of-state institutions that enroll the state’s residents.²⁸ That proposal was eventually trimmed to focus on managing school closures. The department also proposed requiring out-of-state schools to seek direct authorization to operate in states where they enroll 500 or more students.²⁹ This proposal would tilt reciprocal state oversight back in favor of students and consumers. While the negotiating committee did not achieve consensus on these issues, the strongest final proposed regulations should include these elements. Reciprocity agreements should not prevent states from enforcing their consumer protection laws against out-of-state institutions that enroll a substantial number of the state’s residents.

Quality assurance

Future and emerging reciprocity agreements should come with baseline quality assurances to which all participating states agree. These assurances should include a range of quality indicators, including faculty qualifications and per-student financial investment in education and support.

State oversight and autonomy

States need to retain the right to review and approve licensure-oriented programs. This would ensure that programs offered across state lines meet local standards required for licensure in the student’s home state. In a 2022 update to federal regulations, the Department of Education addressed this by prohibiting institutions from enrolling students in programs that do not meet licensing requirements in students’ state of residence or where they intend to work.³⁰

Economic and fiscal impacts

Reciprocity agreements should be structured in thoughtful ways that more deeply engage out-of-state institutions—perhaps through business partnerships, targeted workforce development programs, or educational infrastructure investment—to contribute to local economies where the institutions enroll a critical number of students.

In addition, to strengthen NC-SARA’s framework in particular and state authorization in general, reciprocity agreements should be steered by states and not the institutions seeking authorization. Reciprocity agreements are, after all, meant to provide a bureaucratic easement or stand-in for direct state regulation and oversight.

Status quo distance education reciprocity agreements send the message that the ability to do business across state lines is more important than consumer protection. By carefully aligning reciprocity agreements with the primary needs of students, states, and institutions, and by ensuring a balanced approach to federal oversight and state autonomy, the United States can create a more cohesive, effective, and equitable higher education system.