Skip to main content

Press Releases

State authorization loophole leaves students vulnerable, new legal analysis finds

November 13, 2023

MEDIA CONTACT | 202-734-7495 

State authorization loophole leaves students vulnerable, new legal analysis finds

A loophole in federal higher education regulations has allowed states to forfeit their oversight of colleges and universities by ceding this authority to accrediting agencies, according to a new Student Defense legal analysis released today. 

The Higher Education Act (HEA) outlines the so-called oversight “triad,” where states, accrediting agencies, and the federal government share oversight of colleges and universities. Policymakers and advocates have long looked to each of these players to enforce overlapping but discrete rules designed to protect students and taxpayers, sometimes referring to them as a “three-legged stool.” The implication, of course, is that without one of the legs, the stool falls over.

But as the new analysis lays out, a little-discussed 2010 regulation from the U.S. Department of Education has allowed states to essentially opt-out of this regime, leaving the regulatory infrastructure at risk of toppling. 

The HEA requires that, to be eligible for Federal Student Aid, colleges and universities must be “legally authorized within such State.” But the 2010 regulation permits states to completely exempt institutions from state higher education laws by either delegating its authority back to accreditors or eschewing oversight altogether so long as the state “has a process to review and appropriately act on complaints” made about colleges and universities.

In 2011, the Department further weakened that requirement by permitting states to refer complaints to another agency, including accreditors.

“[T]he Department of Education has essentially blessed a universe in which states can hand-off or eliminate oversight of institutions,” the analysis says. “Students with valid concerns about institutional misconduct—which may be in violation of their state’s higher education laws—could be left without recourse because the school is not subject to the state’s higher education laws.”

Today, “several states enable institutions to avoid certain state higher education laws,” the analysis finds. Those states include Texas and California, the two states with the highest numbers of students enrolled in postsecondary education.

“This loophole makes it far too easy for states to wash their hands of their oversight responsibility,” said Student Defense Vice President & Chief Counsel Dan Zibel. “State laws are often students’ best defense against predatory behavior, but the federal government can’t enforce them, and we’ve seen repeatedly that accreditors and the Department of Education are not a sufficient check on bad behavior. It’s time for the Department to revisit its rules. 

Accreditors have rarely held schools accountable for breaking state higher education laws, the analysis found. The loophole also exempts schools from certain consumer protection laws, including regulations against false advertising, promoting misleading employment prospects, and lying about the time or cost required to complete certain programs. 

A full copy of the analysis can be found on the Student Defense website.