This piece is from a larger discussion on higher education regulation that originally appeared on EducationNext. Check out Part 1 here, as well as the full piece and a corresponding perspective by Kevin Carey, Director of the Education Policy Program at New America.

There is plenty of evidence that the regulatory burden in higher education is too high. For instance, the Federal Student Aid Handbook, which lists the rules with which US colleges must comply in order to be eligible to participate in Title IV programs, runs to nearly 1,500 pages and is available for download in six different volumes (appendices come separately).

Additionally, there are many indicators that the volumes of regulation aren’t eliminating low-value college experiences: our higher education system produces a loan default for every three degrees it grants. Prospective students have little information on institutional outcomes, and minimal practical recourse from low-quality schools that don’t live up to their marketing materials.

It’s understandable, given the ineffectiveness of our current regulatory framework, that many lawmakers would like to burn the book. But if we want to spur innovation that drives student outcomes, a better answer is to rethink it.

The Higher Education Act

The House of Representatives has produced a draft reauthorization of the Higher Education Act (HEA) called the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act. PROSPER’s authors tout it as promoting innovation because it eliminates some of HEA’s regulations intended as consumer protections, including the gainful-employment provision that the Obama administration used to hold career training programs accountable if their students graduated with debt they couldn’t afford, and the 90/10 rule, requiring for-profit schools to raise at least 10 percent of their revenue from non-federal sources. The draft bill also does away with cumbersome and ineffective input-based definitions such as the “regular and substantive interaction” clause. This provision was established to prevent fraud by ensuring that students in distance-education programs eligible for federal financial aid have sufficient interaction with faculty, but it has had the unintended consequence of bedeviling online and competency-based education providers by limiting innovative and streamlined staffing models that take advantage of new technologies.

The proposals in PROSPER have drawn understandable pushback. Innovation often advances the state of the art, but innovation at the expense of student protection could also be a great deal for charlatans, whose abusive practices could hurt students and taxpayers. The tradeoff between innovation and student protection is a false one, however. Regulated properly, innovation in higher education can create tremendous benefits for students. And innovators focused on creating value for students and society have an incentive to operate within a regulatory context that discourages the proliferation of charlatans. In other words, the right focus is not on whether there should be more or less regulation but on the kind of regulation.

Competency-Based Education

One model that illustrates both the challenges of the current funding approach and the promise of a new one is competency-based education (CBE), which assesses student progress based on demonstrated mastery of content and skills rather than on time spent (or credit hours earned) in school. CBE has the potential to lower costs, enhance learning, and align higher education to workforce needs. In recent years, CBE has been on the rise as lawmakers have promoted it and regulators have authorized several providers to operate CBE programs.

These programs are currently a square peg in a round hole, however, as they seek to operate within a framework designed for time-based arrangements. Gaining approval to operate a CBE program is a lengthy endeavor; getting access to federal financial aid takes even longer. This has limited the growth of the CBE universe. Although hundreds of institutions are developing CBE programs, or considering doing so, only a handful are actively operating CBE models eligible for federal aid.

The PROSPER Act strips away many of the rules and definitions that constrain CBE programs. The Washington-based think tank New America has described this approach as “too much too fast,” writing that “while CBE has significant potential to help students complete their degrees on their own (faster or slower) schedules, opening the floodgates too quickly presents a huge risk, to students and to the field.” The risk is that a lack of rules governing CBE programs—in combination with nearly unlimited federal financial-aid dollars and low transparency around learning or long-term outcomes—attracts a rush of low-quality providers. That isn’t innovation. It’s rent-seeking.

Although these fears are well placed, strategies to regulate CBE providers by tightly defining what qualifies as a competency-based model are misguided. For example, New America has recommended creating a statutory definition for CBE that maintains the requirement for regular and substantive interaction between faculty and students, but modifies it for the CBE context. This kind of policy, while well intended, would sharply curb innovation at the expense of students. Witness the unintended regulatory hurdles that have ensnared Western Governors University, a high-quality online CBE provider with an innovative staffing model, in legal wrangling with the Department of Education’s inspector general over whether students were experiencing regular and substantive interaction with faculty.

Lawmakers should choose a different path. Instead of using a pay-for-enrollment model and a long list of rules and definitions, regulators could focus on making students’ postgraduation outcomes transparent for all programs and on realigning federal aid to a pay-for-outcomes model.


  • Alana Dunagan
    Alana Dunagan