A Leg Up on Neg Reg

There’s been a lot of chatter lately about the Department of Education’s efforts around what’s often pithily called “neg reg”, but what exactly is this negotiated rulemaking and what does it all mean? To answer that, let’s first briefly discuss the ‘rulemaking’ part. We recall from civics that Congress, as the legislative branch, passes laws, but less often discussed is the fact that it usually empowers executive branch departments and agencies to administer and enforce those laws. This, in turn, leads those bodies to develop regulations (the “reg” in neg reg), which are essentially the more technical, detailed, and specific frameworks and rules for how the broad language of those overarching laws will be enacted.

Ok, so what exactly is negotiated rulemaking? According to the Congressional Research Service, 

“Negotiated rulemaking is a process sometimes used by federal agencies to develop proposed rules. In negotiated rulemaking, an agency convenes a committee of stakeholders with the goal of reaching a consensus outcome on the text of a proposed rule. If the committee is able to reach a consensus outcome, thus achieving buy-in from stakeholders, the rule may be easier to implement and less likely to be subject to litigation.” 

As you might imagine, this process can have benefits for everyone: each party can benefit from hearing the concerns and perspectives of the others involved, and from having their own heard and considered, and the representative participants can gather an appreciation not only for what the final rules might be, but what the underlying motivations behind them are. Just as the executive agencies rely on the expertise of their employees to draft proposed regulations, they can leverage the expertise of stakeholders in the regulated field to highlight instances where regulatory language could be more clearly stated or usefully focused, leading ultimately to regulations that are workable for and acceptable to both the regulator and the regulated. When all goes well and the committee is able to reach consensus on suggested rules, the department may–and generally does–adopt them as created. When the committee is unable to reach consensus, the department in question usually relies on the information it gleaned from the failed process, and may use any areas of agreement in its final rules–or none of them–to draft a new proposal on its own.

That last part is important, because a lack of consensus was the exact result of the Department of Education’s latest round of negotiated rulemaking around the issue of state reciprocity (for a discussion of state reciprocity, what it means for an institution, and how SARA helps to ease the compliance burden, please see What’s The Deal With SARA from our April 2024 newsletter). The department subsequently released an issue paper that discussed several new proposed regulations; foremost among those that are related to our interest are rules related to institutional closures, and the number of students an institution has enrolled in a given state. Currently, authorization via SARA participation largely exempts us from having to comply with each state’s different closure laws and requirements, which have to do with things like record retention, teach-outs and transfers, and tuition recovery; the proposed regulations would essentially reimpose that requirement from the federal level, essentially undoing what 49 states and assorted territories agreed to when they acceded to SARA membership and participation. Although of course we don’t anticipate this institution’s closure, either imminently or in the foreseeable future, reimposing 50ish slightly different compliance components from which many institutions had previously been able to shift their attention, and which states hadn’t needed to monitor or enforce as assiduously, reintroduces administrative and financial burdens for both. This is also a notable example of the Department of Education’s interest in asserting its influence on interstate reciprocity in the name of consumer protection, and it is reasonable to anticipate other such moves.

The department has also proposed a regulation stipulating that an institution may not use SARA participation for the purposes of state authorization “in a State where it enrolled more than 500 students in the two most recently completed award years”–this, again, is despite the fact that states made no such requirement when they agreed to join the SARA compact. If adopted and enacted, this regulation would in effect remove SARA as a means of state authorization for institutions enrolling 500 or more students in a given state, essentially reverting them back to the status quo ante of pre-SARA state-by-state authorization. This, again, is a notable and expansive effort at controlling state reciprocity that would change operations for institutions with a robust online presence, even as institutions like Wake Forest would be unlikely to feel any immediate effect.

These regulations are not final and have yet to go through the period of mandatory public comment, but it would be wise to expect these or substantially similar regulations to come into force. As for when that might be, if final rules are approved before November 1st 2024, they would go into effect on July 1st 2025, while anything approved after that would be offset by at least another year–so, while there is time yet before anything is confirmed and in force, it’s wise to begin thinking, discussing, and planning now. Please reach out to our office if you’d like to discuss any of this further.