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State Authorization 101

Compliance management for out-of-state activities

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How it works

Institutions must follow the state laws of the state where an institution's activity takes place.

State Compliance Foundational Principle:  For any activity that occurs outside of the home state of the institution, the institution has the responsibility to determine if the activity causes the institution to incur legal obligations in the other state. States maintain the authority to regulate out-of-state post-secondary institutions that offer or participate in activities located in their state to protect students as consumers, the general public, and other interests of the state.  States vary widely including possible legal responsibilities to the following agencies:

  • Institutional Approval:  Higher Education Agency (state by state or through reciprocity)
  • Program Approval:  State Professional Boards 
  • RegistrationSecretary of State, Revenue, or Treasury 
  • Tax implicationsDepartment of Taxation
  • Workers Compensation Insurance: Department of Labor 

Federal Compliance Foundational Principle:  There are state authorization/professional licensure related Federal Regulations that tie compliance to participation in Title IV HEA programs.

Reciprocity for state institutional approval by participation in SARA Foundational Principle: reciprocity through the State Authorization Reciprocity Agreements (SARA) offers participating institutions the institutional approval to offer activities subject to SARA oversight, as specified in the SARA Manual, in other SARA member states.  SARA participation does not cover any institution responsibilities to other state agencies in another state beyond the requirements for institutional approval.

Why Comply?

Compliance provides important student consumer protections for the student, as well as maintaining the integrity of the institution and any financial aid programs.

Institutions can obtain state institutional approval for their out-of-state activities either through individual authorization by the states where activities occur or by institutional participation in a reciprocity agreement for many distance education related activities as directed by the agreement. 

Regulation of activities of out-of-state institutions varies per state.  The requirements include differing application & renewal processes, surety bonds, annual reporting, and annual fees.

Reciprocity through the State Authorization Reciprocity Agreements (SARA) provides uniformity of responsibilities to offer certain activities in the states. National Council for State Authorization Reciprocity Agreements (NC-SARA) facilitates collaboration with the four regional compacts to implement the reciprocity agreement for participating institutions in SARA member states.  Institutions that participate in SARA through their state, choose to accept the responsibility to comply with the acknowledgements initialed by the CEO or CAO of the institution in order to offer and participate in specific out-of-state activities of the institution as described in the SARA Manual.

Institutions should note that other state agencies may require compliance when an institution is participating in activities in their state.  These other state requirements are outside of SARA policy.

Federal regulations tie compliance to participation in Title IV, HEA Programs.  Failure to comply with Federal regulations could have the effect of fines or withholding of title IV funds from institutions. 


State Authorization FAQ

What is the history of State Regulations?

States have long had the authority to regulate institutions offering education within the state’s boundaries, regardless of the modality (face-to-face, distance) being used.  The approval process is part of consumer protection for learners in the state. 

What must institutions do to comply with State regulations?

States’ regulations vary from having no regulation to having very strict requirements.  Even if an institution teaches only at a distance in a state, many still expect the state process to be followed.

What is the history of Federal Regulations?

In 2010, the U.S. Department of Education (USED) issued a regulation tying an institution's ability to offer federal financial aid in a state to the institution being authorized in the student's state. The regulation, 34 CFR 600.9 (c), was subsequently "vacated" by federal court ruling and therefore unenforceable.

December 2016, USED released the new federal regulations for State Authorization of Post-secondary Distance Education, Foreign Locations. Effective date: July 1, 2018.

July 2018, A two year delay of the effective date of the regulation was announced.  The Department proposes to amend through negotiated rulemaking.  Institutions must remain compliant with state laws and regulations, SARA Requirements, and other effective Federal regulations for out-of-state activities of the institution.

April 2019, Federal negotiators reached consensus on a new set of State Authorization regulations to be prepared for spring/summer 2019 release of proposed regulations for public comment.

April 26, 2019,  The U.S. District Court Judge orders vacatur of the delay of the 2016 Federal Regulations for State Authorization.  Order delayed for 30 days.

May 26, 2019,  2016 Federal Regulations for State Authorization become effective due to U.S. District Court order.

November 1, 2019, The 2019 Final Federal Regulations for State Authorization were released.  Effective date July 1, 2020, but are subject to immediate certain regulations are subject to immediate implementation upon the discretion of the institution. (600.2; 600.9(c); 668.43; 668.50)

July 1, 2020, The 2019 Final Federal Regulations for State Authorization including Notifications for Professional Licensure became effective.

What does "operating," "physically located," or "physical presence" in a state mean?

The words, "operating", "physically located", or "physical presence" are used by a state to indicate an institution is subject to regulatory oversight by the state because of the activity which occurs in the state.  States vary as to which activities will cause regulatory oversight by the state.  To determine if the activity causes the institution to be regulated in the state, the institution must review the regulations of the state where the institution offers the activity.

Is there a state-by-state list of regulatory agencies?

 In 2011, the State Higher Education Executive Officers Association (SHEEO) created a state survey of higher education agencies in each state.  These SHEEO Surveys became web based and available online. State regulators were provided the ability to update their state's regulations and processes. 

In 2019, state surveys of the higher education agencies in each state were updated and available on The State Authorization Guide (The Guide) hosted on the NC-SARA website.

What about SARA and reciprocal agreements between states?

Institutional approval for the institution to offer some distance education related activities may be achieved by the institution participating in reciprocity through the State Authorization Reciprocity Agreements (SARA).  SARA is a voluntary agreement among states to provide consistent oversight over specific out-of-state activities of a SARA participating institution that offers these activities in another SARA member state.  These activities include online courses, recruiting, marketing, and experiential learning of no more than 10 students per program per site at one time.  Please review the SARA Manual

What are the Federally required public and individualized notifications for programs leading to professional licensure or certification?

Federal regulations, effective July 1, 2020, require institutions to provide prospective and enrolled students with public and individualized notifications for the institution's programs that lead to professional licensure or certification, regardless of modality. (face-to-face & distance education)  

34 CFR 668.43(a)(5)(v) – Public notifications for programs leading to professional licensure or certification

  • New notification added to the list of notifications required under 34 CFR 668.43 Institutional Information, in order to participate in Title IV HEA programs.
  • Describes the scenario for required notifications for programs leading to professional licensure or certification regardless of modality.
  • Describes how to provide general notification for professional licensure programs. (curriculum meets state requirements, curriculum does not meet state requirements, institution has made no determination)

34 CFR 668.43(c) – Individualized notifications for programs leading to professional licensure

  • New notification added to the list of notifications required under 34 CFR 668.43 Institutional Information, in order to participate in Title IV HEA programs.
  • To prospective students if the curriculum does not meet state requirements or the institution has made no determination where the prospective student is located prior to enrollment in the program.  (Prior to enrollment = Prior to financial commitment)
  • To enrolled student within 14 calendars days of the institution making a determination that the curriculum does not meet state requirements where the student is located.

Also note:  To participate in reciprocity, an institution certifies that it will supply professional licensure information as described in the SARA Manual 5.2 and affirmed by the institution CEO or CAO in the SARA Application item #10.

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