Rationale and Methodology

State policies that advance transparency, encourage outcomes-based funding, and promote credit transfer can do a lot to improve student success and boost higher education productivity. But in an era of tight budgets, states must also look for ways to innovate more dramatically. They need to foster new models of higher education that increase student access, build institutional capacity, and allow students to finish degrees more quickly—and at lower cost.

Already, entrepreneurs and innovators around the country have developed many new modes of delivering higher education, from fast-growing online classes to competency-based degree programs. Online delivery frees place- and time-bound students to take courses and earn degrees and certificates when and where their needs require. It can also allow traditional students to progress more quickly by increasing the number of seats in high-demand courses and bending conventional schedules. From the institution or state perspective, online learning has the potential to create money-saving economies of scale by significantly increasing student enrollment. As these innovations tentatively take root, state policies can play a vital role in creating an environment in which they flourish.

To assess states’ commitment to higher education innovation, we looked at two dimensions of state policy. First, we considered state efforts to promote innovative models within their own institutions. We examined whether each state had clear goals for online learning efforts at its public institutions, and whether the state had created a central clearinghouse providing information about online learning opportunities that would help students access these courses. We recognize that online learning is not the end-all and be-all of innovation. Indeed, there are certainly other areas in which states can encourage entrepreneurial higher education leaders to rethink traditional business models, job descriptions, and calendars. But we also believe that a willingness to embrace and support online learning on state campuses serves as a good proxy for a state’s openness to new ways of thinking.

Second, we asked whether states had erected regulatory barriers to cross-border postsecondary providers. New federal regulations require colleges and universities participating in federal student aid programs to obtain authorization from any state in which they serve students. As a result, state regulatory policies surrounding new providers and online delivery have become increasingly important. For-profit, nonprofit, and public institutions that provide online courses across borders are faced with new and sometimes burdensome demands.

To assess barriers to innovative providers, we partnered with Eduventures, a consulting firm that works with public, nonprofit, and for-profit higher education institutions on issues of regulatory policy. Eduventures conducted an in-depth survey of state regulations governing program approval and licensure, and then graded states on their openness to new providers. In undertaking this effort, we are not advocating a laissez faire approach to approving new postsecondary providers. On the contrary, we believe that states should engage in smarter regulation rather than outright deregulation, using providers’ record of success with students to make approval decisions. Our analysis is designed to spotlight instances in which state regulations are so burdensome that they discourage providers from serving students, thus limiting access and thwarting innovation.

Support for Online Learning.

Unfortunately, we could not rate states according to empirical measures, such as the success of students who enroll in online courses, because these data are not reported consistently across states. Instead, we rated states on two criteria that capture their commitment to promoting innovative models. First, we looked at state documents to assess whether state goals for higher education highlighted online learning as a priority, and whether goals for online learning were expressed in concrete, measurable terms (e.g., increasing enrollments or course offerings by a particular number or percentage).

To assess whether a state had made an effort to create a clearinghouse for online courses offered by its public institutions, we searched state higher education websites to see if there was a common portal that aggregated all online courses and programs available to prospective students. We rated states according to whether they had a portal that provided access to both four- and two-year programs and courses. Once we found those resources, we recorded whether the system provided information both on individual courses and on entire undergraduate degree programs that were available online. We considered both online degree programs and “a la carte” online courses as important pieces of the innovation equation. Place- and time-bound students, particularly working learners, often prefer to do an entire degree program online. Other students, including those enrolled in traditional programs, may want access to individual courses that are not offered at their home campus or that they need to take immediately in order to complete their degrees more quickly. We then awarded an additional point to states that have created policies that make it easy for students to take online courses from public providers across the state and transfer those credits to a home campus. Finally, we gave states a point if they had a statewide goal for online learning, and an additional point if this goal had an empirical target (e.g., to increase the number of online degrees by 50%). Using these criteria, we rated states on a seven-point scale, with seven points signifying the best possible score.

Barriers to Innovative Providers.

State regulation of innovative higher education providers has many dimensions. In collaboration with Eduventures, we chose to focus on three. First, we examined whether states required postsecondary institutions to have a physical presence within state lines in order to be authorized, or whether simply enrolling students triggered state oversight. Second, we looked at the extent of state fees for program approval. Third, we examined the variation in the burden of the approval process across the states; some have streamlined, timely procedures, while others require a detailed, drawn out process that duplicates the existing accreditation process. Eduventures researchers graded states on all three of these dimensions to come up with an overall grade for the state’s regulatory environment. For more details on Eduventures grading method, see the Technical Appendix.

Findings

At the time of publication, most states had at least one institution that provided online courses or undergraduate degree programs, but the extent to which states have coordinated these online efforts varied dramatically. In our analysis, Georgia and Florida emerged as leaders in promoting online higher education. Both states had set concrete goals for developing their online learning offerings. The University System of Georgia’s strategic plan called on state institutions to increase access by boosting the number of credits awarded by distance education, and it has set targets for 2011 and 2012. Florida’s state plan established clear targets for increasing the percentage of course sections offered via online and blended learning.

Georgia and Florida also developed easy-to-use resources for students looking to access online courses and degrees. Georgia’s “ONmyLINE” system provides students with access to more than 100 associate’s and bachelor’s degree programs that are available through public institutions in the state, as well as thousands of courses that are open to on-campus students in search of individual courses. Georgia’s eCore program allows beginning students to take their entire first two years of coursework—the core courses required of all Georgia graduates—completely online. Florida’s Distance Learning Consortium allows students to access online degree programs and courses available at the state’s public and private institutions. Students can use Florida’s common course numbering system to figure out which courses will transfer to other colleges.

The Eduventures analysis found that most states have erected high regulatory barriers to innovative higher education providers. Sixteen states received the lowest grade, with Massachusetts, Oregon, North Carolina, and Minnesota receiving the lowest scores on the regulatory rating scale. The difficult application process, high fees, and far-reaching oversight may discourage providers from serving students in those states. An additional 14 states received a D grade on the Eduventures scale.

But the story was not all discouraging: 13 states received grades of A or B on the Eduventures scale, with South Dakota and Hawaii receiving top scores. Many of these states rely on an institution’s home state approval and licensure to admit providers. Some of the states receiving top grades, such as Pennsylvania, have recently made it simpler for out-of-state institutions to receive approval, thus boosting their scores from what they would have been just a few months ago.

Detailed Findings

State Goals for Online Learning.

We found that 33 states had established goals for improving and increasing online learning access, and five of those had set concrete, measurable targets against which to measure their progress. For example, the Arizona Board of Regents 2013–2017 Strategic Plan established targets for the number of online degrees and certificates awarded by the three universities in the system. Iowa had set a similar goal of boosting student enrollments in distance education courses by 15% by 2016.

Encouraging Access to Online Learning.

Thirty-five states had a central clearinghouse where students could access information about online courses and programs at four-year colleges and universities in the state. Forty states had such a system for two-year colleges. In all, 31 states had a clearinghouse that covered online offerings across both sectors.

Several states, including Indiana, Tennessee, North Carolina, Colorado, and Kentucky, stood out for their efforts to promote online learning opportunities, allowing students to cobble together online courses from multiple providers and count those credits toward their degree. North Carolina features two online learning initiatives— one for the University of North Carolina system and the other for the state’s 58 community colleges. Students enrolled in UNC Online courses have access to “e-mentors” who help with academic advising, as well as a network of proctors in the area that can oversee student exam-taking. The Indiana College Network and the Tennessee Regents Online Campus Collaborative allow students to take online courses from different institutions across the state while their home campus handles issues of financial aid and academic advising. The North Dakota University System operates under a similar system.

Barriers to Innovation.

On questions of regulatory jurisdiction, Eduventures found considerable variability in state regulatory thresholds. Seven states (Alabama, Arkansas, Massachusetts, Minnesota, Montana, Wisconsin, and Wyoming) required providers to gain approval if they enroll any state residents in an online degree program. By contrast, 13 states regulated only providers with a brick and mortar presence within their borders. The remaining states fell somewhere in the middle, regulating any provider that hired faculty in the state, engaged in advertising and marketing in the state, or had recruiting agents in the state.

Licensing fees also varied widely, ranging from $250 or less (Delaware, Connecticut, Hawaii, Missouri, Michigan, Wyoming, Maine, and Oklahoma) to $7,500 per program or more. Maryland’s licensure fee is $7,500 for the first two programs; New Hampshire and Massachusetts charge $10,000 for the first program. The states with the highest fees also tended to charge the most for each subsequent program: Massachusetts charges $2,000 for each additional program, and New Hampshire charges $3,000 per additional program. Other states based licensure fees on the amount of tuition dollars paid to the institution from in-state students, or a minimum payment, whichever is higher. Alabama, Florida, Idaho, and South Carolina used this kind of model.

To assess regulatory burden—a subjective judgment, to be sure—Eduventures measured states relative to one another. It compared states’ requirements with those of a “typical” application to operate a postsecondary institution in a state.9 Here, too, there was considerable variety. Twelve states stood out as having extensive application processes. Connecticut, for instance, required providers to circulate program proposals to the Chief Academic Officers at each institution of higher education in the state. Oregon’s application process necessitated that faculty be approved by the state of Oregon; any faculty not approved by the state cannot technically teach Oregon students. Nevada required the name, address, phone, and amount invested for all investors, character references for institution directors and each academic program director, and “a flow chart, outline or similar document depicting how the class will be taught on a day-to-day basis, including as a minimum the completion time for each graded objective.”

By comparison, nine states had application processes that received the top rating for simplicity. Wyoming required a simple two-page application plus proof of accreditation. Montana called for providers to register with the secretary of state. In Oklahoma the institution’s president must provide a formal request to operate in the state, including information on accreditation, an evaluation report, program details, and tuition and fee information. In all, approval processes in 27 states fell somewhere between typical and simple on the Eduventures scale.

Again, this analysis is not intended to advocate a hands-off approach to higher education regulation. Rather, in an era of tight budgets and limited capacity, we believe that states should consider how their regulatory apparatus might cut their students off from providers that can expand capacity, serve certain students better, and do so at little cost to the state. At the same time, states should focus on how they can encourage innovation in their own public institutions. Meeting that goal will require close scrutiny of regulations that may pose an obstacle to experimentation at those institutions.