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Legal and Regulatory Aspects of MOOC Mania

University Business, April 2013

Massive open online courses are all the rage. By allowing anyone to take an online course—in the original form and without receiving a recognized credential from an institution—MOOCs appear to skirt the edges of the complex, multilevel regulatory framework governing American higher education. By different names, these courses have actually been around for years, but the promotion of MOOCs by prestigious American institutions has created a tsunami of interest. In the age of the MOOC are fascinating possibilities for advancing access to quality higher education. Yet it is not a field without land mines and tiger traps.

Already, as the business model for MOOCs has evolved, regulators are taking note.

Currently, there are several directions the MOOC business model appears likely to take, each potentially raising its own regulatory issues. There is the online course provider; the provider of identity-verified competency testing; and the credentialing entity, which could grant conventional academic credit and a degree, or provide non-traditional “badges” or certificates of completion that might be aggregated into a conventional degree.

Although most regulation of higher education is still based on the historic model of on-site, bricks-and-mortar campuses, legal and regulatory rules that evolved in response to distance education business models may potentially also apply to MOOCs.

What Would Trigger Scrutiny

Consider the three legs of the so-called regulatory “triad”—the U.S. Department of Education, the states, and the accreditors. Each has gradually developed a framework for overseeing distance education. 

At the federal level, MOOCs would, at first glance, seem to be outside the regulatory purview of the DOE for the simple reason that such students aren’t able to receive federal student grants and loans, nor do they need them. While that makes sense from a student perspective, bear in mind that many of the federal student financial aid regulations apply to the institution, not to specific programs. These include various rules pertaining to third-party contracts, student privacy, and misrepresentation. Of particular concern is the “incentive compensation rule” that, among other things, generally prohibits revenue-sharing with entities involved in any recruiting or admissions-related activity.

But it is also important to recall that under our federal system, many aspects of educational institution regulation are largely left to individual states, which are chiefly responsible for the protection of students as consumers. States vary widely in approach, and while a majority don’t seek to regulate “pure” distance ed, a minority take the view that offering any program or even course to residents of that state—even without any “physical presence” on the part of the institution—requires the school to be licensed to operate.

State laws represent a particularly serious challenge for a MOOC delivered entirely independently of an accredited institution.

This issue arose last year when Minnesota sought to prevent Coursera from offering its courses to residents in that state. The trigger for Minnesota’s action was the offering of the course to residents of the state by an institution that was not licensed by Minnesota—not necessarily the offering of a degree, or even a course leading to a degree. Minnesota adopted a “wait and see” approach to regulatory authority, but the issue seems likely to re-emerge.

And what of the various accrediting bodies, which in recent years have been pressed hard by the DOE to tighten their oversight of online programs? Institutional accreditors, both regional and national, are supposed to oversee all a university does and assure everything an institution offers is provided with “integrity.”

Agreeing to ascribe academic credits for successful completion of a MOOC raises a host of questions for accreditors, most notably assessing this: How do college leaders know that learning has occurred? As competency-based assessment develops, accreditors are looking with increasing interest into the manner through which schools are awarding credits. 

In addition to the regulatory issues that are presented by MOOCs, there are many legal issues common to distance education programs, such as: faculty intellectual property rights; “fair use” of copyrighted materials; ownership of online course materials, syllabi and courseware; and updating of course materials that are exacerbated by the “massive” nature of MOOCs. 

Officials at schools that become a part of the MOOC movement must therefore be aware of the emerging legal issues, do their “due diligence,” and pay close attention to how the various models—and the world around them—evolve.

Michael Goldstein and Greg Ferenbach are partners in the firm Dow Lohnes PLLC.