New FAQs for NC-SARA

SARA staff have developed new FAQs based on questions received. These FAQs focus on SARA and institutions and SARA and the physical presence standard.

Why does SARA use the U.S. Department of Education’s financial responsibility composite scores to assess the financial soundness of non-public institutions that seek to participate in SARA?

Students deserve assurance that SARA institutions from which they take courses and programs will remain in operation and not close due to financial problems.

Distance education students likely have less information than campus-based students with which to evaluate an institution’s viability; in most cases, they can’t visit the campus, talk directly with institutional representatives, etc. While it is not possible to remove completely the risk of institutional closure, reasonable attempts to lessen that risk in regard to SARA institutions are desirable.

As a fundamental principle, SARA avoids developing new mechanisms and structures when sufficient ones already exist. That is why the initiative builds on the work of the “accountability triad” (the federal government, the states, and recognized accreditors) and the regional education compacts. Ideally, a financial assessment system for SARA would be uniform across the country, clear and readily understandable, already in place, well-regarded in the community, and reliable in evaluating whether an institution is in significant financial trouble and at risk of closure.

No current system meets all of those desirable qualities. The approach taken by the U.S. Department of Education has been in place for many years. It is applied across the country to all non-public institutions participating in federal Title IV programs, and it relies on the administrative capabilities of the Department, including the ability to investigate and audit. Unfortunately, it has been severely criticized by some as being based on outdated accounting approaches, inaccurately assessing the financial health of many institutions (i.e., identifying as financially troubled many institutions thought to be sound), and being unevenly applied.

Much of that criticism has come from the National Association of Independent Colleges and Universities (NAICU) and representatives of some of its member institutions. They have also criticized SARA for using the Department’s scores to determine (in part) a non-public institution’s eligibility for SARA. NAICU believes the Department’s work in this area is seriously flawed, both in design and application. [1]

This issue was discussed at each step of the development of SARA. It was considered by the Presidents’ Forum/Council of State Governments drafting team, the SARA development committees in each of the four regional compacts, the National Commission on the Regulation of Postsecondary Distance Education, and NC-SARA itself.  Use of the Department’s scores to determine (in part) a non-public institution’s financial soundness for SARA purposes was affirmed at each step. The following paragraphs explain why.

Each SARA development group examined the question of whether there should be a financial soundness requirement at all; each group decided that there should be. Various alternatives were then considered. NAICU suggested that all institutions approved to participate in Title IV programs be allowed to participate in SARA, with no other financial expectations. The overwhelming majority of each group involved in the development of SARA believed that standard would be too low to support the consumer protection goals of SARA.

The possibility of allowing each SARA state to set its own financial expectations was discussed; that approach was rejected because it would not yield uniform standards, therefore undermining reciprocity. The possibility of having SARA develop and carry out its own financial evaluation system was also considered; that was rejected because of the likely difficulty of reaching consensus, the delay and cost that developing a new system would require, and the fact that SARA would lack the necessary investigative and auditing authority and capacity.

After much discussion, each group involved in the development of SARA reached the conclusion that incorporation of the Department’s system for assessing an institution’s financial soundness, while flawed, offered the best available approach for SARA purposes.

SARA has acknowledged the shortcomings of the Department’s system and the criticisms made of that system in two ways. First, SARA allows some institutional “wiggle room.” An institution with a composite score of 1.0-1.49 has the opportunity to make the case to its home state that it is nevertheless sufficiently financially stable to justify state approval to participate in SARA. (The general threshold for the financial soundness requirement is 1.5.)  Second, the regional compacts, the Commission on the Regulation of Postsecondary Distance Education[2], and NC-SARA have all recommended that the Department review its methodology for determining institutional financial soundness.


[1] NAICU: Report of the Financial Responsibility Task Force, November 2012 (

[2] See   pages 28-29 additional discussion.


If a college operating under SARA has an agreement with a flight school in another SARA state to offer the flight training component of a program leading to a degree or certificate from the SARA institution, is that a “clinical” site for purposes of SARA?

No. Agreements of this nature involving a training or educational entity offering a significant part of a program as part of an agreement with another provider are not considered supervised field experiences as defined in NC 1 (25).  They are considered a part of the core educational program and fall under the laws of the states where they are located. They are covered by the provisions of SARA that deal with third-party providers, see NC 3-8.

Exceptions: flight training activity falling within the “short course” provision (NC 3-7) or offered for federal employees on a military base (NC 3-9) are covered under SARA.



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