The Federal Trade Commission has waded into the normally sleepy world of higher-education accreditation with a fairly provocative question: What happens when the institutions being regulated have substantial influence over the organizations doing the regulating?
It turns out that question leads somewhere interesting.
The FTC this week endorsed a Department of Education proposal intended to make it easier for new higher-education accreditors to enter the market and for colleges to change accreditors. The Commission argues that the existing system can restrict competition, increase costs and protect incumbent institutions from new educational models.
That matters because accreditation is considerably more consequential than the word makes it sound.
The Education Department describes accreditors as gatekeepers to more than $100 billion in federal student aid every year. Colleges generally need accreditation from a federally recognized organization for their students to participate in Title IV federal aid programs.
The people guarding that gate, however, frequently come from the institutions standing behind it.
The FTC’s 21-of-27 Example
In its comments supporting the proposed rule, the FTC pointed to the Middle States Commission on Higher Education.
According to the Commission, 21 of Middle States’ 27 commissioners are administrators or faculty members at colleges and universities.
That could sound like an unusually cozy arrangement until you start looking at the other accreditors.
Bureaucracy Times did.
The result suggests Middle States is less an exception than an illustration of how American accreditation was designed.
The New England Commission of Higher Education openly describes itself as a “peer-based” membership association. Its commission consists of faculty and administrators from affiliated institutions alongside public representatives.
Then there is the Southern Association of Colleges and Schools Commission on Colleges, better known as SACSCOC.
Its organizational structure makes the relationship particularly easy to see.
The SACSCOC College Delegate Assembly includes one voting representative from every accredited institution. That representative is the institution’s chief executive officer or designee.
Those representatives elect the organization’s 77-member Board of Trustees.
The board, in turn, takes final action on the accreditation status of applicant, candidate and member institutions.
According to SACSCOC’s own organizational materials, the trustees are primarily administrators and faculty members from member institutions, although 11 seats are reserved for public members.
In other words, colleges send representatives to an assembly that elects the board of the organization responsible for deciding whether colleges remain accredited.
Nobody appears to be hiding this arrangement. It is the arrangement.
Peer Review or Competitive Barrier?
There is a perfectly legitimate reason for structuring accreditation this way.
American higher-education accreditation has historically been built around peer review. The theory is straightforward: professors, administrators and university presidents presumably know more about evaluating universities than a federal bureaucracy does.
Accreditors also include public representatives and impose conflict-of-interest requirements intended to prevent commissioners from simply protecting their own institutions.
But the FTC is now asking a different question.
What happens when peer review also becomes market regulation?
Accreditation standards can determine what facilities a college needs, what qualifications faculty must possess, what programs institutions can offer and, ultimately, whether students attending those institutions can receive federal financial aid.
The FTC argues that incumbent institutions therefore can have an economic interest in accreditation requirements that make it more difficult or expensive for competitors to enter the market.
The Education Department has reached a similar conclusion. Its August proposed rule says a small group of accreditors has dominated higher education for decades and proposes simplifying federal recognition of new accrediting organizations while making it easier for institutions to switch accreditors.
The public comment period closed September 21.
We’ve Seen This Movie Before
The FTC also points to the American Bar Association as a cautionary example.
That comparison comes with some history.
The Justice Department sued the ABA in 1995 over its law-school accreditation practices, alleging that legal educators had used the accreditation process in ways that restricted competition. The case ended in a consent decree requiring changes to ABA practices.
More than three decades later, the ABA’s accreditation authority is again being challenged.
Texas has ended its reliance on ABA accreditation for determining which law-school graduates can sit for its bar examination. Florida has also moved to expand accreditation options, while federal competition officials have encouraged efforts to reduce states’ exclusive reliance on the ABA.
That history gives the FTC’s current intervention considerably more weight.
This isn’t merely a philosophical debate over who should evaluate colleges.
It is an antitrust question about who gets to enter the education market and who gets to establish the price of admission.
A Very Expensive Gate
None of this establishes that commissioners are improperly favoring their own institutions, and institutional participation in accreditation governance is not evidence of misconduct.
But the structure creates an unusual accountability loop.
Colleges are evaluated by accrediting organizations substantially governed by people drawn from colleges. Those organizations establish standards colleges must satisfy. Accreditation then helps determine whether those colleges’ students can tap into more than $100 billion in annual federal student aid.
The FTC is essentially asking whether a century-old peer-review system has also become a mechanism for incumbents to influence the rules confronting potential competitors.
That is a considerably different question from whether accreditation is necessary.
And after looking at who actually sits around the accreditation table, it is a question worth asking.
