Minnesota Higher Ed Office Says Udacity’s Nanodegrees Might Violate...

Digital Learning in Higher Ed

Minnesota Higher Ed Office Says Udacity’s Nanodegrees Might Violate State Law

By Jeffrey R. Young     Dec 14, 2016

Minnesota Higher Ed Office Says Udacity’s Nanodegrees Might Violate State Law

Udacity touts its nanodegree as a new kind of credential—so new, that it defies traditional classifications and laws. But officials in Minnesota say the professional program could still fall under state regulations designed for degree programs, which would require Udacity to register with the state if it wants to offer online courses to its residents.

The state’s Office of Higher Education sent a letter to Udacity officials last month notifying the company that Minnesota law requires schools offering degrees to “register with our office prior to offering distance education programs to residents of Minnesota.” Education providers that fail to register “must not advertise or operate in Minnesota,” or else face an injunction or fines, says the letter signed by Betsy Talbot, Manager of Institutional Licensing and Registration for the state office. The letter asked Udacity to provide more information about its programs.

“Minn. Stat. 136A.62 defines the scope of our office’s regulation and Subd. 4 states '‘Degree’ means any award given by a school for completion of a program or course which is designated by the term degree, associate, bachelor, baccalaureate, masters, or doctorate, or any other award which the office shall include by rule.' Udacity is offering ‘nanodegrees’ and that term may fall under the scope of the Minnesota Private and Out-of-State Public Postsecondary Education Act,” the letter states.

Late last month Udacity’s lead attorney sent a reply arguing that nanodegrees do not fall under Minnesota regulations because the company does not call its offerings degrees. “The term ‘nanodegree’ was coined by Udacity as an adjective to ‘nickname’ its practical skills programs offered through its online platform,” says the letter, signed by Kristen Mellor, Udacity’s general counsel. “We specifically do not advertise any educational degrees—our website and other materials identify and clearly define a “Nanodegree Program” as a non-degree, non-occupational practical program leading to an industry-recognized, and in some cases corporate-sponsored, completion recognition.”

To some, that’s simply a way to offer what is effectively a degree, with a made-up name instead of the “d” word. Udacity trademarked the term Nanodegree, meaning it controls who gets to use the designation for its offerings.

“If people were allowed to change names of things to get around laws, I could offer a degre, with one e,” says Russ Poulin, director of policy and analysis for WCET, a nonprofit promoting e-learning programs. After all, he says, a nanodegree, just like other credentials covered by the Minnesota law, involves offering education and promising that that education will help students gain skills or employment. “This does really seem like they’re trying to get around the regulation that Minnesota has in place,” he added.

Poulin admits that state regulations have not kept up with the technology, calling such laws “woefully behind. But he says they need to be revised, rather than ignored, and that without some kind of regulation, students will be harmed—”if not by Udacity, then by some provider down the line.”

Udacity, a company valued at more than $1 billion, can certainly afford to register to operate in Minnesota. Poulin suspects they’re fighting it on principle. “It’s not the registering, it’s that the registering entails that someone has oversight over them,” he says. “This comes out of the Silicon Valley thinking that whatever we do on the internet is not regulated. It's the quick-fail type thinking that we’ll put something out there and then maybe pull it back if it doesn’t work.

That might work for software, he says, but should not be applied to education. “If you quick-fail with students, students are harmed,” he says, “because I’ve now lost my time and I’ve lost my money for something I can’t get back.”

Flashback to 2012

This is not the first time Minnesota has asked upstart online providers to register their offerings. In the early days of MOOCs, the state’s Office of Higher Education made headlines for asking Coursera and other providers of free courses to go through the registration process. Rather than do so, in 2012 Coursera briefly displayed an unusual disclaimer on its Web site:

Notice for Minnesota Users: Coursera has been informed by the Minnesota Office of Higher Education that under Minnesota Statutes (136A.61 to 136A.71), a university cannot offer online courses to Minnesota residents unless the university has received authorization from the State of Minnesota to do so. If you are a resident of Minnesota, you agree that either (1) you will not take courses on Coursera, or (2) for each class that you take, the majority of work you do for the class will be done from outside the State of Minnesota.

State officials eventually changed the rules to include an exemption for MOOCs and other courses that were free or low-cost. But Udacity’s nanodegrees typically cost students $199 per month for six to 12 months, meaning they are not exempt.

Other states have similar regulations designed to protect consumers, so Udacity could face questions in other jurisdictions. But experts point out that rules vary state by state, and it’s hard to make generalizations.

“Whether a school or non-traditional provider needs to get licensed is not always so straightforward,” says Greg Ferenbach, a lawyer for Cooley LLP in Washington. “It really depends on the particular state law, and what the institution is actually offering, to whom, and at what cost, etc.’

Talbot, of Minnesota’s Office of Higher Education, said in an email interview that the state has not yet had a chance to delve into Udacity’s response.

Udacity officials did not respond to requests seeking comment.

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