Online education has become a central feature of American higher education, with three in 10 students enrolled partially or exclusively in distance education. Some policymakers hope that online education can help many more students earn college degrees through its geographic reach, flexible scheduling, and potential to scale. Yet while online education has promise, it also has perils. The challenges in assessing academic rigor and student outcomes can be even greater than in traditional programs, and there is a long history of overpriced and poor-quality programs leaving students with debts they cannot afford to repay. Fueled by the availability of federal financial aid, the rapid growth of online education illustrates the need for policymakers to oversee these programs carefully. Rules released by the U.S. Department of Education (the Department) in 2016 recognized states' desire to develop agreements for "reciprocal" regulation of online distance education, wherein states mutually recognize each other's authorization process for higher education institutions. This report presents eight essential characteristics any distance education regulatory system should possess: (1) Facilitate coordination between states to reduce unnecessary administrative burden where appropriate, while simultaneously improving the oversight and quality of online education; (2) Enable students to enroll at high-quality educational institutions and create safeguards and requirements beyond accreditation; (3) Require institutions to be financially secure, including mandatory tuition recovery funds and prohibitions on conflicts of interest; (4) Prohibit institutions from enrolling students in programs that will not qualify for state professional licensing requirements where they reside; (5) Create a complaint process that focuses on students, encourages collaboration among states, and contains transparency requirements to assist in identifying problematic institutional behavior patterns; (6) Allow states to retain the authority to enforce their own state laws on higher education-specific consumer protections; (7) Permit states to limit problematic institutions from enrolling residents, and to enforce state policy limitations on enrollment; and (8) Give states authority over the creation and modification of distance education regulations. Under each category, the paper provides a discussion of the characteristics, as well as an analysis of the two most prominent attempts to regulate online distance education--the 2016 Federal Rule and NC-SARA--and delineates the strengths and deficiencies of these systems. It concludes with recommendations for ways states can build a better state authorization reciprocity agreement and opportunities for the Department to further strengthen the rules relating to state authorization and distance education. [Substantial contributions to this report were made by James Kvaal, Diane Cheng, Veronica Gonzalez, and Laura Szabo-Kubitz.]