The U.S. Department of Education made its move to strengthen oversight of revenue-sharing agreements between colleges and companies that help operate online courses — in steps that could have a big impact in the edtech sector, as well as for the many students enrolled in online degree programs.
Last week, the department issued new guidance about how higher ed institutions work with companies that offer a bundle of support for online programs, including student recruitment.
Under Secretary James Kvaal pointed toward concerns that recruiting practices by outside companies could be adding to the student loan debt crisis, in a statement. “Online education has the potential to meet the needs of many students and lower costs,” Kvaal said. “But we are concerned about the growth in loan debt and want to ensure students get value for their money.”
In the process, the department has also expanded its definition of “Third-Party Servicers.”
The moves come amid pressure from lawmakers, including a push by Senate Democrats to formally investigate these support companies, known as Online Program Managers (OPMs), for aggressive marketing tactics. And a report issued last year by the U.S. Government Accountability Office called for stricter compliance rules.
Colleges have long been banned by federal rules from giving out bonuses or commissions for student recruitment. But since guidance by the government issued in 2011, OPMs have operated under an exception to those rules. One question is whether that exception has been too lax.
The practices of OPMs have implications for many college students who take online courses, although they may not always realize it. OPMs have been criticized for confusing students, convincing them to sign up for online programs run by vendors on the basis of universities’ reputations.
The impact of the new guidance appears to go further than just the OPM sector, though, according to some observers. The expanded definition of third-party providers could apply to most companies that work with federally funded universities, including ones that aren’t usually considered OPMs. That potentially includes most of the edtech industry.
Under the new guidance, it seems that both the servicers and the universities connected to federal student aid funds have to turn over reports about their agreements by May 1. And even though the federal government won’t get to veto new contracts, it can end existing ones for not following the rules.
Further, according to some early analysis, third-party services can no longer operate from outside the country, and higher ed institutions cannot use servicers that are owned by non-American citizens.
Critics of OPMs argue that the ruling will provide insight into these relationships by opening up the details of how these companies interact with the universities.
But others worry that the result will be an “enormous regulatory burden” for vendors. Chip Paucek, CEO of the OPM 2U, wrote that the latest review was the result of villainizing public-private partnerships in higher ed. To Paucek, OPMs drive innovation that wouldn’t otherwise occur.