NAICU Washington Update

Senators Send Inquiry to Online Program Management Companies

January 29, 2020

Citing their concern about reports of the business practices that online program management (OPM) companies use, “which appear to undermine the best interests of students,” Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) have written to the chief executives of five companies seeking information on their use of federal student aid funds in the administration of their services to Title IV-eligible colleges and universities.
The senators have asked the companies to provide information on existing contracts, sample presentation materials provided to potential institutional clients, expenditure figures for contracted services, revenues for the prior two years, a list of equity partners owning a share of 5 percent or more of the company, and any analysis related to being in compliance with the existing incentive compensation regulations from 2011.
The companies - 2U, Academic Partnerships, Bisk Education, Pearson Learning, and Wiley Education Solutions - have been asked to provide information to Senators Warren and Brown no later than February 21, 2020. This letter is merely an inquiry and does not legally compel a response from the companies.
OPMs have been subjected to enhanced scrutiny from lawmakers and the media over the past year. The letter sent by the senators includes references in the footnotes to an April 2019 article in the Huffington Post and a September 2019 report authored by The Century Foundation calling into question the relative freedom and lack of oversight enjoyed by OPMs in the design and administration of online degree programs. Critics contend that OPMs are not being properly regulated given the nature, scale, and scope of their program offerings, which are eligible to receive federal student aid funds when offered under the banner of a college or university accredited by a federally-recognized accreditor.
While no rulemaking effort is pending, a proposal offered by the Department of Education during a recent negotiated rulemaking panel to grant even greater freedom to colleges and universities to outsource curriculum design and management to OPMs was roundly rejected by negotiators. The Department subsequently dropped the proposal, leaving intact existing regulations for curriculum outsourcing.  At the Department’s insistence, however, negotiators did agree to streamline an accrediting agency’s review of outsourcing proposals. In order to speed up approval, such proposals are considered to be a substantive change subject to review by accreditation staff, rather than an accreditor’s board of directors.
Given that recent action, it is unlikely the Trump Administration would tighten the current rules on program outsourcing.  Those rules allow institutions to outsource up to 50 percent of a program to non-Title IV-eligible providers, like OPMs, and relaxes certain incentive compensation rules on bundled services. However, legislative changes could be made if the Higher Education Act were to be reauthorized, or regulatory changes could be introduced if the Administration changes party control. 
Institutions should consider these factors when reviewing proposals from OPMs to ensure they are protected from any changes in federal rules.

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