Will OPMs be facing further regulation?

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Q. Will the Biden Administration turn its sights to regulation of OPMs, or can they breathe easily?


While higher education oversight efforts under Obama were wide-ranging, for-profits were often the target, notably with the Gainful Employment rules requiring (primarily) for-profits to demonstrate reasonable earnings and loan debt for their graduates, program-by-program. Tightened incentive compensation, misrepresentation, and state authorization regulations were fashioned with for-profits in mind, and the federal Consumer Financial Protection Bureau (CFPB), founded in 2011, faced-off against some of the for-profit sector’s largest firms. During Obama’s second-term, borrower-defense rules made it easier for students to obtain student loan relief if defrauded by a college.

Online Program Management (OPMs) companies, firms that partner with colleges and universities to create and promote online degree programs, were almost caught in the regulatory net, until a last-minute carve-out exempted service bundles from the incentive compensation ban.

Two federal investigations into OPMs are currently underway by: the U.S. Department of Education’s Office of the Inspector General, and the Government Accountability Office, two organizations tasked with keeping an eye on things. The former study began in 2019—although it is not mentioned in the agency’s latest annual plan—and the latter in late 2020.

Both probes focus on compliance with financial aid integrity rules—specifically incentive compensation—transparency about OPM relationships with schools and whether students are informed, and better gauging the scale and reach of OPMs today.

The shift of private capital from for-profit colleges to OPMs—Ashford and Kaplan are cases in point, and Grand Canyon has purchased an OPM (Orbis) and started its own—is an underlying issue for watchdogs. For-profit college enrollment may be depressed, but do OPMs represent a back-door to federal dollars?

We can only speculate about what the OIG and GAO reports will conclude—and the U.S. Department for Education is not necessarily obliged to follow their recommendations—but I think a federal backlash against OPMs is a long shot.

LISTedTECH, Eduventures' data partner, counts about two thousand online programs offered in partnership with an OPM in the U.S., a total that has grown steadily over time, and surged in 2020 as schools scrambled for revenue and online expertise. Hundreds of colleges and universities, including some of the most prestigious and influential, have OPM alliances.

Most of these programs are at the master’s level, meaning savvy consumers and strong graduation rates. Many partnerships are mature and renew, suggesting schools are happy, and it is much easier to find examples of new alliances than failed ones. Schools value OPM investment dollars and expertise, especially in marketing and operational logistics, and leaders are getting better at win-win communication with skeptical faculty.

The typical student is either oblivious or unconcerned. The best OPMs support a seamless student experience behind-the-scenes. If students have to start worrying about such things, the OPM—and the school—are not doing their jobs.

Of course, no OPM deal is perfect. Some program projections do not pan out, and there is always risk of copy-cat partnerships. There is definitely a case for schools to get smarter about OPM contracts: ensuring clear majority control over academics and instructors, spelling out opportunities to renegotiate revenue share, and clarifying one-party exit clauses. But I reckon that the Biden administration will have its hands full trying to push through a new public higher education compact at the undergraduate level: no room for trying to micromanage OPMs.

The one weak spot may be price. Most OPMs have not found ways to use online to lower college prices and still make a buck. Yes, it is schools, not OPMs, that set tuition, but so far both sides have been content to dine on often fat online margins. Even if regulators look away, affordability may put limits on OPM market expansion.


Eduventures Chief Research Officer at ACT | NRCCUA

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