What’s next for federal oversight of online program managers?

In May, a federal oversight agency, the US Government Accountability Office (GAO), released a report calling on the Department of Education (ED) to step up its oversight of Online Program Managers (OPMs) who contract with colleges. For many, including OPMs and their critics, the report was overdue and hardly shocking. Yet, it remains unclear what regulatory changes might come next for the burgeoning OPM industry.

“Essentially, the report said, ‘Department of Education, do your job and provide oversight,'” said Phil Hill, partner and co-founder of MindWires, an education technology consultancy. “I’m not sure anyone is saying they disagree with that. So you may look at this report and think there’s not much to it. But I think there are a lot of regulatory changes that people want to push and are waiting for the GAO report. That’s significant, even if the findings weren’t damning.

OPMs are third-party, for-profit companies that colleges can hire to help run online education programs. These companies provide a range of services, often including student recruitment, according to the GAO report.

To pay OPMs, many colleges choose to split their tuition revenue. OPMs typically receive 40% to 60% of every tuition dollar, and some can get as much as 80%. These contracts also tend to be long, spanning several years. But when recruiting services are involved, colleges and OPMs fall into tricky legal territory that requires careful federal oversight, which the GAO found insufficient.

“There’s nothing groundbreaking about the GAO report,” said Michelle Dimino, senior education adviser at Third Way, a centrist think tank. “The key takeaway is that there are currently no systems in place to actually monitor compliance with the incentive pay ban.”

This prohibition refers to the Higher Education Act prohibiting incentive pay for recruiting students as a way to prevent predatory recruitment practices. But one 2011 Dear Colleague The ED letter allows OPMs to provide recruitment support through tuition-sharing agreements when these services are “bundled” with other services such as program design or marketing.

“So recruitment alone would not be allowed under tuition sharing, but recruitment plus course design and guidance would be under that direction,” Dimino said. “And so that has allowed OPMs to grow while relying on tuition sharing as a core part of their business model.”

The GAO report indicated that as of July 2021, at least 550 colleges are working with an OPM to support at least 2,900 education or certificate and degree programs. But the report notes that “the exact number of OPM arrangements is unknown, due to a lack of complete data, and there may be more such OPM arrangements.”

The pandemic has only accelerated the rise of OPMs. GAO found that there were at least 20 new agreements between colleges and OPMs in 2010. By 2020, that number has grown to at least 165. About 90% of colleges that contract with OPMs are colleges public or non-profit.

Yet according to the GAO report, colleges and auditors “lack clear instruction from education, making it difficult to detect violations” of this incentive compensation ban.

“The GAO report confirmed many of our suspicions, primarily that the ED has not overseen college use of OPMs at all to date,” said Dr. Stephanie Hall, lead researcher at the Century Foundation, a left-wing think tank. who criticized the provisions of the OPM. “It’s wonderful to have our suspicions confirmed, as it means we can take the next step to get corrective action taken to protect students as well as higher education institutions as public assets.”

There is also no federal requirement for colleges to clearly disclose to prospective or current students that they are working with an OPM. For advocates like Dimino and Hall, students should know if much of their tuition is going to an OPM, not a university.

But Trace Urdan, managing director of Tyton Partners, an investment banking and strategy consulting firm that works with the edtech industry, pointed out that many OPMs have been honest.

“It was a fairly benign finding considering how long the team worked on it,” Urdan said of the report, which took more than a year to complete. “Look, if they had found smoke, we’d be reading it.”

The GAO report made two recommendations to ED, which the department accepted. One asks the Secretary of Education to provide clearer guidance to help auditors “better identify and assess potential violations of the incentive pay ban when a college contracts with an OPM.” In particular, the report stated that auditors should have detailed instructions for specifically interviewing colleges about their OPM contracts.

The second recommendation of the GAO report focused on colleges. He said the Education Secretary should “provide further direction to colleges regarding the information they must provide about their OPM provisions during compliance audits and program reviews”.

The recommendation also said that colleges should get clearer instructions explaining how they are responsible “both for identifying all OPM contracts that include recruitment, and then providing auditors and program review staff of the education copies of these contracts and information on how covered OPM staff are compensated. .”

Several OPMs issued statements agreeing with the GAO report.

Pearson supports efforts to improve transparency and ensure quality and accountability in online higher education and we respect the work of GAO,” said a spokesperson for Pearson, one of the largest OPMs. “We look forward to working with stakeholders and helping to inform any policy considerations emerging from the report.”

As for what’s next, Hill said he’ll be watching ED closely in the coming months and suggests others in higher education do as well.

“Don’t think the story is over,” Hill said. “The GAO report is like the opening bell. You will now see the actual changes in federal government oversight and regulation. What we don’t know is: will they mostly keep the Dear Colleague letter intact and tighten the definitions? Or there could be big changes to the letter and revenue sharing. If you’re a school, things are just getting started. You will have to watch this.

Rebecca Kelliher can be reached at [email protected]

Karen O. Fielding