Thoughts on the LA Times Story on USC and 2U

Unpacking OPM lessons.

June 10, 2019

How should our community make sense out of the recent LA Times story: Online Degrees Made USC the World’s Biggest Social Work School. Then Things Went Terribly Wrong?

This is an unfolding story, and we should not rush to judgments before we get a better handle on what is going on with USC.

From the LA Times article, and an earlier one published in May, we know the following:

  • UCS’s Suzanne Dworak-Peck School of Social Work is facing a budgetary crisis, although the size of the shortfall is in dispute.  The Times reports that the size of the shortfall is $20 to $30 million, although a USC spokesperson responded that that estimate is “wildly overstated.”
  • The school is planning to address the budget shortfall by increasing full-time faculty workloads, laying off part-time faculty, and dramatically cutting staff headcount.
  • USC’s online MSW was developed in partnership with the OPM company 2U, which grew enrollment from 900 in 2010 to 3,500 in 2016.
  • Recently, enrollments have declined (to around 3,200), as competition for students has increased, and admissions standards have been tightened.

What is not clear from the LA Times article:

  1. The causes of the budget shortfall at USC?  Are the financial difficulties faced by the school being driven by the growing fixed costs in serving a large online student cohort, with revenues not able to keep up with expenses as enrollment fell?
  2. If the budget crisis at the school is due to the online program, or if the mismatch between revenues and costs is coming from other educational programs or expenses at the school?
  3. How the costs of running the online program are distributed between USC and 2U, and why a relatively modest drop in enrollments would cause such a drastic budget crisis.
  4. What the school’s budget would look like without the revenues from the online master’s program?  If the online program is exacerbating the financial crisis, or is it helping to moderate its impact?

We don’t know how to evaluate USC’s partnership with 2U.

We don’t know if this partnership has been good or bad for the school.

We don’t know what lessons that other schools should be taking from the USC / 2U story.

Is this lack of understanding in anyone’s interest?

I would think that the story is considerably more complicated than what we are learning from the LA Times.

It also seems that the larger story of the challenges being faced by USC’s Dworak-Peck School of Social Work are being intermingled with the school/OPM story.  We need to unpack the USC/2U relationship from everything else that is going on at the university.

How might critical, in-depth, and objective scholarly research on the growth of non-profit/for-profit partnerships in online education be initiated?

What are the data that we need to make sense of what is going on at USC?

Where does the obligation for transparency come from, if there is such an obligation?

Should USC be leading the effort to share with our higher ed community the lessons that they have learned from their efforts to grow online programs and to build partnerships with an OPM provider?

Should 2U be underwriting independent academic research about its partnerships?

My hypothesis is that the USC online social work story is one of too rapid growth.  My guess, and it is only a guess, is that both USC and 2U made decisions aligned with their various incentives - and all those decisions led to growing the online program.

For USC, growth in the online MSW meant revenues to fund every other operation at the school that lost money.  For 2U, growth meant revenue growth - growth that its investors were demanding.

The mistake would be to look for villains.  Everyone, I suspect, worked with good intentions for the benefit of the school, the university, and the students.

The problem, as I see it, is not with the OPM model.  Leveraging private capital to build and grow non-profit online programs should not be viewed as morally compromised.  Whether the money comes from fundraising, internal shifting of resources, lines of credit, or a revenue share agreement with a company - it (the capital) needs to come from somewhere.

The real problem is not OPMs. Instead, the real problem is transparency.  Without transparency, we can’t make informed judgments.  Without a mechanism for independent research and evaluation, we are left with news stories and our own biases to make sense of stories like those coming out of USC.

It is time for schools and OPM companies to stop signing OPM agreements that make transparency, and critical evaluation, impossible.

In the case of USC’s online MSW, we have on our hands a potential teachable moment.  Both USC and 2U should work to make as much of the underlying data - including financial data - available for independent review and analysis.

We all need to learn from what is going on at USC.

Will anyone at USC or 2U step up to this opportunity?


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