Congressional Democrats Want Legal Review of OPMs

The chairs of the Senate and House education committees want the U.S. Department of Education to step up oversight of the outside contractors that colleges and universities use to run online programs in order to ensure the third-party companies aren’t engaging in abusive recruiting practices.

Specifically, the chairs and other congressional Democrats recommended in a letter sent Friday that the department conduct a “formal legal review” of the current rules for online program managers (OPMs), which is a step further than what the nonpartisan Government Accountability Office suggested in a report on the companies earlier this year. They also want the department to review disclosure requirements for OPM arrangements and to provide data on documented violations regarding OPMs.

The lawmakers requested data on documented violations regarding OPMs and details on how the department is planning to revise its guidance. They want to hear back from the department in two weeks.

Colleges and universities have increasingly turned to online program management companies in an effort to boost their online academic programs, with at least 550 working with an outside company, according to the GAO report. In some cases, the companies receive a share of the programs’ tuition revenue, which some critics of the companies say violates a federal ban on offering incentives for student recruitment for institutions that receive federal financial aid. The Education Department created an exception for bundled services in 2011 guidance, which allows a company to receive financial benefits for enrolling students as long as it also paid for other services, such as technology support, in addition to student recruitment.

Several OPM companies have previously indicated their support for the GAO’s report as well as for greater transparency.

“We reviewed the report, and we are very supportive of the GAO’s recommendation,” 2U CEO Chip Paucek said during a May earnings call with investors. “So, No. 1, we have led the industry in transparency. We put out transparency reports for multiple years. We have always complied with the rules regarding incentive compensation. Whenever our university partners have been asked for information about how we can compensate employees when they had any kind of audit, we have happily provided it. And the reality is as the OPM industry continues to grow, [to] become vital part of the higher ed ecosystem.”

Pearson, which has a division focused on online learning services, said in a statement that it supports efforts to enhance transparency and ensure quality and accountability in online higher education.

“We strongly believe that all people should have access to quality online education and are proud of the contributions we are making toward that goal,” the statement read. “We look forward to working with stakeholders and helping inform any policy considerations coming out of the [GAO] report.”

The lawmakers said in the letter that the level of transparency about OPMs and the agreements with colleges and universities was concerning. They also pointed to findings from the GAO report that found the Education Department isn’t asking for enough information about the OPM arrangements to determine whether they are legal. The report also found that the department doesn’t know exactly how many OPM arrangements with colleges and universities currently exist. GAO relied on market research data for its report.

“The GAO report confirmed the current higher education accountability system, the triad of the department, state authorizers, and private nonprofit accreditors, lacks adequate oversight of OPM arrangements, especially considering the significant amount of federal funding flowing to OPMs,” the letter states. “However, based on what’s publicly known about IHE-OPM arrangements, it is clear how these arrangements may create incentives for OPMs to guide students to less selective, more expensive programs, at all levels of higher education.”

The lawmakers cited several public news reports that accused OPMs of using aggressive recruiting practices and playing a role in institutional-level decision-making, among other practices.

“The department is responsible for ensuring colleges and universities comply with the law banning incentive compensation and the regulatory safeguards of the bundled services exception,” the letter states. “However, GAO found there is a high risk that the department does not have the information it needs to detect violations of the incentive compensation ban.”

The lawmakers wrote that they were encouraged by the department’s acceptance of GAO’s recommendations, which included giving instructions to auditors to better assess the legality of a college’s contracts with an OPM and clarifying to colleges and universities what information they need to provide about their OPM arrangements.

“We believe more can be done to prevent harmful recruiting practices and provide more transparency about OPM arrangements” with institutions of higher education, the letter states.

The Student Borrower Protection Center, which has been critical of OPMs and the Education Department’s oversight of the industry, said on social media that “this letter is a key step toward ending abuses and protecting borrowers.”

Stephanie Hall, a senior fellow at the Century Foundation, a left-leaning think tank, said she’s looking forward to seeing the information that the department provides in response, and she thinks the letter is a “great step” toward getting more information about the department’s plans out to the public.

Hall, who’s also been critical of OPMs, said a key part of the letter is having the department formally review the 2011 guidance that created the bundled-services exception, but any changes will likely take time.

“Institutions and OPMs might initially have this knee-jerk reaction, like, ‘Oh, no, this is going to shut down our programs,’ but it really won’t,” she said. “Nothing would happen really quickly. They aren’t just going to suddenly revoke a piece of guidance and leave everybody else to deal with the fallout.