Contrasting Views on Ending Tuition-Sharing Agreements

If officials at the U.S. Department of Education hoped the “listening sessions” they arranged this week would provide consensus on whether to stop letting colleges pay outside companies a share of tuition revenue when they help recruit students, they were surely disappointed.

Like just about every policy discussion in Washington these days, this one found the students, consumer advocates, college officials, corporate leaders and others who shared their opinions in three-minute increments to be sharply divided, with little to no middle ground to be found.

Virtually all of them—whether they argued for or against current policy guidance, which permits revenue-sharing agreements if the provider “bundles” nonrecruitment services with the recruitment work it does—purported to be speaking on behalf of students.

Their major arguments, and an effort to make sense of what’s at stake, follow.

What Is the ‘Bundled-Services Exemption’?

The Education Department announced last month that it would revisit nearly three decades of policy making under Title IV of the Higher Education Act that has largely restricted colleges from paying recruiters based on how many students they enroll.

The original 1992 legislation that cracked down on “incentive compensation” in programs that are eligible for federal student financial aid was modified by 2011 guidance from the Obama administration, which exempted recruiters from that ban if the provider of recruitment and marketing services “bundles” that work with other nonrecruitment services (instructional design, say, or support for enrolled students). That 2011 guidance enabled the emergence over the last decade of an entire industry of companies known as online program management firms, or OPMs.

The companies helped a significant number of nonprofit private and public institutions enter online learning (competing against the for-profit colleges that had previously dominated the online space) by investing up-front funds to build and market the programs (amid an array of other services—hence the “bundle”) in exchange for a large share of the subsequent revenue. Consumer advocates have argued with increasing intensity in recent years that the revenue sharing between colleges and companies incentivizes excessive digital marketing that can draw learners into suboptimal programs and drives up the cost and price of online programs.

While many legal experts believe the administration has the authority to yank the 2011 guidance and unilaterally eliminate the bundled-services exemption, as it is called, agency officials—having seen many of their recent regulatory efforts challenged in court—said they would accept comments on the 2011 guidance through March 16 and hold two “listening sessions” this week. Those happened virtually on Wednesday and Thursday afternoons, with several dozen speakers speeding through the allowed three-minute statements.

The Critics and Their Arguments

The vast majority of the speakers who urged the Education Department to withdraw the 2011 guidance and outlaw revenue sharing for student recruitment were either think tank and consumer group experts or students who said they’d had bad educational outcomes they attributed to online program managers. Representative Rosa DeLauro, a Connecticut Democrat who has called online program managers the “new predators” in higher education, also made an appearance.

The key arguments made by the critics were:

Revenue-sharing agreements harm students. Consumer advocates argued that arrangements that pay investor-backed for-profit companies a hefty share of the tuition paid by every student who enrolls give those companies (and the colleges they work with) incentive to enroll more students, expand the size of programs and charge more for the programs—potentially with insufficient regard to whether the programs are a good fit for the students.

Carolyn Fast, a senior fellow at the Century Foundation, cited reports by Century and other groups that said OPM-fueled programs have used “high-pressure” recruitment tactics (like quickly disappearing scholarships to “create a false sense of urgency” to enroll) and have “filled seats with students who do not meet normal academic criteria.”

“Students are often dealing with a boiler-room environment” that uses “misleading tactics to get as many students as possible in the door,” said Kyra Taylor, a staff attorney at the National Consumer Law Center.

OPMs inject for-profit practices and incentives into nonprofit higher education. Some critics of online program managers are skeptical of online education generally, while others are suspicious of any corporate role in providing higher education, which they consider to be a public good.

OPMs “imported the worst features of predatory for-profit institutions into traditional higher education and normalized them through ubiquity,” said Barmak Nassirian, vice president for higher education policy at Veterans Education Success, an advocacy group. That has created a “corrosive and corrupting effect on higher education institutions.”

Colleges have given OPMs too much authority over their programs. “There has been a full-scale disregard for the 2011 guidance, as evidenced by colleges and their contractors collaborating on institutional decision-making, in areas including enrollment growth goals, curriculum and course offerings, and tuition pricing,” said Stephanie Hall, a senior fellow at the left-leaning think tank the Center for American Progress.

Ending the exemption wouldn’t stop colleges from working with outside contractors. They could still pay OPMs to recruit for them on a fee-for-service basis, and rescinding the guidance would not “end tuition sharing for services other than recruitment,” said Fast, of the Century Foundation.

Supporters and Their Arguments

Those who spoke in favor of keeping the 2011 guidance and the exemption it provided for bundled services fell into three major categories: employees of online program management companies, adult learners who’ve benefited from OPM-managed online programs (and presumably were encouraged to testify by those companies, especially Academic Partnerships), and presidents or other senior leaders of colleges who use online program companies.

Jim Burkee, president of Avila University, in Kansas, summed up their arguments this way: “What exists is working, and messing with it … will only cost students,” he said. “If it ain’t broke, don’t fix it, and from where I sit, it isn’t broken. It’s working well.”

More specifically, he and others made the following arguments:

Many colleges—especially the little guys—need help from outside contractors to compete in online education. Most of the college officials who spoke in favor of revenue sharing came from small, less wealthy nonprofit private and public institutions, and many of them argued that eliminating the bundled-services exemption would leave them unable to compete with more established players (many of which built their programs using revenue-sharing deals with OPMs).

“For a school like ours,” said Lynne Bongiovanni, provost and dean of the college at New York’s College of Mount Saint Vincent, “working with third-party providers … helps us be competitive with flagships and national universities in this space.”

“It is absolutely essential for our survival,” she said, noting that the Roman Catholic college that disproportionately serves low-income and working students “wouldn’t have the resources to pay up front” to build online programs those students need to continue their education. “This is helping us small and middle-sized schools survive.”

Todd Shields, chancellor of Arkansas State University, said his institution doesn’t have the funds to front the costs of building online programs, and it would be unable to compete “alongside for-profits and mega-universities.”

Fee-for-service arrangements have downsides of their own. Helen Drinan, interim president of Cabrini University, in Pennsylvania, expressed her “fervent hope that the array of options” available to colleges would remain broad. When she was president of Simmons University, Drinan said, the institution built an online program in an arrangement that required it to “fund everything before any student paid us a dollar,” resulting in “significant financial losses” and ultimately the suspension of the program. “Online education seemed doomed for us,” she said.

When Simmons began working with the online program provider 2U, Drinan said, “we only paid for 2U’s services once we enrolled and re-enrolled students.” She and others made the case that OPM providers can have incentive to make sure students complete their programs, not just enroll in them initially.

Online education is important for students, especially posttraditional ones. Bongiovanni of Mount Saint Vincent said that many students at her institution are working parents who are constantly balancing school and work in ways that sometimes lead them to stop out. “We can serve them through flexible online programs” that the college might not be able to offer without these financial arrangements, she said.

“Changing this guidance would absolutely negatively affect certain student populations,” she said.

Added Anne Skleder, president of Brenau University, “We should be able to continue to choose revenue sharing when it best serves our students.”

The Middle Ground (Such as It Was)

The vast majority of speakers during the listening sessions staked out strong positions on the poles. But a couple, at least, envisioned the possibility of compromise.

Tanya Ang, managing director for advocacy at Higher Learning Advocates, which strives to identify bipartisan policy solutions for postsecondary education, acknowledged that “some experiences with OPMs have been harmful for students” but called for “striking a balance” given the importance of online education for adult learners. She urged much greater transparency about the relationships between OPMs and institutions.

Ted Mitchell, president of the American Council on Education, said any decisions about changing the guidance should focus on ensuring “transparency, innovation and good student outcomes.”

He said that policy makers should be careful “not to do more harm than good” and that “we do not know enough yet” to decide whether withdrawing the 2011 guidance would be the right choice.

“We must carefully weigh students’ interests against the interests of taxpayers and institutions,” Mitchell said. That process, he added, is likely to “require a scalpel, not a chain saw.”