The online program management firm 2U sued the U.S. Education Department in federal court Tuesday over guidance it issued in February governing the relationships between colleges and third parties that perform key services for them.
In its complaint, filed in federal district court in Washington, D.C., 2U asserts that the department and Education Secretary Miguel Cardona have overreached their authority by using subregulatory guidance to make substantive changes that should not have been made without going through the federal rule-making process.
"The Department’s unprecedented claim of authority—effectuated in a mere Dear Colleague Letter—is contrary to law and arbitrary and capricious, and it ignores the procedural rulemaking requirements set forth in the [Higher Education Act] and Administrative Procedure Act.," the lawsuit states.
More than 1,000 colleges, companies, consumer advocacy groups and other organizations submitted comments in response to the department's request for feedback on the guidance, which was designed to give the federal agency more insight into (and oversight of) outside contractors that in one way or another help colleges recruit, enroll or retain students. The department is particularly focused on entities that receive a share of tuition revenue in exchange for their services, which critics believe can drive up the price of higher education and draw students to low-value academic programs at subpar institutions. Others dispute that assertion.
"2U supports greater transparency, but we believe the 2023 Dear Colleague Letter’s redefinition of the statutory term 'third-party servicer' is unlawful and should be rescinded or invalidated," said Matthew J. Norden, 2U’s chief legal officer. "While we regret the need to file this case, students must be protected from the disruption and uncertainty that such arbitrary rulemaking creates."