As online education expands, public and nonprofit colleges nationwide are increasingly partnering with for-profit companies to design, market, and operate their online programs. These online program managers (OPMs) introduce profit-driven motives into nonprofit and public colleges, creating risks for students, faculty, colleges, and taxpayers.
The Risks of OPM Arrangements
OPMs are for-profit companies that contract with public and nonprofit colleges to develop and manage online degree programs. One of the biggest concerns surrounding OPMs stems from how they are paid. Federal law bans colleges from compensating recruiters based on enrollment numbers to help prevent predatory recruiting practices. However, in 2011, the U.S. Department of Education issued guidance that created a loophole for OPMs that offer bundled services—including marketing and recruitment—that allows them to circumvent this prohibition, leading most OPMs to adopt “tuition-sharing” payment arrangements that tie compensation to student enrollment.
Tuition-sharing can lead to inflated tuition costs and increased student debt. Tuition-sharing arrangements allow colleges to shift some of the risks of starting a new program to the OPM, but tuition-sharing creates financial incentives for OPMs to engage in aggressive, and even deceptive, recruiting practices in order to maximize profits. These arrangements also create incentives for OPMs to water-down admissions requirements in order to increase enrollment. OPMs have faced lawsuits for allegedly misleading prospective students about the quality of online programs or about the nature of their role in providing the program. OPMs have also raised concerns due to their practice of targeting marketing to low-income students and students of color.
OPMs also create risks for faculty and for colleges. OPM contracts may contain provisions that dilute faculty control over the development and operation of online programs, including by providing for shared decision-making on matters such as curriculum development, enrollment targets, or admissions criteria. In some cases, OPM contracts have raised intellectual property concerns for faculty. OPMs also raise risks for colleges, who can become trapped in expensive, multi-year contracts.
States Are Stepping Up to Protect Students
In spite of the risks OPM arrangements pose to students, faculty, and institutions, federal oversight of OPMs remains virtually nonexistent. While colleges that participate in federal financial aid programs are required to meet certain standards, such as meeting accreditation standards, OPMs are not subject to any federal requirements. In fact, while federal financial aid dollars support tens of thousands of students enrolled in OPM-operated programs, the U.S. Department of Education does not even know how many colleges rely on OPM-operated programs or how much federal financial aid is funneled into them.
In the absence of federal oversight, states are stepping up to regulate OPMs. Last year, Minnesota became the first state to pass legislation to strengthen oversight of OPMs. The Minnesota law established guardrails for public institutions in the state, including a ban on incentive compensation. Last month, Ohio introduced a bill that would improve oversight of OPMs working with institutions in Ohio. These state efforts are promising examples of state policymakers stepping up to fill the void in federal oversight.
A Blueprint for State Legislation Regulating OPMs
The Century Foundation has partnered with the Student Borrower Protection Center to develop a blueprint for state OPM legislation. To effectively protect students, faculty, and institutions, state legislation must:
- Apply universally. State legislation should regulate OPMs at all types of postsecondary institutions, including public, private nonprofit, proprietary, and private career schools.
- Ban incentive compensation. State legislation should prohibit tuition-sharing and other types of incentive compensation for OPMs. Colleges currently engaged in such agreements should be given a transition period to rescind or modify their contracts.
- Require reporting. Legislation should require colleges that partner with OPMs to submit OPM contracts to a state regulator so that the state can track programs operated by OPMs and monitor compliance with the requirements of the state law.
- Protect institutional authority. Legislation should ensure that colleges retain full decision-making control over essential functions, such as curriculum development, instructor selection, admissions standards, enrollment targets, and prioritization of existing or new online programs.
- Prevent misrepresentations and misleading branding. Legislation should prohibit OPMs from engaging in deceptive marketing or recruiting practices. Legislation should also require OPMs to clearly disclose their status as third-party providers. Legislation should require OPMs to use distinct branding and prohibit OPM employees from using college logos, emails addresses, or falsely presenting themselves as college staff.
- Protect faculty intellectual property. State legislation should safeguard faculty rights, ensuring that intellectual property, such as course materials developed by faculty, remains owned by the faculty members, not the OPM.
- Require transparency. State legislation should require OPMs and their college partners to disclose OPM’s role in marketing, enrollment, and instruction. Colleges that partner with OPMs must clearly disclose the nature of the relationship in promotional materials.
- Provide for enforcement. State legislation should include clear enforcement mechanisms, such as civil penalties, to assure that the state can take action to enforce the state law.
The Path Forward
With federal oversight lacking, states have a crucial opportunity to lead on OPM accountability. If you are a state policymaker or advocate interested in advancing OPM-related legislation in your own state, please reach out to the authors of this commentary at [email protected] and [email protected] for more details. You can also view a copy of draft bill language on state OPM legislation adapted and compiled by The Century Foundation and Student Borrower Protection Center.
Tags: opm, online college, college accountability, college affordability
A Blueprint for State Legislation Regulating Online Program Managers
As online education expands, public and nonprofit colleges nationwide are increasingly partnering with for-profit companies to design, market, and operate their online programs. These online program managers (OPMs) introduce profit-driven motives into nonprofit and public colleges, creating risks for students, faculty, colleges, and taxpayers.
The Risks of OPM Arrangements
OPMs are for-profit companies that contract with public and nonprofit colleges to develop and manage online degree programs. One of the biggest concerns surrounding OPMs stems from how they are paid. Federal law bans colleges from compensating recruiters based on enrollment numbers to help prevent predatory recruiting practices. However, in 2011, the U.S. Department of Education issued guidance that created a loophole for OPMs that offer bundled services—including marketing and recruitment—that allows them to circumvent this prohibition, leading most OPMs to adopt “tuition-sharing” payment arrangements that tie compensation to student enrollment.
Tuition-sharing can lead to inflated tuition costs and increased student debt. Tuition-sharing arrangements allow colleges to shift some of the risks of starting a new program to the OPM, but tuition-sharing creates financial incentives for OPMs to engage in aggressive, and even deceptive, recruiting practices in order to maximize profits. These arrangements also create incentives for OPMs to water-down admissions requirements in order to increase enrollment. OPMs have faced lawsuits for allegedly misleading prospective students about the quality of online programs or about the nature of their role in providing the program. OPMs have also raised concerns due to their practice of targeting marketing to low-income students and students of color.
OPMs also create risks for faculty and for colleges. OPM contracts may contain provisions that dilute faculty control over the development and operation of online programs, including by providing for shared decision-making on matters such as curriculum development, enrollment targets, or admissions criteria. In some cases, OPM contracts have raised intellectual property concerns for faculty. OPMs also raise risks for colleges, who can become trapped in expensive, multi-year contracts.
States Are Stepping Up to Protect Students
In spite of the risks OPM arrangements pose to students, faculty, and institutions, federal oversight of OPMs remains virtually nonexistent. While colleges that participate in federal financial aid programs are required to meet certain standards, such as meeting accreditation standards, OPMs are not subject to any federal requirements. In fact, while federal financial aid dollars support tens of thousands of students enrolled in OPM-operated programs, the U.S. Department of Education does not even know how many colleges rely on OPM-operated programs or how much federal financial aid is funneled into them.
In the absence of federal oversight, states are stepping up to regulate OPMs. Last year, Minnesota became the first state to pass legislation to strengthen oversight of OPMs. The Minnesota law established guardrails for public institutions in the state, including a ban on incentive compensation. Last month, Ohio introduced a bill that would improve oversight of OPMs working with institutions in Ohio. These state efforts are promising examples of state policymakers stepping up to fill the void in federal oversight.
A Blueprint for State Legislation Regulating OPMs
The Century Foundation has partnered with the Student Borrower Protection Center to develop a blueprint for state OPM legislation. To effectively protect students, faculty, and institutions, state legislation must:
The Path Forward
With federal oversight lacking, states have a crucial opportunity to lead on OPM accountability. If you are a state policymaker or advocate interested in advancing OPM-related legislation in your own state, please reach out to the authors of this commentary at [email protected] and [email protected] for more details. You can also view a copy of draft bill language on state OPM legislation adapted and compiled by The Century Foundation and Student Borrower Protection Center.
Tags: opm, online college, college accountability, college affordability