When the check engine light comes on in your car, the best course of action is to get the problem diagnosed and repaired. If the problem is serious and you can’t afford to address it, you might be tempted to drive it a bit longer, thus doing more damage, or to have a mechanic do the bare minimum that will get you to your destination. In this situation, planning for future trips is out of the question.

If the U.S. higher education system had a dashboard, one area where we’d see the check-engine light come often is online education. For years, many colleges have been battling the general underfunding of higher education by seeking additional revenue by growing their online degree and certificate programs, in hopes of attracting more and more new students who bring their federal student aid dollars with them. While there is nothing inherently wrong with online degree programs as a form of distance education, problems arise when colleges get into business with third-party companies to set up such programs.

When colleges rely on third-party providers to build their online course programs, it is the educational equivalent of continuing to drive while needing a major repair. Colleges may get a bit further down the road thanks to the revenues these programs provide, but they will be worse off in the long run. The check engine light has come on before in this area, but the delivery of new guidance to colleges and universities from the U.S. Department of Education earlier this summer means the light will come on—and stay on—for a lot of schools, which could jeopardize their students’ access to federal financial aid programs.

A Warning from the U.S. Department of Education

Colleges and universities are able to participate in federal financial aid programs so long as they agree to certain conditions—one of which is that they are solely responsible for providing a quality education to their students. However, institutions have had some wiggle room here, as they have been allowed to outsource portions of the work involved in providing degree programs to private contractors who do not have to be vetted by the U.S. Department of Education. In other words, colleges can contract with third parties to help them provide their academic programs. This is not a new development, but in June, the department issued guidance to clarify the parameters of outsourcing. Depending on how entrenched or captive a college is to its contractor, the new guidance should be setting off warning lights of varying severity for just about every college that offers online programs.

Importantly, the Department of Education guidance reminds colleges that they may outsource up to one-half of a program (measured by clock or credit hours), so long as the college and its contractor are not owned or controlled by the same person, partnership, or corporation. This reminder from the department directly implicates at least two online mega universities: Purdue University Global (Purdue Global) and Grand Canyon University (GCU). In the case of Purdue Global, the school and its service provider, Kaplan Education, are jointly managed by an advisory committee established in 2017 by Kaplan’s owner, Graham Holdings. And perhaps more egregiously, Grand Canyon University shares a CEO with its service provider, Grand Canyon Education.

If the guidance stopped there, Purdue Global and GCU might think it did not apply to them because, according to their calculations, they have not outsourced their academic programs.1 However, the guidance goes on to explain what is and is not acceptable when calculating how much of a program has been outsourced. To put it another way, it is likely that these colleges and others have been miscalculating how involved their contractors are in providing educational programs to students.

Who Is Providing Degree Programs? It’s Time To Recalculate

Many colleges up until now have created and grown their outsourced programs by exploiting a gray area: the somewhat blurred line between course design and course delivery. Course design happens on the front end, before classes begin, while course delivery is facilitated through instructional staff. Under the status quo, colleges could outsource course design and still consider themselves to be the sole provider of their programs by employing a simple maneuver: ensuring the person facilitating instruction was a college employee.

When a student signs up to study at a particular institution, they believe they are getting an educational experience designed and delivered by that school.

The new guidance throws up a clear warning signal to colleges by stating the answer to a very basic question: If a college outsources course design or instructional design, have they outsourced the academic program? The simple answer is, yes. Clarifying the answer to this question is important for the integrity of academic programs, because when a student signs up to study at a particular institution, they believe they are getting an educational experience designed and delivered by that school. Third-party companies involved in outsourced online programs use an array of names for their course design services (such as course design, instructional design, or curriculum consulting), but the simple fact is that such services are academic functions and a college cannot outsource academic functions and still consider itself to be the sole course provider, even if it employs the instructor whose name appears on the student transcript. Institutions such as Purdue Global, GCU, and the vast majority of colleges with full-service online program management (OPM) contractors must now recalculate the amount of their programs that have been outsourced.

In the guidance, the Department of Education states it is aware of cases where colleges are misrepresenting how much of their academic programs are outsourced, and that in some such cases, colleges have failed to correctly account for the academic functions taken on by their OPM. With The Century Foundation’s growing database of arrangements between public institutions and their OPMs, it is easy to see which arrangements are indeed crossing the line and in need of the most immediate modifications.

Case Study: Eastern Gateway Community College

One example of a highly outsourced and problematic online program can be found in the arrangement between Eastern Gateway Community College (EGCC) and its OPM, Student Resources Center. EGCC was recently placed on what is known as Heightened Cash Monitoring by the Department of Education, calling into question the wisdom of its recent strategy of massive growth in its OPM-fueled online programs. Such monitoring requires a closer, more frequent look at a college’s cash flows, and the department uses this tool in cases where colleges may be on the brink of insolvency—or where federal funds have previously been mishandled.

The college’s financial difficulties have come to light, but a deeper look at the relationship between EGCC and its OPM reveals it arrived at this point via an arrangement that crosses multiple regulatory lines. EGCC contracted with its OPM to create and manage a set of online programs marketed to union members nationwide. Prior investigations into Eastern Gateway’s arrangement with its OPM revealed the college had been pressured into using “canned curriculum” from another company with ties to the OPM. Additionally, it appears some OPM employees are working as adjunct instructors in the program. The department’s new guidance makes it clear that this crosses the line. Because Eastern Gateway participates in federal student aid programs, it is obligated to maintain control over its academic programs even if an OPM is involved. In response to questions about OPM involvement in curriculum and instruction, Eastern Gateway leadership explained there are mechanisms in place to ensure that the college’s faculty maintain control over curriculum decisions and that the college screens and hires candidates for adjunct teaching positions in accordance with state and accreditor standards. Further, Eastern Gateway views a candidate’s employment status at another organization as irrelevant to that screening process. Based on current practice at Eastern Gateway Community College, it could be on the brink of losing one of its sole revenue sources, because students in its OPM-managed programs may not be eligible for federal student aid.

Case Study: The Clients of Academic Partnerships and Instructional Connections

A number of colleges and universities have contracts with an OPM called Academic Partnerships (AP) and a company AP considers a “strategic partner,” Instructional Connections.2 The schools relying on both of these companies serve as additional examples of arrangements that cross what is now a clear regulatory line. Academic Partnerships (formerly known as Higher Ed Holdings) is a full service OPM that provides and works with client colleges on curriculum development, instructional design, marketing, and recruiting for a large number of public colleges and universities. Instructional Connections in turn supplies many of AP’s client schools with teaching assistants. The Department of Education’s new guidance warns about this kind of arrangement: colleges that appoint their own employees as instructors for their online classes while relying on—and paying for—the instructional labor of a third party should recalculate who is providing the programs. The most important thing for these colleges to do now is to adjust their arrangements where necessary, or risk their students losing access to federal financial aid programs.

The most important thing for these colleges to do now is to adjust their arrangements where necessary, or risk their students losing access to federal financial aid programs.

Questions Remain

The Department of Education’s newest guidance comes down very clearly on the fact that most colleges that have contracted with an OPM will need to recalculate what percent of their academic programs each party is providing. However, some questions remain, which the department could answer by issuing an enforcement bulletin to schools. The department should prioritize getting communication out that provides clarity on how schools should calculate the involvement of their OPM in instructional or course design, and how schools should calculate situations where OPM employees are working in tandem with university-based faculty or staff. Finally, a bulletin is the ideal venue to remind schools of other regulations and guidance that govern the outsourced online higher education space, including the fact that colleges should maintain an arm’s length relationship with their OPMs.

If higher education were a car, the system of online programs would surely fail an inspection at this point. To the detriment of students and colleges, the inspectors have looked the other way for over a decade. The Department of Education’s newest guidance signals that it plans to look away no longer. Colleges need to get under the hood and modify their OPM contracts to ensure that students who are taking out federally guaranteed loans to pay for their programs are in fact getting what they are paying for—an educational experience provided by the public college where they are enrolled.


  1. It should be noted that the arrangements Purdue Global and GCU have with service providers are likely out of compliance with other Department of Education guidance, namely “​​Implementation of Program Integrity Regulations,” DCL-GEN-11-05, March 17, 2011, https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2011-03-17/gen-11-05-subject-implementation-program-integrity-regulations.
  2. The Century Foundation maintains a publicly available database of contracts and agreements between public institutions and private providers, available at https://docs.google.com/spreadsheets/d/1qckopXXj3K6NCKvClO3cxG7TlnSlRBaa5PmHGr1bVDg/edit?usp=sharing.