Minnesota has become the first state to enact higher education legislation that protects students, faculty, and taxpayers from the risks posed by companies known as online program managers (OPMs). OPMs are for-profit companies that contract with public and nonprofit colleges to develop, operate, and market online college programs, but whose practices tend to put profit before education quality or student and faculty experience. This new legislation establishes guardrails on OPMs at the state level that advocates have been calling for at the federal level for years.
This new legislation establishes guardrails on OPMs at the state level that advocates have been calling for at the federal level for years.
OPMs raise concerns for students, faculty, institutions, and taxpayers. When OPMs contract with institutions to provide their online courses, they sometimes use tuition-sharing agreements, in which they receive a cut of tuition for each student they recruit into the program. This has been associated with both increased tuition for students and the predatory recruitment of students. OPM contracts have also affected faculty freedoms and rights by including provisions that limit faculty control over their own curriculum designs and infringe on their decision-making power. Institutions can also be negatively affected by OPMs, in that lengthy contract features can trap them into multi-year contracts. Finally, students in online programs often have more difficulty paying back their loans, leaving taxpayers to foot the bill.
There are currently few mechanisms for protecting students, faculty, institutions, and taxpayers from these risks at the federal level. The Minnesota law creates new, state-level guardrails on OPMs. It prohibits any public colleges in Minnesota from entering into new contracts with OPMs that include tuition-sharing arrangements when OPMs provide recruitment and marketing. Tuition sharing agreements are those in which the OPM receives a percentage of the tuition for each student enrolled in the online program. These contracts have been under fire because they import financial incentives into recruitment, which have led to instances of aggressive and deceptive marketing practices, as well as to predatory recruitment, wherein OPMs target students from underrepresented backgrounds for inclusion in low-value online programs, often leading to worse outcomes for these students. The law also contains provisions that protect faculty intellectual property, increase reporting requirements and oversight of OPM contracts, and require transparency of OPM-institutional relationships. With the implementation of this law, Minnesota leads the way for other states to follow suit to protect students, faculty, and taxpayers from predatory online program managers.
OPMs in Minnesota’s Online Education Landscape
While OPMs are not widespread in Minnesota, two institutions within the Minnesota State Colleges and University system, St. Cloud State and Southwest Minnesota State, partner with OPMs to provide online degree programs. Faculty and advocates in Minnesota quickly raised concerns about the risks posed by OPMs. For example, in a committee hearing on higher education in March of this year, Dr. Jenna Chernega, president of the Minnesota Inter Faculty Organization (IFO), shared a statement on behalf of the IFO listing concerns noted by faculty, including lengthy contract durations, accelerated programs, and high proportions of tuition going to OPMs in tuition-sharing arrangements, including arrangements where as much as 50 percent of tuition per student went to the OPM. Additionally, Dr. Chernega noted that through a contract with the OPM Academic Partners, three-fourths of online graduate programs at St. Cloud State failed to enroll any students at all and were discontinued. In spite of this failure, St. Cloud State signed an addendum with Academic Partners to expand online offerings at the undergraduate level.
IFO’s activism on the issue ended up being instrumental in the development of the new legislation. After raising their concerns with the Minnesota system office, that office then developed an internal approval system to approve OPM contracts. The system saw success, and advocates then moved to enshrine these common-sense protections for all public colleges in the state.
What the New Law Does
Minnesota’s new law establishes a set of guardrails on contracts with OPMs that protect students, faculty, and institutions.
First, the law protects faculty by protecting faculty control over curriculum development and their own intellectual property. Specifically, the law provides for faculty and institutional control over curriculum development for online programs by prohibiting OPM from developing curriculum and from gaining intellectual property rights over any curriculum created by faculty. These protections are critical for faculty. As noted in Dr. Chernega’s statement on behalf of the IFO, under prior OPM contracts, faculty were overburdened with labor and given short timelines to convert their existing full semester in-person courses into an accelerated online format. Faculty were also required to sign over their intellectual property rights to the institution, who could then hand it off to other faculty or to the OPM to be used with other client institutions. The new law protects faculty by ensuring that faculty maintain intellectual property rights over their work.
The new law also guards institutional control by prohibiting OPMs from having any decision making authority over admissions requirements. This is a key victory as some OPMs have allegedly altered admissions requirements in order to increase enrollment in their online programs, leading students into programs where they were unlikely to see success.
The new law also prohibits public colleges in Minnesota from entering into new tuition-sharing agreements with OPMs that provide recruitment and marketing services. This is perhaps the biggest win for Minnesota’s students, institutions, and taxpayers. To illustrate why, let’s take a look at the legal status quo.
Advocates have long called for a ban on tuition-sharing at the federal level. Tuition sharing creates financial incentives for OPMs to water down admissions requirements, increase tuition prices, and engage in aggressive and deceptive recruiting practices. In recognition of the risks of incentive compensation, the Higher Education Act, a federal statute, prohibits institutions from providing incentive compensation to recruiters based on the number of students recruited. However, 2011 Department of Education guidance created an exception to this ban for OPMs that provide recruitment as part of a package of services. As a result, tuition-sharing is widespread among public and nonprofit colleges.
Beginning today, OPMs that enter into new contracts with public colleges in Minnesota will not be able receive a cut of tuition for recruiting students into their online programs.
Now though, the new law in Minnesota specifically prohibits new contractual arrangements that allow for tuition sharing with OPMs that provide recruitment and marketing services. It defines tuition-sharing as compensation or payment to an online program management company based on a percentage of revenue or fees collected from managed programs. Furthermore, it defines an online program management company as a private, for-profit, third-party entity that enters into a contract with an institution of higher education to provide bundled products and services to develop, deliver, or provide managed programs, when the services provided include recruitment and marketing. Thus, beginning today, OPMs that enter into new contracts with public colleges in Minnesota will not be able receive a cut of tuition for recruiting students into their online programs.
The new law also creates improved oversight and increased reporting requirements for OPMs. The law requires an institution’s governing board to review OPM contracts and ensure compliance with all new stipulations of the law before approving any new contracts. The governing boards must not approve any contracts that do not meet all new stipulations. Institutions contracting with OPMs must also annually submit program enrollment and revenue data to members of the higher education finance committees in the house and the senate. Beginning in 2026, these reports must also include measures of student persistence and completion. Combined, these requirements achieve a systematic level of oversight that will protect students in online programs.
The new law also improves transparency by requiring OPMs to identify themselves as third-party providers when engaging in any recruitment or marketing activities. It also requires institutions that contract with OPMs to approve all marketing and recruitment communications from the OPM and publish on their website a list of all online programs that are supported by the OPM. These provisions address concerns that OPM employees that interact with prospective or current students do not always clearly indicate to students that they are employed by outside contractors, rather than by the university. It also holds institutions accountable to students by requiring their review and approval of marketing materials.
What the Law Does Not Do
The Minnesota law provides several critical protections from predatory OPMs, but does not prevent institutions from continuing to enter into contracts with OPMs. In particular, institutions can still partner with OPMs to provide online courses and can continue to contract with OPMs to provide marketing and recruitment services. The law merely prohibits OPMs from receiving a cut of tuition for their online program services when these services include recruitment and marketing.
The legislation strikes at the heart of what drives OPMs’ harmful behavior to provide a critical protection: it is when OPMs are financially incentivized to recruit more students that they are likely to engage in predatory recruitment that harms students. So, how will OPMs that provide recruitment and marketing services be compensated for their work? The same way other service providers in education do: by charging fees based on services provided, rather than on the number of students that enroll in the program.
Other States Should Follow Suit
During a statement made at the Minnesota Committee Hearing on Higher Education, Dr. Jenna Chernega noted,“As the federal government drags their feet properly regulating these companies, we can’t wait any longer while our campuses are preyed upon… Our hope is that this bill becomes a template for other states to take action.” Indeed, the federal government has failed to issue updated guidance that would extend third-party servicer requirements to OPMs and require institutions to report on their arrangements with OPMs. It has also failed to revise or rescind the 2011 bundled services guidance to bring the guidance into line with the Higher Education Act by prohibiting tuition sharing arrangements for recruitment services. Minnesota did not wait for federal action—they took action themselves. Minnesota’s new law serves as a model for other states and sends a clear message: You too can take matters into your own hands and protect your own residents from the risks posed by OPMs.
Tags: higher education, online program managers, Student protections
Minnesota Leads in Protecting Students from Predatory Online College Programs
Minnesota has become the first state to enact higher education legislation that protects students, faculty, and taxpayers from the risks posed by companies known as online program managers (OPMs). OPMs are for-profit companies that contract with public and nonprofit colleges to develop, operate, and market online college programs, but whose practices tend to put profit before education quality or student and faculty experience. This new legislation1 establishes guardrails on OPMs at the state level that advocates have been calling for at the federal level for years.
OPMs raise concerns for students, faculty, institutions, and taxpayers. When OPMs contract with institutions to provide their online courses, they sometimes use tuition-sharing agreements, in which they receive a cut of tuition for each student they recruit into the program. This has been associated with both increased tuition for students and the predatory recruitment of students. OPM contracts have also affected faculty freedoms and rights by including provisions that limit faculty control over their own curriculum designs and infringe on their decision-making power. Institutions can also be negatively affected by OPMs, in that lengthy contract features can trap them into multi-year contracts. Finally, students in online programs often have more difficulty paying back their loans, leaving taxpayers to foot the bill.
There are currently few mechanisms for protecting students, faculty, institutions, and taxpayers from these risks at the federal level. The Minnesota law creates new, state-level guardrails on OPMs. It prohibits any public colleges in Minnesota from entering into new contracts with OPMs that include tuition-sharing arrangements when OPMs provide recruitment and marketing. Tuition sharing agreements are those in which the OPM receives a percentage of the tuition for each student enrolled in the online program. These contracts have been under fire because they import financial incentives into recruitment, which have led to instances of aggressive and deceptive marketing practices, as well as to predatory recruitment, wherein OPMs target students from underrepresented backgrounds for inclusion in low-value online programs, often leading to worse outcomes for these students. The law also contains provisions that protect faculty intellectual property, increase reporting requirements and oversight of OPM contracts, and require transparency of OPM-institutional relationships. With the implementation of this law, Minnesota leads the way for other states to follow suit to protect students, faculty, and taxpayers from predatory online program managers.
OPMs in Minnesota’s Online Education Landscape
While OPMs are not widespread in Minnesota, two institutions within the Minnesota State Colleges and University system, St. Cloud State and Southwest Minnesota State, partner with OPMs to provide online degree programs. Faculty and advocates in Minnesota quickly raised concerns about the risks posed by OPMs. For example, in a committee hearing on higher education in March of this year, Dr. Jenna Chernega, president of the Minnesota Inter Faculty Organization (IFO), shared a statement on behalf of the IFO listing concerns noted by faculty, including lengthy contract durations, accelerated programs, and high proportions of tuition going to OPMs in tuition-sharing arrangements, including arrangements where as much as 50 percent of tuition per student went to the OPM. Additionally, Dr. Chernega noted that through a contract with the OPM Academic Partners, three-fourths of online graduate programs at St. Cloud State failed to enroll any students at all and were discontinued. In spite of this failure, St. Cloud State signed an addendum with Academic Partners to expand online offerings at the undergraduate level.
IFO’s activism on the issue ended up being instrumental in the development of the new legislation. After raising their concerns with the Minnesota system office, that office then developed an internal approval system to approve OPM contracts. The system saw success, and advocates then moved to enshrine these common-sense protections for all public colleges in the state.
What the New Law Does
Minnesota’s new law establishes a set of guardrails on contracts with OPMs that protect students, faculty, and institutions.
First, the law protects faculty by protecting faculty control over curriculum development and their own intellectual property. Specifically, the law provides for faculty and institutional control over curriculum development for online programs by prohibiting OPM from developing curriculum and from gaining intellectual property rights over any curriculum created by faculty. These protections are critical for faculty. As noted in Dr. Chernega’s statement on behalf of the IFO, under prior OPM contracts, faculty were overburdened with labor and given short timelines to convert their existing full semester in-person courses into an accelerated online format. Faculty were also required to sign over their intellectual property rights to the institution, who could then hand it off to other faculty or to the OPM to be used with other client institutions. The new law protects faculty by ensuring that faculty maintain intellectual property rights over their work.
The new law also guards institutional control by prohibiting OPMs from having any decision making authority over admissions requirements. This is a key victory as some OPMs have allegedly altered admissions requirements in order to increase enrollment in their online programs, leading students into programs where they were unlikely to see success.
The new law also prohibits public colleges in Minnesota from entering into new tuition-sharing agreements with OPMs that provide recruitment and marketing services. This is perhaps the biggest win for Minnesota’s students, institutions, and taxpayers. To illustrate why, let’s take a look at the legal status quo.
Advocates have long called for a ban on tuition-sharing at the federal level. Tuition sharing creates financial incentives for OPMs to water down admissions requirements, increase tuition prices, and engage in aggressive and deceptive recruiting practices. In recognition of the risks of incentive compensation, the Higher Education Act, a federal statute, prohibits institutions from providing incentive compensation to recruiters based on the number of students recruited. However, 2011 Department of Education guidance created an exception to this ban for OPMs that provide recruitment as part of a package of services. As a result, tuition-sharing is widespread among public and nonprofit colleges.
Now though, the new law in Minnesota specifically prohibits new contractual arrangements that allow for tuition sharing with OPMs that provide recruitment and marketing services. It defines tuition-sharing as compensation or payment to an online program management company based on a percentage of revenue or fees collected from managed programs. Furthermore, it defines an online program management company as a private, for-profit, third-party entity that enters into a contract with an institution of higher education to provide bundled products and services to develop, deliver, or provide managed programs, when the services provided include recruitment and marketing. Thus, beginning today, OPMs that enter into new contracts with public colleges in Minnesota will not be able receive a cut of tuition for recruiting students into their online programs.
The new law also creates improved oversight and increased reporting requirements for OPMs. The law requires an institution’s governing board to review OPM contracts and ensure compliance with all new stipulations of the law before approving any new contracts. The governing boards must not approve any contracts that do not meet all new stipulations. Institutions contracting with OPMs must also annually submit program enrollment and revenue data to members of the higher education finance committees in the house and the senate. Beginning in 2026, these reports must also include measures of student persistence and completion. Combined, these requirements achieve a systematic level of oversight that will protect students in online programs.
The new law also improves transparency by requiring OPMs to identify themselves as third-party providers when engaging in any recruitment or marketing activities. It also requires institutions that contract with OPMs to approve all marketing and recruitment communications from the OPM and publish on their website a list of all online programs that are supported by the OPM. These provisions address concerns that OPM employees that interact with prospective or current students do not always clearly indicate to students that they are employed by outside contractors, rather than by the university. It also holds institutions accountable to students by requiring their review and approval of marketing materials.
What the Law Does Not Do
The Minnesota law provides several critical protections from predatory OPMs, but does not prevent institutions from continuing to enter into contracts with OPMs. In particular, institutions can still partner with OPMs to provide online courses and can continue to contract with OPMs to provide marketing and recruitment services. The law merely prohibits OPMs from receiving a cut of tuition for their online program services when these services include recruitment and marketing.
The legislation strikes at the heart of what drives OPMs’ harmful behavior to provide a critical protection: it is when OPMs are financially incentivized to recruit more students that they are likely to engage in predatory recruitment that harms students. So, how will OPMs that provide recruitment and marketing services be compensated for their work? The same way other service providers in education do: by charging fees based on services provided, rather than on the number of students that enroll in the program.
Other States Should Follow Suit
During a statement made at the Minnesota Committee Hearing on Higher Education, Dr. Jenna Chernega noted,“As the federal government drags their feet properly regulating these companies, we can’t wait any longer while our campuses are preyed upon… Our hope is that this bill becomes a template for other states to take action.” Indeed, the federal government has failed to issue updated guidance that would extend third-party servicer requirements to OPMs and require institutions to report on their arrangements with OPMs. It has also failed to revise or rescind the 2011 bundled services guidance to bring the guidance into line with the Higher Education Act by prohibiting tuition sharing arrangements for recruitment services. Minnesota did not wait for federal action—they took action themselves. Minnesota’s new law serves as a model for other states and sends a clear message: You too can take matters into your own hands and protect your own residents from the risks posed by OPMs.
Notes
Tags: higher education, online program managers, Student protections