Seven years ago, The Century Foundation filed FOIA requests with more than 100 public universities across the country, seeking copies of contracts with outside companies involved in their online degree programs. The results were alarming. While typical contracting relationships enlisted private companies to provide specific technology, operate a cafeteria, or manage parking, contracts with online program managers (OPMs) were involving for-profit companies in making decisions much closer to the heart of the academic enterprise, including curriculum development, the hiring of instructors, and setting tuition and admission standards. The colleges were frequently locked into the contracts for many years, and often promised half or more of the tuition to the for-profit company.
TCF cautioned that as the online program market became saturated, for-profit OPMs could be motivated to pursue problematic paths in order to increase their revenue. As predicted, students and taxpayers have been harmed by aggressive recruitment tactics to boost enrollment for their institutional partners and, ultimately, their own profit.
Fortunately, colleges and universities now seem to be souring on the OPM model, realizing that they don’t want, or need, to give so much control to a private third-party company in order to provide students with an online learning option. Typically, institutions had been signing long-term tuition bounty agreements with the for-profit companies to establish and grow new programs. More recently, OPMs began to offer a-la-carte or fee-for-service options, allowing institutions to select the services they want to outsource. Meanwhile, some institutions figured out how to scale their own resources in order to provide online programs in house, avoiding the use of OPMs altogether. Other institutions, including the University of Southern California, announced in a mutual statement late in 2023 that they were parting ways with 2U, one of the largest, and now one of the most financially troubled, OPMs in the market. USC will move to run some of their formerly outsourced online programs themselves.
Combined, each of these responses from institutions suggest that institutions no longer feel inclined to fully outsource an online program to a third-party company. Let’s take a look at why, and what seems poised to take the model’s place.
The Current Model Isn’t Working
At a recent industry symposium in March framed as “Post OPM,” a variety of stakeholders in the edtech industry gathered to discuss the state of online higher education. Throughout the convening, it became clear that the post-OPM framing suggested two developments: 1) a higher education landscape in which the term “OPM” is no longer desirable, as it is associated with negative press and calls for regulatory action; and 2) a demand for something beyond the current fully outsourced, revenue-sharing OPM model, which is not meeting the needs of students or institutions. In the room at the convening were university officials such as chancellors and deans of online education at both larger and smaller institutions, CEOs of edtech companies, industry analysts, and policy advocates like the present authors. While some industry participants complained that discussions of OPMs had become “politicized,” others recognized that the industry was its own worst enemy.
In one session, a higher education leader from a smaller institution noted that OPMs don’t conduct meaningful market research about which students are the best fit for the institution: instead, OPMs “worry about numbers” without having a data-driven recruitment strategy. What’s more, they charge a lot to do so. Other higher education leaders voiced concerns about costs to institutions and to students. Specifically, they wondered aloud about how to drive down costs for students and measure the return on investment for their students in the face of the increasing marketing costs. Some university leaders shared ways they are working internally to scale their own resources in order to cut the cost of student acquisition.
What’s Next?
One session at the symposium included a useful discussion about the core components of a quality higher education, and the fact that those should always be the responsibility of the school itself, not that of a third-party provider. Some industry participants seem to be gaining an understanding that their role is as a supporter of the online enterprise, and not as its surrogate or director. These actors are pivoting towards identifying the ways that they can bring added value by offering institutions services that help build components of their online programs, rather than proposing to take the reins.
However, there were signs that the industry has not yet embraced its proper role. Nearly everyone in the room seemed to be avoiding the word that best describes a company’s appropriate relationship with a college: that of a contractor or consultant. Instead, over and over the participants were describing their desire to “partner” with their university clients; the words partnering and partnership peppered the whole event. One company executive even used the metaphor of a marriage to illustrate the relationship that he wants his company to establish with clients. But that is exactly what is wrong with the current problem-plagued OPM model: universities enter contracts under a false impression that they are allying themselves with partners who have the same overall goals. As it turns out, this isn’t always the case. Institutions must retain primary control over all core educational operations. Ultimately, institutions are the ones responsible for their students, as well as for the consequences of the conduct of their third-party servicers. It is the institution, not the OPM, that is accountable to its accreditors and to the department of education.
As one industry participant noted, universities are really OPM customers. Indeed, an OPM–institution relationship is not at all like a partnership or a marriage. Rather, it is like that of a household and a contractor, one hired to build an addition onto a house, or plant a garden in the backyard. OPMs and universities using the term “contractor” would help keep the right questions at the forefront: what exactly is the company being asked to do, at what price, and for how long?
One reason that OPM sales pitches were so successful was their promise to provide services up-front in exchange for a share of tuition later. Participants at the conference seemed to be under this false impression that an elimination or revision of the Department of Education’s “bundled services guidance,” which the Biden administration has signaled it may be considering, would prohibit those types of contracts. That is not the case. There is no impediment to conditioning payments on future tuition revenue in exchange for helping to establish or operate an online postsecondary program. Tuition-based contractor payments are only legally suspect when the services include recruiting students, as that model can incentivize predatory recruitment practices.
As the OPM industry regroups and rebrands itself into a “post OPM” marketplace, the U.S. Department of Education should revoke or revise the outdated and overbroad bundled services guidance, which financially incentivizes OPMs to target and recruit students for their own financial gain. Doing so would restore the guardrails that promote clear, efficient, and quality arrangements between universities and online service providers. The tell may be whether they are calling themselves by the name that fits best: contractors.
Tags: online learning, online program managers, education technology
Universities Are Getting Wise to the Dubious Practices of Online Program Contractors
Seven years ago, The Century Foundation filed FOIA requests with more than 100 public universities across the country, seeking copies of contracts with outside companies involved in their online degree programs. The results were alarming. While typical contracting relationships enlisted private companies to provide specific technology, operate a cafeteria, or manage parking, contracts with online program managers (OPMs) were involving for-profit companies in making decisions much closer to the heart of the academic enterprise, including curriculum development, the hiring of instructors, and setting tuition and admission standards. The colleges were frequently locked into the contracts for many years, and often promised half or more of the tuition to the for-profit company.
TCF cautioned that as the online program market became saturated, for-profit OPMs could be motivated to pursue problematic paths in order to increase their revenue. As predicted, students and taxpayers have been harmed by aggressive recruitment tactics to boost enrollment for their institutional partners and, ultimately, their own profit.
Fortunately, colleges and universities now seem to be souring on the OPM model, realizing that they don’t want, or need, to give so much control to a private third-party company in order to provide students with an online learning option. Typically, institutions had been signing long-term tuition bounty agreements with the for-profit companies to establish and grow new programs. More recently, OPMs began to offer a-la-carte or fee-for-service options, allowing institutions to select the services they want to outsource. Meanwhile, some institutions figured out how to scale their own resources in order to provide online programs in house, avoiding the use of OPMs altogether. Other institutions, including the University of Southern California, announced in a mutual statement late in 2023 that they were parting ways with 2U, one of the largest, and now one of the most financially troubled, OPMs in the market. USC will move to run some of their formerly outsourced online programs themselves.
Combined, each of these responses from institutions suggest that institutions no longer feel inclined to fully outsource an online program to a third-party company. Let’s take a look at why, and what seems poised to take the model’s place.
The Current Model Isn’t Working
At a recent industry symposium in March framed as “Post OPM,” a variety of stakeholders in the edtech industry gathered to discuss the state of online higher education. Throughout the convening, it became clear that the post-OPM framing suggested two developments: 1) a higher education landscape in which the term “OPM” is no longer desirable, as it is associated with negative press and calls for regulatory action; and 2) a demand for something beyond the current fully outsourced, revenue-sharing OPM model, which is not meeting the needs of students or institutions. In the room at the convening were university officials such as chancellors and deans of online education at both larger and smaller institutions, CEOs of edtech companies, industry analysts, and policy advocates like the present authors. While some industry participants complained that discussions of OPMs had become “politicized,” others recognized that the industry was its own worst enemy.
In one session, a higher education leader from a smaller institution noted that OPMs don’t conduct meaningful market research about which students are the best fit for the institution: instead, OPMs “worry about numbers” without having a data-driven recruitment strategy. What’s more, they charge a lot to do so. Other higher education leaders voiced concerns about costs to institutions and to students. Specifically, they wondered aloud about how to drive down costs for students and measure the return on investment for their students in the face of the increasing marketing costs. Some university leaders shared ways they are working internally to scale their own resources in order to cut the cost of student acquisition.
What’s Next?
One session at the symposium included a useful discussion about the core components of a quality higher education, and the fact that those should always be the responsibility of the school itself, not that of a third-party provider. Some industry participants seem to be gaining an understanding that their role is as a supporter of the online enterprise, and not as its surrogate or director. These actors are pivoting towards identifying the ways that they can bring added value by offering institutions services that help build components of their online programs, rather than proposing to take the reins.
However, there were signs that the industry has not yet embraced its proper role. Nearly everyone in the room seemed to be avoiding the word that best describes a company’s appropriate relationship with a college: that of a contractor or consultant. Instead, over and over the participants were describing their desire to “partner” with their university clients; the words partnering and partnership peppered the whole event. One company executive even used the metaphor of a marriage to illustrate the relationship that he wants his company to establish with clients. But that is exactly what is wrong with the current problem-plagued OPM model: universities enter contracts under a false impression that they are allying themselves with partners who have the same overall goals. As it turns out, this isn’t always the case. Institutions must retain primary control over all core educational operations. Ultimately, institutions are the ones responsible for their students, as well as for the consequences of the conduct of their third-party servicers. It is the institution, not the OPM, that is accountable to its accreditors and to the department of education.
As one industry participant noted, universities are really OPM customers. Indeed, an OPM–institution relationship is not at all like a partnership or a marriage. Rather, it is like that of a household and a contractor, one hired to build an addition onto a house, or plant a garden in the backyard. OPMs and universities using the term “contractor” would help keep the right questions at the forefront: what exactly is the company being asked to do, at what price, and for how long?
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One reason that OPM sales pitches were so successful was their promise to provide services up-front in exchange for a share of tuition later. Participants at the conference seemed to be under this false impression that an elimination or revision of the Department of Education’s “bundled services guidance,” which the Biden administration has signaled it may be considering, would prohibit those types of contracts. That is not the case. There is no impediment to conditioning payments on future tuition revenue in exchange for helping to establish or operate an online postsecondary program. Tuition-based contractor payments are only legally suspect when the services include recruiting students, as that model can incentivize predatory recruitment practices.
As the OPM industry regroups and rebrands itself into a “post OPM” marketplace, the U.S. Department of Education should revoke or revise the outdated and overbroad bundled services guidance, which financially incentivizes OPMs to target and recruit students for their own financial gain. Doing so would restore the guardrails that promote clear, efficient, and quality arrangements between universities and online service providers. The tell may be whether they are calling themselves by the name that fits best: contractors.
Tags: online learning, online program managers, education technology