Department of Education Guidance Would Make Online Learning More Costly
The coronavirus pandemic led to a dramatic increase in remote learning in schools, including colleges and universities. As efforts by teachers’ unions to keep schools closed remained successful, online program managers (OPMs) became vital to ensuring that the nation’s college students were not completely neglected. Now, a new Department of Education guidance is threatening these organizations.
Last month, the department issued guidance that would reclassify OPMs as “third-party providers” of education. Ostensibly, the move is driven by the fact OPMs often enter into revenue-sharing agreements with colleges and universities. But reclassification of OPMs would give the federal government sweeping regulatory authority over them – including the ability to shutter them at will.
Traditionally, revenue-sharing is prohibited because it is considered a form of “incentive compensation” for education. However, the Education department provides an exception if the third party provides bundled educational services, is unaffiliated with educational institutions, and does not have any say in or influence over a school’s enrollment numbers. This is appropriately known as the “bundle services exception” and has provided needed flexibility for OPMs and their clients. The recent proposal would all but eliminate this key exception.
The reclassification makes little sense. OPMs might provide services for colleges and universities, but this by no means qualifies them as an educational provider. They can provide methods for students to get their grades or forums for students and teachers to collaborate. But education is still in the hands of the teachers and staff at the schools themselves. The Department of Education’s move is a naked effort to increase its authority over more and more entities.
Another supposed justification is the burden of student debt. Sen. Elizabeth Warren (D-Mass.) has, in the past, raised concerns about the “impact of OPM partnerships on rising student debt loads.” This misses a key point about these OPM partnerships. Instead of contributing to rising education costs and, in turn, student debt, these revenue-sharing agreements actually serve to lower costs for students.
Revenue-sharing agreements make the most business sense both for OPMs and schools. The two entities can share expertise, capital, and – most importantly – risk. This saves colleges and universities from incurring outsize costs upfront without knowing how their revenue numbers will fare over the course of a year. Sparing the schools the need to raise tuition to account for this uncertainty and added cost, a revenue-sharing agreement minimizes risk and allows costs to remain relatively low or stable.
In fact, many of the educational institutions that take the most advantage of the bundled services exception are lower-cost institutions or those that serve underprivileged communities. For example, Ozark Technical Community College uses OPMs to reach a broader range of students due to the time and proximity restraints in that area. The school has an in-state tuition rate of only $5,215 per year. New York’s Mount Saint Vincent school traditionally serves lower-income students and takes full advantage of the exception to compete in the online space without raising costs for families.
The Department of Education’s offering of such guidance at this time is also blatantly hypocritical. OPMs stepped up to the plate when the same policymakers now pushing this guidance wanted to keep schools closed. Senator Warren even described the effort to re-open schools as “cruel, heartless, and incompetent.” OPMs filled the void that public officials created. Now, the federal government wants to eradicate their business models.
Without the innovation provided by these OPMs, the impact of the pandemic on student learning would have been even more severe. Underserved communities would have had limited access to education. Upending this system now will threaten future innovations and partnerships that will benefit students in ways that we may not yet imagine.
The Department of Education should tread carefully. Its new guidance will not achieve the stated goal of lowering student debt burdens – in fact, it might well accomplish the opposite. It will also punish innovators at a time when the nation owes them thanks for what they delivered when policymakers abandoned their responsibilities.
