Friday Follow Up, Part Duex

Dealing with the importance of TPS rescission, fall enrollment, and assorted Educause notes while entering brisket withdrawal

Author

Phil Hill
October 25, 2024

As a reminder, this will be the last Friday Follow Up post in the series to be shared with all subscribers (free and premium). Next week the series will be premium only. You can continue reading with a $10/month or $100/year premium subscription along with all of our other content.

After an enjoyable trip to San Antonio (and surroundings) for Educause, it’s good to catch up on the news and discussions of the past week. To keep the emails a reasonable length, this week’s entry has been broken into two parts - this one on news events.

Why the TPS Rescission is More Than a Formality

Earlier this week the US Department of Education (ED) announced in court records relating to the 2U lawsuit that it planned to formally rescind the TPS guidance within the next month. Huh - I thought it was already gone? Actually, what has happened is that ED simply delayed its guidance while keeping it on the books, using informal methods.

It is very important to remember that ED has been working on two fronts in its actions targeting revenue-sharing OPMs.

  • Reviewing the 2011 Bundled Services Exception Dear Colleague Letter (DCL, effectively synonymous with guidance) that underpins OPM revenue-sharing models. Removing or restricting this guidance would harm OPMs.

  • Creating the 2023 Third Party Servicers (TPS) guidance that would place burdensome reporting and audit requirements on OPM contracts (and most of of EdTech if the original language comes back), and importantly giving a lot of ammunition for ED and its activist allies to target OPMs (think news stories, class action lawsuits, lobbying at the state level). Adding some form of this guidance would harm OPMs.

How we got here on TPS:

What you’ll notice is that ED delayed the expected implementation date of TPS expansion many times and promised to change the guidance, but it has not rescinded the guidance. The new language is still on the books.

The way to interpret this week’s news, in my opinion:

  • As I have argued from the beginning, the 2U lawsuit mattered, and the need for ED to respond to a judge for real status updates helped force ED’s hand.

  • The one change to TPS language that will persist is the removal of the foreign ownership restrictions. All the other changes and promises are off the books.

  • ED is cleaning up the books and will have to start any TPS new proposals from scratch, which helps them in the 2U lawsuit.

  • What this action also does is make it easier for ED to finally take some action on the Bundled Services Exception guidance. The word on the street (unconfirmed) is that ED might revise or rescind this rev-share-related guidance in the coming weeks. My guess is that any action will happen shortly after election day (Nov 5th) to take advantage of election news cover for making these changes. I’m hearing revisions to the DCL, not rescission.

  • Remember the Supreme Court case ending the Chevron Deference that will make it harder for agencies to create new guidance and regulations? If ED changes or pulls back the Bundled Services Exception guidance, and if there is a Trump win, the Chevron decision will enable activists to gum up the works and make it very difficult for the new administration to reverse any ED actions re-enabling revenue sharing.

Note that there is speculation involved with upcoming action on the Bundled Services Exception guidance, but I do not think that this week’s plan to formally rescind the TPS expansion guidance is merely a formality. I think it signals a shift in short-term strategy for the ED / activists’ approach targeting rev share OPMs, as alluded to in the IHE coverage.

Madison Weiss, a senior policy analyst for higher education at the left-leaning think tank the Center for American Progress, urged the department to rescind that 2011 guidance, which created an exemption to the federal ban on incentive compensation and has led to “unfair recruiting practices.”

“The federal government can address this by eliminating the exception and warning universities to stop these deceptive methods or risk losing their Title IV funding,” she said. “Removing this loophole is essential to protecting the integrity of higher education, as students are currently suffering from these predatory tactics.”

Stay tuned - there could be some meaningful news in this area during the lame duck portion of the Biden Administration, whether Harris wins or Trump wins.

About the FAFSA Enrollment Effect

On Wednesday the National Student Clearinghouse (NSC) provided the first updates on Fall 2024 enrollments for US higher education, which has been of intense interest due to the FAFSA fiasco. Initially I was hearing from enrollment experts that overall enrollment could decline by Covid levels (5% or more of a drop), but over time I kept seeing record enrollments in many institutions and collapses in others.

In my last update, I described a Haves and Have Nots situation.

The emerging theme is that aggregate enrollments are steady and possibly slightly increased for the fall. There will be Haves and Have Nots both in terms of institutions (see previous post calling out increases in community college enrollments vs. dramatic drops at Drexel) and in terms of student demographics, with disadvantaged students dropping overall.

On one hand, this is good news in that we are unlikely to see a FAFSA bloodbath. This is good for students looking to attend college or university, good for higher education institutions, and good for EdTech vendors. But remember the Fitz [credit ratings agency] headline - even with modest enrollment gains, the financial picture for institutions is worsening.

The headline news this week is that Fall 2024 enrollments increased in aggregate, by 3% year-over-year, but that first-year enrollment hit the initial estimates dropping more than 5%.

* Preliminary data for fall 2024 shows undergraduate enrollment increasing 3 percent. All sectors are seeing growth in the number of undergraduates this fall.

* Contrary to overall enrollment growth, freshman enrollment is declining, down 5 percent from this time last fall with public and private nonprofit 4-year institutions seeing the largest declines (-8.5% and -6.5%). An almost 6 percent drop in the number of 18-year-old freshmen (a proxy for those enrolling immediately after high school graduation) is driving most of the decline.

* Declines in freshman enrollment are most significant at four-year colleges that serve low-income students. At four-year colleges where high shares of the undergraduate population receive Pell Grants, freshman enrollment is declining by more than 10 percent. At comparable community colleges, freshman enrollment is rising (+1.2%).

* Bachelor’s (+1.9%) and associate degree (+4.3%) programs are seeing enrollment gains this fall. The number of students pursuing shorter-term credentials is continuing to grow rapidly, with enrollment in undergraduate certificate programs increasing 7.3 percent.

Well, that’s better than a 5+% overall decline, but not by much. First-year enrollment drops of 6 - 8% represent a truly big problem, primarily caused by the FAFSA fiasco. And that will take years to reverse, as described by NSC research director Doug Shapiro in Inside Higher Ed.

“The nearest precedent we have for this is fall 2020, when we saw a 7 percent plunge in freshmen,” he said. “We tracked them for the next two years and found an infinitesimal number of them coming back next year or the year after. Based on that, prospects of a rebound are low.”

And this news comes with additional data that makes the first-year enrollment drops even more troublesome.

  • Just as most commenters had observed, low-income students (represented by those with Pell grants) had the biggest drops. See the red oval highlight.

  • There is a shift away from full-time and towards part-time in the data, as seen in the blue oval highlight. The drops are even worse for full-time students than for part-time students.

Having said that, the retention numbers are much better than expected for second-year and beyond students.

One other note - the biggest gains from an institution type are for Primarily Online Institutions (POIs) and Historically Black Colleges and Universities (HBCUs).

At the end of the day, we are seeing more of a Haves and Have Nots situation in the FAFSA fiasco impact, with the added element of first-year students clearly being in the latter camp.

Educause Revival

Overall, the Educause conference feel was more positive than I expected, particularly in terms of activity in the exhibit hall. I believe that Educause claimed that total attendance increased from roughly 6,000 to 7,500 from 2023 to 2024, but there is more than that to the story. The new neighborhoods approach by Educause to group all Teaching & Learning vendors in one area (separate from Enterprise & ERP, etc), I think led to more activity. Most vendor representatives that I talked to had similar observations, although I asked mostly on Tuesday, the first day of the conference.

Our friends at ListEdTech had an interesting chart this week showing the changes in numbers and types of vendors in the exhibit all over time.

While we’re not back to pre-Covid levels with exhibitors, there is a clear increase from 2023 - 24.

Educause is regaining its position as the go-to HigherEd event of the fall. For 2024, there are 25 large exhibitors (600 sq ft or more)—the highest since the pandemic—compared to 23 in 2022 and 2023 and 21 in 2021. If we look at even bigger exhibitors (1,200 sq ft or more), we see eight massive booths this year, compared to just seven or six in the past few years. Before the pandemic, the average was nine massive exhibitors (2017-2019). While this year shows a slight increase, these large booths still make up a small fraction of total exhibitors. However, Educause has gained 16 more exhibitors across all sizes, signaling that companies still value face-to-face connections to build relationships and find new clients.

We plan more coverage next week, but I’ll say for now that the Educause conference experience seems to align with my observations about EdTech investment activity - something is in the air with some meaningful (positive) changes.

The premium On EdTech+ newsletter is intended for a single recipient with occasional forwarding allowed.