International Impacts of US OPM Rule Making

As a reminder, I’m co-leading a webinar on Monday with Russ Poulin and Cheryl Dowd of WCET and the State Authorization Network (SAN) to address question on third-party servicer (TPS) expansion. You can register here for the event at March 20th at 11am PDT / 2pm EDT. It’s free.

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And speaking of questions . . . on to the update.

As those of us in the EdTech community deal with the (potential) implications of the dual US Department of Education (ED) actions targeting OPM companies, one of the most common questions I’m getting is whether people outside of the US should care. In other words, will there be implications in other countries from these actions? The short answer is yes.

Background on the review of bundled services exception for OPM companies and the expansion of TPS guidelines can be found here, here, and here.

TPS Foreign Entity Rule

The most obvious impact is the TPS ruling that has been in place since 2016.

The expansion guidance means that no longer would this provision apply only to companies handling financial aid programs, almost all of EdTech would or could be classified as within the TPS category. LMSs, SISs, retention systems, courseware providers, etc, etc. As written, the guidance excludes the usage of non-US platforms, or at least causes significant confusion about whether such usage would jeopardize an institution’s Title IV eligibility.

But even in the case of recruiting, there are impacts well outside of the intended OPM space. Consider this public comment on the ED regulation site, which is echoed by several others.

Non-US owned platform companies, OPM companies, and recruiting companies could get locked out of the US market. And indirectly, it would become much more difficult for non-US students to receive support in finding a US institution.

These provisions might be pulled back, but people outside of the US should care and monitory this situation.

OPM Bundled Services Review

If ED decides to rescind the bundled services exception and therefore force an end to OPM tuition revenue sharing agreements, there will be impacts outside the US, both direct and indirect.

One impact is that the OPM market is increasingly global in nature. 2U sells to many countries, especially after the acquisition of edX. Pearson is a UK-based company with one of the largest OPM client bases (for now). Keypath is an Australian-based OPM company that also sells in the US. Coursera, Wiley, Academic Partnerships, and other OPM providers have many tuition revenue-sharing contracts both in and outside the US.

It would be naive to think that pulling away these types of agreements would mean that the companies simply shift to fee-for-service offerings. Their financial models are built on rev-share, and many of them are publicly-traded companies whose investors would have to reevaluate their valuations of the companies. Chaos might be too strong of a word to describe what might happen if the guidance were to be rescinded, but at a minimum these companies would be tied up for years renegotiating contracts, trying to assuage investors, and dealing with new revenue expectations. One likely impact is a new wave of market consolidation, as smaller players find it too difficult stay in business, leading to fewer choices for institutions looking for partners.

It might be the case that rescinding the guidance and removing tuition revenue-sharing would increase the focus of most companies to sell outside of the US. Market activity for OPM companies could dramatically increase.

Furthermore, other countries may follow the US lead on changing what is permissible.

An Indirect Impact

I have noted a few times that the conflation of these two issues can be confusing if you look at them with a regulatory lens. The bundled services exception review is different than the definition of a TPS, with separate regulations and processes. The better way to understand what is happening is with a political lens. ED conflated these two issues as they are under political pressure to rein in for-profit companies, especially OPMs, coming from politicians, media accounts, and activist think tank / foundations.

We are already seeing a similar campaign in Australia (again, thanks to our stellar research team for the heads up). The Guardian Australia has an ongoing investigative series called “Education Outsourced,” with this description:

The tone and conclusions are fairly obvious, as evidenced by the titles “‘No actual teaching’: alarm bells over online courses outsourced by Australian universities” and “‘Universally hated’: academics speak out on outsourced university courses.” This is journalism with a purpose.

I am not sure if the campaign in the US to rescind bundled services exception and rein in OPM companies is directly related to the emerging Australian campaign, or if the former inspired the latter, or if the campaigns are technically unrelated. But I suspect that there is a relationship, and that we will see more campaigns in other other countries soon, especially if ED rescinds the guidance.

This may be good news to you or bad news, but my main argument is that this is news that is relevant in many countries.

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