What She Said

Building evidence that ED and Arnold Ventures activity is targeting online education - not just OPMs and for-profits

Author

Phil Hill
February 13, 2024

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Higher Ed Partnerships Summit March 5-6

On March 5th and 6th Morgan and I will be participating in a summit titled Exploring the Future of Higher Education Partnerships Post OPM Era. The event will be held in Washington, DC, immediately after the ACE Presidents and Chancellors Summit.

That’s a provocative title, and I feel I need to explain our perspective. I do not believe that the Online Program Management (OPM) market is gone or even that tuition revenue-sharing agreements are dead. We recently shared in two premium posts that while OPM usage represents a minority of online education writ large in the US (15 - 19% of 4-year institutions with OPM contracts and 22 - 28% of students enrolled in fully-online programs at 4-year institutions), a large majority (~80%) of those OPM contracts are based on revenue-sharing models. Leaders at higher education institutions continue to choose revenue-sharing arrangements more often than fee-for-service. Our experience aligns with the data - there remains significant interest in rev share OPM deals.

At the same time, it is undeniable that the OPM market is in a chaotic period with entirely new dynamics. Regulatory activism that includes third-party servicer (TPS) expansion guidance and potential changes or elimination of the bundled services exception remains an existential risk, at least to revenue sharing options. We are also dealing with the end of the free money era where near-zero interest rates led to investments in growth over profits for roughly a decade. When combined with changing enrollment trends, the financial picture has not just changed; it has reversed itself with profits over growth demands. Witness the financial crisis at 2U/edX that we have covered recently. From this perspective, we believe we are in a new era for higher education partnerships - including but not limited to OPM usage.

Given the chaos and underlying dynamics, we need debate and discussion on what the future of college and university partnerships looks like, and this is one event where this will be happening.

I am well aware that the organizers of the event, Noodle, have a different perspective on what Post OPM means. It is in their interests to view rev share OPM models are dead or dying. While we do not share that perspective, we agree that we are in a new era.

There are many folks central to this discussion that will be attending, including those with whom I disagree. Yes, including James Kvaal. I believe in good debate on big topics.

We encourage any president or chancellor attending the ACE summit, or any head of innovation or similar executive, to register and attend. Time is tight, but these are important discussions.

On to the update.

What She Said

In early December Morgan pitched a post she was working on, titled “Online is the Target”, which due to the holidays was published in early January.

2023 was a heck of a year for those interested in online learning in the US, with all kinds of new regulations and executive actions (and newsletter posts) coming out to fundamentally impact the delivery of online learning. But 2023 was just a warmup, a sideshow. This is because OPMs and for-profits are not necessarily the core focus of the Department of Education (ED) and its aligned activist organizations seeking to shape higher education. What is becoming more clear is the focus is online learning itself.

In the post she shared four related articles, all with a common inspirational and funding theme.

Trade press coverage of course misses or ignores the common funding, but our readers might find this interesting (in order from the articles listed above).

The Arnold Ventures (AV) coalition at work - meaning the Department of Ed (ED) regulations must be sure to follow.

Enter Newest ED Regulatory Actions

And right on cue, in the current round of Negotiated Rulemaking, we can see the near term impact right along these lines - targeting online education even at nonprofit institutions as potentially predatory and needing aggressive oversight.

We are in the middle of the current process, with two of the three scheduled sessions now complete. The best summary of the quite complex potential rules has been provided by WCET - these two posts in particular. The folks at WCET have opinions, particularly around state authorization reciprocity, but they go to lengths to explain the problem identified by ED, the proposed solutions, and then their own analysis. The three primary online ed issues:

  • Gutting of State Authorization Reciprocity Agreements;

  • Requiring attendance to be taken for all online courses for students who withdraw without notifying an institution (Return to Title IV, or R2T4);

  • Create a Virtual Location to separate fully online program reporting in IPEDS

I completely agree with WCET’s lede today [emphasis original]:

We encourage you to stay alert as the changes proposed could have a major impact on distance education and all of higher education.

 

Rather than rehashing the details and summary, I want to highlight two aspects of the proposed ED rule changes that exemplify the shared ED / AV targeting of online education in general.

Clarity from a Detailed Issue

From the proposed rule changes from ED on R2T4 [emphasis added]:

The Return of Title IV funds (R2T4) regulations govern the process institutions must conduct when a Title IV recipient ceases attendance during a payment period (term) or a period of enrollment. An R2T4 calculation determines, based on the proportion of a payment period a student completed, whether funds must be returned by the school and/or student, or whether the student is eligible for a post-withdrawal disbursement (PWD). R2T4 calculations differ based on program format (credit hour/clock hour) and module courses within terms. R2T4 is consistently in the top 10 compliance findings for schools, is the subject of an entire volume in the FSA handbook, and yields complex and challenging questions.

Through this rulemaking, the Department of Education (Department) seeks to: (1) help withdrawn students repay their credit balances; (2) increase the accuracy and simplicity of performing R2T4 calculations; (3) address unique circumstances for what constitutes a withdrawal; and (4) codify longstanding policies into regulation.

There are some useful clarifications in the rules to resolve previously confusing calculations. ED goes on to call out challenging compliance that needs simplicity. I’m all for that.

However, that is not what is happening in the ED issue papers. Initially ED proposed that all fully-online programs be required to take attendance. WCET described the problems with this approach [emphasis added].

For students who withdraw from distance programs, the current practice is to capture the “last day of attendance.” A mere login is not sufficient, as evidence of an academically-related activity (e.g., exam taken, paper submitted, participation in a discussion) is required. For details, see the Federal Student Aid Handbook, Volume 5 on withdrawals, p. 52.

The 14 day drop requirement poses new challenges. When we posted this question to WCET members, some said that they have adult students (some in the military) who necessarily stop out for a few weeks, yet they successfully complete the course.

The Department says taking attendance will “Increase accuracy and simplicity of performing R2T4 calculations.” If the Department seeks to simplify, then forcing additional work on every faculty member is not simplifying. Currently, institutions track the last academically-related activity for the few students who drop without notice. The Department’s proposal would require additional attendance records for every student. Adding to the complexity is the need for new procedures for collecting attendance for asynchronous programs. How would that be done? Again, far from simple.

What was ED’s response after the pushback from the first week? To double down and increase this requirement to apply for all online courses and not just fully-online programs.

The net effect, if this proposal survives as expected, is a new bureaucratic reporting requirement for every online course at every institution that accepts federal financial aid. Not for on-campus courses, mind you, and not based on any shared evidence that online course attendance is a problem compared to on-campus. All in the name of simplicity but really in the service of targeting online education as a common predatory activity.

Gutting State Authorization Reciprocity

I use the R2T4 example to reinforce the point that online is the target and that it effects all institution types, but the bigger impact is the gutting of reciprocity. As described by WCET -

In considering “state authorization,” the Department continues to primarily focus on distance education reciprocity agreements. In week two, the Department’s proposal expanded the language addressing complaints and governance that were the sole focus of their January proposal. This time they also took into consideration a far-sweeping negotiator’s proposal from week 1 to limit the scope of reciprocity.

Do I really need to say this? That negotiator works for The Century Foundation, funded by Arnold Ventures. They propose, ED complies. Continuing from WCET [emphasis added]:

That proposal contemplates limiting reciprocity covering only the application for authorization in each state. It would also subject reciprocity institutions to “education-specific laws.” The week two committee discussion centered on the definition of “education-specific” and the applicability of those laws.” Clarity did not seem to result. Another proposal emerged recommending the removal of the “education-specific” term and to plainly say that, for reciprocity, each state can enforce all state laws.

Applicability of enforcement of state education-specific laws upon institutions participating in reciprocity will affect the value of reciprocity by removing the uniformity of oversight of institutions across all member states. For example, even if participating in reciprocity, institutions would be subject to state requirements (e.g., bonding, closure, tuition refund timeline) at the discretion of each state.

If the proposals are implemented, the assertion that reciprocity still exists is disingenuous.

OK, OK. This proposal was from both The Century Foundation and Veterans Education Success, both funded by Arnold Ventures. A twofer.

Anyone who as worked at or is familiar with national for-profit universities or mega nonprofits (SNHU and WGU) knows that they have enormous teams designed to deal with myriad compliance requirements. The schools that will be mostly impacted by the gutting of state authorization reciprocity (if proposals are finalized) will be nonprofit colleges and universities that are in the 1,000 - 25,000 online enrollment size.

Online is the target.

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