On July 25, the once giant online program manager (OPM) 2U filed for bankruptcy. 2U’s financial struggles highlight the risks OPMs can pose for both institutions and faculty. OPMs are for-profit companies that help schools create or expand their programs online and offer many other services, including recruiting, marketing, and financial services. Based on concerns about OPMs generally, TICAS recently published two white papers about potential implications of OPM contracts. These concerns include predatory recruiting practices, valuing enrollment numbers over educational quality, and a lack of transparency over OPMs’ role in educational programming.
Following the Loper Bright ruling by the Supreme Court and others that weaken the power of federal agencies, there is both an opportunity and need for state governments to strengthen their student protection efforts. California and New Jersey have each tried to pass legislation concerning OPMs in recent years, but neither proposal has become law. Earlier this year, however, Minnesota became the first state to successfully pass a bill to create guardrails on contracts between public colleges and universities and OPMs. The Minnesota example may point the way for other states to follow.
The Minnesota law sets a variety of limits on OPMs. First, it limits the type of contracts OPMs and institutions can agree on, prohibiting contracts involving incentive-based compensation for recruiting services and contracts that allow OPMs to control curriculum or gain rights to faculty intellectual property. The law also calls for mandatory contract reviews and approval by the governing bodies of each system: The Minnesota State System Board of Trustees and the University of Minnesota System Board of Regents.
Additionally, each institution that contracts with an OPM is required to provide annual reports detailing the OPM’s expenditures made on the institution’s behalf. Required reports include expenditures on advertising, admissions, and student support services. Last, the bill requires all OPMs hired to do marketing to make clear that they are third-party entities in their advertisements and when speaking to prospective students.
Perhaps the most significant part of the law is banning incentive-based compensation, including tuition sharing. The new Minnesota law defines incentive-based compensation as, “a commission or bonus from an institution of higher education to third party entities based on securing enrollment or financial aid.” Tuition sharing, where OPMs receive a set percentage of the school’s tuition revenue as payment, is included in this definition. With a tuition sharing model, the way for OPMs to maximize revenue is to enroll as many students as possible. By banning tuition-sharing practices between colleges and OPMs, the law struck one of their problematic practices and a key source of their profits.
New America’s Jeremy Bauer-Wolf recently documented how the bill became law and described the ultimately unsuccessful lobbying efforts of the Texas-based OPM operating in Minnesota, Risepoint. Faculty voices and advocacy are compelling for policy making and may have played a significant role in gathering support for the legislation. Amber Villalobos of The Century Foundation credits the engagement of the Minnesota Inter Faculty Organization (IFO) as pivotal to the bill’s development.
Empowering faculty to be similarly involved in the creation of OPM safeguard bills in other states could be a good way to ensure their support for similar legislation. Gathering statewide faculty support while limiting opposition may be the best way to increase the likelihood of a bill’s success.
One issue with the proposal in California may have been that it created too much widespread opposition. Where the Minnesota law only sets guardrails for OPMs, the proposal in California sought guardrails on OPMs as well as other college recruiting services. Keeping the focus strictly on OPMs may make a bill more likely to succeed. This approach may be tougher in other states though, because Minnesota may have been a prime spot for a bill like this. Only two schools in the state used an OPM company, and both used the same one. The small OPM presence in Minnesota meant that only one company was fighting the bill.
2U’s bankruptcy demonstrates the need for stronger safeguards against OPMs, especially since the Supreme Court’s decision to overturn Chevron Deference will undermine future federal regulatory power. States interested in strengthening student protections can now follow Minnesota’s lead in creating OPM guardrails.
Minnesota’s message to OPMs is clear: No longer will the goal be to simply enroll as many students as possible.
Ben Hale was a Summer 2024 federal policy intern at TICAS. He is a rising junior at Davidson College, where he is a data collector for the College Crisis Initiative.
