Recent regulatory changes in how Online Program Managers (OPMs) and universities can do business have caused an upset in the educational services community. Federal guidelines are shifting away from their laissez-faire approach to one that puts more scrutiny on third-party vendors. Higher education institutions that receive federal student aid funds are reevaluating their relationships with these for-profit businesses.
Over the last 15 years, there’s been a boom in companies that provide online program management services to higher education institutions. There’s not been much government oversight of OPMs historically, but that’s all about to change.
New Department of Education Guidelines
After noticing inconsistencies in how colleges reported on their relationships with third-party servicers, the U.S. Department of Education released new guidance in 2023. It was ostensibly aimed at aggressive recruitment tactics by companies with revenue-sharing agreements with higher educational institutions.
Previously, guidance from 2011 exempted recruitment partners who bundled other services in their agreements. But the new guidance will significantly expand who’s considered a “third-party” servicer to include many companies that aren’t historically bad actors. While the final version of the regulations won’t be available until 2025, institutions and OPMs should rethink their relationships for the future.
Initially, the guidance suggested that any company that touched financial aid funding is now considered a “third-party servicer” and subject to new regulations. These included intercollege consortiums, online extension campuses, hospitals providing clinical experiences, and retention services for at-risk students.
According to one expert*, the department expanded its definition so that more people are liable for bad outcomes when things go wrong. When things do go wrong, the new rules may impose a fine of up to $67,000 per violation, even for inadvertent failure to report a relationship.
*https://bit.ly/insidehighered-outsourcing
OPMs Respond
In response, many companies have begun breaking up bundled services so that universities can pick and choose which services they contract moving forward.
We’re watching another aspect of the new ED guidelines closely: the prohibition on third parties owned all or in part by foreign entities. Massive pushback by the industry caused the department to reevaluate this provision. Now, they’re using negotiated rule-making tactics to decide how to move forward.
While we don’t have the final guidelines available, it’s clear that leaders in higher ed need to reexamine the way we do business. To avoid costly violations, be more vigilant and selective when it comes to choosing and working with OPM partners.
Our Takeaway
Regulators are focused on companies that provide student generation services, and they aren’t backing down. Plan for the future by developing a strategy to keep your student pipeline healthy while avoiding risky partnerships.
