Dive Brief:

• Sens. Elizabeth Warren, D-Mass., and Sherrod Brown, D-Ohio, wrote letters to five online-program management (OPM) companies asking them to turn over the terms of their contracts with colleges and universities.
• The lawmakers argue that revenue-share agreements — in which OPMs receive a percentage of tuition revenue in exchange for covering the costs of launching an online program — could violate federal law. 
• The congressional inquiry adds to growing pressure on OPM companies to be more transparent about their contracts.

Dive Insight:

The letters target five OPM companies that make up a large share of the $3.5 billion global OPM market: 2U, Academic Partnerships, Bisk Education, Pearson Learning and Wiley Education Solutions. 

The senators argue that these OPMs, which often provide recruiting services, could be violating a federal law that bars colleges that receive federal student aid from paying commission for recruiting and enrolling new students. The law, enacted in 1992, was designed to stop colleges from using predatory recruiting practices. 

"Available evidence suggests that tuition-sharing arrangements in OPM contracts create perverse incentives that lead to aggressive and deceptive recruiting practices, similar to those that pervade the for-profit college industry," the lawmakers wrote in the letter they both signed. 

However, the U.S. Department of Education issued guidance in 2011 that carved out some exceptions to the law. It allows OPMs to offer bundled-services contracts that include recruitment — so long as the college determines its own enrollment levels. 

Scott Overland, a spokesperson for Pearson, said the company has received and is reviewing the letter's request for information. 

"Pearson's online program management business model depends on the success of students, not the recruitment of students," he wrote in an email to Education Dive. "Pearson thrives when our university partners are retaining and graduating their students and achieving their strategic and educational objectives."

A spokesperson for 2U said the company also received the letter and looks forward to sharing more information about its business model and university partnerships. 

"Our partners retain control of the same core governance and academic functions in their online degree-granting programs as they do for their campus-based programs," the company said in a statement emailed to Education Dive. 

Bisk confirmed it received the letter but declined to provide a comment. Wiley did not respond to Education Dive's request for comment on Tuesday by the time of publication. 

Industry observers say the inquiry could fuel a growing movement to crack down on OPMs. 

Criticism against the sector hit the mainstream last spring when Kevin Carey, vice president for educational policy and knowledge management at New America, a left-leaning think tank, penned a piece for HuffPost that took a hard line against OPMs, arguing that they have contributed to the rising cost of college. 

The letters reference that article and a recent report from The Century Foundation, a left-leaning think tank, that described most OPM companies as "predatory for-profit actors masquerading" as public universities. Its analysis of several dozen OPM contracts highlighted common "red flags," including the inability for colleges to "reasonably terminate" their agreements and switch providers. 

The day before The Century Foundation released its report, 2U publicly called on other OPMs to be more transparent about who their customers are, how they set tuition prices and their outcomes. Analysts suspect the move was intended to help the company get ahead of regulatory changes targeting the sector. 

"This has been a political battle that's been fought kind of on the down-low," said Trace Urdan, a managing director with investment bank and consulting firm Tyton Partners who studies OPMs, in an interview with Education Dive. "This letter turns up the volume … and we're just going to have to see whether it really catches on or not." 

Purdue University and Kaplan Higher Education account for possible regulatory changes in their agreement through which the latter provides OPM services for Purdue University Global in exchange for 12.5% of the online entity's annual revenue, said Phil Hill, an ed tech consultant with the firm MindWires in an interview with Education Dive. 

If the Ed Department prohibits colleges from sharing tuition revenue with OPMs, their contract requires Purdue and Kaplan to "negotiate in good faith a mutually agreed alternative compensation model."

Revenue-share agreements can be an important tool for colleges that don't have the capital or know-how to launch an online program on their own. But fee-for-service contracts could be more attractive to institutions that are looking for a third-party provider to help with only one or two elements of their programs, such as course design. 

"You're getting a lot more choices in the market," Hill said. "This political push will add fuel to the fire, it will push more in that direction."