Dive Brief:
- A group of Democratic lawmakers asked the U.S. Department of Education in a letter last week to formally investigate whether the agency should allow colleges to contract with companies for recruiting services using tuition-share agreements.
- The letter — signed by prominent legislators, including Sens. Elizabeth Warren and Patty Murray — takes aim at a common business model used by online program management companies, or OPMs. These companies often provide services such as marketing, recruitment and course design for online programs in exchange for a cut of their revenue.
- Tuition-share agreements may incentivize OPMs to steer students to costly programs, the lawmakers argued. They referenced recent reporting accusing these companies of using aggressive marketing tactics, and asked the Education Department to detail within two weeks how it is reviewing colleges’ contracts with OPMs.
Dive Insight:
The OPM sector exploded over the past decade. At least 550 colleges contract with OPMs, and a large percentage of them give these companies a portion of their revenue for recruiting services.
Yet a recent report from the U.S. Government Accountability Office, an auditing agency for Congress, found the Education Department hasn’t sufficiently monitored whether colleges’ contracts with these companies comply with federal law and regulations.
Policy advocates and lawmakers have questioned whether tuition-share agreements are in line with the Higher Education Act, the law authorizing federal financial aid programs. The HEA bars colleges from giving incentive-based compensation such as bonuses to companies or employees that recruit students into their programs.
The Education Department counts tuition-share agreements as incentive compensation. However, decade-old guidance from the agency allows colleges to contract with OPMs for recruiting via tuition-share arrangements so long as the companies also provide a bundle of other services, such as online course support and career counseling.
Colleges must also keep control of their admissions decisions and determine how many students can enroll.
“The Department is responsible for ensuring colleges and universities comply with the law banning incentive compensation and the regulatory safeguards of the bundled services exception,” the lawmakers wrote Friday. “However, GAO found there is a high risk that the Department does not have the information it needs to detect violations of the incentive compensation ban.”
Some policy advocates have called on the Education Department to rescind the guidance allowing tuition-share agreements. The GAO report indicated the agency was considering changes to the guidance to address what constitutes a large enough bundle of services, as well as whether a college is sufficiently independent from an OPM.
The lawmakers also asked the Education Department to share with them within two weeks how it oversees whether colleges are complying with the incentive compensation ban and the bundled services exception. For instance, they asked the department to share how it plans to improve the data it collects on OPMs, such as how they spend the federal financial aid they receive.
An Education Department spokesperson said the agency is reviewing the letter.
