As public and nonprofit colleges have sought to expand their online course offerings, a major industry has developed to help them with that task. These private, for-profit developers—including divisions of big publishers, like Wiley and Pearson, and firms like 2U, Academic Partnerships, and Bisk—are known as online program managers (OPMs). They operate on a contract basis, and on terms that endow them with enormous, and, at times, comprehensive control over the services offered in the contracting college’s name. There are downsides to handing over responsibilities to external, for-profit operators—downsides that make the convenience schools receive in return seem a bad bargain indeed.
Two years ago, The Century Foundation did a major study of partnerships between private OPMs and public universities, drawing on contracts from every state in the country.1 We learned that these partnerships are as bad as many had suspected, if not worse: in return for some superficial convenience, public universities in every corner of the United States had been putting their for-profit contractors in the driver’s seat in nearly every respect, including financial considerations. More often than not, more than half of the programs’ tuition revenue goes straight to the contractors.
This year, TCF followed up on that research, looking at an entirely new tranche of OPM–university contracts, and our findings reflect those trends from 2017, deepening this already deeply unsettling picture. In this report, we share those findings, but we don’t stop there: through a typology of the actors to be wary of and an outline of five contracting red flags to avoid, we also provide schools with the know-how they need to start fighting back, and what to do instead. Along the way, we interweave examples from this year’s contract analysis, to demonstrate how theory can be put into practice to allow for safer contracting.
If schools act quickly and effectively, they can make a lot of progress in curtailing this crisis, protecting their students and themselves in the process. Our hope is that this action-focused report will assist schools and those who care about them to jumpstart a paradigm shift in how online education in the United States is done.
The OPM Landscape Today, Revealed: Lessons from Our New Data
Bad deals made with for-profit actors are nothing new in higher education;2 and since 2017, The Century Foundation has been monitoring this aspect of the industry, using state FOIA laws to acquire the contracts between public higher education institutions and online program managers. In that first year of our research, TCF requested contracts related to online courses and programs from the flagship public institution and at least one community college in each state, as well as a set of randomly selected schools around the country, and analyzed the data we received.3 From that analysis, we learned:
- OPMs are largely private, for-profit enterprises.
- Programs where OPMs control the majority of course development and operations in exchange for a share of tuition revenue expose students to the same risks involved with enrolling in a for-profit college, but with even less protection than those students receive, since an online program is run under the guise of a public institution, wherein public interest is assumed to be the chief priority.
- The most problematic aspects of public university–private OPM contracts are tuition-sharing schemes; the lack of transparency afforded students and the public; and the exchange of student and prospective student information and data.
Our analysis revealed that, by and large, contracted online programs in higher education are wolves in sheep’s clothing: predatory for-profit actors masquerading as some of the nation’s most trustworthy public universities.
This year, to expand our data pool and our analysis, we requested contracts from public institutions with a large number of students enrolled online.4 The new data reinforced the trends we found in our 2017 analysis: for-profit OPMs exercise far more control over online programs than do the schools themselves, to the detriment of both students and the hosting institutions.
As of August 2019, our new batch of public records requests has garnered contracts that outline arrangements between seventy-nine public colleges and universities and third-party providers. The trends put forth below are in regards to these contracts alone, and are not necessarily representative of the nationwide status of online degree programs, nor of all forms of contracting in higher education.
Types of Partnerships
One important result of our research is that we continue to see two distinct types of university–OPM partnerships: those in which the school hands over tuition revenue to the third party and those in which the school pays a flat rate for services. Though they are undetectable and indistinguishable from the perspective of students and consumers, the differences between these types have important implications on cost and quality for both institutions and students. Differentiating them will help institutions to avoid the harms of many such arrangements in the future.
One of the more prevalent forms of partnership is a tuition-sharing agreement. Companies like 2U, Academic Partnerships, Wiley, and Pearson, which have been prominent in the OPM space for as long as a decade, usually contract with schools using this type.5 In such an arrangement, a portion of the tuition is handed over to the OPM in exchange for a bundle of services: the amount the OPM receives typically runs anywhere from 40 percent to 65 percent, with some contracts going as high as 80 percent. These partnerships tend to involve very long contracts, ranging from six to ten years, and sometimes have very strict exiting terms and automatic contract renewals.
Entities that consider themselves providers of Massive Open Online Courses (MOOCs) have not traditionally operated in the same vein as OPMs, but schools have increasingly started working with them to run certain courses or entire programs. Run by companies like Ed2Go, Coursera, and Edmentum, they are referred to as “massive” and “open” because they offer their courses freely to the public, at least to some extent. Offered by itself, a MOOC can be an efficient, low-cost option for a student to advance in one specific skill-set. Coursera, for example, provides many of its courses to the public completely free. However, it rapidly becomes problematic when a MOOC is offered and marketed as a public institution’s course, yet created and staffed entirely by the MOOC provider. Because a MOOC is an online course in and of itself, the companies often provide the course content as well as the instructor. MOOCs also tend to take a substantial portion of the tuition revenues, with a typical cut spanning 50 percent to 80 percent.
While MOOCs may not consider themselves to be OPMs as traditionally defined, they frequently contract and behave more or less identically to how OPMs like 2U and Wiley contract and behave. Accordingly, our trend analysis includes OPMs and such OPM-adjacent entities, many of whom, furthermore, have evolved overtime to become partnered, merged, or acquired by one another.6
A second form of partnership is the fee-for-service model. Companies such as iDesignEDU, Noodle Partners, and ExtensionEngine offer specific services for a fixed price. Specific services in this case could be anything from course development to faculty training to marketing. The important feature of this type of partnership is that a contract covers one service alone in exchange for a single lump sum. In other words, the payment is not directly linked to tuition—or to enrollment numbers.
A separate entity that exists near the fee-for-service model is the learning management system (LMS) provider. An LMS is a software application that schools can develop themselves or contract out to host various activities, like storing assignments, managing grades, and so on. Since LMS providers, like Blackboard and Instructure for example, are large tech companies that contract their services to schools, and some OPMs simultaneously offer LMSs, it is important to consider the nature of these partnerships under the realm of public–private education contracting. However, this report primarily focuses on partnerships that have greater influence over a school’s academics, admissions, and, consequently mission.
Our New Data, and What They Tell Us
Keeping our analysis within the bounds of the typology outlined above,7 our findings, while reinforcing those TCF made two years ago, are nonetheless striking and distressing. Here, we present a summary of the types of partnerships and characteristics found within the relevant contracts, and provide the key takeaways we see in the data and trends. Of the contracts pertaining to the management of online programs, partnerships where the school hands over a portion of its tuition revenue are more problematic than are fee-for-service arrangements. Detailed examples outlining why this is and how to avoid these problems follow throughout the second half of the report.
As of August 2019, we received seventy-nine contracts, and of these, forty-one are directly relevant to the management of online courses. These forty-one do not include contracts that only address access to software like learning management systems. Of the relevant contracts, over half (53 percent) entitle the provider to a share of the school’s tuition. Typical arrangements involve the college or university splitting about half of its revenue with the third party, though it can vary by program and year. Such is the case, for example, in a ten-year contract between the University of North Dakota and Pearson: in the early years of the agreement, UND will hand over 62 percent of its tuition revenue which tapers down to 54 percent by the tenth year. At the lowest end of these revenue-share agreements is a five-year deal between the University of Arizona and for-profit OPM All Campus: the university gives 35 percent of its tuition revenue to All Campus. The highest amount of tuition handed over from institution to private third-party provider is 80 percent, and these are found between colleges and private career training bootcamp providers Ed2Go and The Learning House. In these arrangements, the contractor usually fully develops and runs the program, including by providing instructors.
Forty-one percent of relevant contracts task the provider with recruiting on the school’s behalf. Some OPMs contract with different institutions for similar degree programs, which likely helps these third-party companies more easily develop and use recruiting materials. For example, the for-profit OPM Academic Partnerships manages recruiting for the same types of programs at seven institutions in our contract set:
- Boise State University
- Eastern Michigan University
- Emporia State University
- Louisiana State University
- Louisiana State University Shreveport
- Southeastern Oklahoma State University
- University of West Florida
Academic Partnerships manages and recruits for online business degrees offered by six of the above institutions, and does the same for four of the institutions’ online education degrees, underscoring the potential for third-party online program managers to efficiently provide certain services—whether those efficiencies are passed on to students or not.
One of the primary reasons institutions cite for seeking outside help in developing online programs is a lack of internal capacity for developing or transferring courses into a format conducive to online study. It was not surprising, then, that in 68 percent of contracts, the third-party provider develops the course and/or the program. In fewer cases, just 32 percent of contracts, the third party also provides instruction. These tend to be at programs marketed as short-term, certificate, or “boot camp” in nature. Our contract set includes arrangements where companies like Ed2Go, The Learning House, Trilogy, and WozU design the program from top to bottom, including instruction, under the brand name of a university.
Of contracts with clear terms concerning the length of the agreement, 56 percent last for five years or more. Six of these contracts last between seven and ten years and involve the OPMs Academic Partnerships, Everspring, and Pearson, companies that frequently operate using a revenue-share model. This is noteworthy because the longer a school’s contract, the more entrenched in the school the OPM becomes, even more so if the OPM is running multiple aspects of the program. With the incentive to generate as much profit as possible, some of these for-profit third parties make it nearly impossible to get out of an agreement. Over a quarter (27 percent) of the total contracts reviewed lock in schools with strict exiting terms. These terms include things like requiring a years-in-advance termination notice, automatic renewals, and clauses prohibiting schools from contracting with other companies for similar services after termination. We only came across these terms in revenue-share agreements. Furthermore, some contracts appear to give the third party ability to profit off of student data, and 32 percent have vague terms or say nothing about data usage at all, which leaves it unclear who really has authority over students’ information.
In sum, the data, patterns, and trends we’ve culled from this batch of contracts not only underscore how much control for-profit companies have over these public online programs, but also illuminate how much they’re profiting off that control, as well as many of the contractually binding methods that they employ to acquire and maintain control. The picture is a troubling one indeed; and we’ll now turn to what can, and should, be done in response.