Report Calls Online Program Managers 'Wolves in Sheep's Clothing'

• By Dian Schaffhauser
• 09/12/19

A damning report from the Century Foundation calls into question the continuing use of for-profit companies to deliver online courses in public institutions, referring to the companies as "wolves in sheep's clothing." Authors Stephanie Hall and Taela Dudley described the contracts between public universities and "online program managers" (OPMs) such as 2U, Academic Partnerships, Bisk, Wiley and Pearson "bad deals made with for-profit actors." The foundation is a self-described "progressive, nonpartisan think tank."

The findings in the report were based on an analysis of 79 contracts between public institutions and third-party OPMs, which the foundation obtained through state public records requests. The article includes a link to most of those contracts.

The new work is a follow-on to a study published two years ago on these same partnerships, which found that "more often than not, more than half of the programs' tuition revenue goes straight to the contractors."

The latest report, "Dear Colleges: Take Control of Your Online Courses," relied on information contained in the contracts for online courses and programs signed by the flagship public institution and at least one community college in each state, as well as other randomly selected schools. The report described two types of partnership deals: those where the school hands over a share of tuition revenue (typically between 40 and 65 percent) to the third party, and those where the school pays a flat rate for services, otherwise known as the fee-for-service model. The contracts range from six to 10 years and often entail "very strict exiting terms and automatic contract renewals."

The big findings were these:

• Those programs where the OPM has control over course development and operations in exchange for a cut of the tuition revenue (found in 68 percent of the contracts analyzed) "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"; and
• The "tuition-sharing schemes" these deals frequently rely on having no transparency to either students or the public and inevitably involve the exchange of student and prospect data.

Among the particular concerns expressed in the report was the difficulty that schools face in getting out of contracts (through termination notices that require years of advance warning, automatic renewals and clauses that prohibit institutions from contracting with other companies for the same services); and the ability for the third-party companies "to profit off of student data."

While some of the contracts analyzed included provisions that allow the school to keep control over program governance, revenue and mission, many granted OPMs "enormous and at times comprehensive control over the services offered."

As an example, the report described the contract between the University of North Dakota and Pearson, in which the university is prevented from making changes to the course content without first appealing to Pearson, which "then evaluates the effect of the proposed changes on enrollment." (After publication, a Pearson official contacted Campus Technology and called the charge that UND would need to appeal to the company before making academic changes as "completely false." Pearson said the university retained "complete control over program curriculum, admission standards, enrollments, course instruction, course assessment and credentialing.")

In the contract between Boise State University and Academic Partnerships, according to Century, Boise State is required to give AP two years' notice to keep its contract from auto-renewing for another three years. If the university finds a way to end the contract after the five-year term, it must still pay Academic for each student it secured that is still taking online courses.

And then there's the contract between the University of California Los Angeles and Trilogy to run a coding bootcamp through the university's extension school; according to the report, UCLA is required to set the tuition price as high as the market will bear, and Trilogy has the right to veto the price suggested by UCLA.

The bottom line: "...Frequently, colleges have been taken for a ride by OPM companies, forfeiting too much control and at too high a price." In many cases, the OPMs exercise far more control over online programs than do the schools themselves.

"Online higher education programs are essentially wolves in sheep's clothing: while these courses are being offered under the guise of a public institution, in reality they are being run — often from top to bottom — by private, for-profit companies," said Hall in a statement. "This presents real and profound risks — not only for students but also for the institution itself, whose hands are often tied as a result of their contract with an OPM."

Still, it's worth noting that OPMs offer a number of services that institutions have needed to help develop their online programs. "These companies provide various services for which traditional institutions historically have not had the experience or organizational capability to fully support, at least for fully-online programs and often for non-traditional student populations," wrote consultant Phil Hill in an analysis of the OPM market last year. "Some examples of the services include marketing & recruitment, enrollment management, curriculum development, online course design, student retention support, technology infrastructure, and student & faculty call center support." But as institutions' online presences have matured, Hill said, there has been growing pushback on the revenue models established by early OPM deals.

The Century Foundation report offered guidance for schools as they consider contracting with OPMs:

• Avoid bundled services deals; better, the authors suggested, to contract "for the specific services needed, as discrete units, at the time they're needed" and to pay for each service up front, without tuition revenue sharing.
• Stay away from "lengthy, unbreakable contracts." A better option: to contract "on more flexible, shorter terms, with clauses that allow for early termination as needed."
• Never "bypass" the faculty and always retain "the power to determine how an online program is used."

The foundation also encouraged policymakers to mandate a few basics for institutions:

• Be upfront about who's running the online programs as well as the advertising that promotes them;
• Require the display of a net price calculator that covers both non-tuition costs and the percentage of students in the program receiving institutional aid; and
• Stipulate that colleges collect and report expenditure data from OPMs, to increase the transparency of program management and where tuition dollars are being spent.

"While predatory, risky contracts between public institutions and OPMs are unfortunately the norm today, they are not a foregone conclusion," said Dudley. "There are proven policies and best practices that policymakers can enact and institutions can employ when contracting that will go a long way toward ensuring that colleges and universities retain control over their online courses, safeguard their reputations as stewards of the public trust and protect the rights of their students."

The report is openly available on the Century Foundation website.

[Note: This story was updated on Sept. 16, 2019 with a response from Pearson.]