DeLauro: For-profit online program management companies are the new predators in higher education

For years, my colleagues and I have fought to protect students and taxpayers from the predatory practices of for-profit colleges. While the Biden administration is working to address these abuses through strong gainful employment regulations, I am disturbed by the loose regulation and nonexistent oversight over a similar, newer phenomenon — the proliferation of for-profit online program management, or OPM, companies across our higher education landscape.

Just like predatory for-profit colleges, these OPMs mislead students, drive up costs and leave student borrowers with a low-value education, excessive debt and low-paying jobs after graduation.

In December, former students of the University of Southern California’s partnership with for-profit OPM 2U filed a lawsuit against USC and 2U, claiming they misled potential students by using inflated Rossier School of Education rankings to increase profit. The lawsuit follows student stories of a grim reality experienced with similar programs where they have been ripped off, felt a program was “a degree mill,” and soon realized they “could have gotten the same job with a much cheaper degree” elsewhere.

Through their tuition-sharing agreement, USC and 2U recruited thousands of students to an expensive social work program leaving borrowers with a median debt of $112,000, a burden far higher than the national median for such programs, and median earnings of just $52,000 two years later. 2U, which received 60% of the program’s revenue, encouraged students to take full advantage of the federal Grad Plus student loan program, which allows students to borrow as much as universities charge — funds that ended up in 2U’s pockets.

A follow-up piece in The Wall Street Journal last year detailed 2U’s remarkable effectiveness at profiting off students’ excessive debt burdens. Thanks to the company’s arduous work of intensely recruiting new students into high-cost programs, 2U hosted its employees at a lavish Caesars Palace retreat that included wining and dining, a surprise Diana Ross concert, and front-row tickets to see Christina Aguilera. This is money that came directly from the excessive federal loans the company’s students now struggle to pay off. A former 2U employee even said “it just felt wrong” knowing where funds for the retreat came from.

But 2U is not alone. It is part of a group of at least 25 for-profit companies that set up and recruit students for online university programs, an industry estimated to soon make as much as $8 billion in global revenue. These partnerships clearly represent a valuable revenue stream for OPMs and universities; I do not believe, however, that these relationships are in the best interests of students or taxpayers.

In April of last year, as chair of the committee that determines federal funding for education, I questioned U.S. Secretary of Education Miguel Cardona on his agency’s oversight of OPMs at a hearing on the Education Department’s budget. In the House report accompanying my subcommittee’s 2023 funding bill enacted in December, I also outlined my concerns with OPMs and urged immediate intervention by the department to protect students and taxpayers. And last month, I joined Democratic colleagues in Congress to request information on the department’s oversight of OPMs.

Above all, the department should rescind flawed 2011 subregulatory guidance that established a dangerous loophole to the incentive compensation ban, a critical protection in the Higher Education Act prohibiting schools from providing incentive payments based on an individual’s success in enrolling students and obtaining federal financial aid revenue. The guidance establishes harmful exceptions that pave the way for tuition-sharing agreements between universities and aggressive OPM recruiters — arrangements that undermine the law.

In the meantime, the department should immediately enforce commonsense aspects of the otherwise flawed guidance, including requirements that contractors are truly independent entities not involved in decision-making. The department must also invoke serious consequences and penalties for schools and OPMs that will deter predatory behavior. When a school with an OPM partner receives a financial penalty for deceiving and misleading students, the department must make clear that both the school and the OPM will pay the price.

As federal policymakers, we cannot afford to maintain the status quo, which has allowed for the proliferation of abusive practices toward students and wasteful spending of taxpayer dollars. We must, at once and fully, maintain the integrity of our great system of higher education and protect student loan borrowers.