New OPM Crackdown Law Has Higher Ed on Notice

Private third-party online education programs partnering with U.S. colleges and universities to add or complement curriculums are not new. Since 2011, the U.S. Department of Education has facilitated partnerships between universities and online program managers (OPMs). Nonetheless, concerns over financial instability and abusive recruiting practices led to a 2022 report calling for stricter regulations.

The latest domino fell earlier this year in Minnesota. Legislators in the Gopher State passed what the higher-ed community believes is the first state law anywhere in the country to define and regulate OPMs specifically. HF 4024 bans public schools in Minnesota from tuition-sharing with any OPM that offers “bundled products and services to develop, deliver, or provide managed programs,” particularly programs related to recruitment and marketing.

Interviewed higher-ed administrators and consultants believe Minnesota’s new law might begin a nationwide shift in OPM policy.

History of OPMs

As far back as 2011, the U.S. Department of Education actively helped intertwine such programs, called online program managers (OPMs), into the fabric of American education by giving universities the unique opportunity to share revenue with OPM companies in exchange for their services. 

In the years since OPMs took on a life of their own. Companies developing and running the programs went from simply offering a platform to gradually adding marketing services, student recruitment and enrollment incentive structures among other options. The results were positive for some schools, but others — such as the University of Southern California and its online social work masters program — infamously saw revenues dry up and debts amount in “non-cancelable” contracts with their OPM providers. 

A decade of “abusive recruiting practices” finally sparked a scathing report from the U.S. Government Accountability Office in 2022, calling for the DoE to “strengthen its approach” to OPMs so public universities, and taxpayers as a result, stopped ending up with the short end of the stick. The report’s main premise: schools need to stop paying OPMs for recruiting students. The education department agreed and last year loosely laid out a process for eventually tightening its grip on the industry.

Moving Forward with Clearer Rules

Noah Sudow has followed the roller coaster journey of OPMs and other third-party services (TPS) for nearly 10 years from his leadership position at the D.C.-based Whiteboard Advisors consultancy. As Whiteboard’s senior vice president, Sudow helps guide the firm’s higher-ed policy to advance educational equity and economic mobility.

Although OPMs revolve around helping institutions launch or run online programs, Sudow admitted the term can be ambiguous across different states and universities. Generally, though, OPMs include “bundled services,” which encompass marketing for their partnered universities and recruiting students to help increase schools’ tuition tallies. Sudow notes that in the new Minnesota law, legislators were abundantly clear on the definition to focus specifically on for-profit companies, how the companies manage and deliver their programs, how they market the programs, and rules on recruitment.

“That also tends to be the emphasis for policymakers across the country in terms of what concerns them about OPMs,” Sudow said.

According to the 2022 GAO report, about 550 colleges nationwide contracted with an online program manager to support more than 2,900 combined certificate and degree programs. In Minnesota, less than a dozen schools work with OPMs. Still, Sudow suggested the “bad behaviors” of OPMs attracting students to high-cost, low-value programs has played a part in the increased scrutiny — both in Minnesota and nationwide — around them.

“This is really about moving forward,” he said of the Minnesota law. “In addition to the tuition-sharing, which is how hands are getting paid, the law has some interesting marketing requirements that schools and OPMs will have to do, including clearly disclosing the OPM’s relationship and ensuring that all marketing communications have prior approval from the institution. Ultimately, this will be on the institution and their contract with the OPM.”

A Downside to Hampering OPMs

Jim Lummus, executive vice president of university services at higher-ed marketing consultancy AllCampus, believes Minnesota has always been a challenging state for OPMs to partner with public universities due in part to a robust faculty union with strong decision-making power. From Lummus’ perspective, handcuffing OPMs in a state where demand for online programs is growing and student enrollment is projected to nosedive in the coming years is risky business.

“Especially the regional institutions need to get back to previous enrollment levels to break the cycle of cuts,” Lummus opined. “But legislation like the one in Minnesota will hamper the ability of these regional schools – especially those that are in more rural areas – to make inroads into the online space in any significant way.”

Lummus stated he doesn’t expect Minnesota schools to see much change in the coming months since so few actually partner with OPMs. But in the long term, he believes the lack of investment capital from OPMs will harm Minnesota’s public universities. The law notably excludes private universities, meaning the state’s 28 non-public schools can continue brokering tuition-sharing deals with OPMs.

“I suspect private schools will benefit most here and in turn take market share,” Lummus said. “Although it doesn’t seem like revenue sharing will be declared illegal at the federal level, regulators have dealt a blow in the court of public perception. The result will be fewer smaller schools online, less competition among institutions and, ultimately, less options for students.”

Public Schools Prepare to Work Within the New Law

Satasha Green-Stephen has spent the past two decades of her career in higher ed, first as a faculty member and then as an administrator. She began in the administrative offices of the Minnesota State Colleges and Universities system six years ago and now oversees its 26 colleges and seven state universities as senior vice chancellor for academic and student affairs.

With the knowledge that a state bill to regulate OPMs was in the works, Green-Stephen last year helped launch a pilot program for OPMs that required any of the system’s schools wanting to partner with an OPM to undergo an administrative evaluation process lasting from a minimum of six to 12 months. Only if the OPM supported a few main criteria would Green-Stephen and her team allow a Minnesota State college or university to partner with it. 

First, according to Green-Stephen, students needed a say in the decision-making. Each school brought on a select group of students within its elected student council or department-specific programs to help administrators evaluate OPM candidates and ensure they’d be useful. Minnesota State also prioritized the reputation of OPM candidates to help maintain academic integrity and intellectual property rights. Most importantly, the business model had to work out favorably; Minnesota State leaders want to avoid cutting staff or going into debt, so they’re paying close attention to avoid mistakes like those USC infamously made with its social work program.

“We really thought there had to be some guardrails,” Green-Stephen explained. “The guardrails will help determine in advance if these OPMs will have a positive or adverse impact on the campus, and whether the partnership meets our stated enrollment and financial goals. It ultimately goes back to trying to ensure student satisfaction and success.”

So far, St. Cloud State University and Minnesota State College Southeast are the only two public schools under Green-Stephen’s umbrella to adopt OPMs — they’re both working with Dallas-based Academic Partnerships on three online degree programs in business, engineering and nursing. Although the universities have offered tuition-sharing and other incentives in the past, starting July 1 they’ll be limited by law to a more straightforward relationship that bans some terms of their previous contracts with Academic Partnerships. Green-Stephen said the university system has no plans to add other schools to its OPM pilot.

“To be clear, this isn’t stopping our schools from having an OPM, it’s just very specific about the type of OPM and the type of partnership you can have,” she said.

An Uncertain Future

Is Minnesota’s OPM law a harbinger of what’s to come in other states across the country? Or is it a one-off instance of a state tired of waiting for the feds and deciding to move forward on its own?

The short answer: few know for sure. The Department of Education looked poised to take action last year before quietly reversing course and instead kicking the can down the road. 

At the state level, Sudow noted that similar bills to restrict OPMs have failed in New Jersey and California, and none of the interviewed sources for this story were aware of any other state legislatures having significant momentum behind new bills to regulate OPMs. 

Perhaps, the biggest takeaway is a general surprise that Minnesota actually passed an OPM bill and a curiosity among higher-ed professionals to see how the new law plays out in the Gopher State.

“People will be watching Minnesota closely,” Sudow said. “But there’s also this uncertainty and curiosity around the Department of Education to see what its next move will be.”