Online Program Management (OPM) Companies.—The Committee is deeply concerned by the proliferation of for-profit OPMs in higher education. Specifically, the Committee is troubled by how tuition-sharing agreements between universities and for-profit OPM companies can create perverse incentives that drive up costs, waste taxpayer dollars, and rip off students. In addition, the Committee is concerned by the role OPMs play in saddling graduate students with unsustainable student debt by taking advantage of the Grad Plus program, which lets students borrow as much as colleges charge. Though the practice has proven to be a valuable revenue stream for OPMs and universities, the Committee is not persuaded that these relationships are in the best interests of students.
A November 2021 Wall Street Journal investigation revealed how for-profit OPM 2U and the University of Southern California (USC) recruited thousands of students to an expensive online graduate program which left student borrowers with median debt of $112,000 and median earnings of $52,000 two years later. 2U, which received 60 percent of the program’s total revenue, helped USC use demographic profiles to target low-income and minority students to maximize profits. The Committee believes this behavior is straight from the playbook of the predatory for-profit colleges. Further, the Committee believes a status quo that allows for the continuation and proliferation of wasteful, abusive relationships between OPMs and universities is untenable. The Committee is disappointed by the inappropriately loose regulatory environment and sparse enforcement that has allowed OPMs to gain their foothold across the higher education landscape.
The Committee is aware of GAO’s recent report (GAO–22– 104463) and agrees with recommendations for the Department to improve its audit and review process regarding OPM arrangements, including via revisions to the Compliance Supplement; however, given the severity of OPM-driven waste and abuse, the Committee supports stronger, more urgent measures. Specifically, the Committee supports the complete rescission of March 2011 sub-regulatory guidance that established a loophole to the statutory incentive compensation ban. Under the HEA, individuals and entities cannot provide commissions, bonuses, or incentive payments based on securing enrollments or the awarding of Federal student aid. However, the misguided 2011 guidance establishes a loophole if recruiting is part of a ‘‘bundle of services’’ provided by an ‘‘unaffiliated third party’’ contractor, such as an OPM. The Committee strongly urges the Department to immediately rescind the 2011 bundled services guidance and to establish a process to wind down institutions’ inappropriate reliance on wasteful, abusive OPM tactics.
In the interim, the Committee strongly urges the Department to immediately enforce commonsense aspects of the otherwise flawed guidance. Specifically, the Committee urges the Department to ensure any contractors are independent entities, unaffiliated with the institution, and uninvolved in decision making. The Committee believes several common practices by OPMs clearly overstep the existing guidance, including, the establishment of steering committees or other governing bodies that give the OPM an official and regular role in decision making; higher shares of revenue paid to the OPM as enrollment increases; and OPM control over marketing and recruiting, in the name of school. The Committee urges the Department to employ meaningful consequences and penalties to deter predatory behavior.
Finally, the Committee urges the Department to develop adequate guidance to institutions that indicates when marketing could be considered a covered activity under the ban on incentive compensation payments. In addition, the Committee urges the Department to revise audit and program review guides to meet oversight goals of the incentive compensation ban. Moving forward, the Committee is committed to vigorous oversight of relationships between universities and for-profit OPMs and urges the Department to crack down on OPM waste and abuse to protect students and the overall integrity of taxpayer-funded Federal student aid programs.
Graduate Student Debt.—According to the fiscal year 2023 budget request, excluding consolidations, graduate student loans are expected to make up over 47 percent of new Federal student loan originations in fiscal year 2023. This proportion is significantly up from the 34 percent of new loan originations graduate student debt represented in fiscal year 2014. While OPMs play a concerning role in this trend, the Committee is also concerned about the broader landscape of graduate student debt. In response, the Committee urges the Department to analyze the disproportionate share of new student loan originations represented by graduate student programs and to determine whether graduate student programs leave students with reasonable debt levels. In addition, the Committee strongly urges the Department to take actions to ensure that graduate program outcomes are commensurate with the debt levels of their students.