A federal watchdog said OPMs need more oversight. Here’s how that will affect colleges and companies.

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In 2011, just a few years after 2U was founded, the company brought in about $ 30 million in revenue, selling colleges on the idea it would help them launch and run online degree programs by offering a suite of services, including marketing, recruitment and course design.

As more colleges sought to expand their online footprint over the next decade, the company size exploded. Last year, 2U neared $ 1 billion in revenue – roughly 30 times more than it brought in 10 years prior. Meanwhile, it’s amassed over $ 1 billion in debt and other liabilities and never posted a profitable year as a public company.

2U’s growth illustrates the boom that online program management companies, or OPMs, have seen in recent years. Typically, these companies help colleges grow online programs in exchange for a cut of their tuition revenue, usually between 40% and 60%.

Hundreds of colleges have contracts with these companies, including top-ranked schools such as the University of Southern California. But the proliferation of OPMs has stoked concerns among key Democratic lawmakers, who worry these deals drive up the price of online education and do not comply with federal law.

Five such legislators commissioned the US Government Accountability Office, an auditing agency for Congress, to look into the OPM sector. This spring, the GAO: delivered that report:which concluded regulators have not exercised enough oversight over OPM contracts to ensure they were complying with federal laws meant to protect students from aggressive recruitment practices.

But the report was hardly an indictment of the OPM sector. The GAO mentioned no specific instances in which contracts violated federal law or harmed students.

“Perhaps some people were hoping there would be a blockbuster GAO report, finding fault with the OPM industry, but the GAO answers the specific questions that Congress asks it to answer,” said Kevin Carey, vice president for education policy and knowledge management at New America, a left-leaning think tank, and one of: the most prominent critics: of the college-OPM complex. “It’s a neutral, analytical and investigative body that acts within the mandate that it’s given, and I think that’s what it did in this case.”

Still, the report will likely kick off heightened monitoring of the sector and suggests regulatory changes are coming that could affect how OPMs work with colleges. And it remains to be seen how much any such changes would affect companies’ ability to use tuition-share agreements, the bedrock of some of their business models.

More oversight is coming to OPMs:

The GAO report concluded that independent auditors conducting reviews of colleges aren’t adequately checking that their contracts with OPMs comply with federal law designed to prevent predatory student recruiting. The law bars colleges that receive federal funding from giving incentive-based compensation, such as commissions or bonuses, to companies or employees that recruit students into their programs.

The US Department of Education considers tuition-sharing deals to be incentive compensation, but it carved out an exception for OPM companies in 2011 guidance. The exception says OPMs that offer recruiting services can strike tuition-sharing deals with colleges – so long as recruitment is part of a larger bundle of services, such as course design and career counseling. Colleges also must retain control of their admissions decisions and determine the number of students who enroll.

The GAO report recommends that the Ed Department provide information to independent auditors so they can better review such contracts for compliance with this guidance. It also suggests the department instruct colleges about the information they must furnish about their work with OPMs during audits and program reviews. The Ed Department agreed with both recommendations.

Lawmakers who commissioned the report ramped up their calls for more oversight of the OPM sector when it was released.

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