Government Accountability Office Report Finds Oversight Of OPMs By Dept. Of Ed Lacking

Last week the Government Accountability Office released a report on Online Program Managers (OPMs), private companies that help colleges and universities set up and run online courses, often taking a big slice of tuition revenue in exchange for their work. The report was commissioned by Senators Patty Murray, Bobby Scott, Sherrod Brown, Tina Smith, and Elizabeth Warren, all of who have expressed concerns that OPMs might be increasing the cost of college for students and providing little direct benefit when it comes to the actual education part of online education.\

The focus of the GAO report is on what is known as the incentive compensation ban and whether the use of OPMs to recruit students might be illegal. The prohibition of incentive compensation is relatively straightforward; it means institutions that accept federal financial aid cannot pay commissions to individuals or companies based on how many students they enroll. It also means they cannot pay admissions and financial aid staff through incentive compensation.

The Department of Education (ED) has banned paying staff in college admissions and financial aid on an incentive basis since 1992, with changes made in 2011 to strengthen the prohibition. The ban ensures that recruiters are not compensated for pressuring students to enroll in poorly performing programs.

There is a loophole to the ban on incentive-based compensation, one large enough to have allowed OPMs to proliferate and thrive. A loophole that ED created by issuing a memo allowing schools to pay third-party companies for recruitment services under certain circumstances. The memo said that schools could pay a private company to help them recruit students if and only if the recruitment services are part of a bundle that includes other assistance, like the setup and design of the courses students are being recruited for.

ED’s own Inspector General (OIG) objected to the change in guidance at the time of the memo, saying that “We do not believe that the existing statutory ban on incentive compensation allows any incentive payments to entities involved in recruiting based on their success in enrolling students.” The guidance remained in place in spite of this objection and is viewed as one of the primary reasons for the growth in OPMs.

OPM contracts have proliferated over the past decade, with more than 500 schools working with OPMs to run almost 3000 different online programs. This growth has come at least partly as a response to the massive growth of online education provided by for-profit institutions. Public and private non-profit schools wanted to enter the online education realm but felt ill-equipped to do so.

OPMs helped public and non-profit private schools enter the online education space and try to catch up to for-profit schools that had long dominated this type of education. The only problem is some of those programs have taken on the very worst characteristics of predatory for-profit programs, including aggressive recruiting, over-promising on employment outcomes, and often landing students with huge amounts of student loan debt. Schools that use OPMs, including some interviewed for the report, believe that OPMs are vital for the success of their online programs, particularly when it comes to recruiting students.

The GAO report says that ED has failed to properly monitor institutions’ contracts with OPMs and that ED has failed to guide auditors who ensure that schools are meeting all the requirements needed to participate in federal financial aid programs. The report does not say that colleges should not be allowed to work with OPMs; it would be rare for the GAO to weigh into the legality of agency guidance. The report recommends that ED’s new guidance explicitly addresses how auditors should review OPM contracts to ensure OPM contracts do not violate the law.

Some advocates have previously argued that the 2011 memo should be rescinded, echoing the OIG’s arguments that schools should never be allowed to pay individuals or companies for recruitment services. This latest report has created renewed pressure for ED to consider rescinding the guidance. The Century Foundation has even provided guidance on how schools can still use OPMs without falling foul of incentive compensation rules.

Online education is a vital part of the higher education landscape and OPMs have tried to become vital to the online ecosystem. As more problems emerge with how extractive OPMs are, schools might want to start managing their own online courses.

Read related stories in higher education

$18.5 Billion In Student Loan Forgiveness From Biden Department Of Education, Is More Coming?