December 09, 2022
Democrats Seek Crackdown on Online Program Managers
Democrats in both the House and the Senate are renewing calls for increased scrutiny of – and potentially a ban on – online program management (OPM) companies. The latest push for closer regulation of OPMs came in a letter that several lawmakers sent to Education Secretary Miguel Cardona this week.
In recent years, OPMs have been subjected to enhanced scrutiny from lawmakers and the media. Critics contend that OPMs are not being properly regulated given the nature, scale, and scope of their program offerings, which are eligible to receive federal student aid funds when offered under the banner of a college or university accredited by a federally-recognized accreditor.
This week’s letter, which goes even farther than previous efforts to crack down on OPMs, formally calls for a legal review of 2011 guidance that provides an exception to a statutory ban on incentive compensation. Under that exemption, colleges and universities may enter into revenue-sharing agreements with companies that offer “bundled services.” If a legal review were to lead to the repeal of the 2011 guidance, then the agreements that some colleges and universities currently have with OPMs would likely violate the Higher Education Act.
Although the Department of Education did not immediately respond to the letter, the Biden Administration may be receptive to the request for a review of the 2011 guidance. During the most recent negotiated rulemaking, the Department proposed regulatory amendments that would have defined a private, nonprofit institution, in part, as an institution that has no revenue-sharing agreements with any party unless it can be demonstrated that those revenue-sharing agreements are reasonable based on the market price for such services or materials.
Ultimately, the Department modified the language on revenue-sharing agreements in light of opposition during negotiated rulemaking. The final regulations contain a more limited definition of a nonprofit institution that prohibits only revenue-sharing agreements with a former owner of an institution that has converted from for-profit to nonprofit status, unless the Secretary determines that the payments and terms under the revenue-sharing agreement are reasonable based on market price.
It seems clear, however, that the Biden Administration is interested in more closely regulating OPMs. Institutions should consider recent developments when reviewing any proposals from OPMs to ensure they are protected from any changes in federal policy.
In recent years, OPMs have been subjected to enhanced scrutiny from lawmakers and the media. Critics contend that OPMs are not being properly regulated given the nature, scale, and scope of their program offerings, which are eligible to receive federal student aid funds when offered under the banner of a college or university accredited by a federally-recognized accreditor.
This week’s letter, which goes even farther than previous efforts to crack down on OPMs, formally calls for a legal review of 2011 guidance that provides an exception to a statutory ban on incentive compensation. Under that exemption, colleges and universities may enter into revenue-sharing agreements with companies that offer “bundled services.” If a legal review were to lead to the repeal of the 2011 guidance, then the agreements that some colleges and universities currently have with OPMs would likely violate the Higher Education Act.
Although the Department of Education did not immediately respond to the letter, the Biden Administration may be receptive to the request for a review of the 2011 guidance. During the most recent negotiated rulemaking, the Department proposed regulatory amendments that would have defined a private, nonprofit institution, in part, as an institution that has no revenue-sharing agreements with any party unless it can be demonstrated that those revenue-sharing agreements are reasonable based on the market price for such services or materials.
Ultimately, the Department modified the language on revenue-sharing agreements in light of opposition during negotiated rulemaking. The final regulations contain a more limited definition of a nonprofit institution that prohibits only revenue-sharing agreements with a former owner of an institution that has converted from for-profit to nonprofit status, unless the Secretary determines that the payments and terms under the revenue-sharing agreement are reasonable based on market price.
It seems clear, however, that the Biden Administration is interested in more closely regulating OPMs. Institutions should consider recent developments when reviewing any proposals from OPMs to ensure they are protected from any changes in federal policy.
For more information, please contact:
Jody Feder