Tuesday, April 11, 2023 - Michael weighs in on how the Department of Education recently roiled the world of higher education companies when it issued new guidance around TPS companies—third party servicers—along with a request for comment about OPMs—online program managers. Plus, Jeff asks Michael if David Brooks was right when he wrote that there isn't nearly enough innovation in K12 education coming out of the pandemic. This episode is made possible with support from Ascendium Education Group, the Bill & Melinda Gates Foundation, and Course Hero.
This episode of Future U is sponsored by Ascendium Education Group, a nonprofit organization committed to helping learners from low income backgrounds reach their education and career goals. For more information, visit ascendiumphilanthropy.org. Earn continuing education units this spring with Teaching Practice, an online faculty development program from Course Hero. Over a series of asynchronous courses, you'll uncover new ways to leverage tech in the classroom and build inclusive curriculum all while supporting your own wellbeing. Plus, you'll get weekly office hours support from leading instructors. Enroll for free today at education.coursehero.com. This episode is brought to you by the Bill and Melinda Gates Foundation, working to eliminate race, ethnicity, and income as predictors of student success through innovation, data and information, policy and institutional transformation.
I'm Jeff Selingo.
And I'm Michael Horn.
Welcome to the latest episode of Future U, where we're going to go guestless, if that's a term, Michael.
Well, if it's not, you just made it one. Jeff, which in education isn't actually all that unusual. We make up acronyms and terms all the time, and then sometimes those acronyms make their way into the vernacular whether we want them to or not.
Probably more not. I can think of a much better term than FAFSA, for example, if we want people to complete a form that can get them financial aid, and that is probably the rule of unintended consequences because when they named the Free Application for Federal Student Aid, they wanted to emphasize the word free. Thus, it was first, but of course, it didn't take long for people just to call it the FAFSA.
And if I could just get into the intricacies of style for a minute, Michael. There was a time when I was editor of the Chronicle, and because FAFSA was five letters, according to the New York Times style book, which we followed, you were only supposed to capitalize the first letter of the acronym with five or more letters. Now, it seems that it's changed though when I read The Chronicle these days. Now there are a few other acronyms being talked a lot about in higher ed circles these days, and that's OPM and TPS. And I wanted to get your take, Michael, on two recent news items on this episode. So let's start there. For listeners of the show, you might recall we did a Higher Ed 101 episode last year with Phil Hill on OPMs or online program managers.
That's right, Jeff. And as Phil laid out in that show, which we'll link to in the show notes, online program managers or these OPMs, they're they're companies that colleges hire to help them operate their online degree programs and recruit students. And Jeff, they do basically everything except for making the admissions decisions and arguably designing the curriculum and teaching the courses. Although those latter parts get pretty intertwined. But where these companies are absolutely critical is in finding the students.
And Michael, that's where the rub has always been because these companies are paid through revenue sharing agreements. They get a cut of tuition, maybe 50% or more in some cases, and universities also get a share. And they've been criticized for then basically recruiting anyone that they could because obviously the larger the enrollment, the more money they could make. And since the 1990s, the education department has looked dimly on essentially paying recruiters for how many students they enroll. But in 2011, the Obama administration, not through any formal regulatory action, but through what's known as a dear colleague letter that is often used to provide guidance on federal regulations. They told colleges that revenue sharing agreements with recruiters can be exempted from the band if the provider bundles non-recruitment services with the recruitment work it does.
And so since then, colleges and OPMs have used that guidance to greatly expand the number of programs and universities that they have with fully online programs with the assistance of these outside companies. Indeed, we'll also link to that Sean Gallagher Higher Ed 101 episode, where he talks about the growth of online master's degrees in particular, which largely came from the ease of getting these programs online through OPMs. Now, this growth has been criticized by some, namely, a few think tanks like New America and the Century Foundation and a few progressive lawmakers, including your home state senator, Elizabeth Warren, because they think aggressively marketing these degrees and pushes up the prices of higher education, particularly at the graduate level.
Yeah, that's right, Jeff and the GAO, the Government Accountability Office. There's another acronym for you, came out with a report on OPMs last year, which most observers saw as neutral, and it basically just told the education department to make colleges provide some more information about their OPM arrangements during basic compliance audits, but no absolute wrongdoing found, Jeff.
Yeah, and Michael, I think that everyone was just kind of waiting then for the education department to say something after that GAO report, because even though the 2011 guidance was given during a Democratic administration, there was a sense that OPMs had grown more than anyone expected. There was a lot of criticism of them from democratic leaning circles, including Bob Shireman who served in Obama's education department.
So seemingly out of the blue in February, I think out of the blue, for most of us, that's exactly what the education department did with some more guidance to colleges on what it means to be a TPS or a third party servicer for institutions that receive federal financial aid funds. But rather than narrowly tailor that guidance to OPMs, for example, what was surprising, I think, to a lot of people, including colleges that don't even have OPMs and never really paid attention to this whole part of the world, was how the department broadened the definition. Not of OPMs, but of third party servicers to include things such as monitoring academic engagement, or even things like daily attendance, assessing student learning, including through electronic means, and performing individualized and interactive financial aid counseling. And I'm taking those words right from their guidance. And so Michael, I think that's where our story starts. Essentially from many people's reading of this, it includes a lot of third party vendors that provide services to colleges, everything from the learning management system to even things like study abroad.
That's right, Jeff. And I think the first thing to know is that the department really took two different actions here. The first action actually on OPMs narrowly tailored was just to ask for comments about what it should do. They're going to put out more guidance and we're still waiting in other words, for what they're going to ultimately do with these OPM contracts. Will revenue shares still be permissible? My gut is that they're going to say no, but we don't really know. At the exact same time, however, that they issued that call for guidance, which is what made this super confusing, Jeff, they released new guidance, as you said, completely out of the blue about third party servicers. We had no idea what problem they were trying to solve with that guidance, but essentially, formerly these third party servicers were just companies that literally processed federal financial aid funds.
And then the department massively expanded the definition though, of what falls into a third party servicer. I'll tell you why that's relevant in a moment. But there was some back and forth from the left-leaning think tanks that you cited with them arguing that this wasn't really an expansion of the definition. But I actually thought Phil Hill did a very credible refutation of that point by showing that the department added literally a completely new bullet point that dramatically expands the definition of what a third party servicer is to, as you said, include any entity that in essence touches a program that gets Title IV federal financial aid.
So all of a sudden you have almost every single outside entity that contracts with higher ed institutions regulated by this formerly somewhat obscure provision, but it's sort of like the department pierced through the entities that they actually have authority to regulate, that is the colleges and universities, to touch the entities with which they have contracts. And the stipulations now say that all of these entities have to submit to audits and compliance monitoring, but also, and get this, that the non US-based companies or the companies that have a CEO who is not a US citizen, cannot enter into these contracts with colleges or universities anymore. And again, because these rules were written originally with entities that handle federal monies, I suppose it's reasonable. They didn't want foreign companies doing fraudulent things there that would make it harder to catch and prosecute and so forth. But this is a big expansion of that.
And so what do they want colleges to do? Because a lot of the advocates of more oversights keep saying, this isn't that big of a deal. It's just making colleges be more transparent about these relationships. And as long as they don't violate any federal rules, they're going to be fine. But given most of these companies are not used to being in a business where they might come in contact with federal auditors, is that where the rub is, a chilling effect on people wanting to do business in higher ed? What's the real impact here?
Well, here's the debate, I think, and you've put your finger right on it. Some folks argue, just as you said, this really isn't a big deal. It's just basic auditing. But others who are close to the auditing industry have said, no, it actually is a very big deal because auditors are now going to have to create new standards for what they're even auditing. And that will be on top of a regular financial audit, which some of these entities, frankly, are likely too small to perhaps go through on a regular basis. But in my mind, the regulatory red tape is going to increase costs at a time when most agree that the price of education for colleges and universities has simply risen too high. It's also going to favor incumbents over nimble startups that frankly don't have the budgets to comply with these audits. And here's the other piece of it.
It's not just for-profits that are going to get caught up in this. You think of the venture funded companies or something like that, but take a nonprofit like Get Schooled, for example. They provide first gen low income students with support to complete their financial aid applications. They're almost certainly going to fall under the guidance, and they're going to waste precious resources on red tape now.
And that's not all. Startup companies that launch new innovations, I'm sure, don't have the budgets or processes or even know how to comply with the costs of annual audits. And so that's naturally going to favor larger, slower moving incumbents with bigger balance sheets, which is going to cripple critical innovations for students. And let's be honest, Jeff, the cost of that compliance is almost certainly going to get passed onto the universities, which then we know are going to pass those costs on to students through higher tuition. And I'm pretty sure that's not what the administration wants to see happen. And I'm pretty sure that the administration didn't mean to bar all foreign nationals from operating companies that do business with higher education. I'd be shocked if that's the intent, but that is the effect it seems of the new provision.
Yeah, I think this is a classic swing of the pendulum in the DC regulatory environment. We either set up a regulatory structure or there isn't one at all. Someone sees an opening for a new business or existing businesses see a way to do more. There are some bad players, and the federal government cracks down by swinging the regulatory pendulum completely to the other side without ever stopping in the middle. And what's interesting about this one is how little, I think a lot of college leaders have been paying attention because they don't have an OPM on campus. It's fascinating. I got a call from a former president of a liberal arts college the other day who said, "What can we do?"
And this former president admitted they knew nothing about this issue until someone called them to ask to sign on to a letter to the department. But after a few days of research, this president was shocked at how much this would impact the former institution that they led. So Michael, what's the best solution here, in your opinion? Clearly the ed department after the GAO report and the pressure from the left, they had to do something. So what can that something be?
Yeah, so look, I hate to be the stodgy one here, Jeff, but I'd like to see the department get away from just regulation, which is prone frankly to the next administration coming in and just reversing whatever they had done and creating this pendulum effect that you and I talked about. Not just now, but also we had former Secretaries of Education, Margaret Spellings and John King on the show. And we talked about how this pendulum between Republic and Democratic administrations, and it's just not healthy for the college leaders who are trying to lead in this environment. And so what I'd love to see them do is move to policymaking. And what I mean by that is, let's start with this, that the policy concern they're addressing is not totally misplaced. There are many bad online college programs that have a miserable return on investment for students just like there are many bad brick and mortar programs.
But I think the instinct to intervene into which companies private and public accredited colleges are allowed to do business with or frankly to micromanage the contracts with third party organizations is simply misplaced. I mean, I'm not sure they have the capacity to do it effectively. If you think about the tens of thousands of contracts this even means, but let's say they even just end up focusing on revenue share and they say, you can't do that anymore. Well, let's just be honest. The contracts are just going to get rewritten as fee for service and be it an amount, I'm pretty sure that still allows the OPMs to make money and do so in a way that allows them to put a lot of money up front for universities to build these online programs. Because what we've learned is that most, not all, but most colleges and universities say that they need an influx of outside money to launch these programs.
And because, as we talked about a few episodes ago on the M&A Show, they don't have access to capital markets. These outside entities are really important for them. And so here's the funny thing. I think that the market is sort of moving to a fee for service model by itself because of competition from players like Noodle, Coursera and the like. So to me, and to answer your question, instead of regulating of inputs, how a college chooses to do its work, which by the way is only going to lock institutions into a set way of doing things and inhibit innovation, I'd rather see the department start focusing on student outcomes and empower schools to figure out the best ways to deliver. And so I would argue that better policy would do things like tie the ability of college programs to participate in federal aid programs in the first place on the condition that their students get good paying jobs when they leave and can repay their debt.
Or Congress could pass policy to require that colleges sharing the risk when student borrowers don't repay what they borrow. Under this model, schools would've the incentive to cut off companies that add costs without benefiting students. And Preston Cooper put forth recently a really compelling model legislation onto how this could operate now.
Now, look, Jeff, these moves would probably require working with Congress. And that's, I guess my distinction. Regulation versus real policymaking, because we know that it's not easy to work with Congress at the moment. It would involve deliberation and it would be slower than issuing regulations by fiat, and it would also likely require some compromises. No one's going to get everything. But I think we're at a moment where Republicans would love to crack down on bad colleges that don't promise a good ROI. And I think there's a deal to be had with the administration, even if it's not a full reauthorization of the Higher Education Act. So I'd love to see them do the hard work of policymaking rather than just issuing more regulations from on high that could simply get reversed with the next administration.
Yeah. Michael, there's obviously a lot of comments on this. The ed department pushed some of these regulations to September, so we're obviously going to be talking about this a lot more, but let's take a break here to hear from our sponsors. And when we come back, there's another pressing issue on my mind about the broader impact of COVID on our education system that I want to get your take on. We'll be right back on Future U.
This episode of Future U is sponsored by Ascendium Education Group, a nonprofit organization committed to helping learners from low-income backgrounds reach their education and career goals. Ascendium believes that system level change and a student-centric approach are important for our nation's efforts to boost post-secondary education and workforce training opportunities. That's why their philanthropy aims to remove systemic barriers faced by these learners, specifically first generation students, incarcerated adults, veterans, students of color, adult learners, and rural community members. For more information, visit ascendiumphilanthropy.org.
So welcome back to Future U and Michael, I want to get your take on one other issue on the show today, and we recently passed the third anniversary of the shutdown after COVID-19, and as my oldest kid reminds me, it was Friday the 13th, March 13th, 2020 to be exact when they left school. And three years later, we're still talking about the impact on students of that shutdown of schools and then the virtual and hybrid learning that followed. And we've talked a little bit on the show about learning loss and enrollment loss and mental health issues. As David Brooks put it in his column recently in the New York Times, given the alarming statistics about K through 12 schools and children, as he said, "You would think that education would be one of the most talked about subjects in America right now. This moment of disruption should be a moment of reinvention" he said.
And since we talked so much about reinvention in higher ed, I wanted to ask you about innovation in K through 12 and kind of what happened. During the pandemic, we heard so much about micro schools and learning pods, and you've talked on this show about mastery-based learning. We know Americans aren't happy with their K through 12 schools. So what happened to all these COVID innovations and the momentum that it seemed we had with real change in K through 12? Is there something taking hold that maybe most of us who are not following this on a regular basis like you are, are just unaware of?
Yeah, it's a good question. And I think David Brooks had it both right and wrong, Jeff. In the mainstream system, I'll be candid, I think it's super frustrating. We're not seeing a lot of innovations in this direction stick as far as I can tell. We fret about learning loss, but continue to pedal the lie that our system was built to optimize each kid's learning. And in my mind, if we're serious about learning loss, we need to move to mastery based learning. Otherwise, by design, we are left with a system that creates holes in kids' learning, and it does so on purpose.
And second, we hear a ton about how high dosage tutoring right now is the most effective way to educate a child. But if that's the case, Jeff, then why the heck are we just tacking it on to the side of the existing education systems and not fundamentally turning the system upside down to put tutor like experiences that personalize learning at the heart of each child's experience. And given that we're not, no wonder the reports are trickling in that the implementation of tutoring in districts has been really bad for the most part. Most kids just aren't getting consistent tutoring, and when they are, they're not getting tutoring with strong curriculum that matches what they're working on. So it's been a bit of a mess in my mind.
And yet at the same time, I think we also see this huge shift. 1.2 million children are out of district schools since the pandemic, as we've discussed. What's interesting is that up to 2.2 million by some estimates are currently enrolled in micro schools, that's a huge number, 2.2 million in micro schools outside of public schools. We know that homeschooling and private schooling and charter schooling are still up in enrollment. Lots of people, frankly, we actually don't know where the children are in school right now. It's totally uncaptured by the data, which is its own scary thing. People are just opting out of the traditional system.
And there's a wave of ESA bills being passed there. There's another acronym for you, ESA, Education Savings Account. It's this wave of legislation in places like Arizona, New Hampshire, West Virginia, on and on, Arkansas, that basically gives families a set of money, the money that they would get from the state that would ordinarily go to their public school district and says, "Hey, you can take this 7, 8, $9,000, whatever it is, and spend it among a variety of education providers." So you can do it for your core private schooling experience, you can do it for tutoring, things like that.
And then lots of former public school teachers are actually creating these micro schools and other education opportunities. There's just a wave of entrepreneurial energy where they're frustrated with the system, so they're doing it outside of the system. And then you have things like Khan Academy, just integrating ChatGPT-4 into its platform so that students can have a tutor like experience as they're learning online with Khan Academy and with ASU Prep Digital, which you of course know Arizona State's k-12 enterprise. They've launched the Khan World School as this online private school that's going global.
So there's a lot of energy right now outside the system to do things differently, to personalize, to do mastery based learning, to integrate with the real world. So I think we just have to see where this goes, because I think to some extent, public school districts are either going to have to respond with real meaningful innovations, or we may continue to see this drain of students out of the system to a certain extent. And that parent energy and teacher entrepreneurial energy could just be the thing that David Brooks is clamoring for. But it will come from the grassroots, I think, not from a top-down force.
And talking about the grassroots and that parent energy, there just seems to be a lot of political force right now around the culture wars in K through 12, much like it's happening in higher ed. The Washington Post wrote this piece recently about school boards in Ohio specifically. So has the momentum for change, has it shifted in the direction around DEI and banning books and pronouns and such? Is there any hope for us to get focused on change in learning instead?
Jeff, I think I'm with you on this. I think a lot of folks like me just think this is incredibly frustrating about how the focus has been on all those issues as opposed to focusing on the learning itself. And look, you help with equity and empowerment of communities and individuals who've been treated poorly by helping those students learn, by connecting them to opportunities that they can seize, not by having food fights and all of these other questions. And I'm not sure I have a great answer of here of what to do, but back when Presidents Bush and Obama used to call education the great civil rights issue of our time, well, I think we need to get back to that kind of thinking and put our focus and our energy there.
But Jeff, I think there's a corollary on these K-12 questions around market share and trust and change, which is how students are increasingly, it seems less interested in college also as the path forward. We talked about the sum on the show, but I want to go to a very specific audience question on this as part of one of our favorite segments on the show, sponsored by Course Hero, where we answer a question from a listener. And this question comes from Ruth Gardner from the University of The Bahamas, and she asks, "Is higher education losing ground to professional certificates or certifications your take?" What's your take, Jeff?
Yeah. So I think it's both and. I don't think that it's a zero sum game, whereas certificates and certifications rise, the degree, which is really the coin of the realm of colleges and universities decreases as a result. I just finished co-writing a paper with Matt Sigelman of the Burning Glass Institute, which we'll be talking about on a future episode about the value of the bachelor's degree. And what really just floored me is that for all the talk that it's certificates and badges and micro-degrees that are going to take the place of the traditional degree, the bachelor's degree really remains a valuable commodity in this job market. The BA delivers an immediate 25% wage premium within a year of graduation. That dividend holds steady over a 12 year period. But in comparing it with certifications and certificates, the big difference is that it gives people mobility. The degree gives people mobility. They're able to move up and out in jobs, particularly out because a lot of these certification programs sometimes are closed systems. It only works with certain employers or might only work with a single employer.
And so I don't think it's an either or here. But again, we're going to be diving a lot more into this in a future episode where we talk about the value of the bachelor's degree. And so with that, Michael, we've come to the end of another episode of Future U. We're going to be talking about both of these issues, I think both K through 12 and what's happening in terms of the regulatory environment in higher ed in Washington for a long time to come. Thank you for being with us today, and we'll see you next time on Future U.