OPM and Third-Party Servicers Update; Your Turn to Inform the Department of Ed
Published by: WCET | 3/14/2023
The U.S. Department of Education is listening! Their February 15 press release (see our post about it) provides opportunities to inform the Department on two separate but related topic areas. We hope that you will take one or more of the opportunities described below to ask questions, share the impacts on students, and generally apprise the Department of practical information about the use of OPM’s and Third-Party Servicers at your institution.
In today’s post we will provide updates on what WCET and SAN have been doing on this issue and advise you (and urge you) to participation in this process. The topics include:
Virtual listening sessions were hosted by the Department on March 8-9, 2023. Participants pre-registered to provide three-minute statements on their experiences with OPMs. They also gave their opinion on whether or not to maintain, revise, or rescind the “bundled services” exception to the statutory ban on incentive compensation provided in the 2011 Dear Colleague letter (DCL GEN-11-05). The sessions were open for public viewing. More than sixty-five individuals offered testimony falling into these general categories: consumer advocacy organizations, institution staff, former students, and OPM representatives.
It appeared that the testimony gave a split in the interest whether to maintain or rescind the bundled services exception. Based upon the testimony, it is clear that not all OPMs are created equal nor provide the same level of transparency, services, and coordination with the institutions.
Many institution representatives spoke passionately about incentive compensation providing the ability to serve a wider range of non-traditional students who benefit from the online opportunities. They believe that the institution would not have otherwise had the initial financial capability to develop the programs. Additionally, the testimony from some public institutions indicated that incentive compensation gave them the opportunity to compete with for-profit institutions that have the capital upfront to develop their online programs. This provides students more choice. Other positive responses from students and institutions showed that a strong institutional relationship with the OPM is needed to provide a clear structure for control by the institution and transparency to the students. One OPM, Academic Partnership, was positively represented by many who highlighted that this company was an example of an OPM that develops a well-coordinated relationship with the institution and helped the institution provide programs for which the students shared met important needs. In those situations, it was shared that the institution maintained important control over decision-making in the relationship.
On the other hand, there was a strong contingent of consumer advocates and students that brought up the darker side of incentive compensation. They cited predatory practices in recruiting, practices that border on misrepresentation, and potential higher debt for students. Several students expressed their dismay with the lack of transparency of an OPM that, to all appearances was staffed by the institutions, when in actuality they were staffed by an OPM. In some cases the instructors were employed by the OPM and not the institution. The result appeared to be inferior education at a higher cost. Additionally, in some situations it appears that the financial split within a bundled service showed that a significant potion went to recruiting and marketing as opposed to supporting education and student services.
There were some advocates of a middle ground. They asked the Department not to throw the bundled services exception out completely, but to include more guardrails. There were suggestions of ensuring institution choice and concern the rescission could cause more harm than good for student outcomes. This moderate view appears to consider that some OPMs play by the rules and act in a more transparent manner. This group hopes that revising the language will result in pulling the errant OPMs back in line.
Honestly, the biggest takeaway is that institutions should not cede control to OPMs. Institutions must be assertive in their contract development. The lack of transparency of some OPMs as shared by a few former students who provided testimony, was truly shady. OPMs that do not provide for collaboration and flexibility with their contracts should not be considered. There are other options.
Thank you to the WCET members who responded to our recent survey about your experiences with OPMs. Our questions were fashioned with the intention of responding to the Department of Education’s interest in rules regarding oversight of “incentive compensation” vs “fee-for-service” fiscal models. By obtaining input from members on the front lines, our comment to the Department about the envisioned changes will be much stronger. The feedback is very valuable.
Amidst the polarizing discussions around these services, it is not surprising that our members have varying experiences and have more nuanced outlooks. Below are a few highlights of what we learned through the responses.
Some benefited from their OPM partnership:
“As a small state school, we simply do not have the funds to take on all the risk in a fee-for-service at one time.”
Another felt that it helped to keep their content refreshed in the face of the ‘Great Resignation.’ One respondent felt that the relationship set them up to move beyond the contract and bring the supports in-house.
One respondent disliked the revenue-sharing model “because it means an institution continues to pay for a service even when it was a one-time activity (such as online course development) and as enrollment grows, it means the school pays more for it.”
Several members indicated that the length of their revenue-share contracts is problematic and that they would prefer either a shorter contract or increased opportunities to get out of contracts early. Several members expressed frustration with a lack of transparency on the part of the OPM, especially around lead generation and the OPM’s activities with potential competitor institutions.
One institution has existing contracts for both revenue-sharing and fee-for-service: “The revenue-share makes it easier and quicker to enter the market (launch a program) but we lose transparency with the operations and revenue. The fee-for-service agreement was harder to get started (required university buy-in, investment, scaling operations), but it has given us a window into what is required to properly manage online programs, and, therefore, we are able to future plan to bring some of the workstreams in-house. We’re learning how to fish.”
When asked “What regulations, rules, or contractual agreements would hamper your OPM experience?” institutional responses included:
When asked “What regulations, rules, or contractual arrangements would hamper your OPM experience?” institutional responses included a discussion of the restraints regulations can cause:
One question we included in our survey hints at the interest in setting limits on the amount spent on marketing by institutions. We are skeptical that a fair formula can be devised. As higher education becomes increasingly competitive, institutions unable to appropriately invest in marketing for their programs, especially their online programs, may be placed at a disadvantage when competing with larger, better resourced institutions.
There also seems to be interest in regulating the tuition and fees charged by institutions using OPMs. First, it is difficult to compare the price students pay for an engineering vs. a philosophy degree at one institution, never mind across institutions. Also, our previous research shows that the price at public institutions is often set by their boards without reflection on the cost to build and offer the program.
An observation that we have made is that institutions need strong leadership to manage an OPM. If there is a change, colleges and universities will need time to transition to a new model.
And one final quote on using OPMs: “It is a complete win/win for everyone—universities, OPMs, but most importantly STUDENTS. This is not to say that there aren’t some tyrannical practices by OPMs. I’m sure there are. But that has not been our experience. Our OPM is made up of decent, caring human beings who want to help students and universities thrive.”
Since the release of the Third-Party Servicers (TPS) guidance by the Department of Education, we have been following the interpretations from law firms, higher education membership agencies, corporations, and state and institution leaders. The two of us have had discussions with representatives from each of these perspectives.
Some of what we have heard:
While you may wish to journey through the stages of grief, we advise you that this guidance provides the new Departmental expectations or institutions…until they change them. We hope that they provide more guidance, but we suggest that you do not sleep on these requirements.
This guidance is widely viewed as a significant expansion of functions that are to be considered as provided by a Third-Party Servicer. If so categorized, the service is subject to additional regulatory oversight which includes reporting, annual audits, and program reviews. Additionally, the vendor as a Third-Party Servicer becomes subject to joint and several liability and subject to consequences as provided in Federal regulation along with the institution, if found out of compliance. It is not hyperbole to indicate that this expansion of TPS Guidance could have a dramatic impact on how the institution and its vendors are managing their contracts and services.
The definition of a Third-Party Servicer as provided in Federal regulation appears to be expanded through the new guidance by leaning heavily on the phrase, “any aspect”, in regulation, as related to the institution’s participation in Title IV. Many questions have arisen about the reach of this new expanded view of Third-Party Servicers as new areas in this guidance. In addition to OPMs, other entities that could be included within this expanded definition includes clinical sites, state agencies collaborating as a consortium, study abroad organizations, providers of student support services including mental health counseling, textbook publishers. The list could go on and on until we get clear guidance.
It is critical that the Department hears from all stakeholders. Clear, practical, and student-focused regulations and guidance can only be developed when the full picture of implications is shared with the Department. The goal is to ensure that institutions know the path to compliance so as students are ultimately protected.
First, there is still time to submit written public comments regarding the management of compensation for OPMs. Although the virtual listening sessions have concluded, the deadline for written public comments will be accepted through March 16, 2023. WCET members were sent additional member-only advice on commenting. If you are a member of WCET or SAN and did not receive this content, please reach out to us at firstname.lastname@example.org.
The Department is seeking better understanding of the impact of the bundled services exception of the 2011 guidance (DCL GEN-11-05) related to growing online enrollment and its association with Federal student loan dept. In the Department’s announcement they requested responses to nine questions addressing the institution compensation structure when working with an OPM. You may wish to review our thoughts and direction on these questions in our recent post as you develop your written public comment.
Second, the Department extended the deadline to provide public comment for the recently released updated Third-Party Servicer Guidance.
The public is invited to submit written comments regarding this guidance. This is an important opportunity to ask questions and share with the Department any concerns about vendor functions and liability, student impact, institution contract development, and any other unintended consequences that you uncover based upon the guidance. If you did not have enough time to submit a public comment about OPM arrangements, you may wish to consider that OPMs are a type of Third-Party Servicer and that your questions are relevant for this written comment period. It is through this feedback that the Department can be better informed about the parameters of these vendor relationships and the role they play to better educate students.
The Department indicated that they will consider the comments and publish any relevant changes based upon that feedback at a later date. Additionally, they indicated that they are particularly interested in comments that address the impact of continuing the limitation on institution contracting with third-party servicers that are outside the United States or owned by those that are not citizen. The Department expressed concern about their ability to hold these servicers liable, if necessary.
The deadline for this public comment period is March 30, 2023 through regulations.gov (Docket ID ED-2022-OPE-0103).
The path to ask the Department to assess an undetermined entity is right here! Institutions are instructed that if they are unsure whether an individual or entity is to be reported as a TPS and subject to TPS requirements to contact the Department’s School Participation Division at CaseTeams@ed.gov. We strenuously urge you to take the Department’s suggestion to contact them! They have not published a deadline for these questions.
As always, we include advice related to participating in public comments. If you comment on behalf of your institution or organization, make sure you have the authority to do so. If you comment as an individual, you can’t use your institution or organization letterhead. You can supply your name, title, and employer as context as an indicator or your experience on the topic. Remember that your voice is important. If you have questions, concerns, or just need clarity, please raise these to the Department!
For more information on this issue, please register and join SAN, WCET, & Phil Hill, publisher of PhilOnEdTech blog and Partner at MindWires, LLC., at 2pm ET on March 20, 2023 for a special virtual event that is open to the public. Our webinar, Third-Party Servicer Guidance: Update, What Do We Know, and Why You Should Comment, will provide the opportunity for us to share what we know, address and collect your questions, and suggest why you should provide a public comment. Please join us!
And watch for more updates from WCET and its State Authorization Network.