Tuition sharing agreements, an update

Almost nine months ago, the Government Accountability Office asked the Dept. of Education to more closely monitor the revenue sharing agreements with Online Program Managers, and then a couple months after that the House Appropriations Committee had a line item to try to tackle it. Now finally, the Dept. of Ed is reviewing some of their guidance on tuition sharing.

Tuition sharing is the controversial practice of academic institutions sharing a portion of a student’s tuition with an outside entity. In the case of most OPMs, the reality is something closer to the OPM sharing tuition with the university, but from the point of view of the government, it is the same thing.

The main complaint leveled against OPMs and the Universities who partner with them is that tuition sharing leads to overly aggressive student recruiting using unrealistic promises regarding their degrees. The worry is that an OPM could use an aggressive technique, similar to what for-profit universities like ITT Tech used in the halcyon days of easy financial aid. Because OPMs share in the tuition received, they technically make money per student that signs up for the program, instead of being a course provider whose products are purchased by a university.

To be clear, there are no OPMs currently being accused of using these techniques on the scale that ITT Tech was, but the fact that the incentive structure is there, along with the ways that an OPM is usually allowed to use the university’s name, has many people worried that it could happen. This concern is part of what led  many larger universities to pull back their online programs from OPMs, since they were aware of the growing scrutiny around the industry.

Now OPM providers have unsurprisingly defended their work as benefiting the university. Certainly one of the criticisms of OPMs, that they would drive up the cost of higher-ed, seems to be happening quite easily without their influence. But the main argument of the article linked above is that a tuition sharing agreement with an OPM shifts the risk off the university and on to the OPM, who is often in charge of developing the course content. 

From the perspective of a small university this is often true. Online programs are expensive. When everything went remote in March 2020, students were thrust into learning at home. They were not making use of university gyms, common areas, libraries, classrooms, or grounds. Many students wondered why their tuition didn’t get cheaper. Several class action lawsuits were even filed to try to get some tuition refunded, and Brown eventually agreed to pay some money back.

However schools did not suddenly have a bunch of costs they could cut. Theoretically they could lay off some custodial staff, but many didn’t want to add to the woes of blue collar workers right then. Salaries, construction costs, mortgages on buildings, and a long list of other costs did not suddenly decrease. But there were new costs in the form of Zoom subscriptions, COVID tests, and home office equipment. The students were receiving a noticeably worse product and it was costing the universities more than ever to provide it.

This was not true for all universities. Some did quite well, especially as the economy went on a great run and their endowments saw record returns.

But that was often not true for small schools. For small schools, the promise of a private partnership where a company can take on a lot of the costs for developing a curriculum and then use their name in return for 60% of the tuition money, looked like a really good way to attract students of all kinds and from all over the country or world. They wouldn’t be limited by the size of their campus or the number of faculty, but by the reach that their name carried. Tuition sharing agreements with an OPM just made sense for them.

If the Dept. of Ed comes down hard on tuition sharing agreements, it could lead the smaller universities to close any online educational offerings they have. And that could be OK for a while, but as Justin Reich pointed out, we aren’t done with disrupted learning. So it could make things even more difficult for many small universities in the long run.

For the students, it is not clear that this is a terrible thing. To some degree, viewpoint diversity is helped by having more universities that students can choose from, but for the past several years students have been pretty clearly picking large or well known universities over smaller ones. 

Like when the myth of small school excellence was proven wrong, it is not clear that students on average benefit from being in a smaller school. They benefit from being in a good school, and certainly attending CalTech is an excellent opportunity. But is a student better off going to SAE Institute of Technology in Nashville over community college? It is hard to say, but it is pretty clear that fewer students are choosing to go that route.