In the waning days of the Biden administration, questions swirled about how and whether the Department of Education (ED) might alter—or even erase—the longstanding “Dear Colleague” letter that serves as a guidepost for online program management (OPM) contracts.
In recent weeks, we’ve been asked the same question by a growing number of college leaders and providers: So where did it all land?
The short answer is easy: business as usual. The tuition-share contracting model for OPM relationships was ultimately reaffirmed by the Biden administration. In this blog post, our team takes a deeper dive into the history—and current state—of the Department’s “bundled services” guidance.
Get up to speed
In the final two years of the Biden administration, ED initiated a review of guidance for OPMs, fueling confusion and concern among colleges and universities that utilize such partnerships to launch and expand access to online programs and reach a fast-growing population of “today’s students.”
At the core of the issue was a 2011 “Dear Colleague” letter (DCL) which has informed the work of colleges and universities that rely on tuition-sharing arrangements for more than a decade.
In short, the DCL confirmed that tuition-sharing is permissible under federal law, so long as a third-party provider bundled recruitment services with other functions and was unaffiliated with the institution.
The guidance interprets a 1992 statute, passed in the wake of a now infamous report on for-profit colleges, that banned “incentive payments” to “persons or entities” “engaged” in “student recruiting or admissions” activities. Of course, contemporary OPM contracts didn’t exist at the time. And while the accompanying Conference Committee Report made clear that the law was meant only to prohibit payments based solely on enrollment and recruitment, ED’s guidance was welcome news to the growing number of institutions that were innovating to meet learner demand.
What’s a DCL, anyway? A DCL does not establish new law or regulation. It is sub-regulatory guidance, meant to guide institutions in interpreting the law. Ultimately, it is up to institutions to determine what they feel is in compliance with law and regulation. DCLs are meant to guide how the Executive Branch will interpret and implement the law in question.
In 2023 and 2024, concerns about bad actors led to increased pressure on the Biden administration to boost oversight of university contractors, including OPMs.
In response to the increased scrutiny and a 2022 GAO Report, ED launched a formal review of the 2011 guidance and began to accept comments.
The threat of more restrictive regulations never came to pass, calming the waters for institutions and signaling a normalized regulatory (and political) environment for OPMs in years to come.
Instead of a draconian alternative, the outgoing Biden administration issued a new DCL confirming that the statute permits institutions revenue share agreements with third parties that provide recruitment services as long as they bundle recruitment with a package of other services.
While significant, news of the January guidance failed to make headlines, as the presidential election—and potential dismantling of ED—dominated our collective consciousness.
So, what’s in the January letter?
The January DCL effectively reaffirms the 2011 guidance and provides additional clarity and guideposts to safeguard against the risk of misrepresentation by third-party servicers. Among other things, the letter reminds institutions they are responsible for the activities of third parties working on their behalf and focuses on three potential forms of misrepresentation:
- Inaccurately identifying employees of third parties as college employees (e.g., through potentially using university titles or email addresses).
- Inaccurately identifying third-party recruiters or sales representatives as an “academic advisor” or “counselor.”
- Comparing outcomes of online programs managed by third parties as “the same” as campus-based programs.
By building upon the 2011 DCL, the Department further entrenched its tenets in federal policy and provided new clarity to inform the structure of arrangements in response to growing student demand. As former U.S. Department of Education General Counsel Charlie Rose recently wrote: “The Department’s reaffirmation of the March 2011 DCL underscores the federal statutory foundation for IHEs [institutions of higher education] that prefer to use a revenue-share contracting model for building and managing online programs.”
What’s next?
While the Trump Administration is unlikely to prioritize the regulation of OPMs, Congress is seeking to codify the 2011 ’bundled services” guidance into law. North Carolina Rep. Virginia Foxx’s (former Chair of the House Education and Workforce Committee) College Cost Reduction Act (CCRA), which serves as a blueprint for this Congress’ higher education policy priorities, includes language specifically noting the incentive compensation ban does not apply to third parties that i) bundle services, ii) do not provide any incentive compensation to their employees, and iii), is not awarding or disbursing federal aid.
Our March Education Insider survey found that support for such codification may be growing. More than a quarter of insiders believe that such language is likely to pass through the budget reconciliation, up from just 7% who thought that in a similar January survey.
Our team will continue to track and monitor this issue closely. For more information, please contact us.
