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Jun 08, 2023

Does Your Campus Outsource Its Online Programs? Prepare for Changes

​​​​​​​​​​​​​​Aired March 9, 2023 The Department of Education’s recently

​​​​​​​​​​​​​​Aired March 9, 2023

The Department of Education's recently released guidance on third-party servicers and online program managers (OPMs) is shining a spotlight on contracts created to expand online academic offerings. Why did these relationships grow dramatically during the pandemic, and why are they needed now? Kelly Otter, dean of the School of Continuing Studies at Georgetown University, joins the podcast to explain. Jon, Sarah, and Mushtaq get into the Supreme Court hearing that could determine the fate of President Joe Biden's student loan forgiveness initiative and other happenings in Washington.

Here are some of the links and references from this week's show:

On Student Loan Forgiveness, Conservative Justices Skeptical of Biden Plan The Washington Post (sub. req.) | Feb. 28, 2023

Plan B To Cancel Student Loan Debt? The White House Won't Go There Even as Pressure Mounts USA Today (sub. req.) | March 4, 2023

Fact Sheet: The President's Budget: Extending Medicare Solvency by 25 Years or More, Strengthening Medicare, and Lowering Health Care Costs The White House | March 7, 2023

House Republicans Introduce ‘Parents Bill of Rights’ Aimed at Oversight in Education CNN | March 2, 2023

House Panel To Consider GOP Bill Banning Transgender Women, Girls From Team Sports The Hill | March 6, 2023

USC Pushed a $115,000 Online Degree. Graduates Got Low Salaries, Huge Debts. The Wall Street Journal (sub. req.) | Nov. 9, 2021

GAO Takes Moderate Stance on Online Program Providers Inside Higher Ed | May 6, 2022

Request for Extension on Third-Party Servicers Comment Deadline ACE | Feb. 23, 2023

Competing Models Among OPM Providers Inside Higher Ed | Oct. 25, 2017

Jon Fansmith: Hello, and welcome to dotEDU, the higher education policy podcast from the American Council on Education. I’m one of your hosts, Jon Fansmith, senior vice president of government relations here at ACE, and I am joined by my amazing co-hosts, Mushtaq Gunja and Sarah Spreitzer. How are you both on this lovely sunny day here in Washington, DC?

Mushtaq Gunja: Yeah, the flowers are blooming. I can't quite tell if the cherry blossoms are about to pop. I feel like I’ve seen some of them, but I don't know.

Jon Fansmith: I think it's early this year because the winter was so warm, but it should be very pretty in DC soon.

Mushtaq Gunja: Everybody should come visit 1 Dupont Circle and they can come say hi to the three of us at ACE.

Jon Fansmith: Maybe join a recording.

Sarah Spreitzer: Yeah.

Jon Fansmith: Why not? Send us a topic idea and maybe you can sit in on it.

So despite the astounding beauty happening in our fair city, there are some other things that are happening in our fair city, probably a little bit more contentious, and the one I’m thinking of that probably has gotten the most attention recently was the Biden administration's loan forgiveness plan, which had its day in court last week. The Supreme Court heard oral arguments regarding two lawsuits that were joined challenging the legality of the Biden administration's plan, one by a group of six states’ attorneys general and one by two borrowers, individual borrowers. We’ve obviously talked about this at some length in previous episodes, but what is happening? What happened? You’re the lawyer among us. Lay out what we need to know.

Mushtaq Gunja: Yeah. I’m really actually curious what the two of you think happened. I mean, from my perspective, we have been talking about this for a long time, and I feel like the arguments went about the way that I thought that they would go.

Jon Fansmith: Yeah.

Mushtaq Gunja: I mean, to me, the Biden administration has a pretty strong argument on standing, and I thought that the justices recognized that, and it may be that they will get to the merits of the case. But if they do, it's going to be because they had to climb a little bit of a weird standing hurdle.

Sarah Spreitzer: Mm-hmm.

Mushtaq Gunja: And then if they get to the merits of the case, I think that the writing is a little bit on the wall that the conservative justices are likely to find the Biden administration's actions illegal, that they would have gone too far, probably under the major questions doctrine. And that's my read of this.

I think the standing question is a real one, though. I mean, standing, of course, is this idea that only people that are directly affected by the lawsuit can sue. So if Sarah has been in a car accident, I don't get to just sue on her behalf just because I witnessed it or because I’m friends with Sarah. She has to be the one who sues. And we have this basic problem of who has been harmed by the Biden administration's potential actions on debt relief.

It's a real question, and it's interestingly not a particularly political one, right? Questions of standing and mootness, questions of ripeness are nonpartisan for the most part. So we’ll see how this goes. But what did you two think? I mean, you probably watched this closely. I know it probably made you want to go to law school, especially the standing. Those riveting standing arguments. What do you all think?

Sarah Spreitzer: You know, Mushtaq, I am looking for representation regarding car accidents, since I’ve been without my car for two months, currently, but that's a side note.

On the Supreme Court case, I thought one of the interesting questions was, does the Biden administration...I mean, the whole crux of the case is does the Biden administration have the authority under the HEROES Act, which is one of the COVID bills? And I was reading that the administration may argue that if the Supreme Court throws out the authority under the HEROES Act, that they might try and say that they have the authority under the Higher Education Act, which seems like a little further of a reach, and I guess I’d throw it back to you to ask you what you thought.

Jon Fansmith: This argument predates the current Biden administration plan. A lot of advocates for loan forgiveness have said for a while, prepandemic even, that they believe the secretary has the authority to do this unilaterally based on some language that I think there is...ambiguity is maybe an understatement, right? You tend to read a lot of a person's political viewpoint in how they read that language. And I think this gets into this idea. People are a little bit skeptical that this will hold up after the court hears it.

Mushtaq, I’m receptive to your point about standing, and that is kind of the apolitical part of it, and the precedent it sets will apply to lots of other plaintiffs before the Supreme Court, so not just in this case. Even if you think the conservative justices have a hostility towards this administration or there's large federal policies, they set a precedent that says, "Well, if we greatly expand the scope of who gets standing, that can be used by liberal plaintiffs to bring suits challenging a conservative administration." It has real meaning, but there doesn't seem to be a fallback plan.

This other language you’re talking about, this administration privately made it pretty clear that they didn't find that binding. In fact, there's a reason they used and were very specific about citing HEROES as their authority. If they thought they had it in HEA, that's black letter law not tied to a national emergency. If they thought it was there, they would’ve just gone with that. So I don't know that there is a backup plan. I think this is the throw of the dice, right? If it comes up their way, there will be a loan forgiveness program. If the court finds against it, that's probably the end of the matter, and then we launch into what will probably be a really messy return to repayment sometime this summer.

Mushtaq Gunja: I mean, I think what would happen is if this got overturned and the Biden administration wanted to try to reinvigorate this plan, they could try to do this just straight under settlement and compromise. Get sued again and then we can brief it for real, but I’m not sure if it's going to happen. But that's not the only thing that's been happening in Washington. The president is set to release a budget. Is that right, my friends?

Jon Fansmith: Yeah. As we record this, we recorded on a Tuesday. Thursday the 9th, we will see the president's third budget proposal. And for those who don't track this as closely as we do, the president's budget request is really just that. It's the president's statement of what he would like to see. It has no binding impact. Congress usually looks at it, makes a few notes, and then tosses it in the dumpster, right? It does not really meaningfully shape a lot of the actual appropriations process. Probably the biggest impact is at the top level, where the president says, "This is how much I want to spend on defense. This is how much I want to spend on non-defense." Those are usually the numbers that Congress at least takes as the starting point for "Where are we going to go? Should we spend more on these areas, less on these areas? What's the overall spending amount?"

We will see what's in there. I mean, I think we have tended to see across administrations, regardless of ideology, that there's a lot of consistency the first year or two. You tend to see big, bold, new initiatives outlined. Every few years, you might see something new that's proposed that's either responsive to what they’re hearing or what they’re seeing or a political agenda, but by and large you tend to see incremental shifts from budget to budget, and I think we’ll probably see the same thing here.

We’re certainly eager to see affirmation of their commitment to doubling the Pell Grant. The president mentioned Pell Grants in the last State of the Union, so certainly hopeful to see that. We’ll also likely see a lot of funding for scientific research, especially around cancer research, which is an area very close to the president's heart. A continuation, in a lot of ways, of what we’ve seen in the last couple years. Maybe no new big initiatives.

I think one of the ones, he talked about community college in the State of the Union, and I think a lot of people read that as a nod towards free community college. That will be really interesting to see, because they haven't been talking that much about free community college. And he didn't specifically cite free community college. He talked about the value of community college, making it accessible. So maybe there’ll be more attention to that issue. That's kind of what I think is out there. I don't know. Sarah, you track it too pretty closely.

Sarah Spreitzer: Yeah. And, Jon, you’re kind of downplaying this. You say it's not exciting, and yet I know both of us will be parsing through it on Thursday to see what hidden gems are in there.

Jon Fansmith: That says more about us, though, Sarah, than it does about the excitement level of the budget.

Sarah Spreitzer: But it's also kind of the official starting pistol, if you will, of the appropriations season, right? Or if we were going to have a more regular appropriations process. I mean, when was the last time we had that? But you see the president's budget introduced, and then they talk about the allocations for the different appropriations committees, and then each subcommittee writes up their bill, and then they’re supposed to conference it.

And I know a lot of folks have been having their fly-in days coming in and advocating for different numbers, and you referenced Pell, whether or not there will be a nice request there for Pell. I’m sure advocates would be looking at that closely.

But speaking of appropriations, Jon, I think House Republicans just came out with their rules and they made some changes to what they’re going to do with earmarks this year. Correct?

Jon Fansmith: Yeah. And not in a positive way for higher education institutions, really. This is an interesting one. When Republicans retook control of the House, they had been very vocal in opposition to the restoration of earmarks. Earmarks are now called varying names in the House. They call them community-funded projects, but it's essentially the same thing. A member of Congress asks for money to be directed somewhere in their district.

As it turned out, Republicans did not abandon the practice of community-funded projects. They kept it going as they take control of the House. But what they did do was they made some changes, and not significantly different from what the Democratic Party, the Democrats, had done when they were in charge of the House, except in one area. There are 12 appropriations bills, 12 spending bills. Those 12 bills fund all of the different programs the federal government does, all the agencies in the federal government. Of those 12 bills, they said, "For three of them, you can't do earmarks." And those three bills are financial services, the Defense Department bill, and the Labor-HHS-Education bill.

It's not a coincidence that Defense and Labor-HHS-Education contain the largest number of earmarks for higher education institutions, by far the largest number of earmarks for higher education institutions. Higher education institutions are huge beneficiaries of earmarks. We get the most by number of any area, and we get the most by money of any area. Taking out two of the bills that most directly impact our members really is going to represent a blow to the amount directed funding that's available.

Lots of institutions, you talked about, are in for fly-in days. Lots of institutions have a pretty comprehensive strategy to address needs on their campus by working with their legislators, identifying them, getting those requests in. In a lot of ways, for a lot of those institutions, that avenue has been closed.

Now, the Senate will still take earmarks on all 12 of those appropriations bills. They’ll take those requests. There are other avenues. Commerce-Justice-Science is a bill where you can have things done. There's lots of places where you can address your institution's needs, but this move by the House really starts to narrow the pool, not just the funding, but the options that you can have tosee needs addressed. So it's not good news.

Mushtaq Gunja: People!

Sarah Spreitzer: I know one thing that they’re agreeing on.

Jon Fansmith: Yeah?

Sarah Spreitzer: Really quickly. They held their first hearing for the China Select Committee, which had a lot of bipartisan representation. And they have started talking about some bipartisan bills, so the one place that we could have agreement.

But sorry, Mushtaq, I interrupted you.

Mushtaq Gunja: No, no, no. I was just going to ask. First of all, you guys have depressed me. It's a sunny beautiful day as we started, and now I’m feeling like the clouds are-

Sarah Spreitzer: That's what we do.

Jon Fansmith: Right.

Mushtaq Gunja: So then what? Right? So the House has different rules than the Senate. I mean, McCarthy cut these crazy deals. Fine. So what? Are we just going to be in CR land? Will the Republicans agree to that? I mean, I know what they want, which are not big omnibus. They want individual votes on individual bills. They’ve done nothing to actually get us there to the extent that the House is holding hearings. Right, Jon? It's on culture war issues, it seems to me. So-

Jon Fansmith: Yeah. There is very little progress on these things, and I think you’re right. Short-term CRs are inevitable in this Congress.

Can they actually get to any sort of a deal? I mean, these are very, very far apart in terms of negotiating positions. The House Republicans want to return to a fiscal year ‘22 funding level, all of the cuts from that coming from the non-defense side. So big increases for defense over the last couple of years, all that would come out of non-defense. If you did that, that's 25% of all non-defense funding. That is a staggering cut. It will never pass muster, with a lot of Republicans, frankly, and the Senate and with the Biden administration.

So what do we have? I mean, your prediction is as good as mine. I think a yearlong CR is the easiest outcome. Congress really likes kicking the can down the road. They’d rather avoid making a decision than making a decision that annoys people, especially advocates who see their money being cut or not being raised. But a yearlong CR is flat funding. That's actually a cut for a lot of programs where we’ve seen growth in the demand. So not a great outcome either. Maybe not the worst outcome, a prolonged government shutdown, but not a great outcome.

Mushtaq Gunja: Mm-hmm.

Sarah Spreitzer: Yeah. We don't want a shutdown, but I would say, while we’ve discouraged Mushtaq, I would say keep up the fly-in days and continue to come out to DC. Both the House and the Senate office buildings are open now and staff are taking meetings. And so there's a lot of really great energy up there.

Jon Fansmith: And I want to come back to actually something, Mushtaq, you touched on in the culture war issues. They’re not doing budget appropriations. Well, what are they doing? I think we have certainly been hearing a lot about what's going on in the states in terms of these, particularly around education and K-12, but also in higher ed, about what can be taught in classrooms. How do you handle issues of sexuality or sexual identity or gender or race, the history of race in this country? And we are, in a really pretty remarkable way, seeing that filtering up to the federal level.

We’ve always heard the rhetoric at the federal level. It's not unusual. Things you see in the states that resonate with various constituencies, members of Congress will adopt that. But tomorrow, there will be a markup in the House Education and Workforce Committee, and the two bills that are being marked up are the Parents’ Bill of Rights and the Protecting Women and Girls in Sports Act. I think I got the name right. What's remarkable about both of those bills? The Parents’ Bill of Rights, it's a K-12-focused bill. It incorporates a lot of the elements of the Florida legislation we’ve seen introduced about limitations as to what can be taught in classrooms and what are the rights parents have in determining what can be taught to their children. The Protecting Women and Girls in Sports, very clear, it speaks about limiting, or frankly preventing, the ability of transgender athletes to participate in women's athletics.

These are culture war issues, right? They are being elevated not just to the level of rhetoric in Congress now, but to the level of legislation that will be marked up by a committee. They will pass the committee because it's the House and the majority wins. This committee will pass both those bills. They will go to the floor and likely get a favorable House vote that reports them out of the House. They won't go anywhere after that. The Senate is not going to take this up. The Biden administration certainly would never sign these bills into law.

But we are seeing very rapidly a progression from, "Here are some issues that sort of work as electoral issues. Here are issues that excite the base and motivate our voters," to "We’re now actually going to drive legislation through on these topics" in a way that we haven't really seen before. It is a marked step forward. And what I feel pretty confident saying, I think, is a pretty destructive path for how higher education is considered and addressed, and respect for the rights of institutional autonomy and academic freedom, things that we think are very, very important and, traditionally, legislators from both parties have also upheld as being very, very important and worthy of preserving. So not a positive trend. So maybe more depressing for you, Mushtaq. Sorry, I didn't have an uplifting one to end on there.

Mushtaq Gunja: Well, something that will put a smile on my face is a conversation that we are about to have with Dean Kelly Otter of the Georgetown School of Continuing Studies about this topic that I actually admittedly don't know that much about: online providers of educational services to institutions, OPMs, third-party servicers, a whole set of issues about how our institutions run. Really looking forward to this conversation.

Jon Fansmith: Yeah. I think that will be a great conversation. Kelly is certainly a person who's thought a lot about this and has practical experience and can really fill in some of the gaps, even for people like me who are spending a lot of time thinking about this right now. So we will be back with that conversation, which I’m sure you will all enjoy, right after the break.

Sarah Spreitzer: And we are back. And we’re joined by Kelly Otter, who is the dean of the School of Continuing Studies at Georgetown University and has done some work thinking about OPMs, or online program management. And there's a lot of discussion going on right now, Kelly, about OPMs. I’m sure Jon hears it even more than me, but I hear about it two or three times a day in the world of higher ed. So can you start by just talking about what is an OPM?

Kelly Otter: Sure. Well, thank you, Sarah. It's great to be here. I appreciate the opportunity. So essentially, an online program management company is a business that is set up, from my perspective, to provide the infrastructure to support institutions of higher education in delivering their academic programs to an expanded audience. So they supplement for us with those structural elements that many institutions do not already have, or they don't have to an extent that they can do an adequate job of promoting their programs and helping to admit students or even develop programs online.

Many institutions don't have instructional design units or the resources to invest and build out those teams. So there are these companies that have sprung up in the last 15 years or so that provide these services to varying extents. When we’re moving into the online space, it really requires a different kind of infrastructure. So that's what they’re able to supplement for us.

Jon Fansmith: Mm-hmm.

Sarah Spreitzer: And since we’ve seen this kind of growth in this movement towards more online courses, have we seen a growth in OPMs over the past decade?

Kelly Otter: Certainly within the last few years, during the pandemic. So you could think of the growth as prepandemic, during, and post, just because of the need. Many institutions, well, we all had to, in a sense, go virtual during the pandemic. And some of us were already set up with infrastructures that allowed us to take our in-person programs online because we had instructional designers, or we had templates already designed that could be quickly ramped up and we could move in-person classes into templates that could design interactive courses and provide a high-quality experience for students.

What happened often was that many in-person courses were just replaced by Zoom. And you heard about Zoom fatigue. Those of us in meetings 11 hours a day got Zoom fatigue. Imagine what it felt like to be a student and have to just sit on Zoom all day. And many people thought of that as online education.

Sarah Spreitzer: Mm-hmm.

Kelly Otter: Those of us in the space of online education argue very strenuously that that is not online education. That is simply replacing an in-person session with Zoom. So many institutions then partnered with OPMs that were able to, again, provide those infrastructural elements to help them really thoughtfully and methodically design high-quality, highly interactive online courses if they didn't have the resources to do that. So that's why you saw this expansion, and now we’re seeing so much more competition in this space because institutions prepandemic that didn't have the resources now have the partnerships that have provided them those resources. So yes, overall, to answer your question, there has been huge growth in that market.

Sarah Spreitzer: And how are the partnerships or relationships structured between an institution of higher education and, say, an OPM? Are they the same as another contract that an institution of higher education might have with another type of servicer?Kelly Otter: Well, I would argue that they’re unique because, as I said a moment ago, there are those infrastructural elements, those pieces around marketing, supplementing our enrollment and recruitment of students. And then when we get into the instructional design space, all of this starts to come up a little bit closer to the core of our institutional missions, the teaching and learning.

Jon Fansmith: Mm-hmm.

Kelly Otter: And I think that's where there is some unease in this community.

Jon Fansmith: Yeah.

Kelly Otter: Because, from my perspective, there is and should be a very bright line drawn between those functional elements and the actual content and pedagogy and decisions about who and how the teaching is done, decisions about who is admitted to the programs and how students are advised. I feel very strongly that those decisions belong within the walls of the institution.

And what we have done is built up resources within the institution that can guide both our internal teams and our partners at the strategic level. And whether you build the infrastructure in-house or if you partner externally, you have to manage those teams. So an OPM needs to be managed, just as all of your stuff have to be managed. It's a different kind of management, and I think that sometimes institutions don't recognize the responsibility and the structure required to manage them effectively.

Mushtaq Gunja: Kelly, it sounds like you’ve been very thoughtful in how you’re using these online providers at the School of Continuing Studies. Can you talk a little bit about where the School of Continuing Studies uses outside vendors and where you’ve developed some of that in-house expertise that you referenced?

Kelly Otter: Absolutely. We started with a vendor eight years ago because we did not have all of the necessary elements internally. And when we looked at the investment that would be required to build everything internally, it was quite significant. And to be frank, we would’ve had to have gone into debt for two or three years and waited even another four or five years to make back that investment, and many institutions are not in a position to be able to go into debt for that period of time for a return that may or may not come if there are shifts in the marketplace.

So working with a vendor dramatically reduces the financial risk that an institution has to take. And I feel, again, very strongly that we are stewards of tuition dollars, and we need to be very prudent with how we invest those funds. If we can work with a vendor that is much more able, much more optimized, to withstand some of those investments and those risks, that allows us to focus on the academic enterprise.

So I expect the business model to be different and complementary to the model of higher education, which is built around teaching and learning, right, a culture of producing and disseminating knowledge. I feel that those things are complementary. They don't have to be at odds, but what we do need to be aligned around is the principles, the values, and our styles of management.

Jon Fansmith: Yeah. And, Kelly, that's such a great response and I think very clearly lays out the approach that you and Georgetown have taken in this space. But Sarah started off by talking about the fact that we hear about OPMs all the time, and we are hearing about them at ACE and in the national discussion because there are concerns. And you’ve touched on some of these concerns with the growth of this practice within higher education, particularly around the delivery of education. And you certainly see these other examples that get frequently cited, not just in the media, but in policy discussions. I think of the 2U-USC School of Social Work program. There's been some other discussions about those.

When we look at that, is this an organizational failing? You have seen this also portrayed as predatory corporations reaching out. There's a lot of different perspectives. But as somebody who has had these relationships and, again, has laid out a very, I think, comprehensive and holistic approach to how you engage that keeps that alignment very central towards you, when you look at this, is this something you say, "This is a problem that's widespread across the field"? Is this something that's unique in certain situations? How does that look to you as somebody with experience in this area?

Kelly Otter: I’m glad you brought up that example because I think that there is so much to learn from it. I guess my frustration and concern about that example is the conversation stopped where it needed to actually be starting. So we looked at the particular program that was offered, the price point that was offered, but I would ask, who did the market research to determine what the salary levels of the graduates was likely to be? Who did the research about the actual value from the student perspective and what kind of debt they may or may not have to take on? Were there discussions about differential pricing based on this program versus a program where there typically might be very high yields? Where were the discussions about the values and principles of making all of those decisions?

And we don't really hear about that when we hear about that example. What we hear about is the negative impact on the students, and I feel like that is an institutional responsibility. It's our job to know, if we are setting up a program, where we’re hoping it will lead our students in terms of their careers and their lives. And I think we have a responsibility, if we’re going to set a price point without differentiating it based on market, to be sure that it's a responsible thing to do to set a certain price point, because it accurately reflects our costs of delivering a program.

Jon Fansmith: Part of that, I think, speaks to what we know. Frankly, it's what we don't know about this space. A lot of these relationships are managed through private contracts with institutions. I think our listeners are aware of this, but the Government Accountability Office, which does a lot of investigations of different issues, GAO, as it's called, did a report on OPMs. And interestingly, what they said wasn't "this is good" or "this is bad." What they said is, "We don't know enough to know exactly what's occurring in this space." And you talked about there's a variety of models. There's a variety of relationships. Obviously, we know about the diversity of higher education institutions, run the gamut. Part of, I think, some of this ongoing policy debate about this is fueled by that lack of information. So what we have to go on, what, frankly, the public hears about are those anomalies, like the example we talked about at USC.

Do you think there is an information imbalance in this space? Do you think that this is something where there is a need for greater transparency? Or is this, Sarah sort of made this point, we’ve been contracting with outside vendors to do a million different things for colleges and universities for a long time? Is this more in that space, or is there really, actually, do we need to start shining a light on what these relationships look like?

Kelly Otter: I would absolutely come down on the side of asking for more transparency, but I think we also need to be specific about what is it we need to know so that we are assured that we are all in compliance. And at this point, our relationships are structured in such a way that we are sure of that, because, in our case, we make all the admissions decisions. We do all the hiring of faculty. We control all of the content. So there is absolute clarity on that.

There could be more transparency around, say, the marketing piece, you know, what the cost of acquisition is. If expenditures are made on certain tactics, what are the more successful ones? What are the less successful ones? So things like that. But all of that still, I believe, falls within compliance.

So yes, I think there's room for greater transparency, and I think that we probably have to have some conversations with our partners about providing, on a regular basis, more detailed information about the process so that everybody is comfortable that we are in compliance, because ultimately, it's the institution that is responsible. The OPMs are not regulated. So I think that we could do a better job of providing some documentation and having that transparency.

Jon Fansmith: And one of the other things that often comes up in these discussions is the compensation model, right? You hear a lot about revenue sharing in particular, this idea that essentially parts of the contract terms are dependent on the number of students who enroll and the payments to the OPM depend on the size of the program or growth within the program. Most of the time we hear about it, revenue sharing is used almost as a dirty word. And I think, again, we get into there's not much understanding of how these contracts work broadly.

So there's sort of a simple, easy to understand approach that, well, if you’re tying payments to the number of students, you’re essentially incentivizing growth in the program regardless of student outcomes. That's financially beneficial for the institution and for the provider. Can you give a little bit more clarity on revenue sharing and what other models may exist in this area, and sort of talk about why that is the predominant model? I assume it is actually the predominant model, but if so, why it is.

Kelly Otter: Yes. Essentially, there is the revenue-share model and a fee-for-service model. And there are advantages to both, but it also depends on a number of different things. The construction of the portfolio, the types of programs, the size of the market of programs, the expected returns, the existing resources that an institution has to invest. So with a revenue-share, as we mentioned earlier, the up-front investment is made by the partner and the institution is able to just see the returns of that investment, largely your first term or your first year.

So the structure of that is, in my opinion, advantageous to the institution. It reduces the risk. Yes, you could say that down the line, perhaps there might be the forfeiting of profits after that investment is made back, but what people don't consider is the actual investment that has to be made within the institution. If you were to build everything in-house, if you were to hire all those staff, invest in all of that software, take on all of the responsibility of marketing, increase those marketing budgets as the competition increases, you are then appreciably increasing the fixed costs of the institution, and you now have the responsibility for all of these resources that are not able to be very flexible or adaptable when you experience shifts in the external market. And there will be shifts.

Jon Fansmith: Yup, and I think that's really helpful to understanding this environment a little bit more. And part of why we are so interested in this topic at this moment is that the Department of Education just a few weeks ago released guidance on what they’re calling third-party servicers, which is sort of an understood term of art in higher education, has always been understood to relate really to the processing and administration and management of financial aid data around students who are participating in the Title IV financial aid programs.

Part of the reason for the guidance was this concern they have with OPMs, the concern they’re hearing from people on the Hill and in the public. And so that was, we think, clearly the intent of what they did, and what they did was they expanded the definition of who a third-party servicer is, really to look at OPMs and put them under the information and transparency, the auditing, compliance requirements that third-party servicers undergo.

What they did, at least from our perspective and what we’re hearing from our members, is they brought in just about everybody else, most entities that contract with an institution, really across the gamut, areas. We’ve identified institutions that are working together to have a consortium course between them. That would now be a third-party servicer as we read it under the new definition. An example. Or a police department that does crime statistics and analyzes those and provides them to the institution as part of their reporting requirements through the Clery Act would now be a third-party servicer because they’re facilitating the delivery of a Title IV program.

I’m not going to ask you your views on the policy, unless you want to share them, but certainly, I know you’ve looked at this, when you look at it from your position as dean at the School of Continuing Studies, if this guidance is upheld, when ultimately September 1st is when it's supposed to take effect, what does that mean to your campus? What does that look like to you? What does that do in terms of the relationships you have, the vendors you contract with, the services you offer to students, how you manage the business of being the School of Continuing Studies?

Kelly Otter: Well, certainly there is a good amount of ambiguity about this. This expansion certainly does have the potential to affect our existing contracts and partnerships and our academic program delivery and our future contracts and partnerships. So I think we are very keen to learn more and to engage very deeply in these conversations. That's about all I know at this moment.

Jon Fansmith: That is very helpful. And I would share that in terms of ambiguity, you are certainly not alone. I think everyone is trying to puzzle out exactly what this means. But I feel better that you have the same ambiguity that I do too. It makes me feel a little bit better about my confusion.

Kelly Otter: Oh, absolutely.

Sarah Spreitzer: Well, since everything is kind of fuzzy right now, but there's this huge focus on OPMs, Kelly, any predictions for the future or what OPMs might look like a decade from now? Will we even need OPMs? Will we just be doing everything in-house? What do you think might happen?

Kelly Otter: Oh, interesting question. As we’re becoming more data-mature in higher education, where we’re starting to take a closer look at the digital transformation that needs to happen so that we can do a better job of managing systems, gathering data, and making data-informed decisions, that allows us to be more proactive in managing data and managing many of these systems that allow us to understand why we’re even working with edtech companies in the first place.

So I think that we’re getting smarter, more agile, more data-mature on the higher ed side, and I think that the edtech world is becoming more adaptable, working with higher education institutions. And I think that we’re going to see a future where some of these forces are going to allow us to fine-tune these arrangements. But 10 years ago, several years ago, when many of these concerns started getting a lot of attention, are working themselves out just by nature of engaged conversations and the expectations shifting, increasing.

I also think that there's an opportunity for us to work in some new forums where higher education accreditors and the edtech industry can fine-tune, through best practices, sharing best practices, empowering, especially the institutions that might not have the resources, to negotiate and build their own contracts in as effective a way as possible, would get the support and resources to do that. So I really would like to see that trend continue because I think that the strongest institutions are going to be those that have solid strategic alliances that allow us to bear the changes and sudden shocks in the system, because we’re going to be looking more and more at audiences outside that traditional residential undergraduate population.

Mushtaq Gunja: Well, thank you, Dean Otter. I mean, I feel like I have learned a ton about third-party servicers broadly, about OPMs more specifically, and thank you for allowing us to look into how you’re approaching these issues at the School of Continuing Studies. This has been incredibly valuable. So thank you so much.

Kelly Otter: Thank you for the opportunity. It was great to talk with you all today.

Sarah Spreitzer: As always, you can check out earlier episodes and subscribe to dotEDU on Apple, Google Podcasts, Spotify, Stitcher, or wherever you listen to your podcasts. For show notes and links to the resources mentioned in the episode, you can go to our website at acenet.edu/podcast. While there, please take a short survey to let us know how we’re doing. You can also email us at [email protected] to give us suggestions on upcoming shows and guests.

And finally, a very big thank you to the producers who helped pull this podcast together: Laurie Arnston, Audrey Hamilton, Malcolm Moore, Anthony Trueheart, Rebecca Morris, Jack Nicholson, and Fatma Ngom. They do an incredible job making this happen and making Jon, Mushtaq, and I sound as good as possible. Finally, thank you so much to all of you for listening.

​​Each episode of dotEDU presents a deep dive into a major public policy issue impacting college campuses and students across the country. Hosts from ACE are joined by guest experts to lead you through thought-provoking conversations on topics such as campus free speech, diversity in admissions, college costs and affordability, and more. Find all episodes of the podcast at the dotEDU page.

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