Earlier this year, the Department of Education
announced
it would implement new rules that would make it more difficult for colleges to use outside contractors to help them educate their students. The unexpected and expansive nature of this new guidance sent both colleges and their business partners scrambling to interpret the new rules and figuring out a way to carry on business as usual despite this massive disruption. While the intention may be to stick it to the businesses managing to eek profit out of this wildly inefficient and hyper-regulated industry, it’s the students who will pay for this ill-advised change.
The new guidance would require businesses working with schools to participate in extensive oversight programs previously reserved for contractors supporting the servicing of federal financial aid dollars. Countless businesses that fall under the newly proposed rules are not in compliance with this new guidance and some may not able to comply with some of the new standards.
Originally intended to go into effect in May, delays have pushed the enforcement of the new rules to six months after the publication of the revised final rule, which will likely come later this year. Regardless of when this new regime takes effect, it’s likely to have the unintended consequence of squelching innovation in a sector that is notoriously static and in need of serious reform.
Higher education has always been slow to adopt new technology, with online education as a prime example. The combination of it being a highly regulated industry and the rigid governance structures at institutions makes the industry seemingly allergic to change. Third party businesses, called Online Program Managers (OPM,) ultimately facilitated the development of the vast majority of online programs that exist today; programs that have expanded the opportunity for college enrollment for millions of students who were unserved by brick-and-mortar programs. Without this industry, each college seeking to offer virtual education would have had to reinvent the wheel when it came to the services that enable delivery of an online education. OPMs enabled innovation that would have been practically impossible otherwise.
Partnerships with other third-party businesses allow for innovation in similar ways, offering a way for institutions to advance their educational offers without having to build the capacity in-house and enabling countless other innovations that would still be off on the horizon.
This announcement follows a
report
from the Government Accountability Office, prompted by concerns among Democratic lawmakers. The report identified a lack of oversight over the growing OPM industry and its engagement with institutions of higher education.
But the new system of oversight will apply to all businesses that work with colleges to support “the functions of student recruiting and retention, the provision of software products and services involving Title IV administration activities, and the provision of educational content and instruction.” This goes far beyond increasing oversight of OPMs and vastly expands the set of parties subject to increased oversight.
For example, the American Council on Education (ACE) noted in a
letter
to Secretary of Education Miguel Cardona that the new guidance would apply to a vast range of (seemingly) unintended targets including affiliated hospitals; local police departments; course material publishers, or software providers.
Pushing colleges to operate in a more isolated existence will hurt the students that this guidance intends to help. Just as international trade is good for nations both nations engaged in the trade, allowing colleges to engage, relatively unencumbered, with a marketplace for educational services can help students while also yielding profit for businesses. A high quality, modern system of higher education depends critically on institutions being able to tap into the innovation that comes from and can be supported by the third-party business relationships.
In the context of broader policy efforts of Democratic lawmakers, past and present, this has the appearance of an attack on profit-seeking in higher education. The Obama administration took a major jab at for-profit seeking in 2014 when they raised the bar for participation federal student aid programs for-profit colleges while allowing public or non-profit colleges to operate with lesser student outcomes. This new guidance, if implemented as written, may effectively advance the mission of squelching for-profit sector involvement in higher education by making the business environment untenably inhospitable.
The new rules are hastily crafted and ill conceived. The ambition to protect students from programs that don’t deliver results is the right one. But the effort and political capital spent on this effort would be better spent on shoring up the broader system of accountability for colleges: pushing all colleges to prove their worth, on economic grounds, to maintain participation in federal student aid programs. Hopefully the Department will take the time afforded by the delay of implementation to hear from the parties affected by the proposed change and will revise the new rules accordingly.
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This article originally appeared in the AEIdeas blog and is reprinted with kind permission from the American Enterprise Institute.
