College Finances Are Being Eaten From the Inside

In his recent Chronicle essay, “The Great Master’s-Degree Swindle,” Kevin Carey describes how colleges are charging students outrageous prices for master’s degrees in low-paying fields like positive psychology or filmmaking. The situation is shocking. After all, we don’t expect nonprofit colleges to treat students like prey. As Carey points out, the master’s-degree market is less regulated and less subject to “historical norms” than are the markets for bachelor’s degrees and Ph.D.s. Thus, the world of master’s degrees sees more skullduggery than other parts of the academic economy.

Carey’s focus is on up-market colleges exploiting their reputations to separate over-optimistic students from their money. I work at an institution where a different dynamic is at work. Here, in the vast middle tier of American higher education, where college names often include instructions on where to find them, it’s not so much the students who are the prey, it’s the colleges themselves.

The predators here are the online program managers, or OPMs. These are private companies that help colleges that lack the capital, expertise, or self-confidence to launch online programs. Their deals with colleges are often subject to nondisclosure agreements, so the details of the arrangements are hard to nail down. But in general, OPMs provide the money needed to design the new program and offer guidance on how to move an existing face-to-face program online. Once things are up and running, they handle marketing and recruiting. In exchange they want a cut of the action. Usually that means they get 50 percent or more of the tuition, but it is sometimes far more than that. In one disastrous arrangement, Concordia University at Portland — which has since closed its doors — paid HotChalk, an OPM, 75 to 80 percent of the tuition dollars that an online master’s degree in education brought in.

Unlike the exploitative upmarket model that Carey describes, in my world the OPMs are not peddling expensive degrees in nebulous fields like positive psychology. Here, the OPMs want master’s degrees that provide a desirable credential in fields that lend themselves to scalability. The archetype is the master of science in education. In most states, a sure way for teachers to get a raise is to earn a master’s degree. This makes the MSE a credential with a direct and immediate return for its recipient. It’s also a big market — not only are there lots of teachers, there is also a lot of turnover in the field, so the pool of people who want these degrees is large. Better yet, the programs don’t require labs or anything that can’t easily be done online. Low-cost, high-volume programs like this draw OPMs like flies to honey.

Here at Arkansas State, our relationship with Academic Partnerships, an OPM, began in 2009 (it was then called Higher Ed Holdings), with a master of science in education program. In the fall of 2010, we reported a 10-percent jump in our overall enrollment to a then-record high of 13,438. The College of Education’s enrollment increased by 43 percent, which our press release discreetly attributed to growth in “distance learning.” We had already learned the first rule of OPM Club: Never acknowledge that you use an OPM.

Now, 11 years later, Academic Partnerships “manages” virtually all of our graduate programs in education, including the Ed.D. In other areas they have cherry-picked the moneymakers like the master of public administration and master of engineering management.

This fall we have an enrollment of 13,772. That’s down a bit from our record highs five or so years back, but compared with similar institutions, that number looks pretty good.

But all is not well. Back in 2010, when we experienced our 10-percent surge in enrollment, just a few of our programs were run through Academic Partnerships. This fall though, our “distance learning” students are roughly 40 percent of our enrollment.

According to an investigation published recently by the Century Foundation, our situation is not unique. In a finding characterized as a “bombshell,” the author describes universities like mine as having been “taken over from within.”

Based on a dozen responses to public-records requests the foundation sent to public colleges they knew had extensive OPM involvement, researchers found that “an OPM brings in around 40 percent of all students at both Southeastern Oklahoma State University and Arkansas State University; and at Lamar University in Texas, over half of the school’s total enrollment is recruited by an OPM.”

If this small sample is representative of what’s going on at OPM-partnered colleges nationwide, that’s a lot of the market in the hands of the OPMs. It’s also a lot of colleges under the thumb of private businesses.

The financial consequences of this are grim. Besides the fact that OPMs take a large chunk of tuition from these programs, it’s also the case that most students in these programs don’t pay the same fees as on-campus students. That’s a big deal at midtier institutions like mine, where fees are a big source of revenue. Here at ASU, the rule of thumb is that it takes three students in an OPM-run program to create the same revenue as one on-campus student. Online students don’t live in dorms, they don’t buy meal plans, and they don’t get parking tickets, all of which reduces auxiliary revenue. As a result, despite a nominally stable enrollment, we have been lurching from one budget crisis to another.

Covid bailout money may have insulated us, temporarily, from the consequences of our entanglement with Academic Partnerships. But now it seems the chickens have come home to roost. We are currently engaged in a program-viability study that is almost certainly a prelude to cuts. Even though we have a slightly larger enrollment than we did in 2010, it seems we can no longer afford some of the programs we supported then.

A key part of the OPM business model is to offer degrees through traditional brick-and-mortar colleges. Many of the players in the field started in for-profit education and then scuttled to the OPM model when the for-profit industry came under federal scrutiny. Online education is often presented as an innovative way to offer higher education without the expense of maintaining a physical campus (at least, it was before Covid exposed it as the dreary, impoverished cousin of real education). But people are justifiably leery of 100-percent online, for-profit colleges. A physical campus lends an aura of credibility that online for-profits lack.

The genius of the OPM model is that it combines for-profit colleges’ money-making, credential-generating, easily scalable programs with the apparent respectability of being associated with a public institution that has an actual campus and a football team. Best of all, it shifts the cost of running the campus (and money pits like football programs) to in-person students and the public. The cost of paying for reputationally essential but unprofitable academic programs like math, languages, or philosophy are borne by the college. So too are athletics, federal compliance, accreditation, diversity offices, dining services, student-health services, lazy rivers, parking, and so on.

But, as the number of on-campus students paying the fees that support the brick-and-mortar façade shrinks, the system’s contradictions become more apparent. When the roughly 7,000 students in traditional on-campus programs are paying for a campus that was created with 12,000-plus students in mind, that’s a big and unequally shared burden. That we are contemplating program cuts is a sign that our “partnership” is placing unsustainable strains on the institution.

These sorts of strains lead colleges to ethically dark places. At Lamar University, according to the Century Foundation, the existence of a steering committee on which half the representatives are from Academic Partnerships suggests the company’s outsize influence on institutional affairs: “Tuition and fees analyses pepper the agendas. Admission policy changes are also discussed, with [Academic Partnerships] representatives emphasizing the ‘revenue impact’ of admissions policy in discussions with the Lamar team.”

Why are colleges so quick to embark on such dicey deals? For many of them, it is likely because there is often a surge of money or new enrollments to make it look like they will do well. Others are probably concerned that if they don’t jump at these partnerships, another nearby college will, taking students and revenue with them. Deans are under particular pressure to bring in money. And once colleges have signed these deals, it is hard to get out.

Things seem to have taken a disturbing turn at the University of Southern California, where the dean of the School of Social Work has just been indicted on bribery charges. She is accused of engaging in illegal activity not for her personal gain, but to shore up revenues to her program after the initial flood of cash from a deal with the online program management company 2U dropped off. In a tweet, Kevin Carey cautioned that the USC situation shows that “universities should beware of what might happen when they turn their deans into businesspeople charged with monetizing their valuable brands however they can.”

I don’t know what the solution to this is, but some transparency would be a start. Universities are cagey about their deals with online program managers. OPMs themselves prefer to operate from the shadows. There is a reason for this: Both parties know the details of their relationships look bad. Right now, there is no requirement that colleges report their connections with OPMs. Students don’t know when their programs are run through an OPM. Nor do students, the public, or state and federal authorities know what percentage of the tuition from these programs goes to the OPM. If, as seems possible, an institution like mine is sending a fifth or more of its tuition revenue to a for-profit partner, that’s a big deal. I hate to saddle anyone with an additional reporting requirement, but this needs to be public information.

Transcripts also need to reflect how a degree was earned. If it was earned entirely online, that should be stated on the transcript. Advocates of online programs claim that they are the equivalents of their face-to-face competitors. If that’s true, there should be no objections.

OPMs are engaged in a harmful, parasitic relationship with higher education. Because a veil of secrecy obscures these deals, it’s impossible to know how widespread the problem is and how many colleges are in so deep that their OPMs are the ones calling the shots. It’s time to bring the details of these troubling relationships into the light.