Documents obtained by The Chronicle have captured several 2U partners’ frustrations with the online-program manager as it attempts to overcome financial turmoil amid close media scrutiny.
According to an internal email attachment summarizing an April meeting of the University Partner Advisory Council, some colleges have felt that 2U — which works with more than 250 colleges and corporate partners to run online degree programs, boot camps, courses, and other offerings — hasn’t communicated enough about its progress toward refinancing debts totaling more than $900 million, and hasn’t adequately equipped its partners to broach such issues with their communities.
“The optics are terrible,” the summary of the meeting reads, “and we have no tools to better understand or communicate with our stakeholders.”
The notes also vaguely allude to some partners’ intentions to move program operations in-house and negotiate contract renewals for shorter terms; further details weren’t provided.
While some sources say a number of the concerns raised have been remediated since last month’s meeting, the notes offer a candid snapshot of the challenges of such partnerships that often stay out of the public eye — especially during moments of crisis.
The material does not represent official meeting minutes, and it’s not clear who on the council (there are 26 members, according to 2U’s website) raised which concerns during the meeting. It’s also not fully clear which portions of the notes were and weren’t shared with 2U leaders before this article was written.
What’s Been Happening
2U has weathered a wave of bad news in the last year.
The online-program manager, or OPM, has nearly $1 billion in total debt. Its former chief executive, Chip Paucek, stepped down in November, just days after news broke that 2U and the University of Southern California were winding down their partnership. The company’s stock prices have plunged, leading to threats that it could be delisted from a leading stock exchange. The U.S. Education Department last month told Higher Ed Dive it was “concerned” about OPMs like 2U failing, and the implications for students.
Yet 2U has publicly stayed optimistic about its outlook, and its leaders have said they expect to refinance the debt by the end of this year. On a quarterly-earnings call on May 2, executives announced that 2U had recently started 42 new degree programs — six with Pepperdine University — and was leaning into alternative credential offerings in “high-demand” areas like artificial intelligence.
The optics are terrible, and we have no tools to better understand or communicate with our stakeholders.
Largely absent from the public discourse, though, have been 2U’s institutional partners. On the whole, they’ve been mum on how the parade of concerning developments at 2U is affecting them and their online offerings — or, at the least, the perception of those offerings, and their sustainability.
The Chronicle has witnessed this firsthand. It reached out to about 20 of 2U’s degree-program partners back in December, wondering: What kinds of questions were these program administrators asking 2U? Were they confident that their current operations would continue? At least 10 declined to comment, or gave boilerplate replies that confirmed awareness of 2U’s challenges but expressed optimism in a resolution. A handful didn’t respond at all.
Hoping to glean more insights, The Chronicle filed a public-records request in early April with three public universities in partnerships with 2U. One of them, the University of North Carolina at Chapel Hill, shared corresponding documents (emails) last week that offered a picture of at least a moment in time.
What the Meeting Summary Said
2U established the University Partner Advisory Council, or UPAC, in 2022 for the express purpose of collecting feedback and ideas from partners. Advisers are unpaid volunteers.
On April 11, Todd Nicolet, vice provost for digital and lifelong learning at Chapel Hill, shot off an email to fellow members of UPAC, including those from Boston, Harvard, and Rutgers Universities, the University of Michigan at Ann Arbor, and the Georgia and Massachusetts Institutes of Technology.
In an attached document, Nicolet recapped a meeting that about a dozen of the council members had held that day on Zoom, alongside drafted talking points for the council to share with 2U.
Most of the recap spotlighted frustrations with communications. One specific complaint cited was the recent news that 2U planned to offer retention bonuses to top executives, including more than $2.3 million to its chief executive and $1.2 million to its chief financial officer. Members reportedly had heard about the bonuses at the same time the media did, and were given “no notice or information to understand the packages.”
The attached notes also stated that, “For one institution, they [2U] cut boot camps with no notice. Institution lost money but more importantly had an upset constituency of students. The lack of notice meant it could not be managed. This is not how you treat long-term partners.”
A few members, according to the summary, had spoken specifically about insufficient communications regarding 2U’s financial outlook. They had yet to receive “a substantive update about the debt” and about refinancing, the notes say. “We recognize there are limitations to what can be shared, but some kind of update is possible and was not provided.”
At least one member brought up the potential implications of a Chapter 11 bankruptcy. (Chapter 11 bankruptcy involves a court-supervised reorganization of a debtor’s assets and liabilities.)
“Bankruptcy carries some additional risk for us that contracts may not mitigate,” the notes say. “Courts may be able to change contract terms unilaterally.”
A fear, it appeared, was damage to UPAC members’ reputations with their colleagues should 2U fail.
“Many of us have been or are advocates for these programs,” the notes say. “If 2U declares bankruptcy, that can hurt our credibility on campus, which is one of our most important assets.”
While the notes do not detail partners’ plans with respect to 2U, a brief portion outlines “some examples of what we are saying to internal stakeholders,” including:
- “Not doing new programs.”
- “Prepared to move programs in-house.”
- “Negotiating contracts renewals for smaller terms.”
- “Continuing to leverage edX platform.”
The Wall Street Journal reported this month that Chapel Hill itself had been “souring” on its partnerships with 2U. The university has ended the contract for its accounting program, and plans to terminate one in public administration. (Nicolet wrote in a statement to The Chronicle that those changes “are not related to anything outlined in the UPAC meeting notes.”)
To be sure, the broader market for online-program management beyond 2U has been undergoing something of an existential crisis. More colleges have grown disillusioned with long-term contracts that siphon off hefty percentages of their program revenues. They’re also simultaneously gaining confidence in building their own online programs and offerings, and since the pandemic, they’ve been re-evaluating how they want to approach online degrees and certificates. The specter of increased government regulation of OPMs looms large as well.
All of that doesn’t translate into wanting 2U to fail, a UPAC member, who asked to talk on background in order to speak freely, told The Chronicle on a call this week. Members are still rooting for 2U — a notion that’s reflected in the notes.
“2U’s ongoing success is important for us and for the industry,” the notes say, citing edX, a 2U subsidiary that provides massive open online courses geared largely toward nontraditional learners.
“In no other place can we reach or recreate a funnel of 50 million learners,” the notes read. “With erosion of public trust in universities, the story of bringing high-quality learning at low cost is one we need to lean into.”
The notes end with bulleted concerns about communication to share with 2U, and a request that the company provide the council with proactive, monthly updates. Replies from a handful of members followed, confirming that the document had captured the council’s conversation and the agreed-upon next steps.
It’s worth noting that The Chronicle’s public-records request ended with April 11. It is possible that further feedback arrived afterward. A March 19 op-ed in Inside Higher Ed by one UPAC member also suggests some members were more satisfied than others at that time with 2U’s communications.
What Came After
2U declined an opportunity to respond on the record to portions of the notes, or to provide an update on how it had addressed partners’ concerns.
Nicolet, at UNC, affirmed in a written statement to The Chronicle that the council’s “primary function is to provide 2U with feedback and counsel that helps support our students’ online experience.” He added that 2U “has valued this feedback, taken our suggestions seriously, and implemented meaningful changes.”
Another UPAC member — the one who’d asked to speak on background — expounded a bit more, noting that 2U has “really made an effort” since that time to provide more regular and robust updates to the group. (Members have been receiving text messages, emails, and webinar invites, for example.)
The member added that recent correspondence — like the quarterly-earnings call this month, where 2U reported “a solid start” to 2024 and a slew of cost-cutting strategies — had left many reassured that the company was “pulling out every stop” to avoid a worst-case scenario like bankruptcy.
David Smith, a UPAC member who is senior associate provost for online programs at Pepperdine University, expressed a similar sentiment.
“Meeting notes offer a snapshot, not a comprehensive picture,” he wrote. 2U “is proactively working to enhance communication and address our concerns, further underscoring their commitment to our shared goals. I am confident that our ongoing collaboration will continue to yield positive outcomes.”
