Ministry of Education is examining agreements between universities and online degree programs

The Department of Education said on Wednesday it would examine whether a controversial 2011 provision allowing universities to split tuition fees with for-profit online education companies could contribute to rising student debt.

The department also issued guidance to require universities to disclose more details about dealings with companies offering their online degree programs.

Student officials say the tuition-sharing arrangements are encouraging education technology companies to hire more students, leading to aggressive marketing and confusion among students about which parts of their education are being offered by the universities versus the companies.

“Online education has the potential to meet the needs of many students and reduce costs,” Under-Secretary for Education James Kvaal said in Wednesday’s announcement. “But we’re concerned about credit debt growth and want to make sure students are getting bang for their buck.”


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The moves come after Democratic lawmakers in December asked the Department of Education to increase its oversight of deals between online program managers and universities. Lawmakers, including Sen. Elizabeth Warren (D., Mass.) and Rep. Rosa DeLauro (D., Conn.), cited Wall Street Journal reports showing that online program managers often retain up to 60% of students tuition and spend large sums of money to aggressively recruit and market students, including minorities.

The Higher Education Act prohibits colleges and universities from offering incentive compensation based on recruitment or financial aid. In 2011, the ministry issued an exception to the ban that allowed companies to share classes with schools, so long as the companies not only recruit students but also provide a bundle of services like course design and counseling.

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Since then, the number of for-profit online education businesses has increased dramatically along with online student enrollment. The expansion has allowed colleges to offer more graduate programs and other degrees and certificates — often without cutting tuition to reflect the lower costs. The partnerships have been controversial, and school officials who say the programs often have lower standards contrast those who say they make it easier for students from a variety of backgrounds to earn degrees.

In response to the Department of Education’s announcement on Wednesday, 2U Inc., one of the largest managers of online programs, said it welcomed the opportunity to exchange views with the department. “2U is consistent with the Department’s goal of ensuring students can achieve strong outcomes from their investments in higher education,” the company said in a statement.

Last May, the US Government Accounting Office released a report recommending that the Department of Education should increase its oversight of contracts between universities and online program managers and investigate whether tuition-sharing arrangements are consistent with the law. The Department of Education said universities have until May 1 to report their third-party companies, the services they provide and the timeframes of the agreements.

Write to Lisa Bannon at [email protected]

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