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Online program management companies existed well before 2U (originally known as 2tor) came on the scene in 2008. But the company’s announcement that year that it was partnering with the University of Southern California on its successful (and expensive) master’s in teaching—a partnership that eventually extended to numerous other graduate and professional programs at USC—could reasonably be viewed as the start of the modern era of online program management (OPM).
That era has in recent years been clouded by controversy and growing scrutiny of the OPM companies that help colleges extend the virtual reach of their academic programs, driving significant change in what those companies do and how they do it.
Which makes it fitting, perhaps, that Thursday 2U and USC announced that that they would largely wind down their 15-year partnership, which in the eyes of consumer advocates and some journalists had come to exemplify how involving companies intimately in the delivery of education could undermine, rather than expand, access and affordability to higher education.
The parties said they would continue to collaborate on a hybrid online clinical program for USC’s division of biokinesiology and physical therapy program but that USC would assume sole responsibility over the next 18 months for the “delivery and administration of services” for programs in the university’s schools of education and social work and its entrepreneurship academy. USC will pay nearly $26 million to 2U to extract itself from the arrangement.
USC and 2U did not address the concerns about the nature of the OPM model directly in the announcement that they had “mutually agreed” to alter their relationship, which they described as “characterized by innovation, commitment, and a shared vision for quality education.”
But in comments on a call with investors Thursday, Chip Paucek, 2U’s co-founder and chief executive officer, said the company was in the process of “rotating out of degree programs that are not performing from a financial standpoint, from a debt-to-earnings standpoint, from a partner relationship standpoint, or for other reasons.”
Paucek said that the market for degree programs has “become more difficult to run due to their pricing or other factors”—an oblique reference to the kind of criticism that has been leveled at USC’s social work program.
The Wall Street Journal’s 2021 article about that program became a flashpoint for the Biden administration and congressional Democrats; it was titled “USC Pushed a $115,000 Online Degree. Graduates Got Low Salaries, Huge Debts,” but the assumption underlying the article was that 2U and companies like it had played a significant role in driving the price of such programs higher. Paucek consistently challenged that assertion, insisting that 2U’s institutional partners were responsible for pricing. The social work program also became the subject of a class action challenging its quality and value.
In his statement to analysts Thursday, Paucek added, “Where we can’t work with our partners to make adjustments to improve these factors, we will consider whether exiting the program makes sense to improve the health of our overall portfolio long term … We believe that affordability is key to the Degree Segment’s success going forward but, as you know, program pricing is a decision that rests with the university partner, so we’ve taken a hard look at our portfolio through that lens.”
Also on Thursday 2U announced that it would add 50 new programs with six institutions using its “flex degree” approach, which gives institutions more flexibility in which 2U services they use and changes the agreements’ pricing accordingly. Many of the online program providers have moved away from full-service revenue-sharing agreements.
“The average price of our flex degree programs is $40,000, about 50 percent less than our full-model degree programs,” Paucek said Thursday.
