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Federal regulations for third-party servicers have been delayed yet again.
After months of promising regulations that could flip the world of online program management on its head, the Education Department is largely leaving OPMs untouched for the remainder of the year.
The department announced Wednesday it will delay a slew of regulations that were expected to be finalized this fall, including those putting new restrictions on third-party servicers, the companies many colleges hire to administer online courses, financial aid programs and more.
In February, the department issued guidance expanding the definition of third-party servicers to include any entity that provides recruitment services for colleges and universities. The department originally said any institution that contracts with third-party servicers, under that broad definition, should submit details about their contracts by May. But it was swiftly hit with widespread outcry for what many called an overly broad definition of an OPM that could bring down unintended consequences, including jeopardizing international student enrollment. In April, the department delayed the guidance yet again.
Now, the department will go through a lengthy rule-making process to change the regulations—but those changes won’t be finalized until 2025. And that’ll only happen, observers say, if Democrats win the presidential election in November.
“I’m surprised they’re going straight into negotiated rule making in this almost doomed-to-fail effort, but they just want to go for it,” said Phil Hill, a market analyst and ed-tech consultant with Phil Hill and Associates. “It’s one final battle—‘We’re going down in a blaze of glory.’”
Stephanie Hall, senior director of higher education policy at the Center for American Progress, a left-leaning think tank, said the rule-making process is necessary because “oversight hasn’t kept pace.” But she and other OPM critics hope new regulations aren’t delayed too long—or put off indefinitely in a second Trump administration.
“It feels like a slow leak in a basement we’re waiting to fix,” Hall said. “If you don’t attend to it, people will drown or furniture will be ruined. And we have a set of substandard programs whose business models are based on siphoning federal dollars away, versus providing a quality education.”
Changes Already Afoot
Although the new rules are in limbo, OPMs have already gone through mass changes: Pearson Online Learning Services, once a leader in the space, sold its online business in 2023, which rebranded to Boundless Learning; 2U, a former behemoth in the OPM world, has massively struggled in recent months. (Boundless Learning officials could not be reached for comment, while 2U officials declined to comment on the latest regulatory delay.)
Some universities and colleges have moved away from OPMs and launched their own programs in-house—either on their own accord or because of state or local legislation that’s begun to gather steam with an eye on OPMs’ revenue-sharing models.
OPMs traditionally offer a revenue-sharing model to institutions, where the OPM pays the up-front costs of launching the program and then revenue from the program is split between the OPM and the institution. Opponents of revenue sharing say it can be predatory, incentivizing servicers to use aggressive, dishonest recruiting methods to attract more students—and more money. Over the years, the OPM model has expanded to now offer “fee for service” models as well, with clients choosing from an à la carte menu and paying up front.
Proponents of OPMs say they’re particularly helpful for small institutions that otherwise lack the resources to launch online programs.
“Even with all the threats, they’re choosing rev share,” Hill said. “There’s a reason it exists, and it’s getting dangerous and politically fraught, but they’re still choosing it.”
Minnesota lawmakers were the first in the nation to ban OPMs from sharing tuition revenue, in May. In California, a state auditor’s report of the University of California system called for more transparency and oversight for its 51 contracts with OPMs, and the system has one year to make those changes.
Whither Revenue Sharing?
The proposed regulations on third-party servicers would not specifically target revenue-sharing models. The Education Department is aiming to address the “incentive compensation”—or revenue sharing —in separate regulations focused on companies offering “bundled services” such as technology support and recruitment. The department said it will issue guidance “no sooner than late this year.”
Depending on how it is written and what is ultimately approved, the guidance could compel the companies to shift away from paying institutions up front in exchange for a share of tuition revenue over time, instead adopting a fee-for-service model that would require campus leaders to use their own money to fund projects.
Regardless of what the Education Department does, that shift will still occur, according to Trace Urdan, managing director at Tyton Partners.
“One way or another, rev share is a goner,” he said. “If the Dems get re-elected, it probably happens more sharply because it does get addressed in 2025. But the end result is kind of the same.”
But OPM companies have already been evolving away from the revenue-sharing model. “They all have a plan” to diversify their business models,” Urdan said. “It’s baked in at this point.”
And whether or not any federal regulations do get passed, Hill believes more states will begin going the way of Minnesota and the UC system and taking matters into their own hands.
“The Minnesota law and the University of California audit were done for a reason; they’re going after models no matter what,” Hill said. “Particularly with public systems, I don’t think they’re holding off.”
While Hall of CAP believes states should continue down that path, she and other advocates are still pushing—and hoping—for sweeping federal regulations.
“We do need a systemic cleanup in terms of how online programs are outsourced,” Hall said. “That being said, nothing is stopping schools or states from doing the right thing for their students. I would love to see a both-and situation.”
