2U sues Education Department over third-party guidance

Higher Ed Dive

Laura Spitalniak

April 6, 2023

Dive Brief:

• 2U is suing the U.S. Department of Education over its most recent guidance regulating the relationships between colleges and their third-party contractors.

• The online program manager, or OPM, filed suit against the department on Tuesday and said the department’s new guidance radically redefines the definition of a third-party servicer, something 2U said the agency lacks the unilateral authority to do.

• Third-party servicers — companies that administer any part of colleges’ Title IV federal financial aid programs — share liability for federal student aid and must meet additional regulatory requirements. Under the Education Department’s new definition, OPMs that provide colleges with recruiting and retention services, as well as educational content, will broadly be considered third-party servicers.

Dive Insight:

Hundreds of U.S. colleges use OPM services to start and run online programs, often trading upfront capital from the companies for a portion of their programs’ revenue. But controversy surrounds the fast-growing sector, and the Education Department’s increased oversight into OPMs has been in the works for some time.

Last year, the U.S. Government Accountability Office, an auditing agency for Congress, called on the department to more thoroughly assess colleges’ OPM contracts to ensure they follow federal law and don’t rely on abusive recruiting practices.

With the release of the new guidance in February, the Education Department initially told colleges they would have to report on their OPM contracts by May. Shortly thereafter, it bumped the deadline back to September given the new rules’ complexity.

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