Additional Clarity into Regulatory Activism in Education

Last week I described a trend that I believe will have an enormous impact on education, particularly for nontraditional and online models.

We all knew that the US Department of Education (ED) would change its regulatory approach with the new administration, and it has been virtually axiomatic that they would directly target the for-profit sector. But recently it is becoming more clear the approach and scope of the ED regulations, and it can best be described as regulatory activism, by which I mean using the regulatory processes to achieve pre-defined end goals. And those goals seem to have a common “protect students from the bad actors” theme, usually based on the involvement of for-profit companies – and not just in the for-profit sector. Some people applaud the changes as overdue corrections to the system, and others decry the changes as overly broad and likely to have unintended consequences, but either way, I think those involved in online education and alternative models should take notice and avoid assuming that only the for-profit sector will face aggressive regulations.

I shared three anecdotes from the past two weeks and then attempted to summarize the common approach taken.

* Use regulatory processes not just as safeguards but also to enable predefined end goals, usually around ‘reining in for-profit’ entities;

* Minimize the amount of time allowed for public comment and debate;

* Informally work through multiple agencies, both federal and state, to set new rules; and

* Worry about the unintended consequences later.

This week at ASU+GSV there has been little discussion about this changing regulatory landscape, with one exception of Paul LeBlanc (president of Southern New Hampshire University). In a discussion with Charla Long, president C-BEN, LeBlanc noted that during the Obama administration there was a dual emphasis on consumer protection and on innovation, but in the Biden administration the full emphasis is on consumer protection. This makes for a tough situation for those interested in educational change through online and hybrid and CBE education, as well as a host of other changes. Of course this description captures the vast majority of the people at ASU+GSV.

The administration at large (going beyond the Department of Education) has been busy over the past week with this regulatory activism, providing three additional examples.

The Leaky OPM Cauldron

The Century Foundation (TCF) has long been deeply involved in pushing for regulatory activism to target for-profit schools and more recently nonprofit conversions (Purdue Global, UAGC, Grand Canyon University, etc). That foundation is not an outside observer, as Bob Shireman in particular has been directly involved in writing or directly lobbying for the changes. In 2019 I described the situation in California and the position on the State Authorization Reciprocity Agreement (SARA).

Back in July I wrote a mini-rant Twitter thread 1 triggered by tens of thousands of California residents losing access to federal financial aid for their online education studies at out-of-state schools. My basic argument was that we were witnessing the consequences of a dance of elephants – triggered by activists who were targeting for-profit institutions, nonprofit conversion institutions, and Online Program Management (OPM) companies – with students caught in the middle.

With this part of the Twitter thread describing the role of TCF and Shireman. They are insiders with fairly direct knowledge of (and crafters of) many regulatory changes.

Sometime in the coming weeks, there will be a policy change announced by the U.S. Department of Education that some of your for-profit contractors will tell you is going to wreak havoc on your budget. Don’t believe them.

The policy change will impact the arrangements you have made to enroll students in your online-only college programs. Companies that provide platforms for colleges’ online courses—known as online program managers (OPMs)—may be taking 50 percent or more of your college’s tuition revenue for these courses through long-term contracts. As it turns out, since most of those contracts involve the companies recruiting students in addition to running the online platform, the tuition-sharing component of these contracts may implicate a federal law that prohibits commission-paid sales in colleges that receive federal aid.

Despite this ban, the Department of Education has let the practice continue since 2011. I am writing to let you know that the practice is under increased scrutiny, and the days for this policy exception are probably numbered. Whether due to the anticipated report from the Government Accountability Office or the next scandal like this one, the department probably soon will need to revise its policy exception and enforce the law as written by Congress.1

The GAO report itself, as noted by Trace Urdan, seems to have been delivered to Congress this week.

The reversal of the policy exception will not be sudden, though, because the U.S. Supreme Court, in a case decided against the Trump administration in 2020, made it clear that policy changes must—even when they involve enforcing an existing law—be carried out in a way that is orderly and fair, not suddenly pulling the rug out from current practices based on policy guidance.

Given the TCF role and the pending GAO report release, I would be very surprised if nothing happens this spring. But I would be somewhat surprised if the changes are a complete reversal of the 2011 exception, taking down tuition revenue sharing models (which, by the way, go well beyond the OPM market). My guess is that the ED will avoid explicit rule-making changes and stick to guidance aimed at stirring the pot. We don’t know what is going to happen, but don’t be surprised to read a lot more about OPM regulations and oversight changes in the next two to three months, including the potential for collateral damage.

Tell Me That You’re Canceling Student Debt Without Canceling Student Debt

Yesterday the Biden administration announced that they are extending the moratorium on federal student loan payments through August 2022. Robert Kelchen has an interesting take that the moratorium will continue throughout the term of the administration.

Multiple news outlets are reporting that the Biden administration will announce a fifth extension of the federal student loan repayment pause that began in March 2020 shortly, with this extension going through the end of August 2022. This news doesn’t seem to make anyone truly happy, with borrower advocates and many progressives advocating for an extension through the end of 2022 and/or outright student debt forgiveness. On the right, conservatives are unhappy with continuing to kick the repayment can down the road when the economy is strong and a sizable share of borrowers could resume repayment (with or without income-driven repayment).

At this point, it seems more likely than not to me that the Biden administration will not resume student loan repayment during its time in office. There is almost no chance that the administration will restart payments in August as Democrats face a challenging midterm election and need every vote that they can get from their base and younger voters. Then 2023 starts the next presidential election cycle. If Biden and/or Harris want to run for office, resuming payments is a terrible way to position themselves in a Democratic primary.

This argument makes a lot of sense to me, and if Kelchen’s guesses are accurate, then what we will be seeing is another example of pre-defined policy making (this time around student debt) ‘informally working through multiple agencies, both federal and state, to set new rules’, with the emphasis on informally. The moratorium is formal, but the impact of continuing extension of the moratorium indirectly sets policy on the general topic of student debt reduction or forgiveness, without directly proposing a direct policy. I guess we’ll need to check back in August on this one.

UAGC Appeal Becoming More Selective

The University of Arizona Global Campus told students Friday it has temporarily lost access to education benefits covered by the GI Bill, which could spell enrollment troubles if it doesn’t soon regain approval.

The loss of military education benefits could deal a bruising blow to the online college, where nearly 10% of the institution’s roughly 28,000 students receive financial aid from Veterans Affairs, according to a snapshot of the university’s student demographics shared in February. The university draws a sizable share of its revenue from VA benefits, with 3,422 of the university’s students receiving a total of $16.5 million from the GI Bill in fiscal 2020. [snip]

UAGC said it received a notice from a California state agency last week that its programs were no longer approved for VA benefits because its headquarters had moved to Arizona. UAGC submitted an application for VA approval in September with the Arizona State Approving Agency, but that agency said it lacked jurisdiction over the institution because it had a California license, according to a university statement.

The university then worked with a California state agency to close UAGC’s California location to move forward with the Arizona approval.

Which state agency? It is the California Bureau for Private Postsecondary Education, according to the Federal Times. The same agency involved in the 2019 ruling that cut off financial aid for tens of thousands of students (a situation fixed later that year).

On March 30, the California State Approving Agency for Veterans Education officially withdrew GI Bill approval for all coursework offered by the University of Arizona Global Campus, formerly known as Ashford University.

The move followed a decision by the California Bureau for Private Postsecondary Education revoking the school’s license to operate in the state. Without that approval, students are unable to use GI Bill benefits to pay for any of the for-profit school’s 90 education programs.

After California took away approval for VA benefits, the federal VA applied that approval more broadly, shutting off all VA benefits. I do not know the details on why this situation happened, and why UAGC was caught off guard, but it is stunning to see a large program lose this federal funding based on paperwork. What I do know is that students are collateral damage again, as noted in Higher Ed Dive.

Still, it’s possible that most students have already had their housing allowances dispersed this month, giving them a buffer, said William Hubbard, vice president for veterans and military policy at Veterans Education Success, an advocacy organization.

“But if the school continues to remain ineligible for VA benefits and the next month rolls around, I mean, there’s no rent,” he said. “That’s really the worst-case scenario in the immediate term.”

The loss of that housing allowance will likely leave student veterans concerned about how those costs will be covered, said Vanessa Sansone, a higher education professor at the University of Texas at San Antonio.

And it could be difficult to help students who need to finish their education elsewhere to transfer to different institutions.

Why did the BPPE revoke the license, why was UAGC surprised, and why did the Department of Veteran Affairs cut off funding without first working with the school to protect students while the paperwork gets worked out? There seems to be more interest in consumer protection as a concept than in actual student protection, even if the move was justified.

Expect More

Admittedly, there’s a bit of speculation and preliminary dot-connecting in my posts on the regulatory activism picture that is emerging, and there are some elements of I hope I’m wrong. But there are some implications for nontraditional education programs and business models that should be explored in more depth and more openly discussed.