July 25, 2024 | WASHINGTON, D.C. — Today, the online education technology firm 2U, Inc. (NASDAQ: TWOU) filed for Chapter 11 bankruptcy in coordination with its largest creditors. 2U’s bankruptcy comes as the company’s executives have taken a series of unsuccessful steps to shore up the failing firm. At the same time, colleges and universities pulled back deals with 2U, enrollment and revenues declined, and investigations and lawsuits alleged the firm defrauded students across the country.
In response to today’s news, SBPC executive director Mike Pierce issued the following statement:
“2U’s executives have shown time and again that they have no strategy to turn around their failing company. A decade ago, Wall Street and Silicon Valley investors fawned over 2U while ignoring signs that fraud and abuse were central to the 2U model. Today, many of these investors are now working with 2U executives to use federal bankruptcy laws to keep the lights on at 2U—a perverse outcome when those same bankruptcy laws deny a path to a debt-free future for the students harmed by 2U’s schemes. It is long past time for federal and state regulators to take action and hold 2U and its executives accountable for cheating students.”
Background
2U, Inc., a prominent online education technology company, filed for Chapter 11 bankruptcy protection today. 2U has become one of the nation’s most prominent online program management (OPM) companies due to its high-profile partnerships and rapid growth.
Founded in 2009, 2U is a private company that partners with federally accredited universities to provide a range of services often including marketing, enrollment management, and student retention assistance, as well as course design and instruction. 2U promises its students “high-quality digital education” through both degree and “alternative credential” programs to help “propel their careers,” however, the company has faced numerous allegations that it sold students low-quality certificate courses and degrees using deceptive marketing practices, often in partnership with brand-name public and private nonprofit colleges.
For years, 2U, Inc. has also faced substantial and growing financial struggles. Since 2U’s purchase of edX in 2021, the company has seen declining revenues amid over $900 million of corporate debt. In November 2023, 2U reported declines in enrollment in both its degree programs as well as its institution-affiliated bootcamps, to which the company responded by laying off hundreds of employees in order to reduce future expenses. 2U also replaced its CEO, but despite these actions, the company continued to see declines in student enrollment.
From April 2023 to April 2024, 2U’s stock price fell almost 96 percent. In a March 2024 SEC filing, it was disclosed that 2U was out of compliance with the Nasdaq Minimum Bid Price Rule, and needed to increase its stock value above $1.00. In response, 2U completed a 1-30 reverse stock split but continued to see declining valuation. At market close the evening prior to the bankruptcy announcement, 2U had a market cap of less than $12 million, down from over $800 million at the time 2U purchased edX.
Further Reading
Read SBPC and Partners 2024 the letter to regulators on 2U: SBPC, PPSL, and CAP call on CFPB and ED to Protect 2U Borrowers
Read SBPC’s 2024 blog warning about looming collapse of 2U: Students Should Not Bear the Financial Burden when Corporate Greed Shatters the Online Higher Education Market
Read SBPC’s 2022 warning about 2U: ED Needs to Begin Planning Now for the Possibility of a Large OPM Blowing Up
Read SBPC’s 2021 report on OPMs: Pushing Predatory Products: How Public Universities are Partnering with Unaccountable Contractors to Drive Students Toward Risky Private Debt and Credit
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About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.