Potential Fall of Online Program Management Firm 2U Is Poised to Leave Tens of Thousands of Students in Debt
April 2, 2024 | WASHINGTON, D.C. — Today, the Student Borrower Protection Center (SBPC), Project on Predatory Student Lending (PPSL), and the Center for American Progress (CAP) sent an urgent letter to the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Education (ED) warning about the potential collapse of Silicon Valley’s ed tech darling 2U, Inc. (2U) and the need to protect students. Earlier this year, 2U notified its shareholders that due to declining revenue across its business and the strain posed by very high levels of corporate debt, “there is substantial doubt about its ability to continue as a going concern.”
“Students are bearing the burden from risks taken by private-sector ed tech firms like 2U. Companies like 2U are propped up by college partners, including some of the country’s largest public colleges, that have grown dependent on the companies to deliver everything from instruction to recruiting, marketing, and financial aid to students across the country,” said SBPC executive director Mike Pierce. “The writing is on the wall: 2U is spiraling, and the regulators and enforcement agencies have done nothing to prepare for the inevitable impact this will have on the students who were fleeced or misled by a company working in the shadows. CFPB and ED must step up to ensure that these borrowers have access to existing loan discharge programs, and proactively ensure no firm is able to pose this kind of danger to borrowers ever again.”
“The Department of Education has a responsibility to put better oversight policies in place to protect students from predatory arrangements that schools enter into with for-profit companies like 2U. By endorsing these arrangements, the Department is creating a predatory market ripe for abuse that will result in devastating harm to students and their families if the government doesn’t step in immediately,” said PPSL president and executive director Eileen Connor.
Background
The company’s potential downfall will have a sizable impact on students. The company has recently been plagued by financial instability. Since 2U’s purchase of edX in 2021, the company has seen declining revenues amid very high levels of corporate debt. In November 2023, 2U reported declines in enrollment in both its degree programs as well as its institution-affiliated bootcamps. In response, 2U laid off hundreds of employees in order to reduce expenses, replaced their CEO, and began taking steps to shift their business model. At the same time, the announced termination of the company’s partnership with USC marked the end of one of the company’s most visible partnerships, further exacerbating its financial decline. In the last 12 months, 2U’s stock price has fallen almost 96 percent, with a market cap of less than $33 million, down from over $800 million at the time 2U purchased edX. As of earlier this year, more than 67,000 students were enrolled in 2U programs, including more than 43,000 pursuing degrees at programs in partnership with brand-name public and private colleges. However, ED does not currently know where these students are based while enrolled in these fully online programs. For the 1-in-3 students enrolled in 2U programs who are not pursuing degrees—students like those enrolled in “alternative credential” programs including EdX or Trilogy coding bootcamps—the situation may be even more dire.
For more than two years, 2U, along with its partner colleges and private student lenders, has faced credible allegations of deception, fraud, and double-dealing related to the private debt-financing scheme that leaves students with mountains of private debt to attend these programs.
Further Reading
Read the letter: SBPC, PPSL, and CAP call on CFPB and ED to Protect 2U Borrowers
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
Read SBPC’s 2022 warning about 2U: ED Needs to Begin Planning Now for the Possibility of a Large OPM Blowing Up
Read PPSL’s 2023 release announcing the USC lawsuit: Social Work Graduate Students Sue USC Over Online MSW “Diploma Mill”
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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.