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Domino: A Blog About Student Debt With ED Asleep at the Wheel, the CFPB Must Protect Students from Out-of-Control Online Program Managers

With ED Asleep at the Wheel, the CFPB Must Protect Students from Out-of-Control Online Program Managers

By Ben Kaufman and Claire Torchiana | June 8, 2022

Online program managers (OPMs) are for-profit companies that purport to help colleges expand their online course offerings. But a growing body of evidence shows that OPMs use deceptive marketing and lofty, frequently hollow promises to drive students into massive debt for low-quality educational programs. Along the way, these companies get a startlingly big cut of the tuition revenue they generate for schools, funding mammoth paydays for their executives even while defrauded students languish

Today, we sent a letter to the Consumer Financial Protection Bureau (CFPB) calling on the agency to step in and protect students from predatory conduct by OPMs—something the Department of Education (ED) has proven unable or unwilling to do for more than a decade. Drafted alongside Stephanie Hall of the Century Foundation, our letter outlines the CFPB’s clear authority and undeniable duty to rein in this lawless market.

Advocates have long warned that the rise of OPMs may be little more than a cynical ploy to make a buck at students’ expense, and they have noted that rigorous oversight from ED is necessary to monitor whether these companies are putting students on a path to success. Unfortunately, a report last month from the Government Accountability Office (GAO) revealed that ED is categorically failing to meaningfully supervise the OPM industry despite clear warning signs of student harm and an unambiguous mandate to protect the public.

Borrowers have waited far too long for OPMs’ track record of abuse and lies to spur policymakers and law enforcement into action. With ED on the sidelines, it’s time for the nation’s top consumer watchdog to stand up to the companies scheming to turn higher education into their personal piggy bank.

Read our letter to the CFPB here.

ED’s Oversight of the OPM Market is Broken Beyond Repair

OPMs are private companies that provide colleges with a range of services including marketing, enrollment management, and student retention assistance, as well as course design and instruction. Through their marketing and recruiting functions, these programs drive students towards high-cost private and federal student loans, often from partner lenders. 

Thousands of people at hundreds of schools nationwide attend programs run by OPMs, and some colleges rely on OPMs to generate as much as half of their total student enrollment. The OPM market is rapidly growing, with industry revenues rising to $5.7 billion in 2020 and estimates indicating that schools will hand $13.3 billion to these firms by 2025. However, high-profile scandals have revealed a pattern of OPMs recruiting as many people as possible regardless of whether those students are likely to finish or benefit from a given course, jacking up tuition and student debt loads to boost revenue, and cutting costs by skimping on program quality. 

OPMs’ contracts with schools can include penalties if the university “lowers tuition, raises admissions standards, or otherwise reduces revenue.”

Concerns about OPMs are visible not just among activists and journalists, but also among students and teachers. Those inside universities regularly accuse OPM-backed courses of being a “cash cow” aimed at serving schools’ and industry’s bottom line rather than helping students, with workers at more than one college independently landing on that same phrase to describe their school’s involvement with these companies. And these workers’ fears appear to be well-founded—in one instance, minutes from a faculty senate meeting at a flagship state university revealed that the school views its OPM-backed “bootcamp” programs centrally as one of many “revenue opportunities”—not mainly as a venue for learning. Meanwhile, U.S. Senators have noted that OPMs’ contracts with schools can include penalties if the university “lowers tuition, raises admissions standards, or otherwise reduces revenue.”

In all, there is a clear need for ED, which administers various laws and regulations governing colleges’ relationships with OPMs (and which has the authority “to recover . . .  federal student aid funds associated with” colleges’ violations of certain rules), to vigorously scrutinize this space for harm and misconduct. 

But the GAO’s recent report points to ED being asleep at the wheel while OPMs continuously and remorselessly put students in harm’s way. The GAO’s findings included the following:

  • Nobody, including ED, even knows for sure how many arrangements there are between schools and OPMs. That’s hardly a sterling starting point for supervision.
  • ED’s audits of colleges’ relationships with OPMs are so weak that schools can pass through them with their OPM deals going wholly unexamined. In some cases, auditors told ED “that none of the colleges they audited informed them of any contracts with OPMs,” only for “publicly available information on OPM arrangements” to later show that that was not the case. Oversight of colleges’ non-Title IV “bootcamp” offerings, which generate stunningly poor outcomes for students even according to OPMs’ own data, appears particularly lax.
  • ED has handed much responsibility for diligence over OPM arrangements to schools, but that system is evidently failing. Colleges appear not to be keeping basic track of their OPM arrangements (ED described a school that had partnered with an OPM by saying that few college staff even “knew details about the services the OPM provided”), and in some cases colleges have withheld or redacted key sections of OPM contracts that ED has requested—terms ED would likely need to evaluate to make a fulsome determination of whether schools and OPMs are complying with the law. Worse, ED does not appear to have taken steps to address any of these breakdowns. 
  • Against the backdrop of ED’s inaction, there is evidence that deals between OPMs and schools—as well as staff compensation structures within individual OPMs—may have been designed to incentivize these companies to maximize enrollment at all costs. If true, this would put students at enormous risk and possibly violate the law. 

The GAO’s report includes various recommendations for how ED can and should improve oversight of OPMs. But after a decade of ED allowing these companies to run roughshod over students, there is little reason to trust that ED can reform itself—and even less reason for law enforcement to wait around to see if ED will before acting to protect borrowers.

The CFPB Can and Must Hold OPMs and their Private Lender Partners Accountable

The CFPB plays a key role as a regulator, supervisor, and law enforcement agency in the OPM market, particularly in cases where private student loan companies such as Climb Credit, Ascent, and Meritize get involved in OPMs’ deals with schools. This role for the Bureau exists regardless of whether ED faithfully protects consumers from abusive OPM conduct, but ED’s ongoing inaction has turned the need for the CFPB to weed out harmful OPM practices into an outright imperative.

As our letter outlines, the CFPB has multiple clear sources of authority to protect students and hold bad actors in the OPM space accountable:

  • The Bureau can enforce the federal prohibition against unfair, abusive, and deceptive practices by OPMs, lenders, and partner schools. The CFPB has broad authority to enforce the prohibition on unfair, deceptive, and abusive practices against anyone who “engages in offering or providing a consumer financial product or service; and any affiliate [that] acts as a service provider to such person,” or who provides substantial or material assistance to such persons. That means the CFPB can call out OPMs in so far as they unfairly drive students to take out private student loans through misleading marketing about job placement, program quality, and/or job outcomes; through obfuscation about their relationships with partner schools and lenders; or through any other violation of state or federal law—including ED regulations.
  • The Bureau can enforce key student loan borrower protections baked into the Truth in Lending Act (TILA), severing a critical link in OPMs’ scam playbook. The CFPB administers TILA, which provides vital protections for borrowers across the student loan life cycle. These safeguards include mandates for certain disclosures and limits on the representations that student loan companies can make in their marketing, as well as a ban on the “co-branding” of loan products by lenders and schools. These protections emerged in response to a long, ugly history of lenders paying kickbacks to schools for the favor of directing students to their often risky, expensive products—and now, OPMs and lenders appear to be violating them. The Bureau can hold companies accountable right now for TILA violations, allowing the agency to strike at the heart of the deceptive marketing practices that OPMs rely on.

The GAO’s findings underscored what so many students have already learned the hard way: that after creating the regulatory carve-out that allowed the OPM market to flourish, ED abandoned any responsibility to provide meaningful oversight of this space. ED’s abdication has continued even as evidence has mounted that beneath their slick branding, OPMs are less a conduit for innovation and access than a tool to skim cash from students. 

Right now, the CFPB has the power to step in on behalf of the public where ED has chosen to remain shamefully aloof. It’s long past time for the Bureau to wield these powers and assert its role as America’s consumer financial watchdog.

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Ben Kaufman is the Director of Research & Investigations at the Student Borrower Protection Center. He joined SBPC from the Consumer Financial Protection Bureau where he worked on issues related to student lending.

Claire Torchiana is Counsel at the Student Borrower Protection Center. She joined SBPC from an Equal Justice Works fellowship at Housing and Economic and Rights Advocates (HERA), where she represented student loan borrowers in litigation and discharge applications.

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