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Colleges Pull Back From For-Profit Companies Offering Online Programs

Companies that sell marketing, technology, enrollment, and other college services for their online programs – commonly known as OPMs, online program management companies – have been very profitable for some time.

Usually, their agreements with colleges include sharing of the money generated by student enrollments, including tuition, loans, and grants. Regardless of the money paid to a college for an online enrollment, an OPM has taken its share. OPMs have traditionally taken about half of student income from the programs they run, but the percentages can go as high as 70% or 75% for for-profit companies.

For years analysts and insiders criticized the idea of ​​revenue sharing between colleges and the OPM, claiming it drives profit on enrollment, creates pressure to relax admission or retention standards and siphons money from schools. Some predicted that OPM’s revenue sharing model would falter and fail. And some OPMs have faltered.

From the start, it was easy to see why colleges were willing to let someone else create, manage, and sell their courses online – risk free, with no upfront investment.

While at the same time it was hard to understand why the smart people who ran colleges were willing to share their most valuable assets – their brand, the quality of their programs, and their income – with profit-driven outsiders. Plus, it’s always been implausible to me that business-oriented investors and entrepreneurs in PMIs knew more about course design, student engagement, and marketing than the people who actually run colleges, at least. so much so that the colleges thought it was a good idea to hire them to do this job.

Recent news in North Carolina says some colleges and college systems are re-examining the proposition that outsiders can manage their programs better online than they can.

Saving you the click, the news is that the state college system will use $ 97 million to start its own nonprofit online program management operation. The coverage of the change directly quotes that the NC effort “tries to avoid the expense of the profit-driven OPM model for the creation of online education programs.” An NC leader said his goal “is to create an OPM-type non-profit organization.”

North Carolina has, it seems, understood that it is better to own, manage, and market your own online programs than to donate 50% or 60% of your program revenue online each year. It sounds smart. By building instead of renting, North Carolina says its new “Kitty Hawk” program will be self-sustaining within five years.

Under the status quo, schools in North Carolina not only paid millions of dollars a year to outside investor-run companies, but they were also losing their own students to online universities in other states. .

State said, as of fall 2019, nearly half of all state residents taking online university courses were doing so at institutions outside the state. And most of them were enrolled in dubious for-profit or non-profit colleges, such as Liberty University, Strayer University, University of Southern New Hampshire, University of Phoenix, or Grand Canyon University. These five entities alone enrolled approximately 25,000 North Carolina residents in their online programs in 2019.

In other words, North Carolina schools were, and still are, losers to the state’s low-quality online education businesses. and losing money to the OPM companies on the students they kept in the state. The state and its students would do better to reverse the two – keeping their students and their income in the best schools in North Carolina.

What North Carolina is doing is no accident. California has already charted a similar path, investing $ 175 million to create “Calbright,” an in-house OPM for its community colleges. Even Lindenwood University, Missouri’s nearly 200-year-old private nonprofit with a total of less than 10,000 students, now has an OPM, but is moving its program online in-house – launching Lindenwood Global.

Joe Sallustio, new Lindenwood Senior Vice President at Lindenwood Global and host of the must-see higher education podcast, The Ed Up experience, said the school’s decision to own and manage its own online programs made sense.

“Lindenwood will keep the OPM for programs covered by the OPM agreement until the end of the contract. At the same time, I will build Lindenwood Global to rapidly increase market share online, while also putting in place an infrastructure to absorb all students in OPM programs when the contract expires, ”Sallustio said, adding:“ The dependence on with regard to an OPM considerably decreases income. . LU Global will increase its online market share, revenue and build on the university’s 194-year reputation to grow.

When California Community Colleges – the largest education system in the country – and North Carolina State Universities and smaller institutions like Lindenwood and others, all have the same idea at about the same time, it’s a trend. It’s pretty clear that they see and feel the same things.

It may be too early to tell if this trend marks the end of profit-seeking OPM companies. But that might just be the first major sign that their predominant business model of sharing tuition fees and student income is well and truly over. In a competitive university environment, giving up half of your income each year makes no sense.

Going forward, OPM service providers will likely need to demonstrate more value to the schools that hire them and find better and more reasonable ways to collect their compensation.