New Legal Analysis: Department of Education's Bundled Services Loophole is Illegal, And Contrary to the HEA’s Incentive Compensation Ban

FOR IMMEDIATE RELEASE:
March 13, 2023 

MEDIA CONTACT:
press@defendstudents.org | 202-734-7495

New Legal Analysis: Department of Education's Bundled Services Loophole is Illegal, And Contrary to the HEA’s Incentive Compensation Ban 

Student Defense calls on ED to protect students by rescinding 2011 Dear Colleague Letter

Student Defense today released two new legal and policy briefs in response to a Department of Education request for public comment related to online program management (OPM) regulation and oversight. The legal brief finds that a bundled services loophole established in a 2011 ‘Dear Colleague’ letter from the Department of Education is illegal, while the policy brief demonstrates how the loophole harms students by incentivizing predatory student recruitment practices.

Colleges and universities engage third-party OPM companies to provide bundled services such as recruitment, marketing, curriculum development, and instruction on their behalf. The loophole allows these bundled service providers to sidestep the Department’s incentive compensation ban, which prohibits compensation from being directly linked to student enrollment. OPM providers have come under recent scrutiny for employing deceptive marketing tactics in an effort to boost enrollment — exactly the type of behavior that prompted the incentive compensation ban in the first place.

“The gaps in online program management accountability are the next frontier in program oversight and accountability,” said Student Defense Litigation Director Eric Rothschild. “These programs can increase access to higher ed, but too many students have been defrauded by the misleading marketing of companies whose profits depend on enrolling as many students as possible at all costs.” 

“These new analyses underscore the need for the Department to rescind its 2011 Dear Colleague letter to prevent profiteers from gaming the system,” said Student Defense Senior Counsel Libby DeBlasio Webster.

Student Defense recently filed a lawsuit against the University of Southern California’s Rossier School of Education and 2U, Inc. — a for-profit OPM provider — alleging they engaged in a scheme to boost enrollment by doctoring the school’s U.S. News & World Report rankings and using those rankings through deceptive marketing tactics.

A full copy of the legal and policy briefs can be found on the Student Defense website.