Reining in OPMs with Clare McCann

In this episode I interview Clare McCann, Higher Education Policy Fellow at Arnold Ventures. Clare and I discuss the challenges in crafting Federal higher education policy and the need to create clearer guardrails to rein in the kinds predatory practices that concern policy makers about the OPM industry. 

Transcript

Eloy: 0:09

​I'm Ilo Ortiz Oakley, and welcome back to the Rant, the podcast where we get behind the curtain and break down the people, the policies in the politics of our higher education system. In this episode, we talk more about the recent Department of Education changes to the Dear Colleague Letter addressing revenue share agreements and online program program management companies, otherwise known as OPMs. We'll also get into the expanded definition of a third party servicer, and today I'm joined by a friend and well-known policy expert in higher ed Claire McCann. Claire is currently a higher education fellow at Arnold Ventures. Welcome to the podcast, Claire.

Clare: 0:51

Thanks so much. For having me.

Eloy: 0:54

All right, well let's jump right into some of these questions cuz I I know how much time you spend thinking about these issues and it's important that we do think about these issues because. Given the ever-changing landscape of technology in higher education, I think it's always a challenge for the federal government to keep up with those changes. So let me ask you let's first start with where you're at now. So you recently joined Arnold Ventures after serving in the Biden administration and the Department of Education, specifically in the office of the Undersecretary. Tell our listeners about your new role. And tell us a little bit about what Arnold Ventures does.

Clare: 1:34

Yeah. Well I was very excited to join Arnold Ventures last year. AB is a philanthropy that's dedicated to tackling some of the most pressing problems in the US and that includes higher education. So Arnold Ventures has really approached higher education from a consumer protection perspective. First. Seeking to end predatory behavior in higher education and, and increase the return on investment that students and taxpayers are getting out of the system. And that agenda has lots of alignment with my own career and my own work over the last decade, which has largely focused on how we can improve outcomes and increase accountability in higher education. So in this role, I'm working a little bit independently of the philanthropic mission, a little bit independently of the grant making work. I'm a fellow. I'm doing research and policy advocacy work for the organization, and it's, it's given me a, a great way to work with some of the great organizations in our field and, and engage on some of these important higher education issues.

Eloy: 2:40

That's great. And I know Arnold Ventures has been very much involved in a lot of these conversations. We very much appreciate their role in higher education as you said, not only as, as a funder, but also as a thought leader on some of these very important issues. Now you yourself, you've served in two different administrations. I had the great pleasure of serving alongside you at the Department of Education at the start of the Biden administration. So, you know, just how difficult it is to draft federal policy and balance all of the competing constituencies, which there are many in this space. What do you believe are some of the issues that led to. The department's pushed to revise the dear colleague letter, otherwise known as the dcl. And about the expanded definition of third party servicer, how, how do you think they got to this point?

Clare: 3:40

Well, you're absolutely right. It is not easy to draft federal policy. We both know that really well. In this case, I think the department acknowledged their impetus for. Going back and taking another look at the third party servicer Guidance was a GAO report that came out almost a year ago now. And that report said that the department really needed to develop a stronger approach to how it was monitoring college's arrangements with these online program management companies, OPMs. And so basically GAO looked into OPMs found. This is a really fast growing industry. Hundreds of colleges offering thousands of programs with OPMs. And those OPMs are very often providing the same kinds of services that on behalf of schools that are subject to the incentive compensation ban, which has been in the Higher Education Act since the early nineties. So that includes student recruitment and, and retention work. GAO pointed out, you know, the education department assesses. Compliance with the incentive compensation ban through annual compliance audits of schools. But in cases where schools have outsourced those core activities to another entity like an opm, it's not really generally getting those compliance audits. Most schools aren't reporting the entities that they're outsourcing those services to. So, you know, GAO talked to some of the auditors that do these annual compliance audits. They said they'd never been told by one of their institutions that they had an OPM arrangement, even though GAO could easily confer from public information, they do. So the GAO really faulted the education department for this. They said the department isn't doing enough. To make clear to colleges that they should be reporting their OPM arrangements and sub subjecting those contracts with OPMs to Department of Education oversight. So the department said, when this came out about a year ago, the department said, yeah, we agree. We're gonna take steps to improve that guidance. And so that brings us to the guidance that came out which the guidance has always provided a, a list, a non-exhaustive list of the types of services that qualify an entity as a third party servicer. So in the new guidance, the department has added some of the core functions that OPMs are performing, namely recruitment, retention, the provision of instruction. Those all got added to that list of examples. The department, you know, acknowledges they have said how hard it is to write guidance around a gap in the rules. So as a policy maker, right, the challenge is knowing what you don't know. And the TPS regulations in particular are very challenging for the field to understand because it's really fact specific. It really depends on the circumstances of each servicer and each institution. So they've built lots of stakeholder feedback opportunities into this process. They've extended the effective date of the new guidance and the comment deadline, and I think they're gonna carefully consider what they hear from the industry and from advocates to make any additional adjustments that they need to make.

Eloy: 7:04

So part of this is at the core, it's an issue of transparency for Title four institutions, the public policy makers, being aware of what kind of contracts they're entering into and, and what parts of their Title four obligation they may be. Contracting for somebody else to, to carry out. Is that a, a, a fair statement?

Clare: 7:26

Yeah, Absolutely. Absolutely.

Eloy: 7:28

so for our listeners Claire, I think when most people think about third party service, or the first thing that comes to mind is particularly if they have a student loan, is their student loan servicer are there. Other types of third party servicers that have been part of the definition to date, or is that accurate to say that when most people think about it, they're thinking about a student loan servicer?

Clare: 7:55

That is probably what most borrowers think of. I think for an institution, a third party servicer is really any entity that is performing a core Title four function. So a lot of times this has been where an institution is contracting. With another entity to help with things like verification or FAFSA processing, kind of some of the, the mechanics behind this. It can be a pretty extensive universe. You know, I think we've seen an increase in institutions outsourcing a lot of their services and, and these Title four functions kind of carry through from the institution to the entities that they're contracting with for that.

Eloy: 8:36

Right. So let's talk a little bit more about some of the. Issues that you brought up, specifically these predatory practices. You mentioned them in your work with Arnold Ventures. You mentioned them in the work around the concerns about OPMs and, and you've served in various policy roles, including as a senior policy advisor in the Obama Department of Education and as a Deputy Director of Federal Higher Education Policy at New America. So you've been examining this landscape for quite some time. During these years there's been quite a bit of fluctuation in the for-profit, higher education sector. How, how would you characterize the for-profit sector today and what concerns do you have today that may be different than the concerns that were raised during early Obama administration years?

Clare: 9:31

I would say the, the for-profit sector today is. Is a lot messier than it was a decade ago. You know, when I, when I joined the Obama administration, I joined right between the collapses of Corinthian colleges and I t t Tech. So there were, at the time, there was lots of energy being expended on understanding the actions of for-profit colleges and the risks that they were presenting to students, both in the ways they operated and in the ways they closed.

Eloy: 10:01

Mm-hmm.

Clare: 10:02

And one of the big tasks that we undertook at that point was establishing a borrower defense process, really building the plane as we were flying it by trying to process claims under the old regulations, which had hardly been used, and were really clunky for those purposes, while also remaking that process through the new regulations to today. I would say, and this is I think a really great question to think about what's. Different over the last 10 years. But I do think the for-profit industry today looks very different. So for starters, it's a lot smaller than it was. Obviously for-profit college enrollment peaked during the great recession. It was smaller by 2015. When I started at ed during the Obama administration, it was maybe 1.6 million students or so. It's even smaller now. Closer to 1.3 million. And increasingly the industry is not just in for-profit colleges. It used to be a lot easier to find for-profits. So we've seen public and nonprofit colleges starting to acquire for-profit colleges, so trying to convert them away from for-profit status. But often we see them keeping the school largely the way it was before the acquisition. It's kind of separate entity, but related. To the public or nonprofit. We have also seen, relevant to this issue, we've seen public and nonprofit colleges that are building out new programs that they outsource to for-profit entities, like online program management companies. So it's a lot harder today I think, for policy makers who are concerned about consumer protection issues. To identify the kinds of tactics that were so common among the most notorious for-profit colleges. Because they're not concentrated all in the same schools anymore. It's much, much more diffuse.

Eloy: 12:02

When you thought about the for-profit industry, you thought about a half dozen or dozen or so institutions that we all knew about, these are for-profit higher education institutions you know, the University of Phoenix's of the world. Now, most of those have either shrunk or have gone away, and now you see. Different parts of the functions of a higher education institution becoming outsourced to for-profits there's this argument out there that many publics don't have the core capacity to offer online content, and so they. Contract it out or otherwise acquire it. Do you see that that function should go away, or do you just see it as, should be more transparent in the kinds of transactions that are happening, be between public non-profits and for-profit entities?

Clare: 12:58

I think online education is not going anywhere. Right? Certainly during the pandemic that became extremely clear. I think my concern is with institutions that are approaching it in, in the wrong way where maybe it's. Less of an authentic commitment to developing. Expertise in how to offer online education effectively and how to make sure students are well served and more, more of a rush to build out online enrollment, maybe as a, you know, a cash cow for the institution or or to otherwise kind of compete with on bigger online institutions. And so I think, I think that's the real question here is are institutions. Willing to approach online education, not just as an end in and of itself, but, but as a real commitment to serving students well and making sure they're doing that responsibly is a really important part of that.

Eloy: 14:03

I've heard from many of my colleagues. You know, part of the, the challenge right now is just an awareness of what. The department is trying to do how would you respond to critics of the expanded definition of a third party servicers proposed currently? Who say that the, the language goes too far, that it sweeps up. Too many types of contracts in institutions creates a burden on institutions to report all these contracts and has some significant unintended consequences that they feel would undermine innovation in higher education. You,

Clare: 14:40

I think what the department's trying to do here is really make sure that innovation is happening responsibly. It's, there can be human costs to innovation and, and the department's job is to protect students and taxpayers. From those potential downside risks. You know, I think there's a growing sentiment among experts and advocates that what we're seeing in OPMs at public and nonprofit colleges is starting to look a lot like the problems that led Congress and the education department to crack down on for-profit colleges in the past. So Stu, we still see students and taxpayers bearing the cost of past wrongdoing. You know, they've got student loans that they're trying to seek discharge through borrower defense, for instance. They, lots of borrowers out there who hold degrees that didn't pay off for them. I think, you know, it would be a real mistake for the education department to let that happen again by allowing for-profit entities that are working in hundreds of colleges across the country to just operate outside of the law without, without any oversight. And that's really what this updated guidance would do. It doesn't mean that institutions can't work with OPMs or outsource some of their core Title four functions to outside contractors. That's still absolutely something they are permitted to do, but it brings those partners of institutions into the fold of Title four oversight. I think that's what Congress intended when it wrote the third party servicer law. That's what the GAO recommended last year. And you know, of course I will be the first to say the oversight we do of colleges already is not enough to protect students. But we do at least have some baseline requirements for colleges that are getting federal money. Instead, a lot of these third party servicers are getting millions of federal dollars. They're getting it through those colleges and no one's checking to make sure they're following the rules so that the new guidance would fix that, what I would call a, a glaring hole in federal oversight.

Eloy: 16:52

Right. As I hear from my colleagues and I'm sure you can appreciate this because you know, you were in the Obama administration. You took a break in between that other administration that came in and then you came in with the Biden administration. I hear from my colleagues that it would be nice if we had some consistency that we keep going to the extremes. We went to one extreme in the Obama administration. We went to another extreme in the Trump administration, and now they're getting. Push back and, and I'm sure this is true on a lot of things, title ix, any of a number of issues. What would you say to my colleagues who, who run higher education institutions, how should they deal with this kind of extreme policy shifts that come from different administrations?

Clare: 17:45

Know, I absolutely agree. The ideal situation is to have. More stability and more consistency in, in all of these rules. I think the challenge there is you know, we, we don't have a congress that's very functional right now. I, I personally have not seen a lot of me, a lot of institutional leaders on the hill, you know, pushing for an h e a reauthorization that will tackle some of these consumer protection issues. It's a, a system that's working pretty well for people and they they like it the way it is, and so here we are. To the extent Congress is willing to tackle some of these issues, I think, you know, dealing with consumer protection questions in legislation would give institutions. Certainly a lot more a lot more security, a lot more stability. But at the same time, consumer protection isn't gonna hold off until then. It's students who are the ones we need to be thinking about in the meantime.

Eloy: 18:51

Well on that last point centering policy practice funding. All should be centered on the student, the learner. So I appreciate that last comment that you made. Well, listen, Claire I really appreciate you taking some time and, and joining me in this conversation. I think it's an important conversation for people from all backgrounds in higher education to better understand. I think these questions that have been raised by the department, these changes that have been proposed to better protect. Learners are, are an important discussion that I think most people really haven't thought about. So I think it's a great time to, to open up this topic. So I really appreciate you spending some time with me, sharing your expertise and, and sharing your thoughts. So thanks for joining me.

Clare: 19:40

Yeah. I appreciate it. Good to see you.

Eloy: 19:42

All right, well, thanks everyone for joining me on the rant. If you enjoyed this episode as much as I did, hit the like button leave me your comments to hear more episodes. Please subscribe to the channel and follow us on your favorite podcast platform. Take care, everybody, and we'll see you soon on the rant.