PRESS RELEASE: DFI Leads Coalition to Block Biden Administration and Accreditors from Illegal Regulation of Private Companies Providing Online Higher Education Services

Former Education Department officials say the plan will harm low-income students the most by increasing cost and limiting access to online learning

WASHINGTON—A coalition of former U.S. Department of Education (ED) officials is leading the charge to stop a large higher education accrediting agency and the Biden administration from regulating private companies that provide online higher education services. 

Some private companies, referred to as online program management providers (OPMs), have revolutionized higher education by providing scalable, low-cost college access to millions of Americans in ways that traditional higher education institutions have been unable to provide on their own.

In February, circumventing the required rulemaking process, ED issued a Dear Colleague Letter (DCL) announcing that it would expand the statutory definition of third party servicer (TPS) in the Higher Education Act (HEA) to include OPMs and other contractors, thereby saddling institutions of higher education with additional costly, bureaucratic oversight. Under ED’s proposed redefinition, these colleges and universities would have been required to allow the government access to their higher education contracts, to be based in the U.S., and to submit an annual independent compliance audit. This is a significant regulatory change which, by law, requires cost-benefit analysis and negotiated rulemaking under the HEA.

Pushback from the higher education sector was swift, and ED rescinded the DCL and announced that it would issue a revised DCL in the future, presumably 2024. In the interim, the Middle States Commission on Higher Education (MSCHE), an accreditor of higher education institutions, appears to be short-circuiting the Department’s process and unilaterally imposing the withdrawn DCL on its member institutions. 

In a letter to the president of MSCHE, seven former ED officials with postsecondary responsibilities encouraged the accreditor to “suspend its activities” in this area and said that if ED “still intends to issue a revised DCL in 2024, it must follow the law and enter negotiated rulemaking.”

The letter states, “While we welcome good-faith efforts to address soaring costs and other areas of public dissatisfaction with much of postsecondary education, and we might find points of agreement regarding accountability, affordability, and transparency in postsecondary education, the Department’s approach here is misguided for several reasons:

1. “The scope of the Department’s regulation reaches far beyond previous guidance and regulations and sweeps in many more parties for Department regulation.
   
2. “Any definition that sweeps more broadly than existing law is likely to increase students’ costs and stifle innovation in postsecondary education.
   
3. “New oversight will privilege early adopters and discourage new partnerships.
   
4. “Burdening institutions that contract with service providers will harm nontraditional students most.”

The letter concludes, “Online education has made education more accessible and affordable to millions of students who, for diverse reasons, are not best served by having all of their education in person. This accessibility also tends to best serve minority, low income, and rural students. Layering vague, extensive new compliance costs on their institutions and their institutions’ partners will result in higher tuition and hurt these students the most.

“…we urge MSCHE to suspend its consideration of new policies and procedures related to TPS and OPMs. Separately, we will encourage the Department to withdraw its DCLs and revisit its existing regulations and guidance to align with the statutory definition of a third party servicer. We urge MSCHE, as well as the Department, to focus on encouraging institutions to innovate and contract with third parties without having to fear overreach and stifling requirements by a federal agency or its accreditor.”

To read the full letter and view its signatories, click here.