How 2U, Pearson, and Other Companies Are Profiting Off of Online Learning at Top Colleges - The Atlantic

How 2U, Pearson, and Other Companies Are Profiting Off of Online Learning at Top Colleges - The Atlantic:

How Companies Profit Off Education at Nonprofit Schools

Online program managers earn millions by designing and marketing virtual learning options at big-time colleges.

 Selling the dream of a college education is big, profitable business. In 2014, four companies that own and run for-profit colleges collected in excess of $1 billion each. To boost their enrollments and profits, many for-profit schools pioneered modern marketing tactics such as websites that collect information to generate marketing leads, text message follow-ups to inquiries, and phone banks with ambitious “career counselors” ready to help students complete financial-aid requirements and enroll. As a 2011 Senate report found, “[for-profit college] recruiting managers at some companies created a boiler-room atmosphere, in which hitting an enrollment quota was the recruiters’ highest priority … [and] recruiters’ salaries at many for-profit colleges were tightly tied to enrolling a certain number of new students.”

“We all have the impression that commission-paid sales people will say anything to make a sale, and that has certainly been true in higher ed,” Robert Shireman, a senior fellow at The Century Foundation, told me. Shireman is a former Department of Education deputy undersecretary in the Obama administration and is known for organizing the federal response to emerging signs of predatory for-profit education and career training in 2009.

Even though Shireman and the department moved to block paying salaries or bonuses based on how many students are signed up, they could do little to stop for-profit companies from making money based on how many students they enroll. More students equals more profit, and as long as there are for-profit schools, the link between getting more students and earning more money will incentivize creative and assertive marketing and recruitment. That’s part of what you get with for-profit schools; it’s expected.

But the practice of aggressive recruiting of college students isn’t limited to for-profit colleges: Students who study online at many public and private non-profit schools are being recruited in similar ways and are handing over large percentages of their tuition—hundreds of millions of dollars total a year—to companies that profit based on the number of students who enroll. The result is a very lucrative but nearly invisible education market in which students pay, companies profit, costs escalate, and the prospect of scandal lingers.

“There are companies literally taking 80 percent or more of tuition.”

In this marketplace, various reports suggest that students studying online at public and non-profit colleges give an average of about half of their tuition to for-profit companies known as online program managers (OPMs)—companies that design, run, and market the virtual programs for colleges. Because an online bachelor’s degree can easily cost $60,000, those for-profit companies, by taking 50 percent of student tuition, can make as much as $30,000 per student per awarded degree. And it’s often more. According to John Katzman, who founded How 2U, Pearson, and Other Companies Are Profiting Off of Online Learning at Top Colleges - The Atlantic: