Despite regulation efforts and student complaints, this popular edtech platform marches on

“Because revenue sharing with institutions is central to their business model, the Ed Dept’s expanded definition of a third-party service provider could pose significant challenges to 2U's business model in the future," said Matt Winn, Tambellini Group's senior analyst covering academic technology.

With the pandemic accelerating higher education into the online space, colleges and universities have been forced to keep up with rampant student demand. As a result, online program managers (OPMs) have become one of the hottest edtech assets a college and university can partner with, but few OPMs are big enough to stand toe-to-toe with 2U, Inc.

2U recently announced two new degree programs with Cabrini University, extended its contract with Southern Methodist University and signed an agreement with Arcadia University to launch its online Doctor of Education program. Additionally, last year they acquired another popular edtech company edX, which one American business magazine listed as the third-most innovative education company of 2023.

However, 2U has gained notoriety recently for allegedly engaging in deceptive recruitment strategies and contributing to students’ high debt load. Students and the federal government have waged lawsuits and called for stronger oversight of the edtech company. Yet, 2U has managed to fight back on all fronts. Should higher education hold faith in 2U despite its recent spats?

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Student lawsuits

Online students at the University of Southern California have sued the private Los Angeles school in two separate lawsuits relating to its online programs’ deceptive recruitment, which 2U helps operate. In one case filed late last year, Student Defense and Tycko & Zavareei LLP filed a lawsuit against USC and 2U for luring students to enroll in the Rossier School of Education using manipulated U.S. News data. According to the suit, 2U “assumed responsibility for recruiting these online students and was paid a substantial percentage of tuition.”

Additionally, students sued USC again in a class-action lawsuit last month, alleging the university’s online Master of Social Work (MSW) program misrepresented its program’s quality. Specifically, the university advertised its online and on-campus programs were equal in value; however, students found that its online MSW offerings, provided by 2U, were outdated and inferior in quality.

“They paid an unjustifiably high price for a program that was promised to be the same as the on-campus version when in reality, it was run by a for-profit education company. Students were lied to and now are standing up and fighting back,” said Eileen Connor, president and director of the Project on Predatory Student Lending, which is helping to represent the plaintiffs, in a statement, according to USA Today.

While 2U was not named a defendant in the MSW lawsuit, they quickly addressed it, claiming the allegations were “without merit” based on their call recordings and student feedback forms.

Pending federal regulation

Last year, several U.S. Senators voiced their concerns about the dangers of online program managers (OPMs), such as 2U. Aside from engaging in “aggressive marketing and recruitment practices,” the senators were also concerned about OPMs’ ability to burden students with high costs.

“We continue to have concerns about the impact of OPM partnerships on rising student debt loads,” wrote the senators. “OPMs often receive 50% or more of students’ tuition. These agreements may create a disincentive to lower costs.”

A year later, the Department of Education announced that it expanded its definition of third-party services to include OPMs, such as 2U. The department recognized that because the function of OPMs is interlinked with institutions’ Title IV administrative activities, companies like 2U must also comply with TPS requirements as well. Consequently, the edtech company would be forced to report their business dealings and be subjected to tighter regulation, oversight and potential audits.

However, 2U has since sued the Department of Education, claiming it exceeded its authority and did not collect enough input from outside stakeholders to make the decision. Additionally, several higher education leaders have asked the department to rescind the guidance, such as Ted Mitchell, president of the American Council on Education, who spoke for more than 80 higher education associations.

The department has since delayed implementing the ruling on OPMs. However, if the department eventually decides to rule against OPMs, 2U can find itself scrambling for a new revenue stream.

“Because revenue sharing with institutions is central to their business model, the Ed Dept’s expanded definition of a third-party service provider could pose significant challenges to 2U’s business model in the future,” said Matt Winn, Tambellini Group’s senior analyst covering academic technology in an email.

Alcino Donadel
Alcino Donadel
Alcino Donadel is a UB staff writer and Florida Gator alumnus. A graduate in journalism and communications, his beats have ranged from Gainesville's city development, music scene, and regional little league sports divisions. He has triple citizenship from the U.S., Ecuador, and Brazil.

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