2U leadership bullish on OPM business

Chip Paucek, CEO of the online program management company 2U, reassured investors Wednesday that universities are still interested in launching online degrees with the company, despite looming regulatory scrutiny of the OPM business.

“There’s some confusion about what’s going on in the regulatory environment, and I’d like to try to clear that up,” Paucek said in the Q1 investor call.

The U.S. Department of Education issued new guidance in February that expanded the department’s definition of third-party services — a move that 2U, and many universities, have strongly opposed. 2U filed a lawsuit against the department in April “asking the court to declare this guidance unlawful and unenforceable.” The department has since said it is working to revise the guidance.

Also in February, the department signaled its intent to review the so-called “bundled services rule” that allows companies like 2U to recruit students to degree programs for a slice of tuition revenue, as long as their recruitment efforts are offered in conjunction with other services such as instructional design or tech support.

“Essentially in its announcement, the department stated it is reviewing the benefits and disadvantages of revenue-sharing arrangements that have been the norm for many institutions for more than two decades,” Paucek said. 

Rather than being spooked by the potential for a more hostile regulatory environment, Paucek said the company is receiving more inquiries from universities about its OPM offerings. 

“Our velocity of client signings for our new flex model is accelerating, indicating not only our clients’ desires for these revenue sharing models in the current climate, but their confidence in both the immediate and long term future of revenue sharing,” he said.