New US Department of Education guidance alarming for ed-tech and recruitment providers

The US Department of Education has moved to substantially increase its regulatory oversight of third-party service providers. While its surprising announcement appears to be primarily targeted at contracts with online programme managers (OPMs), the sweeping nature of the new Department of Education rules has triggered fresh concerns for other ed-tech vendors as well as international educators.

In a "Dear Colleague" letter (DCL) dated 15 February 2023, the Department of Education essentially establishes its expanded oversight authority for any third-party service provider (TPS) relationships that a US institution may have. It also obliges US institutions to formally report those relationships to the department.

"[The Department] has reviewed numerous contractual arrangements between institutions and outside entities. These reviews have confirmed that most activities and functions performed by outside entities on behalf of an institution are intrinsically intertwined with the institution’s administration of the Title IV programmes and thus the entities performing such activities are appropriately subject to TPS requirements," explains the 15 February letter. "In particular, the Department is revising its guidance concerning the functions of student recruiting and retention, the provision of software products and services involving Title IV administration activities, and the provision of educational content and instruction. The Department is aware that a large and growing industry has developed to provide one or more of these services as a means of transitioning academic programmes into a distance education format and expanding enrolment. Companies providing such services are sometimes referred to as 'online programme managers,' or OPMs."

We should note that the term "Title IV programmes" refers to federal financial aid for post-secondary students in the US, a programme which is almost entirely confined to US citizens.

While the letter specifically refers to OPMs as an area of focus, it goes on to cast a very broad net of recruitment and programme delivery activities which has in turn triggered considerable confusion about the types of TPS relationships the Department of Education now intends to scrutinise.

For example, the letter specifically indicates that "Recruitment- and Application-Related Activities" are within in its oversight scope, including:

• "Interacting with prospective students for the purposes of recruiting or securing enrollment. This includes, but is not limited to, providing prospective students with information on educational programs, application and document requirements, deadlines, and the enrollment process."
• "Assisting students with the completion of application and enrollment processes. This includes offering admission and enrollment counseling."

The 28 February update

In response to concerns raised by US educators and ed-tech providers around the original 15 February letter, the Department subsequently sent an updated DCL on 28 February 2023 to (i) extend the period for public comment on the new rules and (ii) delay the effective date for their implementation from 15 February to 1 September 2023.

The updated guidance explains, "An earlier version of this letter invited the community to submit comments on the guidance in this letter so that we would have an opportunity to hear from the field about areas that are unclear or could be improved. We recognise that this has created some uncertainty around exactly what requirements and reporting deadlines will apply. Therefore, as noted above, we are adjusting the effective date of the guidance to 1 September 2023. Institutions will be required to report any arrangements with third-party servicers that have not been reported to the Department, and entities meeting the definition of a third-party servicer will be required to submit the Third-Party Servicer Data Form to the Department. Additionally, because we are announcing these changes during a comment period, we have elected to adjust the comment period so that it closes 30 days from the date of this update."

What does this mean for international recruitment?

One of the immediate questions arising from the 15 February/28 February DCLs is whether any of these new oversight rules might extend to international recruitment agents, agent aggregators, or other digital platforms relating to the recruitment of foreign students.

The American Recruitment Council (AIRC) has already asked the Department of Education to clarify its latest guidance, in particular whether or not it applies to international recruitment. In a recent letter to its members, AIRC notes that, "Some AIRC members have expressed concerns that the guidance will prohibit institutions from making incentive payments to international educational recruitment agencies, negatively impacting institution-educational agency partnerships."

AIRC notes that it is in discussions with its law firm to further clarify the Department's guidance, and that it will participate in upcoming Department of Education feedback sessions to provide AIRC's input and to "advocate for AIRC Standards and our member partnerships."

We can imagine that further clarification of the Department of Education's intent will be forthcoming shortly, and especially so after the feedback period closes at the end of March. However, even at this stage, the most likely scenario appears to be that the Department is in fact primarily concerned with contractual arrangements that US institutions have with OPMs, and that it inadvertently set a wider-than-intended scope for its oversight with a poorly worded letter on 15 February.

For additional background, please see:

• "AIRC releases best practices guidance for US institutions"
• "US legislative amendments aim to clarify use of agents in international student recruitment"
• "US statement sets stage for coordinated national strategy for international education"