State-Level Bans on Revenue-Sharing Agreements Threaten the Core Business Model of Online Program Managers

The rapid expansion of online college degrees over the last decade wasn't just driven by universities adapting to the digital age. It was largely bankrolled by a shadow industry of third-party companies known as Online Program Managers (OPMs).[5]

These companies operate behind the scenes, building the digital infrastructure, designing courses, and—crucially—marketing the programs to prospective students. In exchange, they typically take a massive cut of the tuition revenue, often between 40 and 60 percent.[1][3]

But this lucrative business model is now facing an existential threat. A growing coalition of state legislatures is stepping in to ban these revenue-sharing agreements at public universities, arguing that the financial incentives lead to predatory recruiting and inflated tuition costs.[5]

The movement began in Minnesota, which passed a landmark law in May 2024 prohibiting public colleges from entering into tuition-sharing contracts with OPMs that provide recruitment and marketing services.[1]

Ohio followed suit in June 2025, embedding similar restrictions deep within its biennial budget bill. The Ohio legislation demands transparency, requiring institutions to publicly disclose their OPM contracts and prohibiting the companies from administering student financial aid.[2]

To understand why states are intervening, it is necessary to look at the federal loophole that created the modern OPM industry. In 2011, the U.S. Department of Education issued a "Dear Colleague" letter addressing the Higher Education Act's ban on incentive compensation.[2][3]

The federal law was originally designed to prevent colleges from paying recruiters a bounty for every student they enrolled, a practice that historically led to aggressive and deceptive marketing. However, the 2011 guidance created a "bundled services" exception.[1][5]

Under this exception, universities could share tuition revenue with third-party companies as long as the recruitment services were bundled with other offerings, such as software development or student support. This regulatory safe harbor sparked a gold rush, allowing OPMs to partner with prestigious universities and scale rapidly.[3][5]

Consumer advocates and faculty unions argue that the bundled services exception simply legalized the very predatory behavior the Higher Education Act was meant to stop. Because OPMs only make money when students enroll, they are financially incentivized to aggressively market high-cost, low-value degrees.[1][3]

Furthermore, critics point out that these contracts often trap universities in long-term agreements that are notoriously difficult to cancel. In some cases, OPMs have exerted outsized influence over academic decisions, pushing to expand programs beyond their original scope to maximize profit.[3]

The state-level crackdowns are already sending shockwaves through the industry. The shift away from revenue-sharing forces OPMs to adopt a fee-for-service model, where universities pay a flat rate for the specific services they need.[5]

While this model eliminates the perverse incentives of tuition-sharing, it also requires universities to front the capital to launch and market their online programs. For wealthy, well-endowed institutions, this is a manageable transition.[4][5]

However, industry defenders warn that banning revenue-sharing could severely limit the ability of smaller, resource-strapped colleges to compete in the digital space. Without the upfront investment provided by OPMs, regional public universities and community colleges may be forced to scale back their online offerings.[4]

This dynamic creates a complex trade-off. While the state bans protect students from aggressive marketing and ensure that public funds remain within the university system, they also threaten to slow the expansion of flexible, accessible online education for working adults and non-traditional students.[4][5]

The federal government's stance has only added to the industry's whiplash. After years of signaling that it might close the bundled services loophole, the Biden administration ultimately reaffirmed the 2011 guidance in early 2025, leaving the regulatory heavy lifting to individual states.[2][5]

As a result, the OPM industry is now facing a fragmented, state-by-state regulatory patchwork. Companies must navigate a landscape where their core business model is perfectly legal in one state but explicitly banned across the border.[5]

The financial toll on the industry is already visible. Major players have seen their valuations plummet, and 2U—once a giant in the OPM space—filed for bankruptcy in mid-2024, highlighting the fragility of a business model entirely dependent on a regulatory loophole.[1][3]

Looking ahead, the higher education sector is bracing for a fundamental restructuring of how online degrees are built and sold. Universities will need to build internal capacity for digital marketing and instructional design, reclaiming control over their online footprint.[5]

For students, the transition promises greater transparency. Under the new state laws, prospective learners will know exactly who is recruiting them and where their tuition dollars are going, marking a significant step toward accountability in the digital classroom.[1][2]