The Two Huge Lessons In That USC, 2U Law Suit

Stop me if you’ve heard this one before – a for-profit education company is being sued or sanctioned for misrepresenting its programs to potential students. In the education world of the last decade, it’s been the most predictable of happenings.

This one that landed this week, however, is a bit different.

The news was that a group of students at the University of Southern California’s Rossier School of Education, graduate students in its Masters and EdD programs, sued the school and 2U, a for-profit education company. 2U is an OPM, an online program manager which means that, in exchange for an undisclosed cut of program revenue, 2U provides marketing, recruitment, infrastructure and management for Rossier’s online programs. The revenue sharing arrangement is not new or unique, though it is controversial and waning in use.

The suit claims that 2U and USC used incomplete or misleading information to boost the school’s standing in published rankings and used those ranks to advertise and recruit students for its online programs, even though the rankings were based only on traditional, in-person offerings.

For 2U, the legal challenge is not well timed. Changes in how schools deal with OPM companies has partially contributed to 2U having a rough go of things lately, including announcing this summer that it was restructuring and laying off staff while it pivots to new business approaches.

For USC, a legal challenge from students alleging deceptive marketing is bad no matter when it comes.

But the real news from this legal challenge is the inherent implication that USC’s online program is not as good as its in-person one. If it was the same or better, where’s the basis for the legal complaint? But the suit makes it clear that what USC and 2U were selling and delivering were not – are not – the same. Especially, one USC offering, a small, in-person PhD program was used to calculate the school’s ranking and that ranking was, in turn, used to stand in for all its graduate programs, including and especially those delivered online.

The suit does not come out and say the online degree marketed and sold by USC and 2U was inferior, though it also does. It’s pretty clear, for example, that’s what the lawyers and plaintiffs mean when they allege that 2U and USC “failed to disclose other information about the Online Degrees that would lead a prospective student to question the reliability of the ranking. For example, [USC and 2U] did not disclose on the Rossier Online Webpages things like selectivity information, or average GRE scores” – which we presume were different than those for the school’s in-person programs.

Indeed, the suit claims USC only submitted data about, and shared its ranking based on, the in-person programs, thus “masking the difference in its in-person and online degree programs that the data would have revealed.”

In fact, according to the legal filing, the school knew that including information from its non-PhD programs, including and especially information about its online programs, would hurt its ranking and reputation. It quotes a former Dean at USC as saying that sharing information on its “online doctoral students would cause USC Rossier to ‘drop like a rock in the rankings.’”

Furthermore, the suit says that “USC never submitted any selectivity data from Rossier’s online EdD program, nor any other online program” to any ranking organizations because, it alleges, “these programs’ standing alone would have been poorly ranked in comparison to the in -person programs.”

And at one point, the legal claim does expressly say that the former students who are suing “were enrolled in online degree programs that were significantly less valuable than advertised.” The advertised programs, again, being the more selective, in-person options. So, there it is.

In other words, a pillar of this challenge is that students were sold a well-regarded program that was in-person and instead got the “significantly less valuable” online one. That is to say that they knew they were getting an online program, it’s just that no one told them it was less valuable than the one being advertised. They thought, incorrectly, they were the same.

Simply pointing out that online college and in-person college are unequal seems big in an era in which we have, largely without evidence, simply accepted them as equivalent. Although, not even that is unprecedented. In 2020 and 2021, when nearly every college campus shuttered and moved students to online teaching, the class action legal challenges mounted alleging a clear quality difference – that students bought the good stuff and got the less valuable, virtual version.

Like those suits, this one merits watching for the same reasons – one of which being that online education in the United States is a multi-billion dollar business. An agreement or verdict related to its implicit quality could be big.

In the meantime, this USC and 2U debacle is another indictment of the current laws and regulations that continue to allow investors to profit from enrollment-based marketing and cash in on tuition payments, which are monetized by student loans and/or government grants. Systems in which companies profit based on how many students they can convince to sign up should be illegal – and they are. Though loopholes such as this 2U and USC one exist. They should be welded shut.

That’s because, as this legal challenge includes, “under most circumstances, federal regulations prohibit institutions from compensating recruiters based on enrollment, in recognition of the fraud that often occurs when financial motivations are introduced.”

That’s exactly right. When motivations for profit align with enrollments, fraud and deception inevitably follow. That’s supposed to be illegal. Yet regulators continue to allow it to happen.

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