Arnold Ventures Influence on ED Policy

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What would lead the Department of Education (ED) to listen to and prioritize the advice given by a handful of think tanks and foundations advocating for removal of the bundled services exception and the expansion of the definition of third-party servicers (TPS) over the near-consensus feedback of the rest of the higher ed community? To develop regulatory guidance that ACE, Educause, WICHE/WCET, AACC, and a thousand other public commenters call misguided and likely to harm higher education institutions with no real benefit to students. To develop regulatory guidance Moody’s said increased credit risks to institutions as it “could lead to heavier administrative burdens and greater expenses.” All in an effort to rein in Online Program Management (OPM) companies.

Vocal Minority

I have shown in two different posts how fewer than 10% of public commenters (22 out of ~250) supported the removal of the bundled services exception and fewer than 1% (10 out of ~1100) support the expanded TPS guidance. Yet even after these comment periods ED refused to admit a mistake and simply rescind the TPS guidance.

Both actions - considering whether to remove the bundled services exception that underpins revenue-sharing agreements and the issued guidance expanding TPS definitions - were conflated by ED in the initial announcement and are clearly two approaches to the same issue. Leveraging our analysis and combining the two lists (while removing individuals) leads to a group of 16 organizations that supported either removing the bundled services exception or supported the expanded TPS definition or both.

Our role as market analysts is to understand and describe market trends and the explanation of why trends exist. As with nearly all organizations or markets, OPM contracts can be both good and bad in terms of helping higher education institutions and providing expanded educational opportunities for students. We have problems in US higher education such as high student debt loads and poor learning outcomes that the community needs to deal with, and the OPM market should not get a pass when looking for changes needed. Part of what is vexing about today’s anti-OPM movement is that the chosen regulatory methods will likely have no impact on these problems, but they will make life very difficult for institutions and also for students. See the linked public comments referenced above.

Deeper Understanding

The obvious next step in our analysis is to gain a better understanding of this group of think tanks and foundations and how they have come to have this much influence on the topic of OPMs and more broadly on EdTech. To be honest, I have avoided this next step of analysis for a while as I knew that it would get personal at some point, dealing with individuals and not just organizations. But given how much sway this coalition has (or represents), it is time to look deeper.

Too many people are living the mid 2010s world, assuming that this informal coalition is led by The Century Foundation, with Bob Shireman as the regulatory godfather inspiring others with similar points of view. Ask anyone who directly deals in these regulatory issues, however, and it becomes clear that Arnold Ventures is currently the central organization.

To their credit, Arnold Ventures has been quite open with their grants, keeping an up-to-date listing of all grants in a public website. In the education space, Arnold Ventures appeared to do some initial grants in the 2015 - 2017 period, but something seemed to have happened around 2017 that led Arnold Ventures to dramatically ramp up their grant-making starting in 2018, and to aggressively fund other think tanks and foundations for a common purpose of “protecting students from predatory for-profit” players. The chosen focus of that work has been the OPM industry.

In an ironic twist, two of the largest three education grants from Arnold Ventures were to edX, the nonprofit that 2U acquired two years ago.

Largely Single-Source Funding

The results of looking at these grants are illuminating. Let’s take the above list of organizations pushing the anti-OPM perspective and add in a column showing those that have received grants from Arnold Ventures in the past five years. In the following table I have included grants directly aimed at higher ed regulatory and legal action or with general operations budgets. I have excluded grants on different subjects such as K-12 reform or expanding voter access.

More than 80% of the think tanks, foundations, and associations that publicly advocated to kill rev share and expand TPS were directly funded by Arnold Ventures, including The Century Foundation. 13 out of 16.

And in some cases the majority of a group’s funding appears to come from Arnold Ventures. Based on Form 990 data, I estimate that the National Student Legal Defense Network has approximately $8.5 million in expenses in the past five years, and Arnold Ventures has provided $7.7 million of funding to that group. Not all groups are in this category, but when more than 90% of your funding comes from one source, that is not donation-based, that is for all intents and purposes a wholly-owned subsidiary.

Many of the grant descriptions are common in theme and axiomatic basis:

“To protect consumers and curb predatory student lending practices.”

“To help establish legal protections for college students against predatory lending practices.”

“To support strategic litigation and regulatory engagement related to predatory lending practices and consumer financial protection issues in the for-profit college industry, as well as provide a non-partisan education resource on potential reforms in the…”

“To support research and policy resources to improve federal oversight of the postsecondary education and training market.”

Hint: “predatory student lending practices” in reality is focused on usage of OPMs in Title IV eligible programs.

Predatory lending is bad, excessive student debt is bad, students getting useless degrees is bad, but the chosen focus on OPMs as the leverage point on these real issues is tenuous at best, and disingenuous in many cases.

Arnold Ventures Role

Arnold Ventures has become the central funding source for a movement, handing out at least $35 million to these groups that have developed a common message. And as we have seen, this coalition stands against the views of nearly everyone else in the higher ed community, at least on TPS expansion.

It may be that all of these groups and individual advocates would have come to similar anti-OPM perspectives on their own, and I give them the benefit of the doubt that reducing student debt is a common motivation. It is important, however, to understand that there is a coalition driving most of this regulatory activity with a common OPMs are predatory perspective, and that this coalition has one common source of funding behind it. And that funding comes from two people - John and Laura Arnold. Whether you agree or disagree with their perspective, I think it is important to understand who is driving the EdTech / OPM regulatory actions recently.

On one hand, many of the players are the same between 2011-era movement against for-profit colleges and today’s organizations pushing against OPMs. But yesteryear’s The Century Foundation and ED-led coalition bears little resemblance to today’s Arnold Ventures led coalition in structure and funding.

The Century Foundation is a century-old progressive think tank with multiple causes and multiple funders. Arnold Ventures is a private LLC funded by a billionaire couple - John and Laura Arnold - and one that builds its coalition by funding others.

Background

John Arnold made his initial fortune at Enron, where he began his reputation as the King of Natural Gas, largely by creating and trading derivatives, and earned the largest Enron bonus in its history right before the company’s bankruptcy. Arnold then created a hedge fund, Centaurus, and earned billions. He shut down Centaurus in 2012 and created the Laura and John Arnold Foundation along with his wife as a way to use their billions to fund pet projects. Think of a mini-Gates Foundation. By 2019, the Arnolds changed the LJAF into an LLC called Arnold Ventures, in order to accelerate the impact of their giving, as described in Philanthropy News Digest [emphasis added].

Problems Already Apparent

I have no problem with different people - regardless of their wealth - advocating their opinions on educational reform issues. The problems with this largely single-source funded coalition and its rush for change are two-fold.

First is the transparency issue, with ED listening to this small group of advocacy organizations, and developing guidance that impacts nearly all institutions and most vendors, without sufficient public knowledge. Especially when some organizations in that coalition are hardly independent.

Second is the groupthink issue, where any small group of likeminded people who believe they know what and who are good and bad can come to flawed conclusions by not engaging or listening to the broad community and challenging their own assumptions.

I strongly believe that these two problems have already manifested in the flawed guidance developed by ED this year. Lack of transparency and groupthink are what led to ED staff being caught completely off guard by the massive pushback against the TPS guidance in particular. And one of the key reasons that we have this situation is the apparent coalition mostly funded by a single couple.

I’ll explore more details of the nature of this single-source funding impact in future premium posts to avoid overwhelming On EdTech with this topic. The next post will go beyond regulatory guidance and get into multi-channel public messaging.

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