US eases threat to ban foreign companies in higher education

The Biden administration is moving to calm concerns about its threat to ban foreign companies across US higher education, saying it expects to focus implementation on those businesses involved in student recruitment and financial aid processing.

The Department of Education, responding to questions from Times Higher Education, partially backed away from the crackdown order that it issued last month, which it aimed at a broad range of companies working with US colleges and universities in areas that include course delivery.

“Our greatest concern is the area of recruitment and activities tied to the administration of federal student aid funds, not broadly used software solutions,” a departmental spokesman told THE.

US higher education spends tens of billions of dollars a year on private teaching-related services, and Democrats have long protested students against being harmed by corporate profit motives. Yet the broad threat to such partnerships in the latest Biden order seemed destined to be narrowed, said Robert Kelchen, head of the department of educational leadership and policy studies at the University of Tennessee-Knoxville. “I don’t understand why they did not clarify this publicly,” he said.

Higher education in the US is generally regulated at the state level. But the federal government holds significant power across the sector, through its delivery of more than $100 billion (£80 billion) a year in student aid.

In its letter last month to the higher education community, the department cited that student aid oversight role – through a provision in federal law known as Title IV – in ordering US colleges and universities to begin reporting details of their partnerships with outside companies and to stop working with those with foreign owners.

The department’s order made particular note of its interest in companies involved in “the provision of educational content and instruction”, calling such curricular activities arguably related to the use of federal student aid.

Along with de-emphasising that language, the Education Department told THE that institutions should pay greater attention to the part of its announcement where it excluded companies that sell a product but then leave the college or university to operate it. “Providing computer services or software where the provider has no access to or control over systems needed to administer any part of Title IV would not fall in the category of a third-party servicer,” it said.

The administration acted after days of protests and complaints from across US higher education, including many of the largest nationwide college and university lobby associations. In an initial public response, the Education Department agreed to postpone, from May to September, the effective date on its original order for institutions to report their private partners and end their ties to those with foreign owners.

Some higher education experts said that while further retreat was expected, the final boundaries might prove difficult to draw because many companies working with colleges and universities have complicated roles that go beyond a single category of services such as recruiting or teaching.

For that reason, ambiguity over the ultimate extent of the planned oversight appears unavoidable for a while, said Charles Rose, co-chair of the education practice at the law firm Hogan Marren Babbo & Rose. The Education Department recognises that it is still at the early stages of trying “to ascertain just what are the nature of these relationships”, Mr Rose told a briefing this past week for representatives of such companies.

The Education Department and universities also might have trouble defining foreign ownership in a world of corporate subcontracting and complex equity structures, said Dennis Cariello, Mr Rose’s co-chair of education policy at Hogan Marren Babbo & Rose. And where some corporate relationships with universities must end, the department should realise that even a September deadline might not be enough time to wind down contracts, Mr Cariello told the company officials.

The Education Department spokesman noted that its order demanding information on outside companies, and forbidding foreign ownership in some cases, is not new, but instead reflects requirements that have existed in law since 2016 with little enforcement.

paul.basken@timeshighereducation.com