US halts plan to block foreign companies

The Biden administration has abandoned – at least for now – a proposed policy change that would restrict the ability of US colleges and universities to work with outside companies, especially those based abroad.

The administration acted after weeks of complaints and, in recent days, the filing of a lawsuit over the matter by 2U, one of the largest providers of online courses.

“We received significant and helpful feedback in the form of more than 1,000 comments,” James Kvaal, the US undersecretary of education, said in announcing the pullback. “The careful review of these comments and consideration of any revisions to the guidance letter will take time.”

Mr Kvaal made particular note of the administration abandoning its planned ban on the foreign ownership of companies involved in providing services to colleges and universities, citing the great “number and breadth” of such entities.

The Biden administration has consistently shown alarm over companies with profit motivations in higher education, citing evidence that they tend to raise costs and shortchange students.

But its planned new restrictions on third-party providers, announced in February, struck many in US higher education as far too heavy-handed. The policy announcement ordered US colleges and universities to begin reporting to the Education Department the details of their partnerships with outside companies, and to stop working with those with foreign owners.

The administration partially retreated a few weeks later, answering questions from Times Higher Education in which it said that its threat against foreign companies would be focused on those businesses involved in student recruitment and financial aid processing. It also pushed back its compliance deadline from May to September.

Then last week, 2U, the curriculum provider that bought the edX platform in 2021, argued in a federal lawsuit that the department did not follow necessary processes in scheduling the changes without enough time for the public to comment and for institutions to adjust.

The department, in its new announcement, said that the September compliance deadline has been cancelled, with the policy revisited and not to be reinstated without at least six months’ prior notice.

The Education Department also explained its reasoning for the planned ban on foreign ownership of companies providing services to US higher education, saying it was based on existing federal guidance from 2016 that aims “to protect taxpayers from uncollectable liabilities against a foreign owner”.

“However, based on comments received,” the department said, “the number and breadth of servicers with at least some level of foreign ownership has expanded in the context of a changing higher education marketplace where institutions are adopting increasing numbers of technology-based solutions.”

As such, it said, “the issue is more appropriately considered through negotiated rulemaking” – the more standard method of regularly change that involves a months-long process for receiving public comment and debating it.

2U celebrated the decision. “2U fully supports the Department’s stated transparency goals,” the company’s chief legal officer, Matthew Norden, said in a written response, “and we welcome the opportunity to collaborate with the department to find better ways to achieve those goals, in a manner consistent with law.”

Meanwhile in Florida, the Republican-dominated state legislature is nearing the passage of a bill that would forbid the state’s public colleges and universities from having relationships inside seven “foreign countries of concern” including China. 

The bill, facing final votes in both chambers of the Florida legislature, would give the state's higher education institutions until 1 December to end financial ties and partnerships in the seven nations, which also include Cuba, Iran, North Korea, Russia, Syria and Venezuela.

paul.basken@timeshighereducation.com