2U: Coronavirus pandemic could ‘severely impact’ business

Dive Brief: 

  • Online program manager 2U said the coronavirus could “severely impact” its business, according to a filing Monday with the Securities and Exchange Commission. 

  • The potential for disruption includes causing one of its college partners to shut down or by making it harder to find clients that want to launch online programs. 

  • As a public company, 2U’s disclosures offer a look at how the pandemic is affecting the firms that provide educational technology services to colleges.

Dive Insight: 

The pandemic has put the higher ed sector on shaky financial ground. Scores of colleges are refunding students for room and board and other fees, losing out on other auxiliary revenue such as summer programs and bearing the upfront costs of moving their instruction online. 

Although the U.S. Department of Education will provide some relief by distributing $14 billion in emergency aid, about half of which is earmarked for students, higher education associations have said this amount is inadequate for addressing the financial repercussions of the crisis. 

In its filing, 2U notes that the pandemic could cause “one or more” of its clients to close, or otherwise reduce student demand for its degree programs, short courses and boot camps. Colleges of all sizes are preparing to absorb massive budget cuts and have begun to freeze hiring and salaries and even furlough some employees.

2U uses revenue-share agreements, in which the company receives a portion of an online program’s tuition revenue in exchange for helping to cover the costs of launching it. If enrollment declines as a result of the pandemic, 2U and other OPMs could suffer along with their partner institutions. 

Trace Urdan, managing director with investment bank and consulting firm Tyton Partners, predicts the hardships won’t be permanent. 

“This is going to sort of breathe new life into institutions’ willingness to consider doing something more substantive online,” he said in an interview with Education Dive. “They’re not all going to go with OPMs, but a large number of them are going to at least look at having a services partner to help them do that.”

Other challenges abound. For example, some of 2U’s graduate programs require students to complete clinical hours. To stem the virus’s spread, colleges and clinical placements have pulled students from those posts. 

2U has also shifted its campus-based boot camp programs online amid the pandemic, a move it stated could result in “interruptions or disruptions” of their delivery. 

The pandemic comes on the heels of a transformative, if fraught, year for 2U. The company has been diversifying its educational offerings — from boot camps and short courses to graduate and undergraduate degrees — in order to reach new students. 

Although it’s unclear how the coronavirus will impact each of those segments, Urdan suspects colleges will want to bring online their professional programs, such as business and law degrees.​

“The best place for 2U to focus is going to be, ironically enough, back on its traditional strengths of offering graduate programs online that are branded by universities and can be financed by Title IV,” he said.

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