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Online education provider, GW partner faces financial decline

Jerry Lai | Photographer
Commuters pass by the Milken Institute School of Public Health as students study inside.

Updated: Feb. 29, 2024, at 9:51 p.m.

As one of GW’s leading online education providers sinks into nearly $900 million of long-term debt, experts say the company may declare bankruptcy, leaving partner universities to decide whether to stay on board.

GW enlists the service of edX, under the parent company 2U, Inc., for online degree programs and boot camps, which officials spent more than $33 million on in fiscal year 2022. But the company has lost more than $200 million in each of the past two years from operations, resulting in administrative restructuring and the mutual termination of relationships with partner universities in an attempt to cut costs.

Officials have expanded course offerings with 2U over the past decade, starting with just three graduate programs for the Milken Institute School of Public Health and branching out to offer an online MicroMasters and Doctorate of Public Health degree through edX in 2022.

University spokesperson Julia Metjian said in January that officials are committed to online program offerings to ensure students around the world can access a GW education. Metjian declined to comment on how 2U’s debt and losses will impact their relationship with GW and why officials boosted spending on 2U services from more than $18 million in FY 2021 to more than $33 million in FY 2022.

“GW’s partnership with 2U/edX meets the needs of an ever-changing marketplace by providing educational opportunities for online students in numerous programs,” Metjian said in the January email.

Officials said University President Ellen Granberg offers 2U feedback on their programs and enables Granberg to spot future online education opportunities for GW through her position on 2U’s advisory committee. Granberg serves on 2U/edX’s University Leadership Council and was involved with the expansion of online program offerings in her former role as provost of Rochester Institute of Technology.

2U acquired online education platform edX in 2021 to expand access to “affordable” online education.

A company spokesperson said 2U has “sufficient” liquidity and time to engage with its stakeholders and find a way to improve their finances.

“We will not speculate on potential outcomes beyond to say that we are focused on taking action that will ensure 2U is well positioned for long-term success,” the spokesperson said in an email.

2U CEO Paul Lalljie said during the company’s quarterly earnings call with investors this month that 2U leaders are trying to increase their earnings margin to boost cash flow and extend their debt maturities. He said he expects the programs launched in 2024 will generate up to $100 million in revenue after two-and-a-half to three-and-a-half years.

“The most important thing we want you to hear from us today is that we know we need to improve our performance and to do it quickly,” Lalljie said on a recording of the call.

He added that they are exploring the addition of asynchronous online learning programs to increase the efficient use of resources.

“We’re embarking on a 12-quarter journey to reset and enhance our operation and we need your support in this journey,” Lalljie said.

Phil Hill, an educational technology consultant, said 2U may have to declare bankruptcy within the first six months of 2024, but GW does not have to end its partnership with the company and can instead negotiate a more favorable contract. He added that officials can also pursue partnerships with other online education providers like Coursera or provide online programs “in house.”

He said 2U officials can remedy their debt by either selling a portion of the company to afford to refinance their debt or convincing their debt holders to refinance the company’s debt. Hill said 2U could also have to declare bankruptcy within the first six months of 2024.

“It seems to me, simple math, that in the year 2024 they will have to make a major change,” Hill said.

He said 2U laid off a large group of employees about a year and a half ago and ended school partnerships like the University of Southern California, who announced in November that they would end their work with 2U. He said more schools could face partnership terminations since they have fewer employees to service the universities.

“I don’t think that’s impacting George Washington, but it is impacting other schools where there’s a lot of projects they’re just not doing anymore,” Hill said.

Marilyn Flynn, the former dean of the USC Suzanne Dworak-Peck School of Social Work, said the school partnered with 2U in 2010, which was “appealing” at the time because universities were starting to develop online programs. She said 2U strived to eliminate the difference between the quality of an in-person education and an online education.

She said she is not surprised that 2U is facing financial difficulties because the company faced increasing costs from competition from other online education providers and investments in many campuses. She added that online programs for fields like social work are difficult to maintain because faculty need to constantly update the curriculum to remain relevant.

“I can’t comment on what they are currently delivering, but I’m not surprised that there are challenges for them,” Flynn said.

She said 2U added many “enhancements” to their online programs to remain competitive, which increased the costs for the company.

“Probably everybody in the universe now can produce a cheap online program,” Flynn said. “You need a camera, you need a faculty member, you need a place for that person to sit, you need a student.”

This post was updated to correct the following:

The Hatchet incorrectly attributed a quote from 2U’s quarterly earnings call to Stephen Virostek. The speaker was Paul Lalljie. We regret this error. This post has also been updated to clarify that 2u and USC mutually agreed to terminate their relationship.

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About the Contributor
Ianne Salvosa, News Editor
Ianne Salvosa is a junior majoring in journalism and international affairs from Lake Saint Louis, Missouri. She is The Hatchet's 2023-2024 news editor for the Administration and Finance beat. She previously served as an assistant news editor for the Administration and Finance beat and a contributing news editor for the Academics and Administration beats for Vol. 119.
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