Online Education Provider 2U Files for Bankruptcy

So much for first-mover advantage. 

On Thursday, pioneering online education company 2U filed for Chapter 11 bankruptcy. It’s not exactly a surprise: The firm hasn’t posted an annual profit since going public a decade ago, even as the public writ large gradually embraced online learning.

Remote Learning

Call it a failure to meet the moment. For years, online program managers (OPMs) succeeded by helping universities design, attract students for, launch and operate online-only courses and degree programs — often in a revenue-sharing model that created a somewhat thorny entanglement between non-profit schools and for-profit companies. 2U, arguably the most prominent practitioners of the trade, first took off after inking deals with elite colleges like Georgetown, the University of North Carolina at Chapel Hill, and the University of Southern California. By 2018, the firm had a market cap of over $5 billion.

But then came covid, a time when OPMs should’ve theoretically taken off. Instead, the industry has come out of the other side “on life support,” market analyst and ed-tech consultant Phill Hill told trade publication Inside Higher Ed last year, after largely failing the pandemic practicum:

• On the one hand, schools were forced to adapt to the times and grew far more comfortable developing online programs entirely in-house, or leaning on OPMs that offered à la carte assistance rather than full-service operations, like 2U.
• Meanwhile, amid congressional probes and backlash from consumer protection groups, last year the Department of Education greatly increased its oversight of OPMs. One Wall Street Journal analysis of government data found that 2U’s social work master’s program offered through USC had one of the worst debt-to-earnings ratios of any masters program offered by an elite school in the US.

Flunked Out: Amid the fallout, schools like USC, Baylor, and UNC began unwinding their partnerships with 2U. Enrollment plummeted, revenue flagged, and last month 2U had to execute a 1-for-30 reverse stock split to avoid being delisted from the Nasdaq; at market close on Wednesday, 2U’s market cap sat at just $11.5 million. As part of the Chapter 11 filing, 2U has entered into agreement with its lenders to cut its $945 million of debt by roughly half. We’re sure that somewhere out there, a very smart business school professor can design an entire bankruptcy lesson plan on 2U’s demise.