A Sector in Flux: How For-Profit Higher Ed Has Shifted
The following article is from The Chronicle of Higher Education
By Dan Bauman and Goldie Blumenstyk
Bridgepoint Education’s decision on Tuesday to spin off its Ashford University brand has already rankled critics of the company specifically, and of the for-profit sector in general. But the move is just the latest in an industry seeking to reorganize and rebrand itself after years of aggressive government oversight, financial problems, and scathing press coverage.
Over the last two years, many of the industry’s biggest and best-financed players have altered their company structures, merged with onetime competitors, or left the education business altogether. Despite a more sympathetic and generous regulator in the Trump administration’s Department of Education, the sector’s former titans have continued to transition from the business models they used at the start of the millennium into a variety of different structures.
Overall, the last two years paint a clear portrait of a sector in flux. Here’s a look at the leading companies and institutions that have undergone change.
April 27, 2017 Purdue announces plans to acquire Kaplan University, its 15 campuses and learning centers, and its 32,000 students and 3,000 employees. Purdue also announces Kaplan’s former holding company will act as a vendor to the public university’s new venture, and fulfill services for Purdue such as marketing, online technology, and student recruiting.
September 19, 2017 Purdue wins approval for the acquisition from the U.S. Department of Education, though the department asks that Purdue absorb the debts and liabilities of Kaplan University as a condition of approval, according to The Washington Post. A month earlier, the Indiana Commission for Higher Education signed off on the deal as well.
February 20, 2018 Purdue’s president, Mitch Daniels, admonishes some faculty members for their continued resistance to the merger. Daniels also says he would have given a faculty letter opposing the acquisition an F, arguing that its authors had "been misled."
March 5, 2018 The Purdue-Kaplan arrangement wins approval from the Higher Learning Commission, but the accreditor says it remains concerned about the potential for confusion among consumers. The commission plans to review the arrangement again in six months, the Journal & Courier reports.
October 30, 2017 Strayer Education Inc. and the Capella Education Company announce plans to merge into one company under the Strayer name while continuing to operate their two namesake universities as separate institutions. The deal is estimated at $1.9 billion, according to Forbes. Stockholders approve the acquisition this past January.
Grand Canyon U.
March 6, 2018 The Higher Learning Commission approves Grand Canyon’s plan to convert from a for-profit institution into a nonprofit. The commission had denied such a conversion in 2016. Grand Canyon still awaits approval of the move from Arizona regulators, the Internal Revenue Service, and the Education Department. University officials tell The Arizona Republic they don’t expect difficulties in gaining those approvals.
Should Grand Canyon win approval for the conversion, its former parent company would become its largest contractor. Analysts estimate the new nonprofit would pay 60 percent of its revenue to its former holding company in exchange for technological, marketing, promotional, financial-aid, and other support services.
U. of Phoenix
February 8, 2016 The University of Phoenix’s former parent company, the Apollo Education Group, agrees to sell the company and its operations to a consortium of private-equity investors. The sale shifts the company from a publicly traded corporation to a private one. The deal is valued at $1.1 billion. Months later, a Phoenix television station reports that the company plans to lay off nearly 8 percent of its work force.
January 24, 2017 The sale to private-equity investors wins approval from the Higher Learning Commission. A month earlier, the Obama administration’s Education Department signed off on the sale as well, though with several conditions attached, according to The Washington Post.
DeVry Education Group
January 30, 2017 New York’s attorney general announces a $2.75-million settlement with the DeVry Education Group following an investigation into allegations that the company inflated the employment prospects for graduates in its advertisements. DeVry had previously reached similar settlements with the Department of Education and the Federal Trade Commission.
December 4, 2017 DeVry University’s parent company announces the transfer of the university chain to Cogswell Education LLC, in California. The company told Crain’s Chicago Business that Cogswell is controlled by private-equity investors.
Education Management Corporation’s Art Institutes
March 3, 2017 The Education Management Corporation announces the sale of its 31 Art Institutes schools as well as its regional South University and Argosy University operations, to a nonprofit organization affiliated with a Pentecostal church. Known as the Dream Center Foundation, the nonprofit had tried unsuccessfully to persuade the Obama administration’s Education Department to allow it to buy ITT Tech, according to BuzzFeed News. Education Management completed its sale of the schools and systems eight months later.
Zenith Education Group
November 8, 2017 The Zenith Education Group announces it will close all but three of its remaining 24 Altierus Career College campuses, which enrolled about 5,400 students in all. The organization says too many of the campuses are located in markets with low student demand, while the costs of the leases are too high. Just 600 of those students are enrolled at campuses that will remain open. The nonprofit was created in 2015, when the ECMC Group agreed to assume control of 56 campuses of Corinthian Colleges Inc. The company said more than 15,000 of its original 30,000 students had graduated since it took over.