Sep 01, 2010
- Posted by:
- John Hall
Many tuition dependent colleges and universities are being forced to deal with the potential of at least one of what we have termed the Three C’s – change, closure, or consolidation. Fortunately, most are only dealing with the reality they must change to avoid the possibility of academic or financial insolvency. The good news is that those institutions that are serious about change and execute well have an amazing opportunity to reinvent and revitalize themselves – ensuring their relevancy for years to come.
Imagine you are the President of a private, liberal arts institution in the Midwest. Your school was founded over a century ago and is about as traditional as they come. Over the past decade, your college enjoyed solid growth and healthy revenues. You were able to expand program offerings, add faculty, and build a state-of-the-art academic building. Then in 2008, you experienced the highlight of your tenure – your school appeared in US News & World Report rankings for the first time and your endowment that was literally pennies when you took office now exceeded $ 25 Million. If all the above was not enough, you were on track to have a record-setting freshman class enrollment! All your work had finally paid off and your momentum seemed unstoppable.
Fast forward to one year later. The Great Recession has significantly cut into your parents’ ability to pay the school’s $ 25,000 annual tuition. Not only is your freshman enrollment down but your continuing enrollments are being impacted as well. Your staff advises you that total enrollment may decline by over 10% and that your overall revenue may decline as much as 15% with the discounting that will be necessary to keep the students you have. What’s worse is that your endowment has lost 33% of its value. Despite all of the bad news, there is more. Your bondholders and regional accreditation agency are both becoming increasingly concerned about your school’s financial stability. While you argue that the financial setbacks are temporary and induced by the recession, your bondholders do not feel you have a sustainable financial future. Your Board of Trustees is demanding action and has suggested you begin looking into the normal exit strategies for the school– partnering with a for-profit firm or merging with a larger, sister-school.
You soon realize that selling or merging will not be feasible and even if it was, either of these moves would be the effective death of your institution. As bleak as things are, you refuse to give up. You have worked too hard to build your institution. You also have a deeper stake. As a life-long educator, you are extremely concerned about what you are witnessing beginning to take shape in higher ed and what it means for providing all students with access to quality educational opportunities. You are beginning to observe more selective institutions (including higher quality for-profits) only being available to students who have a higher academic pedigree or family income. Most everyone else is being relegated to attend overcrowded or lower quality institutions whether they are non-profit or for-profit. You feel strongly that schools such as yours offer a quality education to a wider range of students. Today it is your school but who is to say that many more schools like yours will not have to fold or compromise themselves?
At an AGB conference, you meet a president of a small liberal arts college who took a different path several years ago. He explains that like you, he leads a school that is in an area of a country that is expecting significant declines in the traditional college-age population over the next decade not to mention the impact of sweeping demographic changes. To your complete surprise, the President also shares that he was able to increase total student enrollment by 225% over the past 2 years alone by taking the school’s niche business, sports-management, and nursing programs online. The online enrollments have bolstered the school’s traditional operations and effectively shielded it from financial challenges. In fact, the President shares with you that he has been able to increase traditional enrollments by simply changing the way his institution does business and utilizing revenues from his online enrollment to lure students from outside of the school’s traditional recruitment focus area.
You recall looking at offering online degree programs a couple of years ago but your faculty was not supportive at all. Additionally, being in a rural area, you did not feel you had a market of distance-learning students you could attract. Things are different now though. You need to do something fast or you will lose the faith of your Board and possibly your accreditation. By putting in place significant cuts and other austerity measures, you create a 2 year window that you feel you can use to maintain the institution while you implement a bold turnaround strategy.
After a little persuasion, you are now able to convince your stakeholders that it is time to launch online programs. Unlike other schools that are stepping into online with MBA programs that have already saturated the marketplace, your first online programs will be graduate degrees in Social Work, Finance, Accounting, and Taxation. Your data-driven research has shown that these programs are high in demand instead of other degrees you were encouraged to offer. You also rightfully realize that the undergraduate market is an even larger opportunity so you take your highly regarded social work, early childhood development, accounting, and psychology programs online. Perhaps your boldest step was to launch Associates degree programs. Your extensive research, however, identifies that marketplace as a large one and as underserved. You are particularly surprised to learn that 90% of a major for-profit institution’s enrollment growth over the past 5 years has been with associates’ degree seeking students.
You realize you have one shot to do this right and that means you must proceed at full steam. Failure is not an option! Your first step is to hire firms that can a) assist you with market research, marketing, student recruitment, and retention and b) who can convert your curriculum online. While the investment required will require a substantial portion of your remaining endowment funds, you feel confident that the return on investment will make it worth it. Your Board supports your plan provided that you agree to stay on for the next 5 years to see this important and risky initiative through. After the Board’s unanimous stamp of approval for your plan, the Chairwoman of the Board says that you will be “personally accountable” for the success or failure of your plans. The pressure is on!
Fast forward a few years, your plan is working. You have increased your overall enrollment by over 400 more heads than you had in the Fall 2009. That may not sound like much to your colleagues that run larger institutions but for you it means everything. You have turned around the school’s financial position in just a couple of years. Your compelling programs and investments in student recruitment brought in students from down state and regionally – students you would have otherwise never had the opportunity to serve.
The success is encouraging and is being viewed positively by all stakeholders within your institution, however, due to changes in population and your high cost, your traditional enrollment numbers have yet to recover from their peak highs. You have invested more to recruit traditional students but with minimal results. Your Board is demanding progress in this area, yet you are not sure how you can compete for students that are being courted aggressively by more selective institutions. You are also finding that changing demographics are making it more difficult to recruit college-aged students in general. The large schools in your state’s urban areas that you used to be able to rely on for recruitment purposes are now heavily Latino with many prospective first generation college students. While many of these students are enrolling in your institution just as Anglo and African-American students did years before, your recruiters are telling you that some of these students are wanting to stay closer to home – to be close to family or to help support their families. As a result, many of these students who are otherwise highly qualified to enter your institution are instead choosing community college and/or 4-year public schools that are closer to home and offer online learning options for traditional-age students. Convenience, value, and technology are very important to many of these students – even over institutional reputation.
As another year goes by, your revenue situation and surplus continue to improve. Now it is time to invest in a strategy to attract more traditional learners. After all, a few years from now will be 2015, and you are hoping to retire by then. While you can retire with a sound legacy for saving your school, you want to also be able to retire knowing that you have set your up your successor for real growth in traditional learner enrollments. But, how do you begin attracting a generation that has been exposed to the Internet since birth and looks at email as something as outdated as we might consider a telecopier?
Then it comes to you! You develop an innovative plan called “The 2020 Plan.” The name is inspired by a study you read back in 2009 that suggested that potentially a majority of high school students in 2020 will be online or virtual students. First, you launch innovative and career-oriented online hybrid programs that allow your traditional students to live at home and work while enjoying a handful of traditional face-to-face opportunities. What makes this initiative particularly exciting is that you have developed partnerships with relevant urban employers, providing your students both employment and practical learning opportunities as part of the overall education experience!
Next, you launch an online high school. With all the content, for-profit providers, and charter schools out there now, it is not that difficult to do so. The plan is to recruit high school students from within your state. Your virtual high school students will not only be able to enjoy a dynamic college-prep curriculum online but also be able to attend your campus or those of partner high schools to play sports, attend prom, or involve themselves in required exercises that encourage socialization and face-to-face interaction. The early experience with your institution will also develop loyal students who will want to earn future degrees at your school.
What excites you even more about your virtual high school is that about 50% of your capacity will be reserved for students at high risk of dropping out of a traditional high school placement. You will partner with several urban schools with high drop-out rates to provide a collaborative learning program that will include specialized online instruction, access to advanced placement courses that are typically only available in higher performing suburban schools, and intensive instruction at the student’s local school site. The concept not only enables you to make a difference with the unacceptably high dropout rate in your state but also creates yet another base of traditional students to mold and eventually matriculate into your traditional program.
It is now 2015 and it is finally time to retire! You end your tenure with 1,500 online non-traditional students, Although this was the year that you projected your adult population would overtake your traditional population, you are excited to learn that for the first time since the 2008-09 school year, your traditional population has experienced double-digit growth and now exceeds 1,650 students! You have not only begun to again grow your traditional population but you have done so by adding your first 60 students from your college high school! On top of that, your outreach to students and families in urban areas – offering a truly hybrid online/traditional educational experience has paid off! There is more demand than supply!
As your presidency comes to an end, you look back at the past 6 years specifically. What an experience it has been! You are a modest leader but it is difficult for you to not take enormous pride in the fact that you took your institution from a truly Near Death Experience to where it is today! You are especially proud that your institution has survived and thrived through the past several years. You are humbled by the fact that many others did not survive or are no longer what they once were. Yes, it is a different time and you have changed but your institution is alive and well. You are educating more students, delivering better outcomes than you did even in the good ole days, and you have expanded your faculty! Best of all, you never had to sacrifice your values-based mission although you have expanded it!
This is a hypothetical situation based on emerging trends and taking advantage of real-life leadership challenges/responses of dynamic college and university presidents.
John Hall
Greenwood & Hall
jhall@greenwoodhall.com
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Aug 26, 2010
- Posted by:
- John Hall
With last week’s release of student loan repayment data by the Education Department, I am beginning to again hear chatter about the so-called “higher education bubble.” It began with an informal conversation I had with an enrollment manager and since I have heard similar grim predictions from two reputable financial analysts that track the higher education industry for investors in for-profit schools. No one can argue that this is a turbulent time in higher education. The fundamentals of the business of education are changing before our eyes due to economic realities, the distribution channels are being revolutionized with the maturation of online education, and greater accountability is taking shape in the form of increased regulatory scrutiny as well as greater consumer savvy. Do all these factors, however, portend the bursting of a bubble the likes of which we have not seen since the housing or dot.com bubbles?
University of Tennessee law professor, Glenn Harlan Reynolds, has been an extensive promoter of the bubble idea. Reynolds has warned students to refrain from taking on student loans. He goes as far as to warn some students to “rethink college entirely.” The basis of Reynolds’s argument is that it is likely one day soon that people will wake up and realize their education is not worth the money they borrowed for it. Reynolds further argues that the vast majority of growing occupational fields no longer require a traditional college education but instead an apprenticeship and/or career education.
Reynolds’ foreshadowing of the burst of the higher education bubble is also based on the ideas that institutions have for too long been living way beyond their means, that the flow of easy credit (student loans secured by the federal government) is not sustainable, and that the market (students and employers) will demand significantly greater value from post-secondary institutions.
It is difficult to argue with many of Mr. Reynolds’s points. In the just released US News & World Report 2010 college rankings edition, the top headline on the cover reads “Are They Really Worth It?” and the opening article pointedly declares that “if colleges were businesses, they would be ripe for hostile takeovers, complete with serious cost-cutting, and painful reorganizations.”
As we have seen over the past few years, even our most prestigious Ivy League institutions with hefty endowments are suffering. Many tuition dependent institutions are teetering on the brink of insolvency and once renowned state systems such as the California State University have suffered irreparable damage due to the new financial realities.
In our own practice, where we support nearly 680,000 prospective and existing students annually, we see a level of savvy from students we have not seen in the past. Students, particularly adult learners, are wanting to know what their education will tangibly accomplish for them, will their program of study provide them with the practical knowledge they need, and what real career placement assistance will be provided to them.
We are also seeing the federal government consider new regulations that will in effect restrict the flow of credit to institutions (particularly for-profit schools such as Kaplan, Strayer Education, and Corinthian Colleges) that fail to achieve certain benchmarks as it relates to student loan repayment.
Employers are also beginning to chime in. Earlier this year, a survey commissioned by the Association of American Colleges and Universities (AACU) found that only one in four employers feels that our institutions of higher learning are preparing students for the “challenges of the global economy.” Closer to the ground, we are seeing students that for the past several years had been clamoring towards pursuing an MBA to better their career prospects now demanding advanced degrees that provide more specialization such as masters degrees in finance, taxation, and accounting. Students are reporting that employers are just no longer excited by an MBA education unless it is from a very selective institution. Unfortunately, many schools that launched MBA programs over the past decade (especially online), are beginning to see declines in enrollment because they are not keeping up with consumer preferences – both student and employer.
Finally, there is the student loan issue that is becoming an increasingly serious problem. After all, according to the Wall Street Journal, student loan debt has now exceeded credit card liabilities and the Education Department’s recently released repayment data suggests only 51% of outstanding student loans are currently being repaid. There is little question that this issue will continue to adversely impact some student borrowers as well as the taxpayer.
As evidenced by both data and trends, Mr. Reynolds’s arguments are based on several highly accurate assumptions – factors that have been and will continue to radically alter the higher education landscape. Things will need to change – everything from tuition pricing growth to what schools teach. We, however, find it difficult to subscribe to Mr. Reynolds’s darker overall theory that stakeholders – whether they are students, parents, employers, or the government, will wake up one day and determine that a college education is not “worth” the investment. College-going rates continue to increase and expanding college completion is a big priority of many policymakers. It is also necessary if our nation hopes to maintain its leadership position in the global economy. Further, the same AACU survey mentioned earlier, found that 97% of employers intended to place the same or increased emphasis on hiring candidates with at least a bachelor’s degree over the next year. While there is plenty of constructive debate on whether higher education is worth it, one just needs to look at July’s unemployment numbers. Only 4.5% of college graduates were unemployed while over 10% of individuals with just a high school diploma were.
There will be plenty of fallout and any higher education stakeholders that do not take the realities we are seeing seriously do so at their own peril but we would not spend much time worrying about the entire sky falling on higher education.
John Hall
Greenwood & Hall
jhall@greenwoodhall.com
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Aug 19, 2010
- Posted by:
- John Hall
It has been over two weeks since the gavel came down at the U.S. Senate hearing examining for-profits and deceptive recruitment/financial aid tactics. The highlight was the release of videos of congressional investigators catching the largest for-profit schools “in the act.” While the hearing was little more than a forum for politicians to pontificate, it had a devastating impact. The secret-shopper scenes could not be defended and ever since, the media has been full of highly critical articles of how for-profit schools are taking gross advantage of students and taxpayers.
Over the past week, much of the chatter has turned to the implementation of so-called Gainful Employment regulations that would in effect establish price controls and eliminate certain occupational programs. These career programs are some of the most popular and profitable offerings for companies such as Kaplan, EDMC, and Corinthian Colleges. While the proposed regulations would apply to all institutions, the impact would mostly be felt by for-profit entities. Ironically, many of the schools that were highlighted by the secret-shopper videos are schools that would be most impacted by Gainful Employment.
Many of the larger for-profit education corporations have warned investors that regulatory changes and most specifically Gainful Employment could have a materially adverse impact on their businesses. These warnings coupled with all the negative press out there are not only hammering stock prices but also leaving many of the for-profits with questions on what to do next and what may happen next. Conversely, many non-profit institutions are trying to determine how they might be able to benefit from all of this.
STRATEGIES FOR FOR-PROFITS
Let’s start with ideas for the for-profits. The largest obstacles for having students obtain “gainful employment” so that they are in a position to benefit from their education and repay their student loans are a) making sure students actually persist until completion and b) securing appropriate employment opportunities for students. For-profits that have found ways to address these two issues (and there are ones that have) have a significant advantage.
For-profits should consider implementing proactive retention strategies as well as career placement solutions. This starts with providing each and every student with a caring, dedicated Retention or Reenrollment Counselor. The focus of this counselor should be to get to know each and every student as well as their unique needs. Furthermore, this counselor should make consistent contact with the student to check-in, motivate, and mentor. Whether it is providing a bridge to student services, social services, academic advisors, or financial aid; this counselor should be trained and empowered to help remove any and all obstacles that might prevent a student from completing a specific program. In essence, a counselor should act as a student’s advocate and be just as passionate about seeing a student graduate as an Enrollment Counselor might be to matriculate a prospective student.
Retention Counseling should be supplemented by professional Career & Education Advisors who not only help students write a resume or show them how to login to Monster.com but can prepare students for interviews, build confidence, and work as each student’s partner in securing employment. These advisors should be available to students not only before graduation but long afterward.
Another key strategy is administering a simple online personality assessment to all new students that measures student strengths and weaknesses in 15 key areas. The assessment provides counselors, career advisors, and faculty with a proactive glimpse of how each individual needs to be motivated, mentored, or coached.
These solutions seem costly and complex. The reality is they are, however, the ROI is substantial. Clients of ours that utilize these solutions see on average a 26% improvement in graduation rates and a 39% improvement in career placement even in today’s challenging economy. Not only do these solutions allow schools to better serve their students while providing better outcomes but they also help schools with their bottom line. Finally, schools that promote the existence of these services will recruit more students – especially in the current press climate!
For-profits also need to ensure their programs are at the cutting edge of employment demand – ensuring that students have a better chance to secure employment and maximize earning potential. The cumulative effect of all these strategies is to enhance enrollment revenue and profitability, possibly enabling schools to lower prices without reducing their margins which is so important to Wall Street.
HOW CAN NON-PROFITS BENEFIT
There is no way to sugar coat it. With each passing day, the for-profits are gaining a worse reputation than BP and the common cold combined! This provides non-profits with a unique opportunity to benefit at least in the short-term. While I prefer strategies that allow for long-term gains, a short-term advantage can help many non-profits generate more momentum that can produce long-term results. So what are the 3 key steps that every tuition dependent non-profit that loses student enrollments to for-profit schools should consider taking?
First, an applicable institution (schools that are not highly selective and cater to non-traditional students) must come to the realization that even though they may not compare themselves to a for-profit school, they may be losing students and relevance at the hands of for-profits. Stakeholders must decide to change and act with time of the essence so that they may effectively compete. Part of this decision involves taking risks and thinking outside of the box. There are many resources out there to help schools do just this. Further, institutions do not need to sacrifice their values or educational quality but they should realize that whether they like it or not for-profits will and (in the long-term) probably continue to be a growing competitive force that will draw students.
Next, schools must reevaluate their offerings. If non-traditional students are being served, fully online options should be available. Online programs should be of the highest quality, interactive, accelerated, and applicable to today’s most relevant career opportunities. In some cases, this may mean that institutions may need to look to offer new programs. In other cases, existing programs may need to be modified or reinvented. By way of example, an MBA with a concentration in Accounting that was popular 5 years ago may need to be retooled into a Masters of Accounting program that has much greater career relevancy today.
Finally, non-profits should not only focus on their strengths such as history, having traditional campuses, reputation, full-time faculty, and distinct missions but also on areas that have been traditional benefits offered by the for-profits – acceleration, career-focused programs, flexibility, and in many cases technology. Providing special support services including the type of proactive retention and career counseling mentioned earlier is also key – as it is a competitive advantage compared to most for-profits and non-profits alike.
Do you have other ideas? We would like to hear them!
John Hall
Greenwood & Hall
jhall@greenwoodhall.com
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Aug 12, 2010
- Posted by:
- John Hall
By now, you have heard about last week’s Senate hearings and the outrageous tactics caught on tape by Government Accountability Office secret-shoppers. The recordings were so egregious that they were universally condemned by the Career College Association (CCA), the for-profits who were involved, and officials that represent not-for-profit institutions. We can all agree that you seldom see such consensus on any issue in higher education.
The airing of these recordings certainly caused a significant amount of bloviating by several United States senators as well as other elected officials. Despite the uniform outrage and tough talk, however, did the disbelief create a real movement to pass emergency legislation or extraordinary regulatory action? The answer to both questions is NO! In fact, a week later, nothing has changed at least from a legislative or regulatory standpoint – which is obviously not a surprise. These things take time.
Other phenomena have taken place over the past week that have prompted significant response from key actors in the for-profit space – actions that would have never been imagined in the recent past without the enactment of aggressive regulatory or legislative actions. What has caused Kaplan College to suspend recruitment at two of its campuses, Westwood College to abandon its incentivized recruitment plans, the University of Phoenix to talk tough about deceptive practices, and CCA President Harris Miller to sharply demand “real change” from the organizations his group represents?
The answer is simple – the court of public opinion has accomplished more in the past week to effect change than any governmental action would. We have seen a “shock and awe” amount of negative press coverage on the for-profits. All for-profits have been lumped together and painted as the “big-oil” of education – organizations that are bilking their students and the taxpayer all in the name of making a profit. For the most part, the coverage has squarely focused on the for-profits and has not examined overall accountability in higher education.
The media coverage has begun to shape a general consensus across party lines that for-profit education needs to be reformed. Those from the left feel this way because of their general distrust of the private sector, while conservatives (who have generally been more supportive of the for-profits) are growing concerned because of their predisposition to financial austerity and the feeling that federal Title IV funds are being misused. Then there are the students themselves. At least two (2) for-profit institutions that I consult for have shared that their recruiters and student affairs staff have been spending a lot of time over the past week overcoming student concerns due to all the coverage. It should be noted these two (2) particular schools are shining examples of how all for-profits should operate both in practice and the real outcomes these specific organizations have delivered for decades.
We now find ourselves in a place where the general public is demanding action. This is compounded by the fact that the hundreds of thousands of students who attend for-profit institutions are a part of the general public. If current and prospective students alike are raising concerns about the integrity and/or fitness of for-profit institutions, that can have a real adverse impact on the bottom line of the for-profits. As successful business organizations, the for-profits understand this and realize a tarnished image with the general public is more threatening than most anything the Department of Education or Congress can or will do going forward.
As a result, the for-profits are doing everything they can to overcome the tsunami of negative public opinion that if left unchecked could radically impact their marketplace opportunities in the future. Leaders of the sector are also beginning to take transformative action to demonstrate they take public sentiment seriously and want to make things right. This will be an important step for the sector’s public rehabilitation as well as the reinvention of certain for-profit schools into more accountable entities with increased integrity.
No matter what the final Department of Education regulations look like or whether Congress attempts to deal with for-profit sector via legislative action, I would not be surprised if the events of the last week are viewed in the future as the true impetus for change. Time will tell.
How can individual for-profits turn the negative coverage into a positive?
What are three (3) key steps each tuition-dependant non-profit should take immediately to take advantage of this climate?
These are questions we will answer in future posts.
John Hall
Greenwood & Hall
jhall@greenwoodhall.com
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Jul 25, 2010
- Posted by:
- John Hall
I was talking to an esteemed college president earlier this month. This individual operates a successful traditional liberal arts college that is strongly considering launching online degree programs as a means to attract non-traditional students. While this particular institution is relatively strong compared to many not-for-profit schools these days, the President felt that offering programs for non-traditional students would be a good opportunity for his college to increase enrollment and expand its mission. It’s difficult to argue with that!
A few minutes into our informal conversation, this individual expressed that he thought this was an ideal time to begin marketing online programs due to the scrutiny and pending regulatory action that face the for-profits. Further, the President asked if I thought based on everything going on, the for-profits would play a less significant role in the non-traditional student market and in some cases “cease to exist.” When I asked him his reasoning for believing that the additional scrutiny on for-profits would in effect take their influence back to where it was 25 years ago, the President had sound theories and scenarios that supported his clear conclusion – solid enough to give me pause to rethink my view that the influence of the for-profits will not be diminished by additional regulation, negative press, and consumer scrutiny.
After considering the President’s strong views on the topic, I compared for-profit post-secondary institutions to some of our largest financial institutions and auto manufacturers – who had much more questionable fates in 2008. Organizations including AIG, Citigroup, and General Motors to name a few were deemed “too big to fail.” And arguably so are the vast majority of institutions that make up the for-profit education sector. Unlike the AIG’s of the world, most for-profits are very healthy from a financial standpoint. By way of example, publicly traded for-profits generated an average profit of $ 229 Million in 2009, up from $ 150 Million in 2008. This is just one reason of many that I explained I expected very little long-term fall-out in the for-profit sector.
What are other reasons that the for-profits are “too big to fail?”
There are the economic factors. For profit education is a business that generates billions of dollars in economic activity. A 2007 study pegged that number exceeding $ 38 Billion and that measured economic input back in 2005. The figure is undoubtedly higher now with the explosive growth of many for-profit institutions over the past five years. Next, the space employs tens of thousands of individuals and with our current economic situation, every job matters. Finally, while outcomes are certainly an issue at many institutions including for-profits, these schools as a whole do produce a capable pool of graduates who gain a vocational/career education – graduates who despite the economy remain high in demand in fields such as health care.
Next, there is demand. According to the Career College Association (CCA) and the Department of Education, for-profit institutions enrolled over 2.75 Million students in the 2006-07 school year – many in two year or career-oriented programs. Many of our public community colleges especially in states such as California cannot effectively handle current student demand despite initiatives from the federal government aimed at assisting public two (2) year colleges. Furthermore, many of our four (4) year public and not-for-profit private institutions do not offer the types of emerging programs that cater to career-focused non-traditional students. Thus, it can be asserted that for-profits are needed to ensure that demand for post-secondary education and specifically career education is best met.
Finally, there are the political and social factors. As is the case with many large corporations, for-profit schools have powerful lobbyists as well as powerful friends in Washington D.C. For-profit education corporations and their employees contribute to political campaigns just as Wall Street banks or oil companies do. To be fair, there are several notable not-for-profit institutions that also contribute heavily to political campaigns. There has already been a good amount of chatter out there that the final regulations that will be enacted will be greatly watered down to a point that they may be more symbolic than transformational.
Tied in with political considerations are the social factors. The achievement gap is a huge issue in education in general. White students and those individuals from higher income backgrounds are more likely to achieve, attend traditional colleges, etc., while the for-profits serve a disproportionate number of students of color as well as individuals from lower income families – groups that are still not represented well in our traditional schools as a whole. For-profit institutions argue they are providing important access to educational opportunities that some underrepresented students might not receive but for their programs. Conversely, critics of for-profits argue that these institutions are preying on these populations. Without opening that can of worms any further, the fact is that these schools do serve a significant number of lower income and minority students. Until our public K-16 and private not-for-profit post-secondary schools come up with effective solutions that will close this terrible gap, it will be difficult from a sociopolitical standpoint for policymakers to reduce or eliminate the influence that for-profits currently enjoy.
None of the above means that for-profits are not in store for even more public scrutiny and potentially a more restrictive regulatory environment. That said, it is highly unlikely that at the end of the day these new realities will have a profound detrimental impact on the for-profit sector. What if, however, all these changes have a terribly adverse impact? Who will save the for-profits in that scenario? The answer is the for-profits themselves!
It is important to understand that the largest players in the for-profit world are multi-national corporations. As with any company that faces conditions that could impact or destroy a firm’s business model, for-profits will change and adapt to improve their image, accountability, and product. Unlike their not-for-profit cousins, these institutions have the money to spend to transform and reinvent themselves in any way they need to in order to continue achieving the main objective of a business – building shareholder value. There are many examples of companies in our contemporary history that have had to overcome the most adverse of conditions to preserve their standing, business model, reputation, and/or brands. Examples include Exxon (now Exxon-Mobil) after their oil spill in 1989, Apple after the launch of consumer personal computers and the explosive appeal of Microsoft Windows, and Bridgestone/Firestone to name a few.
Whether for-profit institutions are better equipped to educate non-traditional students compared to non-profits is a question I will let others more qualified than I debate and answer. On the other hand, the potential demise of the influence of the for-profits has been greatly exaggerated. This should serve as a warning to not-for-profit schools as well as a great opportunity. This also presents a clear opportunity for the for-profits – an opportunity that I am sure many for-profits are already working hard at to capitalize on. Finally, this presents an opportunity for several for-profits that are providing exceptional educational experiences for students already. I work with one that serves a niche audience, graduates 90% of their students, and produces positive employment outcomes for over 85% of their graduates. These are results that any institution – non-profit or for-profit would love to produce for their students! My hope is that whatever comes about, the additional scrutiny and regulations even if they are just symbolic will encourage all institutions to do better for all learners!
John Hall
Greenwood & Hall
jhall@greenwoodhall.com
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