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Possible Next For-Profit Target

August 6, 2007

Sheldon Jackson College, which in June announced that it would suspend operations during the coming academic year so it could regroup financially, is in discussions with at least one for-profit institution about an alliance to bail out the struggling nonprofit institution.

David Dobler, president of the college, said in an interview that the small private Alaska institution is in active discussions with "one or two" for-profit entities about alliances that would preserve the "traditional mission of the college." He said that the college "is not for sale and the mission of the college is not up for grabs," but that the for-profit suitors with which the college is in discussions were interested in relationships that would not completely reshape the college. He declined to identify the entities the college is talking to.

The Sheldon Jackson discussions come at a time that many experts are seeing the start of a trend in which for-profit distance education providers either purchase or ally themselves with small nonprofit colleges that are struggling financially, but have accreditation and campuses. Last week, Touro College announced plans to sell its distance education unit to private investors. Sierra Nevada College last year announced an alliance with Knowledge Universe Learning Group, Michael Milken’s education company, in which funds are being provided to the college, which remains nonprofit, while plans are created to expand online graduate and professional education through Knowledge Universe and Cardean Leaning. In 2005, Bridgepoint Education, a for-profit higher education company, purchased Franciscan University of the Prairies, a small Roman Catholic College in Iowa, and transformed it into Ashford University, which still operates on the Iowa campus, but also has a growing distance education program. Grand Canyon and Post Universities have also made the nonprofit to for-profit transition.

When Sheldon Jackson announced its plans to suspend operations, officials said that they needed a year to figure out how to come up with a better financial plan and how to attract more students. (The college last year had about 100 full-time and 200 part-time students.)

A number of developments since the college announced it was suspending operations have former employees (most who worked at the college were laid off) wondering if it will be able to return:

  • The Alaska Commission on Postsecondary Education announced that it was revoking Sheldon Jackson's authority under state law to operate as a college.
  • While the commission agreed to stay its decision, pending an appeal, it has since announced that it will have to suspend authorization at its next meeting because the college's surety is no longer backing its bonding. (If bonding is reinstated, this issue would become moot.)
  • The U.S. Department of Education has canceled the college's authority to award or administer federal financial aid. The college is appealing this decision.
  • The college has been unable to make severance payments to its laid off employees.
  • The college revealed that its entire campus is collateral on a loan it took out more than a year ago.

The suspensions of authority to operate in Alaska or to award federal aid are important for several reasons -- even with the college not planning to operate in the coming year. The process for gaining or regaining such authority is complicated, so if the college develops a plan to resume operations a year from now, it wants its authority to operate and award aid assured. In addition, some of the foundations and private groups the college wants to raise money from require that college recipients have the authority to operate.

Dobler, the president, said he remains confident that the college can rebound. He said that Sheldon Jackson is already taking steps to strengthen its position, such as creating a subdivision of its property so that a portion of its land (and not the entire campus) could serve as collateral for the loan. He said that he believed that the college would hold on to its authorization to operate and receive aid.

And he said that the college would make the severance payments former employees have been expecting "when we have cash to pay them."

What will the future of the college look like? Dobler said it would have to focus on "flexibility and responsiveness." Sheldon Jackson has offered bachelor's and associate degrees, with an emphasis on the environment. Dobler said that based on the "needs of the market place," the college might increase the role of associate degree and one-year certificate programs.

Dobler said that the recent setbacks only demonstrate the importance of suspending operations. "We have demonstrated in the past year and a half that we can't restructure at the same time we are trying to operate under the old model," he said.

 

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