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Paying for Exclusivity

June 13, 2008

Many American college administrators hunt for international students on a shoestring, trekking to recruiting fairs in India and hoping that some of those prospective (full tuition-paying) students yield a return on their investment.

By contrast, in expanding its footprint abroad, National University secured a more immediate financial return. In 2007, an educational management company made a $2.5 million payment, or "donation," to the California-based university -- the payment included as part of an agreement in which Global Campus Management, Inc. gained the exclusive right to recruit international students and provide administrative/student services (including assistance with housing, non-academic advising and cultural programming) to the incoming students upon their arrival at National.

When asked about the payment Wednesday -- described in a contract and other documentation obtained by Inside Higher EdGlobal Campus Management’s president and CEO, Thomas Kerr, said the exclusivity and 10-year contract term were “worth a financial commitment to the university." The company derives its profits through revenue- or tuition-sharing agreements, in which it keeps a proportion of international students’ fees.

Richard Carter, National’s vice president for business and administration, explained in a separate interview that the $2.5 million payment was intended to offset a cost to the university of exclusivity, as on-campus management responsibilities -- and tuition revenue -- for all international students would be shared with the company going forward. (Of course, by dramatically increasing the number of full-paying international students over all, the university and company both stand to benefit financially. Under the terms of the agreement, National provides all academic programming and oversight and evaluates all international students for admission.)

“I think from our perspective it’s been working out quite well,” Carter said of the set-up. According to data submitted to the Institute of International Education’s Open Doors survey, the university’s international student enrollment has climbed from 492 in 2005 -- when the agreement, though then in its initial, non-exclusive form, was established -- to 750 in 2006-7. The goal, according to Global Campus Management, is to reach 800 by the end of 2008 and 1,100 in 2009. National University, a private nonprofit, has more than 22,000 students based at locations throughout California; most students are working adults, Carter said.

“The campuses therefore are managed really for the accommodation of working adults. I think GCM brought with them the expertise for what we needed to do to provide the kinds of [international student] services and support activity that would be required," Carter explained.

“I believe that outsourcing services to those who may have greater expertise is certainly something that’s being done more and more in education as well as any private enterprise.”

Global Campus

Global Campus’s model -- of recruiting and then providing on-campus services for international students in exchange for a share of tuition dollars -- goes well beyond the practice of paying commissions to international student recruiters on a per-student basis, the latter a growing but still controversial practice in the United States given restrictions on per-student incentives in domestic recruitment under federal law.

While there are lots of recruiters out there, "To my understanding, and I’ve been in this business 32 years, we’re the only people who are doing this to this level,” said Global Campus Management’s Kerr. Asked why he thought that might be, he laughed, “I guess people aren’t as entrepreneurial.”

“This is one way of getting into [international student recruiting] at a very low financial cost,” Kerr continued. “The costs are based on per-student enrollment so there’s no financial commitment for the university until the student actually enrolls in a university.”

Global Campus Management's U.S. branch is headquartered in Florida, but the company itself is based in Australia, where it got its start providing similar services for Central Queensland University. The Australian reported in February that Central Queensland had bought its way out of the partnership, purchasing an offshoot of Global Campus for "what is believed to be an eight-figure sum." The Australian Universities Quality Agency had questioned the relationship between the two parties in 2006. But The Australian also reported that Central Queensland had the highest proportion of international students in the country that year, and that the university had, in three years, earned $70 to $80 million in revenue from international student operations.

Global Campus is also interested in acquisitions, and operates a network of colleges and high schools in Australia.

“Obviously we’re not going to be attractive to a Boston University or a Harvard or a Princeton that has very firm and well-established and well-organized international offices and recruitment policies," said Kerr, who has worked in various administrative and teaching posts at Boston, Drexel, Fairleigh Dickinson, Northeastern and Rowan Universities.

"But to recruit internationally for a university, it’s very expensive, especially if you’re just getting started. Just one of those Indian trips is going to cost anywhere from $10,000 to $15,000 and there’s no guarantee you’re going to get any students out of it. I think where we’re attractive is small private universities that have not previously been successful in recruiting international students, but yet see the value of getting into it.”

In recruiting international students, Global Campus Management staff members act on behalf of their partnering universities (and their brands), Kerr explained. “Global Campus Management in the eyes of the student doesn’t exist. We sit behind the university we’re working for.”

Global Campus’s contract with National includes a section on publicity. It indicates that Campus Group International Education Services, Inc. (described in the document as a wholly owned subsidiary of Global Campus, though Kerr said CGIES is now a former name) cannot issue any press releases concerning the contracted services.

“In the event there is adverse publicity,” the signed contract states, “[National University] has the option to take control of responding to the media and creating a positive spin.”

'Too Many Questions'

Colleges' arrangements with outside companies -- especially on matters central to student life -- have come under increasing scrutiny in the past year and a half. In the case of American students going abroad, for instance, a bright light started shining last summer on the common practice of college study abroad officials accepting subsidized “familiarization trips” to outside program providers’ overseas study sites, and the seemingly less common practice of colleges accepting financial incentives in exchange for exclusive agreements.

New York Attorney General Andrew M. Cuomo launched an inquiry into study abroad policies and practices in August, following up on an earlier investigation of conflicts of interest in student lending. In that case, financial aid officers were feeling the heat, with one area of scrutiny being the degree to which banks offered inducements to colleges in exchange for spots on preferred lender lists (which many students use as a guide for taking out loans).

“While I have not seen the actual agreement, it sounds as if this arrangement has some of the elements of the preferred provider arrangements for financial aid. Plus a revenue-sharing agreement raises questions about interests on both sides when it comes to recruiting and evaluating students for admission,” Jane Robbins, a senior lecturer at Vanderbilt University who has researched conflicts of interest and institutional integrity in higher education, said of National’s international student recruiting set-up. The $2.5 million upfront payment in return for exclusivity in itself, she said, “just raises too many questions.”

Revenue-sharing arrangements, in general, she continued, are not a good idea in professional services. “Both sides have an interest in accepting any student these people bring and in retaining that student.”

“I personally would have liked to have seen efforts to recruit foreign students in a different way,” Robbins said. (For instance, she suggested that even small, cash-strapped colleges could join together into consortiums and split the costs of hiring a shared international admissions officer.) "This is part of doing business. If you want to have a global market place, there are costs to doing that, and it doesn’t have to be done this way.”

While this particular model substantially differs from the commission-based international student recruiting system that’s gaining popularity in the United States, because Global Campus retains a share of each student's tuition -- and therefore has the incentive to recruit a high volume of students -- the National Association for College Admission Counseling's general ban on incentive- or commission-based recruiting might apply. While the association has long maintained a standard barring incentive-based recruiting, however, David Hawkins, NACAC’s director of public policy, acknowledged that policy and actual practice have not been in line for some time now.

“What we understand is for quite some time, decades, incentive compensation by U.S. universities for the recruitment of international students has been, more or less, accepted practice," Hawkins said, adding that the association recently began a conversation with NAFSA: Association of International Educators on the issue.

”We as an association I think ultimately believe that commission sales in admissions are not going to be in the student’s best interest in the long run. But we never want to be closing off our eyes and our ears to what is happening in practice," Hawkins said.

A Better Strategy for International Student Success?

In interviews with officials at Global Campus Management’s other (and very new) U.S. partner institution, American International College, in Massachusetts, administrators stressed that Global Campus Management, with its follow-through services on campus, struck them as offering an appealing alternative to working with a stable of commission-driven recruiters abroad. AIC officials said in an interview that while they agreed to share international student tuition with Global Campus in their April agreement, they, unlike National, did not receive any upfront payment from the company.

“When I went to Beijing, for instance, many people that came up to my booth wanted to be agents,” said Roland Holstead, AIC’s chancellor for international education and vice president for educational enterprise. “They wanted a percentage of [revenue] for the students they got. It was very complex for one thing, and secondly it was difficult to assess the quality, sincerity, legitimacy of all the agents.”

“It seemed much more like paying for a body, a warm body, and that may be a misperception, but that was my feeling,” Holstead said.

Global Campus, in contrast, could follow through on campus, provide the "nurturing of the students" that AIC was looking for, Holstead said. And because it shares in all tuition revenue, the company maintains a stake in students succeeding.

“If these students they were to bring to us were to leave after a semester or year they wouldn’t be making any money because the upfront costs are so high,” said Gregory Schmutte, American International's vice president for academic affairs. “We’re interested in these students succeeding.”

AIC, which has a heritage of serving immigrant and international students but now draws primarily from the Northeast, hopes to increase its number of international students to 1,000 within five years. According to Open Doors, it had 59 in 2006-7.

Its strategy of joining with Global Campus is in part due to anticipation of decreases in traditional college-aged students forecasted for the Northeast, Holstead said. If the college meets its goal of 1,000 internationals, a third of its student body would come from abroad -- in turn providing a unique environment for American students, Holstead said.

“We’re a small private college. Because of our name and because of our history we were interested in international students and always have been but we really didn’t have the means to mount an international recruitment campaign the way larger universities can,” Holstead explained.

The first students recruited through Global Campus Management are expected to arrive in Massachusetts this fall.

 

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