June 17

A National Community College?

The University of Phoenix markets itself as a national private university (and the largest one at that). With more than 100,000 individuals now enrolled in its young two-year degree granting college, Axia, has it morphed into a national community college, too?

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“In some ways I guess [Axia] could be considered to be a national community college. That’s not the way we have represented it,” said William J. Pepicello, the University of Phoenix’s president. “Our real thought is it’s a college where the student demographic that it appeals to can come and get a grounding in higher education and have some early success leading to the two-year degree that we hope then will inspire them to go from there.”

Sound a bit like (at least one function of) a community college?

The number of associate degrees awarded by the for-profit Phoenix swelled to 13,000 in 2007, just three years after Axia’s establishment in 2004. The all-online college now offers associate of arts degrees in fields including accounting, communication, health care administration, information technology and paraprofessional education. Students take two courses at a time in nine-week blocks.

Few Axia students are traditional college-aged: Phoenix’s president reports that only 16 to 17 percent are under 22. But the students, many of whom are first-generation college students and 80 percent of whom transfer 15 credits or fewer into Phoenix, differ substantially from the white-collar, mid-career professionals that Phoenix has historically served. In a January conference call on earnings, the president of Apollo Group, Phoenix’s publicly traded parent company, said that while the average Phoenix student is 33 or 34, the average Axia student is 28 or 29, with a lower income. The Axia student is more likely to hold an entry-level job.

Yet, these students are paying more than their peers at community colleges. As of July 1, Axia College courses will cost an average of $325 per credit hour. At public two-year institutions, the College Board calculates that the average annual tuition bill for full-time students is $2,361, which boils down to about $98 per credit for a student taking 24.

But other parallels between the two beasts are striking: Phoenix, much like community colleges, has built a reputation for serving a diverse pool of students who are otherwise underserved in higher education. And the university regards Axia as an entryway into higher education, and yes, the University of Phoenix in particular.

Axia “was a response to a changing demographic at University of Phoenix,” explained Pepicello. The university began as a degree completion institution, in which mid-career professionals with some college experience transferred large numbers of credits and finished off their programs. “What we discovered in the late ’90s and early 2000s, there were lots of students who fit our profile, they were working adults, but they had almost no prior experience in higher education.”

“Why we focused on the associate degree level was that we realized that bringing someone who is older and who has probably been outside education for a number of years, and has no previous college, into a four-year program is very daunting,” Pepicello continued. “If a student needs an associate degree, they can get it, go to work. And they can choose to come back to us — which we hope — for a bachelor’s degree.”

That hope meshes with the business model, which is based on the premise that the associate degree won’t ultimately be sufficient. In the January call, Brian Mueller, Apollo’s president, declined to offer detail on the transfer and completion rates of Axia students moving into Phoenix’s bachelor’s degree programs, saying it was proprietary. But, he said, “That pool of people who can potentially transfer into our bachelor’s program is growing month over month which is a very good thing from our standpoint.”

Asked later in the call whether there “is there any reason why those Axia students would not at some point in time in their growth not want to get a bachelor’s degree,” Mueller replied, “No, I don’t think so.”

“Because if you look at — if you look at the Axia College programs that we have, you will notice that there are a few where there is some direct benefit from having an associate’s degree. There is some increased capability from an income standpoint. But there is still a much greater differentiator at the baccalaureate level and so there’s not — it’s not a scenario where an associate’s degree will give you an opportunity close to or equivalent to a baccalaureate degree so that people would be tempted to stop there. We are not seeing that happen.”

Axia in Context

Given Apollo’s profit motive, Axia, unlike a traditional community college, does not exist in part for the purpose of exporting students to complete their four-year degrees elsewhere. While Phoenix has many articulation agreements for bringing students in, the same can’t be said for students going out. But Axia students graduating with an associate degree will have a regionally accredited credential they could transfer elsewhere on their own — begging the question of what an Axia associate degree means. Where do Axia degrees fit in, both within Phoenix’s own mammoth structure and in higher education’s super-structure more generally?

“It’s not a technical degree; it really is only about helping you into a four-year school,” said Trace A. Urdan, an analyst with the investment group, Signal Hill. He said he wonders about the expectations and outcomes for the two-year online degree itself. Many traditional University of Phoenix students, he pointed out, take courses on the company dime because a supervisor suggests that a M.B.A. might be beneficial, or because they need a credential for a particular promotion.

“Generally speaking they’re not using the University of Phoenix to change the directions of their lives,” said Urdan. Whereas, “the Axia program, I think it’s being pitched as transformative. You’re waiting tables or you’re driving a truck or you’re doing something you don’t like and here’s a chance to move into the business world. I just don’t know. I don’t know what it gets you.”

For those Axia graduates who move on to a Phoenix B.A., “That probably has some value,” Urdan said. “But the two-year associate from University of Phoenix is brand new.”

“You certainly wouldn’t want a two-year degree from a university where there was any doubt about your ability to finish your bachelor’s degree somewhere other than Phoenix, I would think,” said David W. Breneman, a professor of education and head of the University of Virginia’s new Batten School of Public Policy and Leadership. “There are still a lot of institutions that are very reluctant to accept anything from Phoenix.”

At the same time, he added, “There are a number of states where the articulation agreements between the community colleges and four-years are not very good.”

“We know that the United States is falling behind many of the industrialized countries in the world in terms of the percentage of our population that is obtaining higher education. So I think any increased options for higher education are generally good,” said Linda Thor, president of Rio Salado College, an Arizona community college with aggressive online operations (which, incidentally, have caught the attention of a private investor). “That said, it’s very difficult for those of us in public education to compete with the for-profit institutions because we only have a small fraction of the marketing dollars they have available.”

“I think that some students who are enrolling in for-profit institutions may not be aware that comparable programs of comparable quality are available to them at a significantly lower price in the public sector,” continued Thor, who counts the University of Phoenix as a neighbor. “Here’s where somehow we all need to collectively do a better job of educating the consumer about their options.”

“I particularly think it’s a shame for somebody to be coming out of an institution with an associate degree and a significant debt when that same associate degree was available at a public community college at a fraction of the cost.”

Competition

Phoenix’s Pepicello, however, said he doesn’t see Axia in competition with community colleges. “Clearly students have that choice,” he said.

“Many of our students indicate that they might have considered the community college, but that the community college did not particularly have the format they’re looking for.”

“If I were to opine on why students choose us, I think it’s probably ease of access,” Pepicello said, citing small classes (20 students or less in Axia’s case), extensive interaction with faculty and advisers, and the online platform. “In short I think it’s because we tried to design Axia to be something that students can integrate into their lives and I think that resonates.”

Phoenix’s first annual report on academic outcomes, released this month, does not include any data on Axia’s outcomes specifically. It does indicate a 27 percent completion rate for its cohort of associate degree seekers in 2003 (the year before Axia’s establishment), consistent with national norms. In calculating its completion rate, the university used a different formula than the federal standard, which counts only first-time students (who, as the report states, are anomalies at University of Phoenix).

Urdan, of Signal Hill, pointed out that Axia’s growth is consistent with that of other for-profit colleges pursuing the two-year degree market, including Colorado Technical University, owned by Career Education Corp., and American InterContinental University Online. “It’s clear that this new category is very popular,” Urdan said.

“There’s a growing awareness of the importance of the two-year degree on the part of business and industry,” said George R. Boggs, president and CEO of the American Association of Community Colleges. Boggs added that while community college leaders have paid some attention to the expansion of for-profits in the two-year degree market, “I haven’t heard a lot of broad concern about it yet. And I think it’s mainly because community colleges have all they can handle right now.” (Boggs added, too, that community colleges are concerned with many functions beyond conferring associate degrees. Nationally, community colleges award only about 550,000 associate degrees annually, while there are 11.5 million enrollments in U.S. community colleges.)

“There are some things we can all learn from each other,” Boggs said. “For example, Phoenix does one course at a time” [or two, in the case of Axia]. “I think for some students that’s a great model, and some community colleges should be doing that or thinking of doing that, offering classes in a more compressed mode.”

“We can’t completely emulate for-profits because in many ways they have a lot more resources. They charge a lot more money and can devote more time to following students into the job market, for example,” Boggs said.

“It just shows there’s competition out there and big companies like Apollo are interested in serving this audience and think they can be competitive,” said Sean Gallagher, program director and senior analyst for Eduventures, a research and consulting firm for higher education. “It just means that community colleges need to be more flexible in their offerings and be aware of the competition.”

— Elizabeth Redden

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