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Hype and Hope at Labor College

November 8, 2011

National Labor College and the Princeton Review had high hopes for the online education partnership they formed in January 2010, declaring at its creation that they planned to create the largest online college ever in just five years.

Those plans have changed, however, with the college’s announcement Monday that the partnership was ending. Its termination “follows the Princeton Review’s decision to focus its investments and strategy on the company’s core operations,” according to a written statement from the college.

Paula Peinovich, the institution’s president, said the partnership “was rather overblown” in its initial goals. But despite the hype, she said that the college made substantial strides by working with the Princeton Review, and that the “amicable parting” with the company would have no negative effect on students or the college’s operation. The current online programs will also remain in place.

The collaboration was initially as controversial as it was ambitious. National Labor College is the academic arm of organized labor, and receives substantial support from the AFL-CIO. It provides bachelor’s degree completion programs and certificate offerings to a market of as many as 17 million union members and their families. Some faculty members at other colleges and union officials were aghast at the partnership, arguing that turning to a for-profit company for help in expanding was a slap in the face to the values of academic labor.

The deal was touted as part of a growing number of efficiency-creating collaborations between for-profit entities and nonprofit higher education.

By teaming up with the Princeton Review, a for-profit corporation known best for test-prep services, the college hoped to dramatically ramp up its online offerings. It worked directly with Penn Foster, a subsidiary of the Princeton Review that runs online college and high school programs. Penn Foster provided marketing and enrollment support and technical assistance for students and faculty, and helped with the development of online courses.

For its part, the company said it was attracted to the college because "access to the AFL-CIO’s members and their families represents an extremely attractive marketing opportunity," according to a financial statement.

Peinovich said any apprehension among the institution’s faculty members about the partnership faded fast.

“Once we got up and running, everybody forgot about it,” said Peinovich, who became president after the partnership had been announced. She said the programs created through the partnership were high-quality and in line with the college's union mission.

Upon its demise, the collaboration appears to have been worked out better for the college than for the Princeton Review.

The company invested substantial money in the deal, according to financial statements, but failed to reap early returns. Second-quarter revenue this year from the partnership was $45,000, according to an August release to investors. The financial statement cited lower than expected profitability in Penn Foster, and larger than expected cash expenses, raising concerns about the company's liquidity.

The subsequent termination of the partnership follows the Princeton Review’s May sale of a business line it created last year to provide community colleges with fast-track academic programs to expand their enrollment capacity. The company sold that venture for $4 million to a new business partially owned by Michael Perik, its former chief executive, who resigned earlier this year. That sale, like the end of the partnership with National Labor College, was described as a move to get back to the company’s core business.

The Princeton Review did not respond to a request for comment late Monday. But in a written statement from August, it said: "As we move forward in 2011, we will continue to eliminate distractions and apply our efforts toward driving value and growth."

When told of the partnership’s end, one former faculty leader at the National Labor College said he was worried that the move might hurt its bottom line.

Greg Giebel, a former president of the adjunct union, said some faculty members had been “unsettled” by the prospect of working with a corporation, but soon came to see the partnership as a “way to survive.”

The college was one of 180 to fail the Education Department’s most recent “financial responsibility” test, a disputed measure that some institutions say fails to accurately measure total fiscal strength, but which nonetheless can be a sign of money troubles.

Giebel, who is retired but still teaches a course at the college, said the loss of the Princeton Review’s marketing clout could cause “significant hardship.”

Peinovich, however, said the partnership helped the college’s online offerings get off to a good start, including three online bachelor’s degree completion programs in its newly established School of Professional Studies, and that the momentum would continue without the Princeton Review.

In February the Princeton Review contributed $5.8 million to a new company created to support the college’s online programs -- the first payment of a planned total of $20.75 million in capital for the jointly-held company.

The college, which held a 51 percent share in that now-dissolved venture, has no obligation to repay the company's initial investment, said Peinovich. That financial support “certainly positioned us very well to move forward,” she said.

Thanks in part to the boost from the Princeton Review, the college’s online future looks bright, Peinovich said. “If union members want to study online, they’re going to come here.”

 

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