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Accreditor's decision shows for-profits can still take over nonprofit colleges

Still a Viable Exit
July 10, 2012

The really big accreditation news related to for-profit higher education Monday (see related article) was the decision by the Western Association of Schools and Colleges not to accredit Ashford University.

But the other decision that the Western accreditor's senior college commission announced on Monday -- to let a company called UniversityNow take over the struggling nonprofit Patten University -- has significant implications for for-profit and nonprofit higher education alike.

For several years in the mid-to-late 2000s, numerous nonprofit colleges -- often out of other options -- agreed to let for-profit higher education providers subsume them. Some of those arrangements worked out well, but others essentially became shortcuts for the purchasers to attain highly sought regional accreditation that they might not have been able to achieve otherwise (or at least not nearly as quickly). (Ashford was in many ways the poster child for that process, to the displeasure of many critics.)

That pathway appeared to be cut off two years ago, when the country's biggest regional accreditor -- the Higher Learning Commission of the North Central Association of Colleges and Schools -- rejected two requests by for-profit entities to have accreditation continue with their purchases of nonprofit colleges (Dana College, in Nebraska, and Rochester College, in Michigan). Several experts said accreditors had approved no such "change of control" purchases since, leaving many observers with the impression that they were no longer possible.

But Monday's decision by WASC's Accrediting Commission for Senior Colleges & Universities to approve the purchase of Patten by UniversityNow shows that it is still possible for for-profit companies to assume control of nonprofit colleges -- if there is a clear fit between the missions of the two entities, said Michael B. Goldstein, a lawyer at Dow Lohnes who closely monitors the for-profit/nonprofit landscape.

"The mythology" that nonprofit/for-profit conversions were dead "was never true," Goldstein said. "The issue has always been that neither the [U.S. Education Department] nor the accreditors particularly care if an institution is nonprofit or for-profit. What they care about is whether it's the same institution coming in and going out. The key is to show that the change will maintain the mission, or expand on the mission, and doing it in a way that directly correlates with what the institution has been."

That is precisely what officials at UniversityNow (until now known for establishing a new competency-based university called New Charter University) say they plan for Patten, a one-time evangelical Bible college that serves mostly low-income students in a hardscrabble neighborhood in Oakland. Like more than a few small private nonprofit institutions -- its current enrollment stands at less than 1,000 -- Patten has struggled financially in recent years, and WASC placed the institution on probation last year, citing a wide range of serious problems.

Ralph S. Wolff, president of the WASC commission, described the agency's March 2011 assessment this way in a letter Monday to Patten's leaders: "Along with serious concerns about Patten's financial sustainability and management, the Commission was concerned about Patten's declining enrollments coupled with heavy tuition dependence; the effectiveness of leadership and governance; its capacity to assess student learning and conduct program review; its inadequate systems for collecting and using internal data for planning and decision making; the efficacy and implementation of its planning; and its lack of oversight of off-campus sites. The Commission expressed concerns that Patten was not sustainable and called for 'meaningful, lasting, and swift actions' to bring Patten into conformity with the [agency's] standards."

Patten officials began discussions months ago with the leaders of UniversityNow, an investor-backed enterprise that says it aims to "help ensure that affordable, high-quality postsecondary education is available to people everywhere." Its co-founder and CEO, Gene Wade, said the company was drawn to Patten, despite its struggles, because the institution's mission "looks a lot like ours.... They stayed in a tough community in Oakland and stood their ground over the years, trying to serve people who need them by being the lowest-cost school in California right now, giving more financial aid than a lot of places."

Wade said UniversityNow believed that by making a "serious investment" (about $6.5 million to start) in instruction, leadership and facilities and helping Patten change its business model -- the institution will drop its religious focus, shift to a flat per-semester tuition rate of $1,316, and no longer accept federal financial aid for its (mostly adult) students -- the company will enable Patten to thrive in a way it has been unable to do. A fully online four-year degree from Patten could cost students as little as $10,600, Wade said, as the curriculum will enable students to take as many eight-week courses in a 16-week semester as they can successfully complete.

The model won over at least one potential skeptic: Janet Holmgren, the longtime president of Mills College, a selective women's institution in Oakland (and a former administrator at Princeton University and the University of Maryland at College Park) who had been a consultant to nearby Patten.

Holmgren, who will serve as the first president of newly for-profit Patten, said she was excited to be part of an effort to "save an important institution in Oakland," and "give it an opportunity to become a more vital entity" able to serve more of the low-income and adult students that the university has long tried to help.

"A lot of these types of students are the ones incurring a great deal of debt.... They're going to for-profit institutions and having to make up the difference," Holmgren said.

When confronted with the irony that, like many of her peers at private nonprofit colleges, she had just contributed to the conventional wisdom that some for-profit colleges prey on low-income students, Holmgren acknowledged that "as someone coming out of the traditional higher education community, I have had concerns about for-profit models." But "there is great variety among those models, and I don't think we can tar them all with the same brush."

Holmgren said that she "had to kick the tires on this particular venture a great deal," and that she had been persuaded that UniversityNow is a "socially responsible model of for-profit, with investors who want to see ways in which the profits can be reinvested in expanding educational opportunities."

She conceded, too, that by becoming the latest émigré from traditional higher education into for-profit higher education, she would probably surprise and trouble a few of her former colleagues. But "I like raising eyebrows a little bit," she said.

 

 

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