In this year’s presidential election, Trump University brought for-profit colleges into focus, but it should hardly be considered representative of the promise that lies within postsecondary education. To the contrary, for-profit institutions can, in fact, play a valuable role in furthering knowledge and career prospects for a large group of nontraditional students, including military veterans, working adults, single parents and unemployed workers.
The ability of such institutions to effectively deliver on that promise may experience a boost in the coming year under the incoming presidential administration. The stock prices of companies running for-profit colleges rose significantly after the election of Donald Trump. The president-elect is expected to roll back regulations that have negatively impacted hundreds of struggling for-profit schools over the past four years, many of which have been wrestling with falling enrollments and unprofitable operations.
But even though for-profit colleges may be poised to benefit from deregulation under the Trump administration, the potential reduction of regulations governing the sector should not be viewed as a signal that for-profit school operators should pursue taking a passive, business-as-usual approach to managing their operations.
If the goal is to generate better student outcomes and long-term success, as well as attract new financial investment, leaders of struggling postsecondary colleges must be willing to embrace change and move forward with a sensible rethinking of their business models and a restructuring of both their institutional assets and curricula.
Changing demographics are a key challenge for for-profit colleges. The number of eligible enrollments peaked in 2010, and the pool of 18-year-old high school graduates that would typically pursue postsecondary education isn’t expected to rebound until 2021. Enrollments at for-profit colleges have already declined markedly since 2010 as a result of student concerns about job placement and the return on investment of a college degree. In addition, economic challenges mean that students and parents have less discretionary income and ability to pay.
For example, Congress shortened Pell Grant terms from eight years to six years, reduced overall funding for direct-loan programs like Parent Plus, and renewed support for Perkins Loans for just two years. Competition has also heightened. Online offerings from nonprofit colleges have been luring students away from campus-based for-profits. What’s more, for-profit educators have also had to contend with the exit of traditional lenders from the sector. Nontraditional lenders, such as private debt providers, are starting to emerge to fill the gap in financing, but it comes at a price: a higher cost of capital.
However, what has really been putting a choke hold on revenue and cash-flow generation for many for-profit schools -- which typically derive upward of 86 percent of their funding from federal dollars -- has been stiffer government regulation, such as the Obama administration’s gainful-employment regulation that took effect in July 2015. That rule stipulated that for-profit colleges must ensure a student’s annual debt payment does not exceed 20 percent of his or her discretionary earnings or 8 percent of his or her total earnings. Programs that do not meet the gainful-employment thresholds will need to either be discontinued or shortened, which reduces revenue. The stakes got higher in March, when the U.S. Court of Appeals rejected a challenge to the rule brought by the Association of Private Sector Colleges and Universities (which is now called Career Education Colleges and Universities). Industry operators are hopeful that relief comes from the new Trump administration, but no specific changes have been discussed or announced.
In addition, some for-profit institutions shut down due to the U.S. Department of Education declaring them ineligible for Title IV programs, terminating their students’ ability to receive financial aid. In February, for example, the department announced that it denied eligibility to 23 campuses of Marinello Schools of Beauty, leading to the subsequent closing of all 56 of the California-based institution’s schools in five states.
Given all that, it shouldn’t be surprising that the prognosis hasn’t been good for for-profit colleges. Data from the U.S. Department of Education, which analyzed the financial health of 160 private colleges, indicated that 66 for-profit institutions failed the government agency’s financial responsibility test. (The test combines three ratios from an education institution’s audited financial statements: a primary reserve ratio, an equity ratio and a net income ratio.)
A Ray of Light
All that said, owners of for-profit enterprises may have reason for hope after the new presidential administration takes over in January. But perhaps an even greater cause for optimism is the recently approved $1.14 billion sale of Apollo Education Group, which owns the University of Phoenix, to a group of three private equity firms. As former Deputy Secretary of Education Tony Miller, an investor in the deal, said at the time, “We are excited by the opportunity to build on the transformational work being done by the company. For too long and too often, the private education industry has been characterized by inadequate student outcomes, overly aggressive marketing practices and poor compliance. This doesn’t need to be the case.”
The statement is telling, but more important, it should signal a call to action to owners of for-profit enterprises. When an institution representing one of the largest operators of for-profit institutions has been able to generate interest from a group of institutional investors at a time when regulation has undercut the industry, it illustrates how restructuring can attract new investment.
Indeed, the good news is that for-profit-college administrators can undertake a number of restructuring alternatives, without resorting to filing for bankruptcy, to improve their business operations, maintain accreditation, strengthen financial resources, improve use of campus resources and bolster enrollment. Traditional Chapter 11 reorganization isn’t a viable solution for postsecondary colleges that depend on Title IV funding. But owners and administrators at these institutions can be -- and must be -- willing to be accountable, as well as more open to restructuring, if the goal is not just to survive but also to thrive.
Making the Most of Fixed Assets
The way forward for challenged institutions may not be easy, but they can take a number of practical steps. For starters, for-profit operators can scrutinize and reduce capital expenditures as well as costs for duplicate or unnecessary staff involved in campus administration.
For example, one of the biggest challenges for troubled for-profit colleges is how to use campuses efficiently and manage costs connected to long-term property portfolios. Owners of for-profit institutions should close or put up for sale any facilities that aren’t being used and hire a qualified third-party selling agent to manage the process.
As part of that, leaders of for-profits should recognize the impact of liquidity on campus asset sales. If an institution has limited liquidity, it is not going to command top dollar for the sale of its assets. Therefore, it’s crucial for administrators to improve their college’s liquidity before initiating a formal sales process by improving the efficiency of their Title IV funding operations to receive timely disbursements from the Department of Education.
Long-term leases should also be renegotiated with landlords, with the focus being to secure rent concessions. At campus locations with short lease periods or that are facing imminent shutdown, administrators should not be reluctant to move courses to other facilities off-site. They should also consider holding the same courses online to reduce costs and retain students. Beyond leases, for-profit institutions would be wise to review and renegotiate all types of contracts with major vendors for food service, conference center operations, the bookstore and other services.
When assessing institutional resources, owners of for-profits should also evaluate management and teaching staff. If a number of administrators or instructors are determined to be underutilized, or campuses are expected to close, it’s important to be able to make the hard but necessary decisions to reduce the size of the staff. Most for-profit institutions do not typically cancel programs and reduce faculty members unless they lose eligibility for the program. Or, for example, they might hire more counselors and advisers, when instead they should be more effectively training the employees that they do have to perform better and to foster a culture that encourages students not only to enroll in the institution but also to persist and graduate.
Indeed, in some instances, for-profits should not have expanded but rather should have focused on increasing retention by emphasizing student placements and outcomes, the creating of a high-quality culture, and lowering tuition costs. Strayer University, for example, reduced its expenses significantly and cut its tuition costs by 20 percent by more closely managing its operations.
The fact is that the most effective way for-profit institutions can improve their profitability is to enhance retention among their students. Thus, instead of hiring more instructors and staff, a better use of resources might be investment in data and analytics that can provide thoughtful intelligence about when a student needs help so that the institution can effectively intervene and provide the support that student needs.
One of the other most important steps for-profit educators can take to improve student outcomes is to innovate their curricula, particularly programs that are relevant to students’ job placement after they graduate. Course offerings should reflect current trends in education delivery and include high-quality online courses that can strengthen retention and lower campus costs.
In addition, for-profit educators would do well to consider the role local businesses can play in developing new course material. That approach offers a win-win for businesses and pupils alike. Many students are interested in securing employment opportunities in their local community upon graduation, while companies are often eager to use low-cost interns to assist with business projects, as well as scout for future employees. In some instances, some interns are qualified to become full-time employees. Teaming up with corporate partners to develop curriculum also leads to diversification of revenue streams.
For-profit institutions can also augment their traditional sources of revenue by offering contracted education and training services to corporations. For instance, Strayer University has reportedly teamed up with Fiat Chrysler to provide education programs for its work force, including employees of the company’s auto dealerships. By engaging in such contracted services, for-profits can help train and educate new student groups and also use any additional revenues to invest in new programs and support services for their students.
One thing is certain: unless for-profit educators engage in more hands-on restructuring of their institutions, they won’t be able to serve the large number of nontraditional learners that turn to them to advance their careers. The demise of more for-profit colleges would not be a good outcome for millions of students -- or for America’s future job growth in years to come.
Joseph R. D’Angelo is a partner at the investment banking and advisory firm Carl Marks Advisors. He has extensive experience in the education sector, particularly in working with underperforming businesses and advising on restructuring matters.
America’s universities are home, more than any place else in our country, to the enterprise of science. That has been an important and proud role for our great universities, and it has produced wonderful discoveries. Besides providing technical progress, science gives our society its headlights, warning us of oncoming hazards. As the pace of change accelerates, we need those headlights brighter than ever. So when a threat looms over the enterprise of science, the universities that are its home need to help address the threat.
The threat is simple. The fossil fuel industry has adopted and powered up infrastructure and methods originally built by the tobacco industry and others to attack and deny science. That effort has coalesced into a large, adaptive and well-camouflaged apparatus that aspires to mimic and rival legitimate science. The science that universities support now has an unprecedented and unprincipled new adversary.
The science-denial machinery is an industrial-strength adversary, and it has big advantages over real science. First, it does not need to win its disputes with real science; it just needs to create a public illusion of a dispute. Then industry’s political forces can be put into play to stop any efforts to address whatever problem science had disclosed, since now it is “disputed science.” Hence the infamous phrase from the tobacco-era science denial operation -- “Doubt is our product.”
Second, the science-denial operatives don’t waste much time in peer-reviewed forums. They head straight to Fox News and talk radio, to committee hearings and editorial pages. Their work is, at its heart, PR dressed up as science but not actual science. So they go directly to their audience -- and the more uninformed the audience, the better.
Our universities and other organizations engaged in the enterprise of science struggle for funding. Not so for the science-denial forces. You may think maintaining this complex science-denial apparatus sounds like a lot of effort. So consider the stakes for the fossil fuel industry. The International Monetary Fund -- made up of smart people, with no apparent conflict of interest -- has calculated the subsidy fossil fuels receive in the United States to be $700 billion annually. That subsidy is mostly what economists call “externalities” -- costs the public has to bear from the product’s harm that should be, under market theory, in the price of the product. These $700-billion-per-year stakes mean that the funding available to the science-denial enterprise is virtually unlimited.
And it’s your adversary. Those of you who either are scientists, or value and want to defend scientists, should beware. You have a powerful, invasive new alien in your ecosystem: it is a rival assuredly, a mimic at best, and an outright predator at worst. Make no mistake: in every dispute that this denial machinery manufactures with real science, it is determined to see real science fail. That is its purpose.
Given the connections between the fossil fuel industry and the new administration, we can’t count on government any longer to resist this predator. Regrettably, that science denial machinery is now probably hardwired into the incoming administration, as shown by the appointment of the fossil-fuel-funded climate denier Myron Ebell to lead the transition team for the Environmental Protection Agency. This considerably increases the denial machinery’s threat to the enterprise of legitimate science. The hand of industry now works not just behind the science-denial front groups but in the halls of political power.
That makes it all the more important for entities outside government -- notably universities as well as other scientific organizations -- to join together and step up a common defense. It is neither fair nor strategically sensible for universities and scientific associations to expect individual scientists to defend our nation against the science-denial apparatus. Individual scientists are ordinarily not trained in the dark arts of calculated misinformation. Individual scientists are ordinarily not equipped to deal with attacks and harassment on multiple fronts. Individual scientists don’t often have squadrons of spin doctors and public relations experts at their disposal. And they have no institutions devoted to ferreting out the falsehoods or conflicts of interest behind their antagonists.
Individual scientists are trained in the pursuit of truth through the tested methods of science. The science-denial machinery has truth as its enemy, and propaganda and obfuscation -- even outright falsity -- as its method. So the enterprise of science generally, and universities specifically, will need a common strategy to resist this potent and encroaching adversary.
In the Senate, I see the work of this apparatus, and its associated political operation, every day. Do not underestimate its power and ambition. Again, make no mistake: in every dispute that this denial machinery manufactures with real science, it is determined to see real science fail.
Sheldon Whitehouse is a United States senator, a Democrat, representing Rhode Island.
A New York State appellate court has reinstated two professors’ lawsuit against New York University, which alleges that the institution broke a de facto contract with them. The ruling, though preliminary, is significant in that it suggests that policies outlined in a faculty handbook can amount to a kind of contract.
The lawsuit in question involves two tenured professors in the School of Medicine, Marie Monaco and Herbert Samuels, who saw their salaries involuntary reduced for not meeting external funding requirements in ways that they argue violated the faculty handbook. Specifically, they say that tenure, as defined by the handbook, ensures academic freedom and economic security and so is incompatible with salary reductions related to external funding metrics. A lower court found that the lawsuit had no merit, as “no writing was submitted to demonstrate that the respondents agreed that its faculty handbook and policy documents could or should have a contractually binding effect.” Moreover, Justice Alexander W. Hunter Jr. wrote in his 2015 opinion, “even if the handbook were contractually binding, the handbook itself is devoid of any provision which guarantees tenured faculty a particular level of support as a condition of their tenure.”
The appellate court, however, ruled earlier this month that, for the purposes of reinstating the lawsuit, Monaco and Samuels “sufficiently alleged that the policies contained in [NYU’s] faculty handbook, which ‘form part of the essential employment understandings between a member of the faculty and the university,’ have the force of contract” and “that they had a mutual understanding with [NYU] that tenured faculty members' salaries may not be involuntarily reduced.”
Monaco said via email, “Since many tenured faculty members at NYU are without individual contracts and rely solely on the faculty handbook to define their tenure rights of academic freedom and economic security, it is essential that NYU recognize their obligation to respect the contractual nature of the handbook. Had the lower court ruling stood, many tenured faculty at NYU would have become at-will employees. … At a time when tenure across the country is under attack, it is nice to have this win.”
An NYU spokesperson did not immediately respond to a request for comment. William Herbert, executive director of the National Center for the Study of Collective Bargaining in Higher Education and the Professions at Hunter College of the City University of New York, said, “Oftentimes, New York courts reject the argument that an employment handbook is a binding implied contract.” The professors' case was supported by the American Association of University Professors.
Submitted by Jake New on December 20, 2016 - 3:00am
The University of Minnesota football players' short-lived boycott has been parodied in a short sketch spoofing the film Dead Poets Society. In the video, which was created by University of Minnesota undergraduates, male students climb atop their desks as if they are about to take an inspiring stand on behalf of an important issue, only to proclaim they "don't believe rape victims."
The football players said last week they were protesting the suspension of 10 players on the team and threatened to boycott the Holiday Bowl game. The university did not announce a reason for the suspensions, but they are believed to be related to a sex assault investigation in which police declined to bring charges. After the players announced the end of their boycott this weekend, the university's president said the media misinterpreted the team's intent and that reporters "translated" the players' support for their teammates "into support of sexual violence."
The boycott initially attracted sympathy from many alumni, concerned about issues of due process, but support for the university's stance grew as details emerged about what happened to a female student in incidents involving 10 athletes, in particular after a redacted version of the university's equal opportunity office's report on its investigation was published by KSTP News. Contrary to the team's comments, the 80-page report shows that the football players were interviewed, their assertions were considered and they were not all judged equally responsible for what happened. The report also details why the university found that four of the players engaged in sexual assault and that others engaged in forms harassment, such as videotaping the victim without her consent. The report states that some athletes tried to cover up what happened or violated other parts of the student code of conduct.
The Star Tribune reported Sunday that it was the report's details -- many of them read over the weekend for the first time by football players who organized the boycott and by the family members of football players -- that broke the will of players to continue the boycott.
Tenured and tenure-track faculty members at Southern Illinois University at Edwardsville will be represented in collective bargaining by the National Education Association, the Illinois Educational Labor Relations Board said late last week. A majority of faculty members signed a petition in support of such representation, with many thinking more about the ongoing, statewide budget crisis than campus-specific issues, according to information from the new union. “We organized to ensure a place at the table when hard decisions need to be made,” Kim Archer, professor of music, said in a news release.
A former junior professor at Stanford University says the institution retaliated against her for filing a sexual harassment complaint against a senior professor, which resulted in a finding that he had made an “unwanted sexual advance” but did not harass her, The Guardian reported. Michelle Karnes, who is now an associate professor of English at the University of Notre Dame, says Stephen Hinton, Avalon Foundation Professor in the Humanities at Stanford, told her he had a “crush” on her and that he was “tormented” by his feelings, once kissed her on the lips, and continually tried to talk to her at the gym even after she said she wanted no further contact.
Karnes says she confided in a fellow professor who was also the wife of her dean but was told to try to appease Hinton based on his position within the university. The dean’s office approved soon Karnes’s tenure but did not renew the position of her husband, Shane Duarte, a lecturer in philosophy for fall of this year. Karnes says that she and her husband had been hired as a “dual-career” academic couple, and the move to not rehire him after years of service and positive reviews was retaliatory. Instead of targeting her, she believes, administrators went after her husband because he was off the tenure track.
Hinton denied the allegations, saying the two had a “platonic, reciprocal relationship.”
Lisa Lapin, a university spokesperson, said the university conducted a “thorough and objective review” of Karnes’s allegations, but declined further comment on what she called personnel matters.
A federal judge last week dismissed a lawsuit against Florida Atlantic University brought by James Tracy, the former professor of communication there who repeatedly called the 2014 Sandy Hook Elementary School massacre a hoax. Tracy was terminated over failing to complete a conflict of interest policy, but he alleged that he was really fired over the theories he promoted on his personal blog. Judge Robin Rosenberg based her decision in large part on what she called a “lack of clarity” in the lawsuit, which alleged First Amendment violations and other counts.
Tracy’s “narrative intertwines multiple constitutional theories and, as a result, both this court and defendants struggle to define the alleged constitutional injury in this case,” Rosenberg wrote. Regarding Tracy’s free speech violation claim, she said that while "the theoretical possibility exists that the [conflict of interest] form could be used by [the university] to restrict speech or otherwise restrict an outside activity, [Tracy] never reached that particular point as [he] refused to fill out the form.” Tracy will have a final opportunity to rework portions of his lawsuit and possibly resubmit it.