In an unprecedented move, a public research university, Indiana's Purdue University, is buying Kaplan University, a large for-profit chain with a mostly online footprint.
The deal will lead to the creation of a new nonprofit institution, which under some as yet undetermined form of Purdue's name will offer credentials ranging from certificates to doctoral degrees, online and at 15 campus locations.
Kaplan currently enrolls 32,000 students and employs 3,000 faculty members and other staff. All will transition to the new Purdue subsidiary. Kaplan's parent company, Graham Holdings, is publicly traded and, until a few years ago, was the owner of The Washington Post.
Purdue has in recent years won fans and faced some controversy for entrepreneurial moves led by its president, former Republican governor of Indiana Mitch Daniels Jr. The university said the former Kaplan University would become a nonprofit called New University (the name Purdue is using for now), which will operate as a wholly owned subsidiary of the public university. The remaining Kaplan Inc., which already sells a range of mostly technology related services to nonprofit colleges, will continue to provide nonacademic support to the new nonprofit under an agreement with a 30-year term, with a buyout option after six.
Terms for the deal include only a "nominal" up-front payment, according to a corporate filing. "Kaplan is not entitled to receive any reimbursement of costs incurred in providing support functions, or any fee, unless and until New University has first covered all of its operating costs," the filing said.
Like most large for-profits, Kaplan's holding company has in recent years struggled with declining enrollments and unflattering attention from federal and state regulators. For example, Kaplan Higher Education in 2015 paid $1.3 million to settle a federal whistle-blower's allegations that the company employed unqualified instructors. Yet Kaplan University, which is separate from the former Kaplan Higher Education campus involved in that lawsuit, still has a large infrastructure that will allow Purdue to immediately be a major player in online education. Purdue will join several nonprofit institutions that are increasingly dominating online education, including Arizona State, Liberty, Southern New Hampshire and Western Governors Universities.
“None of us knows how fast or in what direction online higher education will evolve, but we know its role will grow, and we intend that Purdue be positioned to be a leader as that happens,” Daniels said in a written statement. “A careful analysis made it clear that we are very ill equipped to build the necessary capabilities ourselves, and that the smart course would be to acquire them if we could. We were able to find exactly what we were looking for. Today’s agreement moves us from a standing start to a leading position.”
The Kaplan news follows several dramatic changes for large, publicly traded for-profits, including the collapse of the controversial ITT Technical Institute and Corinthian Colleges, the sale of the University of Phoenix to private investors, and the so-far unsuccessful attempt by Grand Canyon University to go nonprofit, with the company saying it wants to avoid the "stigma" for-profits face.
Likewise, Education Management Corporation, a major for-profit chain, last month sold to the Dream Center Foundation, a religious missionary group, that plans to run the former EDMC as a secular, nonprofit institution. And a large chunk of the remains of Corinthian was purchased less than three years ago by ECMC Group, a student loan guarantee agency, that created the Zenith Education Group as a new nonprofit career college chain.
The University of Phoenix announced Tuesday that it has hired Peter Cohen as the university's president. Cohen arrives from McGraw-Hill Education, where he most recently has been the company's executive vice president. He previously was president of Pearson Education's school division.
Phoenix is a large for-profit chain that in recent years has struggled with slumping student enrollment and revenue. In addition, last year the university disclosed that some of its academic programs do not pass the federal government's gainful-employment rule.
Also last year, Apollo Education Group, Phoenix's holding company, announced it would eliminate the use of mandatory arbitration clauses in student enrollment agreements as part of a broader effort to improve student graduation and default rates. Apollo also cut most of its associate degree programs and the use of third-party marketing.
"At every step in my career, I have sought ways to make education more engaging, accessible and impactful," Cohen said in a written statement. "It’s a thrill and an honor to continue pursuing this goal at University of Phoenix, a flagship institution of higher education."
Cohen follows Timothy Slottow, a former official at the University of Michigan who led Phoenix for about three years before stepping down last month.
Apollo in February was purchased by a group of private investors for $1.14 billion. The deal was approved by the federal government and an accreditor amid some controversy, in part because of the role of Tony Miller, a former official in the Obama administration's Education Department. Miller is COO and a partner of the Vistria Group, one of Apollo's new owners, and is now chairman of the company's board.
Lauren Asher, president of the Institute for College Access and Success, said Tuesday she will step down as head of the organization after June.
Asher has spent 12 years at the nonprofit organization, serving as president since 2009, when the TICAS board named her to replace Bob Shireman.
She said the group had grown "from a scrappy start-up to a central voice" on issues such as student loan and financial aid policy and access to college.
"I’m so proud of what we’ve accomplished together and the organization TICAS has become," she said in a message announcing her departure. "And our student-centered, data-driven and outcomes-oriented approach to financial aid policy and practice is needed now more than ever. I know TICAS will continue to have a major impact: fighting to make education and training more affordable and successful, not less, and standing up for the most economically vulnerable students and borrowers."
The Department of Education has begun to notify students who attended closed institutions -- including Corinthian Colleges and ITT Technical Institute -- that their lifetime Pell Grant eligibility will be restored.
Democratic senators, led by Washington Senator Patty Murray, have pushed the department since last fall to grant students who attended those institutions the ability to get additional Pell funding so they could attend another university. After previously insisting that federal law did not give the department authority to restore Pell eligibility, the department in October said it would do so after all, citing a provision of the Higher Education Act identified by Murray.
In an update posted to the website of the Office of Federal Student Aid Monday, the department said it will begin to identify students who received a Pell Grant to attend a closed school and who were not reported in the National Student Loan Data System as having graduated. The department will adjust those students' lifetime Pell eligibility to remove the portion awarded to attend a closed school, the update said.
"This is an important step to provide relief to students, but it can’t be the last one -- and I am going to keep pushing this administration to put students and borrowers ahead of for-profit colleges and Wall Street investors," Murray said in a statement.
Westech College, a for-profit college with three campuses in Southern California, shut down this week citing financial issues, the Los Angeles Timesreported. The abrupt closure, which surprised students, was related to the U.S. Department of Education apparently sanctioning the college with its heightened cash monitoring penalty over concerns about a "lack of financial and administrative capability."
The trade college offered two-year degrees and certificates in computer systems, HVAC technology, veterinary assistance and other programs. It is accredited by the Accrediting Commission of Career Schools and Colleges.