Glimpse Into the Future

Spat between Ellis U. and regional accreditor highlights challenges for institutions and regulators alike as higher ed business partnerships grow in scope and complexity.
May 25, 2011

Born into a loveless marriage between a for-profit education company and a nonprofit university, Ellis University may have been destined for a troubled adolescence.

Since its 2008 emancipation from the New York Institute of Technology, Ellis has faced near-constant scrutiny due to money woes and a close relationship with its other parent, Cardean Learning Group. Now Ellis, a fully online institution based in Chicago, has hit another stumbling block in an already fraught quest for the accouterments of legitimacy: after a yearlong probationary period, the Higher Learning Commission of the North Central Association of Colleges and Schools announced last week that it will revoke Ellis’s regional accreditation at the end of August.

In a rationale posted on its website, the agency cited “substantive and pervasive problems at the institution with administrative oversight, integrity, planning and budgeting, sufficiency of financial and human resources, and quality issues related to the oversight of teaching and learning.”

The move could threaten the institution’s ability to market itself as a purveyor of meaningful degrees. It also highlights the challenges facing burgeoning institutions and accreditation agencies as online programs and complex business arrangements grow more common in higher education. Ellis University is an unusual case: a nonprofit university conceived as a business venture by a for-profit company that no longer exists and reared by an existing nonprofit institution with which it longer has any ties.

According to Illinois state officials, Ellis is about to change hands once again and undergo another transformation, reconstituting as a for-profit institution under the name Ellis University LLC.

The new version would have a less cozy relationship with Capital Education, the company that bought out Cardean Learning Group, than it had with Cardean. Ellis University had contracted with Cardean for nearly all services apart from course development, to the chagrin of some at the Higher Learning Commission as well as the Department of Education, which has refused to let Ellis accept federal financial aid from students.

By contrast, Ellis plans to use Capital Education for learning-management and tech support only; it will bring its marketing and enrollment management operations in-house, says Roger Widmer, the university’s president. This would make it more closely resemble a typical for-profit university, which could bring some stability if the new look sticks — which is to say, if it proves profitable.

Widmer would not elaborate on Ellis’s imminent ownership change, citing a non-disclosure agreement, except to say it has not been finalized.

If the deal goes through, it would be the latest in a series of major transformations for Ellis in its brief lifetime. Ellis University was originally Ellis College, formally part of the nonprofit New York Institute of Technology (NYIT) but operated by the Chicago-based education company UNext, which later changed its name to Cardean Learning Group. Ellis was the fruit of a strategic alliance between NYIT and Cardean: the plan was for Ellis to mature under the umbrella of NYIT’s accreditation until it could stand on its own legs, at which point it would spin off and seek accreditation as an independent university.

But the relationship went sour. NYIT decided it was not being adequately compensated for serving as an incubator for the burgeoning online university, and took Cardean to court. The institute even sent a letter to its own accrediting agency, the Middle States Commission on Higher Education, advising the agency not to accredit Ellis, which it didn't. Ellis subsequently sought, and obtained, the accreditation from the Higher Learning Commission that it now stands to lose. It also got accredited by the Distance Education and Training Council, a national agency, which it gets to keep for now.

Regardless of whether the beleaguered institution has a future, some believe that Ellis, in a way, is the future: a degree-granting institution born of multiple business relationships that defy traditional borders, and whose fundamental constitution can change at the pace of business rather than the more languorous pace of academe.

“Those types of relationships and agreements probably are a view into the future,” says Widmer. "And the statement we got back from [the Higher Learning Commission] seems to suggest that maybe that’s more distant as far as acceptance.”

Sylvia Manning, president of the Higher Learning Commission, agrees that the Ellis case stands to become less exceptional. But adjusting to the changing topography of the higher ed landscape is more complicated than simply “accepting” new forms of degree-granting institutions, Manning says. It means figuring out how to apply the principles of accreditation to universities that happily outsource core aspects of their operations such as course materials, course design, content delivery, and teaching.

In its guidelines for determining eligibility for federal student aid dollars, the Department of Education says that universities cannot cede more than 25 percent of the “educational program” to a non-eligible institution, i.e., a non-degree-granting institution. The Higher Learning Commission brings the same standard to bear when making accreditation decisions, Manning says. Indeed, the Higher Learning Commission's account of its relationship with Ellis suggests that it was not so much the university's unusual parentage as its uncomfortably close ties to Cardean Learning Group that initially prompted scrutiny from the accreditors.

Universities historically have outsourced parts of their operations, such as dining, laundry, and marketing, while keeping the “educational program” close. But as technology increasingly blurs the lines between content, teaching, and platform, figuring out who exercises control over various parts of the “educational program” becomes trickier, Manning says.

She offers an example: Say a university contracts with an outside company for a learning-management platform. That would not seem to compromise the “educational program” any more than leasing a classroom at a traditional institution. But what if the platform includes digital course packs with adaptive tutoring software and interactive quizzes? Still O.K., Manning says, as long as the faculty member is still in control of how he uses the material and what he does in class.

Now imagine if the same company offers the university a referral service to help it hire adjunct instructors who are trained to work with the company’s delivery platform and accompanying software, Manning continues. Go one step further: “What if the contractor says, ‘We can interview [the instructors], judge their credentials, and we can just put them on your payroll'?” she says. And then what if the company offers to simply put those instructors on its own payroll, and bill the university at the end of each month? “OK,” says Manning, “so when can you say the university has lost control of the course?”

The online boom, and the truism that online programs can be major cash cows, has created an odd new threat to institutional integrity: that traditional universities, rather than insisting on running everything from within the cloister of their own ivory towers, would in fact eagerly seek to outsource as much of the “educational program” as possible, often to non-accredited course vendors.

Building an online program is a “huge upfront investment,” says Manning. For that reason the idea of buying a plug-and-play nursing program from an outside provider, for example, might hold a lot of appeal for universities that want to respond to demand for such programs but don’t have the cash to build one from scratch. Yet it raises questions for accreditors: “What are the terms of contract? Who approved it? Are there any conflicts of interest? These are complications that are very new,” says Manning.

So far, the Higher Learning Commission has not had to reevaluate many institutions under the “25 percent rule,” Manning says, but that could change as collaborations between universities and companies become more thoroughgoing. She points to a recent “equal partnership” between Arizona State University -- which the Higher Learning Commission accredits -- and Pearson, the media and e-learning conglomerate. Pearson and Arizona State struck a deal in October that gave Pearson an equal stake in the university’s online campus. Arizona State retained control over teaching and curriculum, while Pearson agreed to run the online learning platform, marketing and recruitment, and tech support.

Such an arrangement does not necessarily violate the “25 percent” threshold, Manning says, but it is an example of universities’ willingness to throw the gates open for outside companies. “It’s not good or bad, but it sure is different,” she says. “If this is done well, there’s nothing wrong with it. But since this is new, it can be in danger of going off the rails.”

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