- Group wants to create voluntary standards for the for-profit industry
- Few for-profits have become nonprofits, despite regulatory environment
- For-profit chains announce a new wave of closures and sell-offs
- The for-profit industry is struggling, but has not reached the end of the road
- Grand Canyon uses online to pay for scholarships and campuses
The For-Profit Next Door
Rasmussen College is a relatively small fish that prefers small ponds. That may be why the for-profit chain is sitting pretty compared to many of its higher-profile peers.
Economies of scale and easy access to market capital fueled the explosive growth of large, publicly traded for-profit higher ed providers during most of the last decade. Companies like Education Management Corp. and Kaplan Higher Education followed Apollo Group’s lead in developing centrally controlled curriculums and advertising them to vast numbers of students.
But the bottom fell out with the recession and the withering scrutiny of regulation-minded lawmakers and the news media. Now most of the big for-profits are grappling with slumping enrollment and revenue, as well as worried investors.
Career Education Corporation, for example, saw its net income drop to $19 million in 2011 from $158 million the previous year, while new student enrollment dipped by 27 percent (when comparing fourth quarters). The company hasn’t been helped by a scandal over its job-placement reporting, a related review by its accreditor, the departure of CEO Gary McCullough and a steep share price slide -- all last fall.
Meanwhile, Rasmussen has stayed out of the news and continued its growth aspirations, increasing enrollment to a total headcount of 15,600 from 9,500 three years ago. While Rasmussen is still a modest-sized institution, it has managed to grow and ramp up hiring despite the recession, company officials say, adding a few campuses as well.
The college was founded in 1900 in St. Paul, Minn. In addition to online offerings, it has deep roots in the Midwest, with 17 campuses in mostly small towns in Minnesota, Illinois, Wisconsin and North Dakota, as well as the growing presence in Florida, with five campuses.
“We’ve been in these communities for a long time,” says J. Michael Locke, Rasmussen’s vice chairman.
On its website, Rasmussen tells prospective students that it focuses on “practical, relevant and advanced skills that you need to confidently start or advance a successful career.” It holds regional accreditation.
College officials say they track the employment status of all alumni, and work closely with local businesses and politicians to tailor campus curriculums to local workforce needs.
“I know the outcomes of every one of my graduates over the last 18 months," says Tamryn Hennessy, Rasmussen’s national director of career services and corporate partnerships. Hennessy's staff is tracking the employment status of 4,622 alumni who graduated in the 18 months before last December. She regularly meets with career services staff from each campus to talk about the job prospects of graduates who are not working in their fields or continuing their educations -- about 11 percent of recent alumni.
“This is exactly what Rasmussen has always done,” Hennessy said.
The college collaborates with community colleges, filling in job-training gaps. And it holds twice-annual career fairs at each campus, which are open to the general public. About 1,000 of the 2,800 people who showed up at a recent batch of career fairs had “no affiliation with Rasmussen,” Hennessy says.
Even so, don’t expect President Obama to show up at the college to talk about workforce development. Rasmussen is a privately held company, and profiting from higher education remains controversial to some lawmakers and many in the academy.
For their part, college officials don’t seem to mind missing out on national attention. The college’s focus is local, they say. And flying under the radar isn’t such a bad thing for a for-profit these days.
Locke says Rasmussen has a role to play in meeting labor market demands and President Obama’s college completion goals. “There’s room for everybody.”
For-profits that know their backyards well may sometimes have a competitive advantage, says Kevin Kinser, an associate professor of education at the State University of New York at Albany who studies for-profit institutions. “Local connections and history are really important.”
Rasmussen isn’t the only mid-sized for-profit chain that stresses hometown ties. Harrison College, for example, has operated in Indiana for 110 years. The for-profit has a substantial online component, and is branching out to Ohio, but college officials say those ventures remain deliberate and grounded in specific job markets.
“We have very active advisory boards in all of our communities,” says Jason Konesco, Harrison’s president. And those advisory panels are how Harrison stays “in sync” with local business.
Konesco praised Indiana’s public colleges for being responsive to shifting job training needs, particularly Ivy Tech Community College, which is a statewide two-year system. But sometimes a for-profit can step in to help, he says.
For example, Harrison set up a specialized advisory board in Indianapolis with a focus on logistics and distribution. The college worked closely on the board with two companies: Conexus Indiana and BrightPoint. And it wasn’t like Harrison was new to the business executives, in part because Konesco used to work at BrightPoint.
“We were able to sit down at the table and cut through the red tape,” he says.
The college-next-door approach is a departure from what is seen as a chief advantage of national for-profits: Call it the McDonald’s effect, where a customer can expect the same burger anywhere in the world. A consistent product works in higher education, too. But sometimes local trumps national.
Kinser says for-profit chains may have made a mistake in rebranding local colleges they absorbed.
“I can understand that from a narrow marketing perspective,” Kinser says via e-mail. “But I always thought it was a shortsighted approach to the value that tradition holds for higher education.”
For example, he points to the former Duff's Business College in Pittsburgh, which was founded in 1840, making it the oldest continually operated for-profit in the U.S. In 2006 Duff was renamed Everest Institute-Pittsburgh by Corinthian Colleges.
However, smaller for-profits don’t always gain the upper hand on cornering markets. For that matter, experts say not to count out the publicly traded chains and their big capital. Some of those institutions’ recent pains may be savvy readjustments, particularly for Apollo and Kaplan, which have begun voluntarily turning away less-prepared students to adjust to the tighter enrollment outlook and regulatory climate.
And even lesser-known for-profits have had their recent scandals. Westwood College, a mid-sized chain owned by Alta Colleges Inc., last week settled with Colorado’s attorney general over allegations about misleading students through deceptive business practices, the latest in a series of missteps.
But Rasmussen has an edge on its larger peers in a subtle, but powerful distinction: to many people its campuses are local colleges, not for-profit corporations. If for-profit colleges do eventually follow the health care example, as some predict, where patients typically don’t know the tax status of a hospital, Rasmussen will probably be on the front edge of that shift.
The college already has blended its boundaries with traditional higher education. Rasmussen’s board chairman, Henry Bienen, is the former president of Northwestern University. And Andrea Backman, who Rasmussen recently hired as chief academic officer, previously worked for both the University of Virginia and DePaul University, where she helped launch the latter university’s first online degree program.
College officials say they are often close partners with community colleges. For example, Claire Walker, president of Rasmussen’s campus in New Port Richey, Fla., serves on a local workforce board with Katherine M. Johnson, president of Pasco-Hernando Community College. Walker has been on the board for nine years.
Rasmussen’s Florida campuses help displaced workers retrain, many of whom, she says, lost jobs related to the collapsed construction industry. Popular programs include health care and IT. And Walker says the college is in constant contact with local businesses to keep tabs on where the job market is heading.
“We don’t have our hands held out,” Walker says. “We have been supplying a very qualified employee to the market.”
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