Southern New Hampshire University is probably the fastest-growing nonprofit institution in the country, driven by the expansion of our longstanding online program. When it comes to large-scale online programs, for-profit colleges dominate the list, which includes only a handful of national nonprofit players.
That may change soon. Eduventures, the marketing research firm, predicts that hundreds of nonprofits will seek to move online more aggressively. A good number of them have been visiting us.
From small private tuition-dependent colleges to flagship public universities to elite high-brand schools, we have hosted institutions that are exploring how they might enter the online education market or expand their existing programs. It’s not as easy as it was even just a few years ago, and with some frequency they ask if we might contract with them to help them grow their online programs.
We thought about offering such a “services business” and partnering with these institutions to provide everything from marketing expertise to call center support to advising to course development and more, but discovered that we can’t. U.S. Department of Education rules prohibit one institution from offering “bundled services” to another for a share of tuition revenue (the only sensible way to be paid since services contract and expand with enrollments). Ironically, while the rule was designed to thwart for-profits institutions trying to circumvent prohibitions on incentive compensation for enrollment activities, it inadvertently keeps nonprofits from working together while protecting that market for a new breed of for-profit players.
While Southern New Hampshire has abandoned the idea of creating a services business, we learned in investigating it that major for-profit companies are rushing into the breach, claiming millions of tuition dollars, and blurring the boundaries between them and their nonprofit partners.
Though for-profit colleges themselves are reeling and seeing steep declines in enrollment, bundled services providers, as I call these entities, represent a new for-profit sector quietly gaining substantial ground in higher education. Because this sector is doing so in willing partnership with nonprofit institutions, its presence is largely unrecognized and poorly understood.
A new generation of owners and shareholders is being enriched with tuition dollars, and the nonprofit higher education sector may well be compromising its integrity and values. This major new for-profit presence is now becoming established, is a magnet for investors, and in many ways raises more difficult questions for higher education and for regulators than did the for-profit institutions that have been so often vilified.
Bundled services providers are for-profit companies that help institutions establish and grow online programs. While they can help with course development and conversion, platform and IT needs, compliance and reporting, their real added value is marketing and student recruitment. As more and more nonprofits look to expanded online programs as a way of extending their reach and offsetting loss of other revenues (state support for publics, shrinking net student revenue for privates), the BSP industry has heated up.
Publishing behemoth Pearson acquired EmbanetCompass for $650 million. John Wiley & Sons acquired Deltek, another BSP, for $220 million. A number of new BSPs have entered the market place in the last few years -- companies like 2U, Learning House, and Academic Partnerships -- joining longer-term players such as Bisk; heavyweights like Blackboard have announced plans to jump in.
For-profit institutions also have a stake in this business, with Kaplan owning Colloquy and Ivy Bridge College being owned in part by Altius. Udacity, best known for MOOCs, recently announced a partnership with Georgia Tech that really looks like a bundled services deal if you read who will provide what, based on details provided in this recent Inside Higher Ed article.Coursera this week unveiled partnerships with nine state university systems and flagship campuses in which it will provide a suite of services and products including its MOOC platform, entire courses, technical assistance consulting, and analytics – in short, bundled services.
While for-profit institutions have yet to earn much respect from traditional higher education, the BSPs are working with scores of highly reputable nonprofits. EmbanetCompass works with Boston University, Deltak with Purdue, 2U with the University of Southern California and Georgetown, Pearson with Arizona State University, Bisk with Notre Dame -- and the list goes on.
Eduventures estimates that about 200 nonprofits have partnerships with BSPs and another 500 will entertain such partnerships in the next 12 to 24 months. BSPs generally take 50 percent of all tuition revenues for their services, so this is a very lucrative market.
How lucrative? According to the Texas Observer, Academic Partnerships collects 70 percent of the tuition revenue from partner Lamar University, the third-fastest growing university in Texas (it started at 80 percent), more than $33 million in fiscal 2012.
In its partnership with Arizona State, Academic Partnerships collected just short of $4 million or 50 percent of tuition, over $10 million in its partnership with Florida International University, and $18 million, or 50 percent of tuition, for Ohio University’s nursing program. With hundreds of nonprofits hoping to grow online programming and finally shaking off their hesitancy about online education (the real gift of elites offering MOOCs), the bundled services market stands to outgrow the for-profit higher education sector over time. In short, it could be huge.
Why do nonprofits turn to BSPs for help and thereby surrender huge amounts of tuition revenue (and effectively pass through to the for-profit world federal and state financial aid dollars)? There are three primary reasons:
They have tried to launch online programs and had limited success, or they have never done an online program, so they know there is a lot they do not know;
They do not have the internal capacity, whether it be the right people (often the case), technology, systems, data analytics, or processes;
They do not have the financial resources to build capacity and support a necessary marketing effort.
So while the prospect of giving up so much of their tuition revenue is not attractive, these institutions have little other recourse. The BSPs, on the other hand, recognize that they will make major investments to launch and grow these online programs and that over time the institutions will learn from them, so they insist on long-term contracts. Ten years is not uncommon.
Outsourcing parts of what we do is not new to nonprofit higher education. We often outsource food service, bookstores, and maintenance. We increasingly outsource IT, or portions of it anyway. Outside vendors often create our marketing materials. We may outsource some HR functions, such as payroll.
There is little tradition of outsourcing core academic functions and the key engagement with students that begins with recruitment/admissions and extends through the learning experience and advising. Yet nonprofits are increasingly doing just that in their partnerships with BSPs.
I have elsewhere written about the disaggregation currently under way in higher education and could argue that this is the best example of the phenomenon. Essentially, BSPs do the marketing, student recruitment, data analytics, course conversion, and other functional processes far better than most nonprofits can. Disaggregating those functions and paying an entity more expert than you to do them makes a lot of sense, and I could argue that doing so provides access to more students, strengthens the participating institutions by building enrollments and increasing revenues (even if they give up a good portion of them), and ostensibly allows the institution to stay focused on what it does best: develop intellectual assets that the BSPs then help to extend to the world.
Yet, the rise of the BSP industry raises a number of important questions that invite exploration by policy makers, higher education leadership, reporters, and others. To my mind, they are as follows:
Are for-profit companies in the process of claiming another large portion of the higher education pie and doing so largely under the radar screen?
Are BSPs important enablers that will allow nonprofit higher education to reclaim the online marketplace from the huge for-profits, or we trading one kind of for-profit – institutions that are easy to recognize and understand - - for another that is more insidiously embedded within our sector?
What does it mean for any institution to give over so many of its activities to a third-party provider?
How will accreditors and regulators come to think about these disaggregated structures given that the regulatory environment is largely built on the notion of the integrated institution?
Are institutions that enter into BSP contracts sufficiently safeguarding their authority over key functions and decisions and against the recruitment abuses that plagued so much of for-profit higher education?
Are we comfortable with so much tuition revenue leaving our institutions to enrich shareholders and owners of for-profit companies? Put another way, how much do we give away to for-profits before our institutions lose their standing as nonprofits and become fronts for what in reality become much more mixed entities?
BSPs make their profits and meet shareholder expectations by driving growth, and one could argue that when an institution contracts with a BSP there is a perfect alignment of goals: both want to see more enrollments and more tuition revenue. If the BSP is making a lot of money, so too is the institution: an ostensible win-win. Conversely, when a BSP so entirely takes over the management of a nonprofit’s program, how much nonprofit is left?
If non-profit Institution X contracts for a BSP to:
convert its courses for online delivery;
provide all learning materials;
market and recruit students;
process admissions files;
hire faculty and oversee the teaching of the courses; and
what is then left for Institution X to provide? Its name, accreditation, Title IV approval, and intellectual property in the form of the syllabuses and program. Is that not then a kind of franchising in which the student largely engages with the for-profit side of the partnership and very little with the nonprofit? Is such an effective hybrid program truly nonprofit?
On the other hand, many nonprofits have little alternative. They lack the combination of know-how, capital, and infrastructure they need and a BSP contract gets them in the game and generates new tuition revenues. While the contracts may be lengthy, the arrangements give them time to learn what they need and to eventually take back some or all of that for which they contract. There is an alternative.
I propose a BSP cooperative, a nonprofit entity in which nonprofit institutions can be owner/members. From such an entity an institution could buy all the services it needs at a lower cost with a number of benefits:
Because it is a co-op it would have to distribute any “profits” back to the members, thus keeping all tuition dollars within the nonprofit sector;
Institutions would have not have to surrender such large portions of their tuition revenues and, by extension, federal financial aid dollars would stay within the nonprofit sector;
All co-op “profits” could be funneled back into institutions as need-based scholarship support.
Because all members are owners, the earlier cited Department of Education bundled service affiliate rule would prohibit a co-op as just outlined, but I think the idea is compelling enough that (a) the department should find a way to make such a co-op possible and (b) institutions would readily sign on if they could. In the end, a partnership of accredited nonprofit institutions might not address all the boundary and definitional questions that the new for-profit BSP sector raises, but I would find such a partnership more reassuring than our current state of affairs.
Paul LeBlanc is president of Southern New Hampshire University.
Swarthmore, under pressure to divest from fossil fuels, puts the price tag at about $200 million over 10 years, saying removing its investments would require a fundamental shift in how the college manages its endowment.
The world still comes to the United States for higher education. Our elite institutions are the best in the world. Historically, we have done a better job of providing quality education to tens of millions of people than almost any other country on earth.
Yet we’re slipping. Simply put, our graduation rates are too low, our costs are too high, and too many students are slipping through the cracks. Reformers -- and universities themselves -- grasp these realities and want wholesale changes that will fundamentally alter how we think about higher education.
Those long-term battles are important, even necessary. New innovations in distance learning and nontraditional degrees may provide new pathways for students. But such changes may take decades. In the meantime, we have millions of college students taking on ever-higher debt loads for a long, winding road to a degree. We need to make immediate changes to affirmatively lower costs – not just “increase affordability” – while we raise graduation rates. We need to work within the existing framework to do what we’re already doing, but do it better and cheaper.
The good news is we have proven methods to improve our efficiency and outcomes at our postsecondary institutions.
Take student costs. Conventional wisdom focuses on high tuition costs, but there’s a related problem that’s often overlooked. Graduating from college takes most students five or even six years, while they are planning for four. That ends up an extra 25 to 50 percent in tuition costs alone, not to mention college-related fees and the opportunity cost of not working.
Institutions can directly reduce time to degree. Recent data show that “bottleneck courses,” i.e., courses where student demand outstrips available seats, play a big role in delaying degree completion.
To put it in human terms, a student who needs Biology 201 to graduate – when a seat in Biology 201 isn’t available until next year – is wasting time and money. That dynamic is why “access to courses” consistently ranks as the biggest student complaint about higher education, according to the Noel-Levitz annual student satisfaction survey (subscription required).
The fix is relatively straightforward: offer those bottleneck courses more often. Just 5 to 10 percent of courses are responsible for the vast majority of bottlenecks, so colleges and universities can address the shortages quickly. For instance, they can ensure that their most valuable resources -- professors -- are teaching the right mix of courses to prevent bottlenecks, rather than spending limited resources on course offerings that are not needed (15-20 percent of a typical school’s schedule). Similarly, colleges can better align schedules so students don’t have to choose between two required courses, and can make sure room size is aligned to corresponding course demand.
“Quickly” is the key concept in this fix – we can save students hundreds of millions of dollars every year starting immediately. We don’t need to wait a decade, or even a year.
Addressing bottleneck courses is one of the clearest examples of changes we can make to address the problems in higher education immediately, but it is far from the only one. The two below, for instance, lead to real savings right away, but are easy to overlook:
Extensive data show that better allocation of academic space – i.e., which courses are scheduled in which classrooms at which times – is an overlooked yet vital cost issue. Better allocation of classroom resources – identifying and addressing primetime bottlenecks by focusing on room ownership, meeting pattern efficiency and last-minute cancellation, etc. – can postpone or even cancel entire expensive classroom construction projects. (Full disclosure: Ad Astra Information Systems, where Tom Shaver serves as CEO, are providing university leaders with data-based solutions that help them make these important resource allocation decisions.)
College bookstores can adopt software enabling students to take advantage of economies of scale and get their expensive textbooks for vastly reduced costs (One of us wrote an op-ed on this subject in The Hill).
There are, of course, hundreds of other solutions we can adopt right away. These solutions represent just a few ideas that directly address the nuts and bolts of providing courses to thousands of students on a single campus. These solutions aren’t glamorous. They’ll never make the front page of TheNew York Times or be the subject of a TED talk.
Yet they are key operational concerns that save real money. One large community college in the Northeast better aligned its faculty and classroom resources to offer more of the most oversubscribed courses, allowing it to enroll hundreds more students without committing new funding. All told, it improved its balance sheet by over $1.7 million in a single year. A community college system in the Midwest took a similar approach and has improved its fiscal outlook by almost $3 million in just three years. Multiply those figures by the approximately 3,000 institutions of higher education in this country, and you are looking at tremendous savings for students – and for institutions.
Will these changes singlehandedly fix the deep-seated and complicated fiscal issues afflicting our higher education system? Probably not. But can these solutions -- and others like them -- vastly improve the higher education experience for both students and institutions? There is no question they can.
In an era defined by a $16 trillion federal debt and states across the country struggling with multibillion-dollar shortfalls, we are going to see an unfortunate but inevitable reduction in government funding for higher education. Colleges are facing this reality today. They cannot afford to wait for next-generation solutions. They need this-generation solutions. Millions of students’ futures depend on it.
Gene Hickok is the former deputy U.S. secretary of education and a senior adviser at Whiteboard Advisors; Tom Shaver is CEO of Ad Astra Information Systems, a company using data mining technology to help colleges and universities improve student access and lower costs.
At 30 years old, I definitely consider myself part of the Facebook generation. Zuckerberg’s brainchild hit the ‘net when I was a senior in college, and by then I was already well acquainted with e-mail, chat rooms, text-messaging, and all the multifarious precursors to today’s social media. I text, I post, I chat, I even snapchat: in these respects, I’m an utterly unremarkable member of my society.
But I also happen to be a college professor and a molder of young minds. And, far from indulging the technology-driven spirit of the times, I make my students work as students have always worked. They read Seneca, Pascal, Tolstoy, and Schopenhauer. They are obliged to turn in papers by hand; they must come to office hours to speak with me about their grades; they are even, and this is most anachronistic of all, required to attend class. Physical presence is key to every aspect of their learning experience, be it my hovering, breathing presence in the classroom or the office, the cohort of 30 or so warm bodies that shows up for lecture twice a week, or the more abstract form of embodiment conveyed by the weight of a book.
To believe certain commentators, however, this embodied notion of learning is on its way out in American higher education. Writing for The American Interest’s January/February 2013 edition, the recent Yale graduate Nathan Harden offers the following ominous prognostications about the future of university instruction in our digital age:
In fifty years, if not much sooner, half of the roughly 4,500 colleges and universities now operating in the United States will have ceased to exist. The technology driving this change is already at work, and nothing can stop it. The future looks like this: Access to college-level education will be free for everyone; the residential college campus will become largely obsolete; tens of thousands of professors will lose their jobs; the bachelor’s degree will become increasingly irrelevant; and ten years from now Harvard will enroll ten million students.
On Harden’s account, one of the principal reasons for this portended transformation, which is already being partially implemented by such institutions as Harvard and MIT, is that the cost of college is increasingly out of proportion with its perceived economic benefit. As the American job market has become more competitive, the cost of a degree has increased, and only the most naïve of students still believe that a college education is a universally redeemable ticket to middle-class prosperity. The weighing up of costs and benefits involved in earning a college degree will lead inevitably to a re-evaluation of the current higher education model. Luxury residence halls, face-to-face interaction between professors and students, ivied brick walls -- these will all be things of the past once the much-heralded education bubble finally bursts. What will replace them are massively populated, inexpensive online courses and lectures, prerecorded by the very best lecturers and administered by those hordes of professors and other academics not quite sexy or charismatic enough to warrant virtual celebrity.
To anyone who thinks Harden’s predictions are a little too ambitious (not to mention deeply disturbing, at least for college professors who don’t fancy the idea of working in a grading factory), don’t worry -- they most likely are. What Harden forgets -- and indeed, what just about everyone prophesying the eclipse of face-to-face interaction in a virtual world forgets -- is that human beings are, above all else, bodies, and that to lead full, happy, and meaningful lives, we need other bodies. Let’s consider the following examples of how technologies of virtualization have failed to triumph over our species’ thirst for physical presence.
1. The Giant Head. Some older readers may recall a famous article in Reader’s Digest from the late 1950s featuring an illustration of a massive human head connected to miniscule arms and legs. What was the thesis of that article? The tech junkies of the time believed that in the future technology would become so advanced that human beings would no longer need to use their bodies, leading to a swelling of the brain and a shriveling of our appendages. Many also foretold a time when food supplements would replace food. Wouldn’t it be great, they asked, if instead of spending hours preparing and eating meals, we could nourish ourselves in just a few seconds? No one at the time seemed to consider that human beings might not want to do any of this — that we might enjoy using our bodies, eating, and the like. In the half-century since these predictions were made, restaurants have proliferated, and heads haven’t grown one bit.
2. Live Theater. When I was a kid, there were hardly any live theaters in my hometown of Bakersfield, Calif. Now there are about ten. Many people used to believe that movies had sounded the death knell for live theater, but today the latter enjoys just as much, if not more, prestige than it did 100 years ago. I recently had the good fortune to see Kevin Spacey’s production of Richard III. I’ll remember his performance for the rest of my life — it had never occurred to me that acting could be so visceral, so violent, so physical. How many of us can say the same thing about movies? Again, those who foretold the demise of live theater never reckoned that people might just plain like seeing living bodies move around and speak on the stage, and that no amount of special effects could compensate for the lack of real flesh and blood.
3. The myth of social media. This myth holds that virtual, online or technologically mediated interactions are in the process of replacing face-to-face interactions. Most people never take the time to think about what the world would be like if this were really the case. I live in a small college town, and I can assure anyone interested in such things that student interactions on Friday and Saturday nights are plenty physical —sometimes I can hear them from across the lake! Social media does little more than provide a way of sharing information that enhances the intimacy of eventual physical contact. Anyone who doesn’t know this doesn’t understand the technology.
Of course, people like Harden will point to other sectors of the economy where technological innovation has erased thousands of jobs. People don’t need information from stockbrokers or travel agents to make decent decisions about travel or investment anymore, so why should a living, breathing professor be necessary to convey the sort of information one gets out of a college education? If that information can be distributed more cheaply thanks to virtualization, why should students be expected to bear the extra expense of classroom education?
The answer to this question is so elementary that the objection supporting it is almost hard to take seriously. The truth is that education is not simply the conveying of information. In fact, it is probably only marginally that. How many people remember most of what they learned in college? Only very few, I would guess. The benefit of a classroom education is that it keeps students under a certain amount of mental pressure, forces them to think on the spot, and obliges them to explain themselves to other people who are physically present. Information is afoot in these interactions, but so are wisdom, passion, empathy, and a whole host of other viscera that only an embodied teacher or student can properly convey.
How effective, for instance, do we imagine an online church experience would be compared to the real thing? Is it reasonable to think that a virtual tour of the cathedral at Chartres would be as spiritually moving as being there? We should also consider that many students might simply enjoy the physical classroom and their interaction with peers and professors -- or at least they might recognize that they learn better under these conditions. The costs of classroom education may be soaring out of proportion at present, but this is not a verdict on the education itself.
So let’s ask -- what developments are behind these grim augurs of the collapse of America’s higher education model? Some of it undoubtedly has to do with politics. Many commentators on the right (and perhaps Harden is one of them) would likely cheer the dismantlement of a system whose values are often perceived as far left of center. If taking education online can put “tenured radicals” out of work, then why not welcome it? At the same time, however, just as many moderate and left-leaning thinkers have joined the chorus of those predicting the failure of higher education (for instance, see Thomas Friedman’s recent writings in The New York Times), and it would be simplistic to chalk this latest round of doom-peddling up to politics.
The real culprit, I suggest, is what, for lack of a better term, we might call Appleism. Innocent in principle but nefarious in practice, the doctrine of Appleism holds that increases in technological capability are synonymous with increases in human happiness. Anything that can be put on a screen is better than what can be seen with the naked eye. The passage of electrons through a cathode tube is equivalent to passage from a lower to a higher state of being. Proponents of Appleism hold out technology as an intrinsic good; they are the sorts of folks who compulsively buy the latest Apple product, simply on principle.
We can point to fiscal insolvency all we want, but one has difficulty believing that Harden’s and others’ vision of a fully or almost-fully online education is not also the product of society’s limitless fascination with virtualization. Proponents of the current craze ought to think carefully about the human costs of technology before enthusiastically proclaiming the end of a system that could leave hundreds of thousands of people without work, students cheated out of a quality education, and that would further contribute to the creation of a world where virtualization is always and everywhere, without qualification or questioning, heralded as an unequivocal good.
Louis Betty is an assistant professor of French at the University of Wisconsin-Whitewater.