Consultants / businesses

University of Phoenix faces possible probation by accreditor

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For-profit university's accreditation troubles deepen with probation recommendation based on alleged lack of autonomy from its corporate parent.

China and India producing larger share of global college graduates

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A new report predicts that China and India will produce a larger share of worldwide college graduates than the U.S. and some EU countries combined by 2020.

New investment fund to help traditional colleges take ideas to scale

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New $100 million investment aims to fuel innovation by nonprofit higher ed; first projects focus on Hispanic students and online education in Europe.

How for-profit institutions can generate better student outcomes and long-term success (essay)

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.

Headwinds

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.

Rethinking Curriculum

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.

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IT is behind flattening of higher education's wage premium, study finds

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The wage gap between college degree holders and workers without a degree has not grown in recent years, and a new study says the culprit is information technology's displacement of "routine" jobs.

5th International Conference on Sustainable Development 2017

Date: 
Wed, 09/06/2017 to Thu, 09/07/2017

Location

Piazza della Pilotta, 4
Rome , Imperia 00187
Italy

Building higher education's version of the minimum viable product (essay)

One of the most important developments out of Silicon Valley in the past decade is not a technology but a concept. A minimum viable product -- or MVP -- is the simplest, smallest product that provides enough value for consumers to adopt and actually pay for it. It also is the minimal product that allows producers to receive valuable feedback, iterate and improve. A minimum viable product is one of the core tenets of the so-called lean start-up and explains why many technology entrepreneurs are able to launch businesses with practically no investment at all.

For example, the Zappos founder Nick Swinmurn famously launched his business not by investing millions in an e-commerce backend, but by simply taking photos of desirable shoes at shoe stores and posting them online. When customers clicked buy, Swinmurn went to the store, bought the shoes, shipped them -- repeating hundreds of times before getting the necessary feedback to validate further investment in Zappos.

College as we know it is the polar opposite of a minimum viable product. A bachelor’s degree is neither simple nor small. It wasn’t constructed to encourage colleges and universities to iterate and improve. And it’s certainly not minimizing anyone’s investment. Which is why the most important development in higher education in the next decade will be a College MVP.

***

Some of the lean start-ups proliferating in Silicon Valley and elsewhere are boot camps, providing “last-mile” training to unemployed, underemployed and unhappily employed young people and -- critically -- placing them in good jobs in growing sectors of the economy, like technology and health care. This largely technical training is increasingly referred to as last mile not only because it leads directly to employment, but reflecting the last mile in telecom, where the final telephonic or cable connection from trunk to home is the most difficult and costly to install, and also the most valuable.

Boot camps like Galvanize, Revature and AlwaysHired are busy installing these last-mile connections. Making and maintaining connections to employers is complicated and costly -- exponentially more so than developing new academic programs in isolation.

As these connections are made and reinforced, last-mile providers will be tempted. While today they’re serving a population that is roughly 90 percent college graduates, some are already spying a larger opportunity than simply serving as a top-up program for bachelor’s degree completers. Some will be inspired by the Silicon Valley ethos to ask this question: How do we move from “top-up” to “alternative”?

The answer, of course, is by adding a program ahead of the last-mile technical training to form the first stage of a comprehensive pathway to a good first job.

Such a program would equip students with cognitive and noncognitive skills -- not necessarily at the level one would expect of a college graduate, but at the (presumably lower) level employers require for entry-level positions. It would also be much shorter and less expensive than what we know and love as college.

The very concept of a College MVP raises a threshold question: Would any employer hire a candidate with this level of preparation rather than a college degree? Sure, most employers will continue to prefer whole bachelor’s degrees. And many will continue to insist on it. But what if employers could start MVP candidates off at lower salaries? Why? Because MVP graduates won’t have forgone four years of full-time employment and won’t have incurred tens of thousands of dollars in student loan debt.

Another reason to believe employers might take an interest in MVP candidates is that no one -- least of all employers -- knows what cognitive and noncognitive skills are expected of college graduates. Because no one -- least of all colleges -- is measuring anything. Meanwhile, you can bet that last-mile providers who add an innovative College MVP will be asking questions of employers, assessing constantly, measuring and communicating back to employers -- and almost certainly doing a better job of selling their candidates to employers than colleges and universities do.

Finally, employers with any sense of the broader socioeconomic context will - when presented with a potentially viable alternative -- recognize that requiring a whole bachelor’s degree excludes virtually half the work force, many of whom might be great fits.

***

Be disrupted or disrupt thyself? Many colleges and universities will face this choice in a few years. While last-mile providers will be first to market with College MVPs, some colleges and universities will see the writing on the wall and attempt to do the same. Here are the challenges they’re likely to face in doing so.

1) Associate Degree Paradigm. Most colleges and universities probably think they have a College MVP. It’s called an associate degree. The problem is that the associate degree is a flawed credential, failing in many cases to prepare students with the requisite cognitive and noncognitive skills required by employers, and giving rise to studies showing half of associate degree holders are underemployed.

The associate degree is a credential that’s derived from and beholden to the bachelor’s degree. In contrast, a College MVP won’t be organized around credit hours or precepts of general education, but will attempt to maximize development of critical thinking, problem solving, communication and teamwork skills in a minimal period of time.

It will also attempt to provide students with cognitive frameworks that facilitate future learning -- on the job and in continuing formal education and training. And while my guess is that College MVPs may look different depending on the industry or even the type of entry-level job, it seems likely that they’ll emerge from a paradigm shift from how we currently think about college -- much more than simply cost and length.

TRADITIONAL COLLEGE

COLLEGE MVP

Faculty-centric

Employer-centric

Learning outcomes

Competencies/skills

Curriculum

Assessments

Assignments

Work product

Liberal arts

Critical thinking

Electives

Prescribed pathway

Colleges and universities that aspire to develop a College MVP will need to disabuse themselves of the illusion that the associate degree provides a viable model.

2) Building the Last Mile to Employers. Building a College MVP only makes sense if institutions are able to build the last mile to employers, which requires a lot more contact with employers than most colleges and universities are used to having.

The vast majority of colleges and universities continue to believe they’re not in the business of preparing students for their first job, which runs counter to the top reasons matriculating students cite for pursuing postsecondary education, namely to improve employment opportunities (91 percent), to make more money (90 percent) and to get a good job (89 percent). Meanwhile, at most colleges, career services remains the Las Vegas of the university. Northeastern’s co-op program gets so much attention because it’s so rare. It’s also not replicable overnight. Building a network of thousands of employers has taken Northeastern decades.

3) Isomorphism. Perhaps the most significant impediment is cultural. The concept of a minimum viable product is anathema to the culture of higher education. Why would respectable institutions offer less than a bachelor’s degree when their models -- our most elite colleges and universities -- aren’t likely to consider doing so for a very long time? Moreover, higher education reveres tradition, which is too often taken for granted as a signifier of quality -- to the point that U.S. News might as well rank colleges each year based on age. As a result, it’s hard to imagine MVPs popping up at more than a handful of colleges and universities. Which is sad, because tens of millions of Americans could use them right now; college MVPs have the potential to be higher education’s most valuable player.

***

Even if colleges and universities are likely to lag in the emergence of college MVPs, they’re already leading the way in the development of master’s MVPs. When universities like MIT are comfortable rolling out MicroMasters credentials, thousands of institutions are sure to follow.

This is critical, as college MVPs won’t be the end of the postsecondary road for most students. After following a College MVP to last-mile training to placement pathway to a good first job in a growing sector of the economy, subsequent pathways will emerge to equip new employees with the higher-order thinking capabilities required for more complex and managerial positions. Higher education will go from a one- or two-time purchase for most students to a product employees consume as needed throughout their professional lives. And none of the aforementioned barriers to the College MVP are likely to stop colleges and universities from growing significant enrollment in thousands of master’s MVPs.

Ryan Craig is managing director of University Ventures, a fund focused on innovation from within higher education.

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Higher Education Women’s Leadership Workshop

Date: 
Thu, 02/16/2017 to Fri, 02/17/2017

Location

328 Flinders St
Melbourne , Victoria 3000
Australia

The 9th National Higher Education Women’s Leadership Summit 2017

Date: 
Mon, 02/13/2017 to Fri, 02/17/2017

Location

328 Flinders St
Melbourne , Victoria 3000
Australia

Alamo Colleges hope free summer courses will encourage momentum to graduation

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A Texas community college system is hoping the appeal of free summer courses will drive students to move from part-time to full-time status, giving completion rates a boost.

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