U. of Arizona Bought a For-Profit U. for $1? Actually, the For-Profit Paid Millions to Be Acquired.

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The University of Arizona introduced this week that it plans to purchase the for-profit Ashford University for $1. Well, it’s kind of a sale. Except that Ashford’s dad or mum firm will find yourself paying tens of millions to Arizona to make it occur, main New America’s Kevin Carey, the group’s director of training coverage packages, to argue in a widely shared Tweet that “it’s not really a purchase at all.”

So we spent the week making an attempt to work out how the association works.

First of all, that is a large deal. In one sweep of a pen, a new non-profit establishment will probably be created, known as the University of Arizona Global Campus, bringing with it 35,000 on-line college students who will all of a sudden be below a University of Arizona banner. That will make the University of Arizona a participant in a market that’s far greater than simply traditional-age college students prepared to dwell on a campus in the solar belt.

Second, as odd as it’s for a public college to purchase a for-profit one, it’s not unprecedented. In 2017, Purdue University bought Kaplan University, additionally for $1. Kaplan University all of a sudden modified its title to Purdue University Global, and Kaplan, Inc. turned a software-and-services firm that supplied key infrastructure and advertising and marketing to Purdue Global. So the end result was that a for-profit college all of a sudden turned a nonprofit, however one which was locked into a long-term contract with Kaplan and shares tuition income.

The factor is, although, that Purdue’s deal hasn’t led to the rush of new college students that was hoped. In reality, it’s been extra of a cash pit. As guide Phil Hill notes, “Purdue Global spent more than $132 million on marketing and student recruitment alone in fiscal year 2019 while losing $43 million, in its efforts to stop the Kaplan-inherited enrollment decline.”

Also importantly, many present professors at the University of Arizona assume this deal is a horrible concept. Six professors from the college’s Eller College of Management wrote a public letter to college leaders arguing they’d simply purchased a “lemon,” and that the affiliation with Ashford (now the University of Arizona Global Campus) will drag down the status of a flagship analysis college.

The professors cited longstanding complaints towards how Ashford University has operated in recent times. They word ongoing lawsuits charging that the for-profit college has been deceptive college students about its admissions prices and leaving them buried in debt. They reference different dangerous information about Ashford that a easy internet search pulls up. (One article we discovered contains an NBC News investigation that alleges Ashford used high-pressure and deceptive advertising and marketing ways with veterans and different potential college students.)

In conclusion, the professors mentioned the undertaking can be a “catastrophic mistake for the University of Arizona.”

The college has fired again in a assertion, saying these professors aren’t absolutely briefed on the preparations and that “their letter does not reflect the reality of the deal.”

So what’s the actuality?

To strive to kind that out, EdSurge talked with Brent White, the University of Arizona administrator who’s main the transition to this Global Campus.

He agrees that the association is analogous to the one Purdue and Kaplan did. The new University of Arizona Global Campus is committing to a 15-year deal to share 19.5 % of the income from the campus with Zovio, the firm that owned Ashford. Zovio has rebranded itself as a software-and-services firm, and can proceed to run many companies for Arizona’s new Global Campus.

But White argues that the University of Arizona has discovered from Purdue’s expertise, and that there are key variations in its monetary preparations. “We structured this so that a residual amount is guaranteed to Global Campus before Zovio would get any fee—or get reimbursement for its costs,” mentioned Brent. In different phrases, no cash goes to Zovio until the new campus pays its payments first.

“Everything for Zovio is at risk because we put our priority into making sure Global Campus has operating income to deliver” its programs, he added.

Meanwhile, Zovio can even pay Global Campus $37.5 million—“millions” of which is able to return to the University of Arizona, says White—for what’s successfully an affiliation and trademark licensing settlement.

Will this cash assist save college positions that are actually in danger as a result of of monetary challenges of the COVID pandemic? “I wouldn’t characterize it in this regard,” mentioned White. Though he added: “It certainly could be helpful.”

And will the University of Arizona now be on the hook for the lawsuits towards Ashford because it turns into the Global Campus?

No, says White, as a result of technically the college shouldn’t be shopping for Ashford. Instead, it’s shopping for its property—it simply seems meaning most every thing, like curriculum and its professors and will get its college students. And it’s not the University of Arizona shopping for these property, however the nonprofit University of Arizona Global Campus, which is a separate authorized entity. That means Zovio is the one liable for something that occurred again when it was working at Ashford University, he mentioned.

The professors criticizing the deal identified, although, that Arizona’s new Global Campus will probably be accountable for any new lawsuits. So what is going to the college do to tackle complaints about issues like aggressive advertising and marketing that its earlier proprietor has been identified for?

“We will operate the university according to the values of a public land-grant university,” mentioned White. “And that, of course, includes ethical recurring practices and management of the university.”

He pointed to a latest report from Ashford University’s accreditor as proof that Ashford’s practices already met business finest practices. “Part of its accreditation review examined the recruiting practice at Ashford,” he mentioned. “All calls are monitored and recorded by a third party. They reviewed a large random sample of those calls and found … honest and clear communication and didn’t find problems.”

Entering a Crowded Market

Demographic changes imply that the quantity of conventional college-aged college students is declining in the U.S., which is why many faculties see on-line training as the future. White highlighted a rising viewers for on-line training throughout the world.

“By 2040 there will be 800 million people in the world of college age, but there is nowhere near the capacity to serve those students,” he mentioned. “And most of those students will be in south or west Africa. We can’t build enough universities to serve these students, so it has to be online.”

Sean Gallagher, founder and govt director of Northeastern University’s Center for the Future of Higher Education and Talent Strategy, informed EdSurge it is likely to be an uphill battle for Arizona’s new Global Campus. “The bet here is that the University of Arizona brand and quality assurance will attract more students and with better outcomes. But the online market is becoming hyper-competitive, and we already have a case study in this with Purdue and Kaplan, so growth is not a sure thing,” he argued.

In reality, Ashford has seen enrollment declines in recent times.

Arizona has been floor zero for for-profit universities, being the birthplace of the University of Phoenix, which reached a peak of more than 470,000 students in 2010 by pioneering on-line training to a mass viewers.

“For-profit universities—many of them publicly traded companies—had a first-mover advantage but have been losing market share for a decade,” mentioned Gallagher. University of Phoenix, for occasion, now serves about 100,000 students.

“Standalone online universities without a campus today have only 10 percent of the online degree market,” he added. “Their time has passed, and the market long ago swung to favor traditional, campus-based institutions’ online offerings—and the opportunity for edtech companies to support the offering. This novel transaction and partnership, which going forward is about a non-profit university working with a for-profit technology and services provider, is just another example in that direction.”

Zovio, which used to be known as Bridgepoint Education till a title change in 2019, has been making an attempt to flip Ashford into a nonprofit, or promote it, for about two years, mentioned Hill, the guide, in an interview. It is traded on the NASDAQ inventory alternate, and its shares rose on information of the deal.

Guilbert Hentschke, editor of the e book “For-Profit Colleges and Universities: Their Markets, Regulation, Performance, and Place in Higher Education,” mentioned Arizona’s choice to subsume a for-profit on-line college’s operations is a component of a bigger pattern in larger training.

Traditionally, profitable in larger training has been equated with being elite—which meant serving small and unique units of college students. But the wager by of us at U of Arizona, and at others like Arizona State University that now serves 30,000 college students on-line, is that the market leaders will probably be those who serve the largest numbers (even when that training is a bit extra mediocre than gold plated).

“It’s a mental shift of what constitutes getting ahead,” Hentschke informed EdSurge. While the Harvards of the world promote entry to a small unique tribe, he mentioned, proponents of on-line training consider that “to be part of a bigger gang is better, all things being equal, than being part of a smaller gang.”

Getting Students Across the Finish Line

One problem with serving a broader inhabitants of college students, nevertheless, is getting college students throughout the end line to a diploma.

That’s one thing that many for-profit college students have been awful at, together with Ashford University, the place the six-year commencement fee is about 9 %.

Does White fear that completion is so low at the college it’s bringing below the University of Arizona umbrella?

Ashford, and now the Global Campus, goals to serve nontraditional college students who could also be ignored by conventional larger training. “The graduation rate for working adults who go back to school is not high anywhere in the country—I believe it’s at 11 percent,” he mentioned. “Working adults are often fitting in university along with living their lives and taking care of their children. It’s important to contextualize it.” He added that well-respected nonprofit suppliers have comparable challenges, noting that the University of Maryland’s Global Campus has about an eight % six-year commencement fee.

The 2019 accreditation report on Ashford University by the Western Association of Schools and Colleges famous that commencement charges at Ashford have been declining, and known as that pattern “worrisome, even though these decreases are at a lower rate than peer institutions.”

That report is an fascinating learn. Skeptics of for-profit faculties usually paint them as villainous gamers making an attempt to extract as a lot revenue from college students as attainable. The report, although, paints the image of faculty leaders in a hurry to strive as many new high-tech methods to assist college students as they will to maintain college students enrolled and assist them succeed. In reality, one warning in the report is to be sure that they don’t strive too many new concepts directly, inflicting “initiative fatigue” and put the establishment “at risk of trying to do too much at once. ”

The accreditors had a lot of constructive issues to say about the faculty’s packages. Yet, that grad fee lingered.

One of the report’s conclusions: “Despite the current, ongoing efforts and the amount of energy invested in these initiatives [to improve graduation rates,] Ashford has yet to discover—in its own words—the ‘secret sauce’ or effective approaches to enhance student accomplishment.”





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