The Renaissance of For-Profit Education
By: John Hall, Ed.D.
Until recently, it appeared for-profit higher education was headed for a mass extinction. Over the past seven years, a significant portion of the proprietary sector has died on the vine. With the University of Phoenix’ parent company being acquired for $ 1.1 billion in February by two of the largest global private equity firms and last week’s announcement by Purdue University of their intent to acquire Kaplan University, there is mounting evidence that for-profit education is emerging from the dark ages and morphing into a new era. Whatever we think of the merits of for-profit education, it will continue to pay a profound role in post-secondary in the United States.
We may look back to the last several years from now and point to The Renaissance of For-Profit Education.
Just as the case with utilities, hospitals, and other sectors that are comprised of public, non-profit, and investor-owned organizations; the infrastructure, expertise, and capacity required to meet the demand for post-secondary education in the United States is just too great for government or non-profit entities to tackle alone.
Arguably, with 7% of all enrollment, for-profit schools do provide needed capacity especially to the markets they serve – access that at times cannot be fulfilled by other parts of the sector. In the new paradigm of for-profit education, the first thing to understand is that “for-profit education” is more than for-profit or proprietary colleges. I believe the emerging for-profit sector will meld certain interests, hopefully in ways that ultimately benefit all parties. Most importantly, my hope is they will benefit the true consumers of education – students.
The Purdie-Kaplan deal is a strong acknowledgement which I believe we will see much more of in the coming months and years. In many cases, non-profit and public institutions have missions and capabilities that can better support academic performance. Like any business that wants to make a profit and have sustainability, it is hard to believe that for-profit entities would not want to deliver a superior academic experience if they could.
Conversely, many non-profit and public institutions realize that running a customer serving enterprise is not their strong-suit. It is extremely difficult to recruit and provide superior non-academic support services to students that essentially expect and need it on-demand as well as virtually-available. I have yet to meet any administrator or faculty member at any public or non-profit school that does not want to maximize access and support for students. Prior to the technological and demographic changes of the past two decades, institutions really did not need to operate such an enterprise. Thus, they are not equipped to do so in many cases.
Purdue needs to expand aggressively in the online education arena. Kaplan has the theoretical assets to support such an expansion. The proposed transaction, at least initially, provides a path that is less expensive and more than likely less risky than Purdue starting from scratch. As a for-profit, Kaplan was seeing significant declines in enrollment in what had become a difficult regulatory environment, nagging questions about Kaplan’s ability to deliver quality learning outcomes, and the stigma of being a for-profit. Thus, Kaplan needed the academic credibility and capabilities that Purdue brings to the table.
Now, whether theory plays out into practice, will be a different story. Traditionally, mergers/acquisitions whether in private industry or in the public/non-profit sector do not always work out well. That does not mean, however, that the Purdue-Kaplan cannot work if executed properly and under reasonable expectations.
Even before it can be determined whether the Purdue-Kaplan transaction will have positive long-term results, we expect more of these combinations and partnerships of convenience. There are plenty of schools like Purdue and thousands without the brand and reach of Purdue that need a lot of help in transforming themselves or putting in place back-end capabilities that support market realities, despite having strong academic credentials. On the other hand, there are a handful of service providers and for-profit schools that have real expertise and infrastructure that can propel institutions forward as it relates to expanding enrollment, student service, and the delivery of successful outcomes.
For the benefit of our students, we are hopeful that we are entering a renaissance of higher education in general, where for-profit entities and public/non-profit institutions work hand-in-hand in the pursuit of maximizing the power of higher education in the United States.