Leaders of four proprietary universities share insights about their sector and aspirations for the future
The for-profit sector of higher education has lately operated under a cloud. A recent string of epic failures within the sector have left schools closed, students stranded, countless lawsuits, staggering fines from the government, and the sector as a whole tarnished significantly (see sidebar).
But painting the entire sector with the same broad brush misses some important nuances. The for-profit sector of higher education is large and diverse, and assuming that for-profits in the headlines represent the entire sector is myopic and misleading. Tens of thousands of students—indeed, hundreds of thousands—have found the right academic fit in for-profit institutions that generally are not in the headlines or under investigation for malfeasance.
Successful schools in the for-profit sector have succeeded by recognizing underserved student markets and meeting the needs of those markets well. Arguably, for example, some for-profit institutions are more effective in serving working adult students than are many traditional colleges and universities. Arguably, too, some for-profit schools have shown themselves to be more adept than many nonprofit institutions in determining the workplace skills that business and industry need and then moving nimbly to meet the private sector’s requirements for staff training.
While it is plausible and perhaps even likely that more schools in the for-profit sector may implode in the months and years to come—and there are definite lessons to be gained by assessing the reasons behind these closures—we can also learn from focusing not on the train wrecks, but on for-profit institutions that are chugging along nicely, meeting student needs effectively, growing, and perhaps even innovating. To that end, this article takes a closer look at a sampling of successful for-profit institutions. To gain a better perspective on this part of the sector, we talked with leaders of four schools—Capella University, Grand Canyon University, Strayer University, and Walden University—about what distinguishes their institutions, what their plans and aspirations are going forward, and what lessons they might have for all of higher education.
Serving adult professionals
Former Congressman Steve Gunderson, the president of the Association of Private Sector Colleges and Universities (APSCU)—a group that represents some but not all for-profits—has suggested that future success for APSCU members lies in competing directly with community colleges in two-year career education. That value proposition may help APSCU members move forward, but other for-profits see a different tack to success.
Capella, Strayer, and Walden universities, for example, focus on serving adult working professionals. Collectively, those three institutions enroll more than 130,000 students, most of whom are in their thirties. But despite those similarities, each school takes a unique path:
- Emphasizing majors like nursing and social work, Walden’s mission focuses on effecting social change. Primarily online, Walden also offers students face-to-face academic residencies.
- At Strayer, where more than half the students pursue degrees in business administration, students can supplement online coursework with hands-on learning in a physical classroom.
- A pioneer in competency-based education, Capella emphasizes online programs.
- A fourth institution, Grand Canyon University, currently serves some 65,000 graduate and undergraduate students through its robust online component. Simultaneously, the school is also avidly expanding its traditional brick-and-mortar campus in Phoenix, Arizona, which emphasizes affordable undergraduate education with a Christian mission.
Spend any amount of time talking with presidents of these for-profit institutions, and it quickly becomes clear that their concerns are not unlike those of leaders of nonprofit universities. They strive to meet enrollment targets and retain students. They’re interested in honing the ways they measure quality. Fundamentally, they are deeply committed to being true to their missions in ways that serve their core student markets well. Their needs also serve the needs of their shareholders and investors, not unlike the commitment nonprofit universities have to serving their multiple stakeholders.
Capella University President and Chief Academic Officer Richard Senese says a clear focus on mission is at the heart of his institution’s success. “One thing that is true for Capella is that we are very focused on what we can control,” he says. “And that’s how do we serve adult learners the best way possible. Everyone here knows that when we serve our learners—when they are the focus—everything works better. The business works better. The academic outcomes are better. And I think that’s how we have been successful.” Moreover, Senese says, “we have found a way to balance the needs of students, regulators, accreditors, shareholders—a myriad of stakeholders that any university has—to achieve a high quality education.”
As an example of that efficacy, Senese cites the fact that Capella was one of the first 10 universities, and the only proprietary institution, to receive the “Excellence in Assessment” designation, co-sponsored by the Voluntary System of Accountability (VSA), the National Institute for Learning Outcomes Assessment (NILOA), and the Association of American Colleges and Universities (AAC&U). Senese says Capella earned that status because “we focus on what we can control, and because we put the learner at the center of our decision making.”
Another theme that permeates conversations with for-profit university presidents is that their schools often have a passion for innovation. Senese, for example, touts Capella’s competency-based, direct-assessment learning model, dubbed “FlexPath,” which is based on students working at their own pace versus via a traditional credit-hour standard. As the first direct-assessment learning model approved by the U.S. Department of Education, FlexPath “speaks to Capella’s quality, reputation and our ability to deliver high quality education,” he says.
Karl McDonnell, the Chief Executive Officer of Strayer Education, Inc., the parent company of Strayer University, suggests that the nonprofit sector could learn from for-profits’ ability to innovate nimbly and adapt to changing market needs. “At Strayer, one of the things that we’re very proud of is that we have a culture of experimentation. In any given quarter, we are running literally dozens of pilots around uses of technology and alternative forms of instruction,” McDonnell says. “I think traditional higher education could benefit from things like that.”
Sidebar: Turmoil in the Sector
Over the past eight years, the federal government subjected the for-profit sector to intense scrutiny. A key concern was that too many for-profit schools charged too much and delivered too little. Regulators said that many for-profit institutions enticed students to enroll with false promises of future employment success and encouraged them to take on too much student loan debt. A related concern was that many for-profit schools over-rely on federal student aid as the largest source of their revenue—a dynamic that perhaps led some schools to be overly aggressive and possibly less than honest in recruiting students. Congress and state agencies joined federal policymakers in investigating dubious practices in for-profit schools.
The Obama administration leveraged several different regulatory tools and government agencies in its pursuit of malfeasance in the for-profit sector. One notable tack was the Education Department’s “gainful employment” rule, which held that if a school was to continue to be eligible to receive federal student aid under Title IV of the Higher Education Act, its educational programs had to lead to a degree or must prepare students for “gainful employment in a recognized occupation.” In 2016, federal data showed that graduates of more than 1,700 career education programs typically earned less than the federal poverty threshold of $11,880. At the same time, many other students in such programs failed to graduate at all. When the Obama administration announced the gainful employment rules in 2014, it noted that “Students at for-profit colleges represent only about 13%of the total higher education population, but about 31%of all student loans and nearly half of all loan defaults.” The department cited data that about 22% of student borrowers at for-profit colleges defaulted on their loans within three years, compared to 13% of borrowers at public colleges.
Federal actions would eventually lead to some headline-worthy meltdowns in the for-profit sector. In April 2015, the U.S. Department of Education found that Corinthian Colleges had misled students and loan agencies about its graduates’ chances for finding good employment and fined the school nearly $30 million. Corinthian closed entirely within two weeks of that ruling. Shortly after that, the federal Consumer Financial Protection Bureau won a $530 million judgment against the school, in the wake of a $1.1 billion judgment won by California’s attorney general—but by then Corinthian had been dissolved. In late August 2016, the U.S. Department of Education banned ITT Technical Institute, a large for-profit college chain, from enrolling students who received federal aid. Shortly thereafter, the school abruptly closed its doors—stranding some 40,000 students and putting some 8,000 employees out of work. The collapse of a for-profit school even tainted President Donald Trump who, two days before his inauguration, paid $25 million to settle three lawsuits charging that his for-profit institution, Trump University, had defrauded students. (Ironically, perhaps, many for-profit institutions hope the Trump administration and Republican Congress will ease regulatory changes imposed on the sector during the Obama administration.)
In a “state of the sector” report in 2016, the president of the Association of Private Sector Colleges and Universities (APSCU), former Congressman Steve Gunderson, noted that enrollment in for-profit institutions had declined by more than 562,000 students between 2010 and 2014. Gunderson said “the sector grew too fast and too much when we admitted every applicant seeking additional education and skills in the midst of a recession.”
In June 2016, the Department of Education proposed regulations that would help forgive loans of students who were the victim of fraud by postsecondary institutions, and hold those institutions more accountable for such bad behavior. Further suggesting that there was insufficient oversight of many for-profit institutions, the Department announced on December 12, 2016, that it would no longer recognize the Accrediting Council for Independent Colleges and Schools (ACICS), the largest accreditor of for-profit colleges. In government parlance, ACICS was found to be “noncompliant with numerous regulatory criteria for departmental recognition.” A legal challenge to that decision was rejected in February 2017. Meanwhile, schools that had been accredited by the ACICS were eligible for an 18-month provisional approval by the Education Department. That provision allows schools to continue participation in federal student aid programs while they seek accreditation from another federally recognized accrediting body. Reportedly, many former ACICS schools are seeking approval from the Accrediting Commission of Career Schools and Colleges. Yet another wrinkle in this morass is whether the Trump administration and the Republican-controlled Congress might seek to reinstate the ACICS, the potential for which is as yet unclear.
Different economic models
Perhaps suggesting that some of the larger for-profit institutions face yet-unmet economic challenges, several larger for-profit institutions have recently pursued different economic models. Early in 2017, for example, the Apollo Education Group, the parent company of the University of Phoenix and other for-profits, was taken private by a group of investors—a move the company said would help the school thrive in a more competitive environment. Meanwhile, Laureate Education, the parent of Walden University, decided to go public and issued an IPO to sell stock, a move that it said was driven in part by a desire to pay down corporate debt.
Grand Canyon University recently underwent a different kind of change effort. Late in 2016, GCU, which fashions itself in the model of a nonprofit university and started life in 1949 as a nonprofit liberal arts college, lost its bid to officially become a nonprofit again. The move was planned in part to help the school pay lower taxes and improve its revenues from sources like research grants and philanthropic donations. The school would have been willing to take on more debt to buy out its investors. (To date, shareholders have had to be content with rises in the value of GCU’s stock given that, since going public in 2008, the college has invested more in its campus than it has made in after-tax profits and has never paid a dividend. The stock opened in 2008 at $12 and lately has traded as high as $67.)
Despite its failed attempt to go nonprofit, though, GCU derives satisfaction from its existing model. Saying that the nation needs public universities and community colleges, GCU President and Chief Executive Officer Brian E. Mueller said that his school has sought to create an alternative to those models and to expensive private universities. GCU’s niche has been to use the public market to get access to capital that it could use to “build out an online campus and a traditional campus that would compete with state universities from a tuition perspective,” Mueller says. Accordingly, GCU looks in some ways like a private university, such as not being dependent on tax subsidies. From a pricing standpoint, though, it looks more like a state university. The average GCU student pays about $8,300 a year for tuition after scholarships, and graduates in less than four years. GCU has not raised tuition in eight years.
What does the future look like for this group of for-profit institutions? Looking ahead, Walden University President and Chief Executive Officer Jonathan Kaplan says “I think the trends that we will see in the coming years in the for-profit sector are the same trends that we will see across all of higher education.” For example, he says, “there is a demand for greater accountability to ensure that students come out of their programs as graduates who are prepared to enter and advance in the workforce.” Having seen Walden’s student outcomes validated in a recent Gallup poll (one key finding was that Walden graduates are more likely than comparison groups to cite their degree as being important or very important for getting promoted, getting a salary raise, and changing careers), Kaplan says “we want to continue to be market leaders in measuring and tracking the outcomes that our students achieve in the workplace through their studies.”
Among other new program offerings, Kaplan anticipates that Walden will expand its programming in social work. He also says the university will build programming based on current and recent investments in competency-based programing, adaptive learning, and mobile technology.
Walden stands apart from many other for-profit schools in that it enrolls students not just from all 50 states but also from some 155 countries. That kind of international presence is not the usual business model for for-profits, but Walden is not unique. For example, the Apollo Group—parent of the University of Phoenix—includes Apollo Global, Inc., a network of schools abroad. Globalization raises an interesting question for for-profit schools: In an era when federal policies may curtail the flow of students from abroad to physical campuses in the U.S., might online international students be a market for expansion? Walden will likely continue its international outreach, but that avenue is not currently a priority at Capella or Grand Canyon University, which focus primarily on students from the United States. Leaving the door open for more international recruitment, Strayer Education Inc.’s McDonnell says he thinks colleges and universities in general will engage in more international outreach. But for now, he says, “it is more likely that [Strayer] will continue to focus on domestic higher education.”
McDonnell reports that while five years ago about half of Strayer’s students took their classes online and half in physical classrooms, he expects the proportion of students who opt just for the online option to soon top 80%. Accordingly, the college is investing more in its infrastructure for online learning, as well as in tools like adaptive learning and predictive analytics. Strayer is also “investing substantially in content itself,” McDonnell says, and has developed what it calls a film studio, where instructional designers work to “make courses more interesting and more relevant for students.” McDonnell does not foresee that Strayer will add a large number of new programs in the near term. Any new offerings, he says, would likely be linked to the college’s leadership- and management-focused degrees, with possible additions in healthcare as well.
Like many for-profits, Strayer is hoping for an easing of some of the Obama-era regulations that the sector has found onerous. “We think there should be scrutiny and oversight, and we’re willing to abide by any regulation,” McDonnell says. At the same time, though, he says “we don’t think there should be an un-level playing field [for for-profit institutions]. We just ask that all higher education institutions be held to the same standard.”
Looking to the future from Capella’s perspective, Senese says “our focus is to extend access to the working adult professional, and that is going to remain our focus. There is a large unmet need in the United States and in our economy for focusing on that population of students and learners. And we intend on staying squarely focused there.”
Senese believes higher education on the whole needs to do more to understand the skills that business and industry need. In the near term, he says, Capella will focus on innovating and expanding its competency-based Flex Pass model as a means of better linking higher education and employer needs and “helping people grow in their careers.” Senese says Capella will make decisions about what programs to add by “constantly looking at what types of educational programs are needed in various professions in which we have programs.”
“One of the big innovations that Capella has brought to higher education is the focus on the gap between education and career professional aspiration and advancement,” Senese says. “As we design programs, we start there—not only with academic expectations but with what are the key issues in professions today and into the future. And we build that into the programs so that they are professionally relevant right from the beginning.”
Capella is open to doing more to explore alternative credentials like badges and stackable credentials. “I’m not sure that everyone always needs a degree to advance in their profession,” Senese says. “Maybe they need specialized training in a new area adjacent to the education and training that they already have. We need to take our cues from what the professions require and what employers need as we design that. But we think [credentials] should be stackable, and that they should bundle.”
In Phoenix, meanwhile, Grand Canyon University has aggressive plans to grow both its traditional campus and its online programming. Mueller says there is virtually no end to the demand for the education GCU provides primarily for undergraduate students at its physical campus, which he summarizes as “high quality, low cost higher education in the context of a Christian world-view and in the context of a very safe campus with a values orientation.” Grand Canyon currently enrolls some 17,500 students at its physical campus, a figure that Mueller projects will grow to somewhere around 30,000 students in the next five to six years. Mueller expects the physical plant to grow from 260 acres to around 400 acres to accommodate that growth. At the same time, he also expects that GCU’s online campus, which serves mainly working adults pursuing both undergraduate and graduate degrees, will grow from its current 65,000 students to about 85,000 students.
GCU’s ground campus offers 200 programs in nine colleges. The college has added 40 new programs in the last 18 months, including ones on autism education and cybersecurity. “Those programs are areas where the jobs are going to be, and we’re designing programs specific to those job areas,” Mueller says. A similar focus on programmatic areas where students are likely to find jobs drives a major focus at GCU on programs in the STEM areas (science, technology, engineering, and math). New initiatives include an engineering school, programs in computer science and information technology, and expanded biology and chemistry programs.
While GCU is investing in curricular development—including adding more video to its online courses—Mueller says it will not change its fundamental commitment to pedagogy that is instructor-led, small group-focused , interactive, and collaborative. Further, he says, the school is focused on writing, critical thinking, problem solving, and application-based learning.
GCU’s Christian orientation distinguishes it from many other for-profit institutions. The school has a strong commitment to help transform its neighborhood, which suffers from issues that other inner cities endure. What Mueller calls a “faith in action orientation” drives a five-point neighborhood improvement plan and informs student engagement in that work as part of their educational programs.
Learning from for-profits
Leaders of for-profits institutions suggest that nonprofit higher education might benefit from borrowing an insight or two from the proprietary sector’s playbook. McDonnell, for example, suggests that for-profit institutions may be better positioned than traditional institutions to know what skills business and industry needs and to amend their programming to make sure students can meet those needs. “As the labor market continues to shift and the nature of work changes, it’s up to us to make sure that the programs we are offering are relevant to people, that they are able to monetize their degree, and earn what we believe to be a substantive return on their investment,” he says, “But the world is changing fast. Higher education, traditionally at least, has not always done the best job of keeping up with those changes.” Strayer, he says, has relationships with some 350 Fortune 1000 companies. Those relationships, he says, “give us unique insights into what these changes look like in the coming years. And that’s our plan, to continue to evolve to the changing labor market dynamics around us.”
“I think higher education overall needs to be faster and more adaptive and open to credentialing alternatives, and very much rooted in making sure that students earn a return on their investment,” McDonnell adds. “I think institutions that do that, regardless of their capital structure, are going to fare well. And institutions that don’t do that, I think they’re in trouble.”
Ultimately, differences between types of institutions of higher education may not matter all that much. “Higher education has a responsibility to serve its learners in the service of society and the economy, and doing that in a high quality way has nothing to do with how the organization is structured,” Senese says. “It has to do with leadership, it has to do with commitment, it has to do with values.”
Walden University President Jonathan Kaplan says focusing on differences between for-profit and nonprofit institutions may be a false dichotomy. “I would look at some other distinctions that I think matter more in higher education,” he says. “Are you helping to advance accountability and outcomes for students, and preparing students to enter or advance in the workplace?”
Kaplan says that if they were not so focused on their differences, the different types of higher education might learn more from one another. “One of the truly remarkable things about higher education in the United States is how diverse it is,” he says. “We have institutions that are truly expert at serving working adults. We have institutions that are the greatest in the world at serving the traditional 18 to 22-year-old student. We have institutions like our community colleges that do such a tremendous job with workforce development and partnering with industry.”
Kaplan argues that “there needs to be a greater level of humility across all of the sectors and segments within higher education, and a willingness to learn from one another, regardless of tax status, regardless of whether we’re public or private, liberal arts or professional school. So many schools have done a great job at so many things, we all have a great deal that we can learn from one another.”
Stephen G. Pelletier (email@example.com) is an independent writer and editor who writes frequently about higher education. Prior to starting his full-time freelance practice in 2006, he served for many years as vice president for communications at the Council of Independent Colleges, directed the publications program at NASFA: Association of International Educators, and edited the magazine at the Howard Hughes Medical Institute.