Tuesday, June 24, 2014


Teach-outs and Bailouts

I was disappointed to see the discussion on Twitter when the news broke that the federal Department of Education was putting together a “teach-out” for Corinthian Colleges.  Several people who should have known better described it as a “bailout,” and went on the attack against for-profits in general and Arne Duncan in particular.  

A teach-out is not a bailout.  A soft landing is still a landing.  

Teach-outs are terminal semesters during which students who are within shouting distance of finishing their programs are allowed to finish, but nobody new can start.  (The IHE story refers to some campuses still accepting new students, which I’ll admit is puzzling.) The idea is that being turned away from an institution is far less painful than being cut loose just before getting the degree.  It’s substantially the same logic behind choosing hiring freezes over layoffs, but in this case, it’s applied primarily to students.  

Since someone has to teach the remaining classes, teach-outs also provide some continuity of employment for the remaining faculty and staff.  When a teach-out applies to an entire institution, rather than one program within it, I can only imagine the psychological state of the last people standing.

I haven’t seen formal research on this, but I wouldn’t be surprised if someone has.  My guess is that a slow death spiral leads to a sort of adverse selection of personnel, in which the people with the most options in other places start taking them, leaving behind only those without any other options.  That can’t be pretty.  (I saw some of that at DeVry in 2002-3, when enrollments dove.)  But a fast death would skip that step and catch almost everyone flat-footed.  I would imagine that the cultural dynamics of a teach-out semester would be very different under a fast-death scenario than a slow-death one.  If I had to guess, I’d imagine that many of the employees at the various Corinthian campuses were caught flat-footed.  (Internal employee communication in for-profits tends to be, uh, selective.) I’m open to rebuttal on that by anyone who worked there.  

From what I can tell, the Department of Education is taking the most hard-nosed position it can while still respecting the students who have been attending Corinthian.  An abrupt, scorched-earth closing might have satisfied those who see profit as sin, but would have left both students and employees marooned.  

I hope that the DoE, and interested folks in the worlds of higher ed journalism and policy, watch the unwinding of Corinthian closely as a case study.  Given the overcapacity of higher education in much of the Northeast and Midwest, we’ll probably see progressively more teach-outs and closures in the next several years.  I’d love to be wrong on that, but the demographics and economics are pretty compelling.  As a sector, we’ll need to decide how we want teach-outs and closures handled.  If they need to happen, we should at least get good at them.  

The first step is recognizing what they actually are.

I won’t mourn Corinthian, but I question anyone who celebrates a massive loss of jobs, or the relatively abrupt abandonment of tens of thousands of students.  Complaining that they didn’t suffer enough on the way out is petty, if not cruel.  

Let’s learn from Corinthian’s case.  It won’t be the last.  

I read the first part of their SEC filing, and the new enrollments are to be limited to the "Sales" colleges, the ones (if any) they will put up for sale. BTW, there also has to be an "admin out" because someone has to provide transcripts.

I'm not too surprised that many people are unaware of what "teach out" means. You had to read the fine print about CCSF to see the requirement that they prepare plans for an orderly closure. I first saw it when I read a story about an HBCU that had been shut down for financial reasons. Most have been too small to notice except in some locality.
I am a longtime reader, but this is my first comment. I find it interesting how so many people jumped to the "bailout" assumption so quickly, but I can understand the frustration considering recent economic history. That said, I am taken aback by the level of satisfaction (joy?) with the loss of Corinthian. I work in non-profit public education and have a hard time jumping on the "for profit is bad" bandwagon. There are real students that are being impacted by this situation and the government should step in and make sure they have every opportunity to complete their degrees either through a "teach out" period of through other means.
I do find it surprising that they are allowing new enrollments at "sales" college considering there is no guarantee that these institutions will be purchased. Seems irresponsible.
Allowing enrollment at the "sales" colleges is necessary to make them credible purchase opportunities. Losing an entire year or more of students hurts the school in too many ways to be considered viable: loss of "presence" and reputation among prospective students (once a guidance counselor takes them off the list of options to show students, how likely are they to put the effort into finding out if they can (much less should) be re-added); loss of admissions staff (they have no work to do if nobody is being admitted so most should be let go to save money for other areas); loss of faculty / existing adjuncts as low-level courses get (temporarily) dropped from the curriculum; etc.

All of these (and other, similar) issues will take time, effort, and money to recover from, and those efforts will probably not be up to previous quality as most of the experienced former employees have found other jobs.
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