Sunday, April 26, 2015


Don't Gloat When the Canary Dies

Robert Kelchen won Twitter yesterday with his observation that Corinthian Colleges’ move to close all of its remaining campuses will strand 16,000 students, in contrast to the closing of Sweet Briar College, which will strand about 700.

The coverage given Sweet Briar, as opposed to Corinthian, is telling.  And Corinthian isn’t the only one.

On Friday, DeVry announced that it will close 14 campuses, moving those students (or at least, those willing to move) to its online programs.  The University of Phoenix recently announced its fifteenth consecutive quarter (!) of enrollment declines.  Given that for-profits are more purely enrollment-driven than any other sector -- they don’t have endowments or subsidies -- they feel every single percentage point of that drop.

Within the higher education world, it’s easy to look at the for-profits’ recent struggles as just desserts.  In some cases, that’s substantially true.  But it misses some key points.

First, and most basically, for-profits found ways to serve students that nobody else bothered to serve.  Some of those ways were unseemly or unethical, but some were just practical.  For obvious reasons, for-profits have powerful incentives to enroll students, so they tend to take a cold, hard look at student success.  After all, a retained student is a repeat customer.  In my time at DeVry, for example, I noticed a distinct lack of application fees, a small number of majors, and a real reluctance to consign students to developmental or remedial courses.  It took the rest of higher education another decade to catch up to some of those ideas.  

Second, just because the organizational logic of for-profits is often coldly mercenary, it does not follow that everyone who works there is coldly mercenary.  Some of my erstwhile colleagues at DeVry were wonderful, dedicated educators who honestly tried to do right by their students, even when it involved butting heads with upper management.  They (and I) found their way there because nobody else was hiring, at least at the full-time level.  Given the choice between adjuncting at a traditional college and making an adult living at a for-profit, there’s a pretty good argument for the latter.  That’s especially true when the for-profit in question actually does a decent job at what it says it does, as DeVry did during the tech boom of the late ‘90’s.  In 1998, you could do a lot worse than graduating with a degree in telecom or CIS.

Third, for the most part, the for-profits aren’t in trouble because of stellar performance by publics or private non-profits.  They’re mostly in trouble due to varying combinations of regulatory issues, demographics, and flawed business models.  Many non-profits are struggling for similar reasons.  If the failure of the for-profits happened because the publics and non-profits raised their respective games and made for-profits unnecessary, I’d be the first to celebrate.  But for the most part, that’s not it.  I wish it were.

An already-awful academic job market just gets that much worse when entire swaths of campuses close.  In Corinthian’s case, announcing on a Sunday that it would close within 24 hours just adds insult to injury, for both students and employees.  To the extent that its former students are pushing for loan forgiveness, such treatment gives them ammunition.  I wish them success.  For its soon-to-be former employees, though, the picture isn’t pretty.

For-profits are more volatile than their public counterparts.  They charge more than the cost of production, which means that in good times, expansion more than pays for itself.  But their income is entirely enrollment-driven, so in bad times, there’s no cushion.  To the extent that publics’ budgets become more enrollment-driven, they’ll become more volatile, too.  Don’t gloat when the canary dies.

I won’t mourn the loss of Corinthian, but I won’t gloat, either.  Some very good people lost their jobs this week, at both Corinthian and DeVry, and I’d guess that some of the survivors at DeVry are running scared.  Sweet Briar was shocking, and a real loss.  In their ways, these are real losses, too.  My condolences to the employees.

Matt is right about the travails of for-profit schools being a harbinger of hard times to come for the higher-ed industry in general. The business model for most proprietary schools requires an ever-increasing student enrollment for long-term sustainability. Instead, the enrollment at many for-profit schools has steadily declined in the last couple of years. Things have gotten so bad that many for-profits have been forced to close their doors. First Corinthian goes entirely belly-up, then DeVry closes a bunch of its divisions. How many more will fail?

Here at For-Profit Art School, our enrollment has declined by almost a factor of two over the last 4 or 5 years, so much so that there have been numerous layoffs of both faculty and administrative personnel. The administrative area, once bustling with activity, is now virtually a ghost town. Many of my friends on the faculty are now gone. And I haven’t even been able to get a part-time teaching gig at the school for the last couple of quarters. The buzzards are definitely circling over my school, and I fear that it is only a matter of time before we close our doors as well.

Why the declining enrollment? One cause might be that students are discovering that a degree from a for-profit school such as mine isn’t really worth very much on today’s job market. The recent for-profit bubble has produced a vast oversupply of graduates in many fields, making it rather difficult for recent graduates to find employment in their chosen fields. Prospective students are finding that a lot of recent graduates from for-profit school programs can’t find full-time jobs in their fields and have been reduced to flipping burgers at Wendy’s or bagging groceries at the local supermarket. Why go to that school, when your prospects for obtaining gainful employment upon graduation are so small? The for-profit educational bubble is now beginning to burst.

Another factor may be a reluctance to acquire massive student loan debt, especially when the prospects for obtaining gainful employment are so slim. I suspect that student loans may be more difficult to get nowadays, the lenders becoming increasingly skittish, fearing that a lot of these loans may never be repaired.

Another factor is the regulatory environment that disproportionately affects the for-profit education industry. For-profit schools have been repeatedly hassled by members of Congress, by senators, and by government agencies for a long list of irregularities, such as over-inflated employment claims, for excessive numbers of student-loan defaults, and for low gainful-employment numbers. Because of the bad smell that has been generated, a lot of people have come to perceive for-profit schools as being little more than scams, designed to separate the student from his/her money and giving little value in return.

Will the diseases that afflict for-profit schools soon spread to the non-profit higher-ed industry? I suspect that the snootiest of the SLACs and the highest-tier R1 universities such as Harvard or Princeton will be pretty safe in the upcoming higher-ed tsunami. They are super-selective and will always have a lot more applicants than they can possibly accept. But most at risk are probably the second-and-third tier colleges that will accept a student if his/her body is warm. Community colleges are probably also at risk, especially when their government funding is cut back sharply. Also at risk are lower-level research universities, especially if their research grant money and their state subsidies are cut back. Maybe even some of the best colleges are at risk—re the closing of Sweet Briar College
I've encountered more than a few technologically savvy DeVry graduates who are model railroad hobbyists. As Dean Dad notes, that's been a DeVry strength ( bubble or not).

Now, as ArtMathProf notes, the shakeout is likely to affect precisely the institutions that I think of as excess capacity in access-assessment-remediation-retention, and that a disgruntled Keene State faculty member tagged as subprime party schools.
Whoa, DeVry and Corinthian are just utterly different things.

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