Strategic Education and Noodle Partners bet big on employer-assisted tuition programs

An economic downturn in the middle of a pandemic may seem like an odd time to launch a platform encouraging employees to take advantage of workplace college tuition benefits. But Strategic Education Inc. and Noodle Partners are playing a long game.

The two companies yesterday announced the launch of WorkforceEdge, a “complete employee education management platform” that aims to create a seamless approach to administering tuition assistance benefits.

The platform will connect select employers and their employees with degree programs from a network of higher education institutions cultivated by online program management company Noodle Partners. The platform will also include academic offerings from the two for-profit institutions run by Strategic Education -- Strayer University and Capella University.

Strategic Education built the WorkforceEdge platform with collaboration from an unnamed pharmaceutical company. This unnamed company will be the first to try out the platform as part of a pilot program beginning later this month.

Eventually, Strategic Education wants all its employer partners, of which it has several hundred, to start using the platform. Likewise, Noodle Partners intends to bring all of its university partners onboard the platform, said John Katzman, founder and CEO of Noodle Partners. A small number of institutions have agreed to participate in the platform pilot, but Katzman said he could not share the names of the institutions at this stage.

Strategic Education's CEO projects the platform will scale quickly following completion of the pilot. “We envision hundreds of partners and tens of thousands of students using this platform over the next five years,” said Karl McDonnell, CEO of Strategic Education.

The WorkforceEdge platform will enter a nascent but growing marketplace for services that broker relationships between employers and colleges -- tapping into the estimated $20 billion companies spend each year on tuition benefits for their employees.

Guild Education, founded in 2018, works with large employers such as Walmart, Chipotle and Lowe’s, connecting their employees to online programs at institutions such as Southern New Hampshire University and the University of Arizona. Arizona State University’s InStride program, founded in 2019, connects employees at companies such as Starbucks to ASU Online degrees.

Many universities are trying to combat falling enrollment on campus by expanding their online programs, Katzman said. By participating in WorkforceEdge, universities that partner with Noodle will have the opportunity to develop new enrollment pathways for adult learners in collaboration with their employers.

“I’ve been looking for a partner to do this with for years,” Katzman said. “I increasingly see Noodle as a network. We’ve got universities. We’ve got providers doing some terrific work for them. We’ve got millions of students on our website,” he said. “Creating a simple link between companies that offer education as a benefit and great schools is a natural extension.”

The vast majority of employees with access to employer-assisted college tuition don’t use their benefits, said Terry McDonough, president of alternative learning at Strategic Education.

“Many people don’t know what the benefits are and how to use them,” said McDonough, who described the current process for administering these benefits as “Byzantine.”

Typically, employees have to ask their employer to find out if tuition benefits are available, then they have to identify the degree program they want to study and determine whether their employer will actually allow them to use benefits toward their program of choice. WorkforceEdge will take away the ambiguity of this process, McDonough said.

“Some of our partners, even large companies, are still using spreadsheets to keep track of the way people are using their benefits, and very few have what I would call a front-end marketplace of education solutions that are preapproved and in-network,” he said.

By laying out which education providers are considered in-network rather than out-of-network -- a concept similar to how health-care benefits are presented at most companies -- WorkforceEdge will make it much simpler for employees to see the educational opportunities available to them, McDonough.

But in the midst of a pandemic and economic downturn, are many companies still offering tuition benefits? McDonough says yes. While many companies have had to furlough staff members in response to COVID-19, few employers working with Strategic Education have cut their tuition benefit programs. Employers want to keep these benefits because they help to attract and retain talented staff, said McDonough.

Employers currently offer two kinds of tuition assistance programs -- tuition reimbursement and employer student loan repayment, said Liz Supinski, director of research products and data science at the Society for Human Resource Management.

Tuition reimbursement is tax deductible by businesses at a level of $5,250 per student employee per year under Section 127 of the Internal Revenue Code. Due to its deductibility, this benefit is fairly stable over time, Supinski said in an email.

According to SHRM data, tuition reimbursement decreased about 2 percent per year from 2007 to 2011, suggesting that following the Great Recession, some companies reduced their education benefits programs. From 2007 to 2011, the number of organizations providing undergraduate education benefits decreased from 68 to 58 percent, settling at around 55 percent from 2015 through 2019. It is too early to say what the impact of the latest economic downturn on this sector will be, Supinski said.

Employer student loan repayment is a relatively new benefit that was rarely offered during the last recession, said Supinski. The coronavirus relief package passed earlier this year, the CARES Act, allowed for the same tax treatment of employer student loan repayment for the period between March 27 and Dec. 31 of this year only.

“I would anticipate that few employers will retain this benefit once the tax advantage ends,” Supinski said. From 2015 to 2019, when there was no tax deduction for employers offering this benefit, only around 4 percent of employers offered student loan repayment programs.

Only a small percentage of employees ever take advantage of employer tuition-assistance programs, because many of them are “very happy that they have had their last day of school,” said Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce.

If there is no direct career benefit to an employee completing an education program, then even with tuition assistance, the offer is often not particularly attractive, said Carnevale. With guidance to help employees select programs that will benefit their career, however, there is value in connecting employers to education providers in order to retrain or upskill employees, he said.

There are many “missing links” between the U.S. higher education sector and employers, said Carnevale. While these missing links can be partially plugged by efforts from the private sector, Carnevale believes the government will eventually need to do the work of connecting the education system to the job market. 

"We need a counseling system that actually follows kids from high school to their post-secondary job and can effectively connect unemployed people to jobs -- right now America has no such thing," said Carnevale. "This is about building a more active labor market policy connect to education." 

A key goal for the WorkforceEdge platform is to introduce more private capital into the higher education system, said McDonnell, CEO of Strategic Education. He described a vision to “fully transition our tuition revenue to private sector employers over the next ten years.”

For-profit institutions have been criticized in the past by consumer advocates and policy makers for relying too much on federal financial aid and military benefits. But McDonnell denied that his vision is driven by a need to diversify the income of either Strayer or Capella Universities away from federal funding because of the 90-10 rule. The federal 90-10 rule caps the portion of a for-profit university’s revenue from federal financial aid sources at 90 percent.

The potential to drive new students into online education programs managed by Noodle Partners, or offered at institutions owned by Strategic Education, appears to be the biggest financial incentive for the companies to collaborate on the platform. But details of the economics of the WorkforceEdge platform and the financial relationship between Strategic Education and Noodle Partners remain unclear. McDonnell said that neither employers nor employees would pay any fees to access the platform, but Noodle Partners will pay a small fee to Strategic Education to manage corporate relationships and flow of data.

Though Strategic Education designed and will manage the WorkforceEdge platform, McDonnell said there would be no preferential treatment of some institutions over others. He noted that there is “little overlap” between the programs offered at Strayer and Capella and the programs offered by institutions that work with Noodle Partners.

“While the economics of this relationship aren’t yet transparent, a venture like this appears to further demonstrate the continued value and advancement of responsible private capital in the higher education and workforce development marketplaces, particularly by using technology platforms to better connect more traditional institutions of higher education and their students to employers,” said Jennifer Blum, principal at Blum Higher Education Advising LLC.

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Universities operating online K-12 schools report enrollment boost due to COVID-19

Interest in online K-12 schools is surging in response to the educational disruption prompted by COVID-19.

At K12, the nation’s largest online charter school operator, enrollment increased from 123,000 to 170,000 students this year, according to reporting by Chalkbeat. At Connections Academy, another large online charter school company, applications have reportedly increased by 61 percent.

A similar picture is emerging in a more niche corner of the K-12 market -- online schools run by universities.

At Arizona State University Prep Digital, an online public charter school run by the Tempe, Ariz.-based public university, student enrollment has grown by almost 700 percent -- from 600 full-time students in 2019 to around 4,500 students this year.

This growth is partially explained by the fact that ASU Prep Digital welcomed its first classes of kindergartners through eighth graders this August -- adding to the existing grades 9 to 12 launched in 2017. The COVID-19 pandemic nonetheless played a major role in driving interest in the school and is continuing to drive new inquiries from families in the state of Arizona and nationally.

“We are definitely hearing from families that the pandemic is a catalyst for our growth,” said Julie Young, chief executive officer at ASU Prep Digital. “Families went through a rocky spring. They are looking for stability.”

In the spring semester, many traditional K-12 schools switched to remote instruction without equipping teachers with the right training or tools, Young said. Since ASU Prep Digital was conceived as a fully online institution, some parents feel the school is "a less risky option" than waiting to see how the fall semester at their local school pans out.

While ASU Prep Digital is drawing students from schools that are grappling with the impact of the pandemic, its leaders are eager to share its online learning expertise with other institutions, Young said. ASU Prep Digital is actively providing training in online teaching and learning to public school teachers in Arizona and elsewhere.

The Arizona Virtual Teaching Institute, an initiative of ASU Prep Digital, provides free training to teachers with financial support from the Arizona Department of Education, the state's governor's office, Helios Education Foundation and ASU. The institute has so far helped 3,200 of the state’s 4,800 teachers prepare to offer remote or hybrid instruction, said Amy McGrath, chief operating officer at ASU Prep Digital.

By helping neighboring schools offer better online teaching and learning, including licensing content and offering remote instruction to schools where there are teacher shortages, ASU Prep Digital is helping to raise the profile of online education, McGrath said. Online K-12 has some bad actors with poor student outcomes, but high-tech, high-touch personalized learning is “something that should be an option for every student,” she said.

The rapid expansion of ASU Prep Digital -- including both the launch of K-8 and additional students due to the pandemic -- required “significant investment in staffing and infrastructure up front,” McGrath said.

“As a result, financial year 2021 surpluses will lag the first year of this expansion, but it will create opportunities to reinvest future surpluses to maintain growth trajectories,” McGrath said.

Part of the allure of studying at ASU Prep Digital for older students and families with ties to ASU is that students have access to college-level classes through concurrent enrollment at both the school and the university. That gives them the opportunity to test out so-called career pathways, earn credit and ultimately save money on college tuition, Young said.

At another university-run online school, Texas Tech University's TTU K-12, the pandemic has also boosted enrollment.

“We are sitting at about 2,400 students. Of that 2,400, around 55 percent are domestic,” said Justin Louder, interim superintendent at the school. Student numbers fluctuate, as it is possible for students to enroll or graduate at any time, but Louder estimates around 300 full-time students enrolled because of the pandemic. Around 100 additional students who were close to graduating from high school came to TTU K-12 just to take a few classes.

"We’ve heard from a number of parents that have enrolled their children full-time," Louder said. "They weren’t comfortable with the online learning their local school was providing."

Similar to ASU Digital Prep, TTU K-12 recently started offering free faculty development training to teachers at other schools looking to improve their knowledge of online pedagogy.

The majority of TTU K-12’s new students are from Texas, but some new students hail from states as far away as Hawaii and Maine. Student enrollment surged in June and July, but the school continues to receive applications even now that most students have already started the new school year.

“As traditional school districts open up, some families are realizing their children are not as supported as they would like them to be and moving them to us,” Louder said. “We’re continuing to see new enrollments, but now it’s from families that waited to see what would happen at their local school.”

Despite gaining hundreds of new students, TTU K-12 hasn’t been pushed over capacity.

“Because our program allows students to work at their own pace, we anticipate fluctuations in enrollments each semester,” Louder said. “Although we didn’t anticipate such a large increase in students all at once, the students coming into our program are spread out over all grades, so it hasn’t overwhelmed our elementary, middle or high school staff.”

At TTU K-12, students pay per course, and increases in enrollment increase revenue. The institution hasn’t needed to increase current staffing or teaching levels to handle the extra students but has had to increase user capacity in its learning management system and proctoring solution, Louder said.

Realizing interest in the school was growing from pockets of Texas TTU K-12 hadn’t previously reached, the school increased its marketing in certain regions over the summer. But the school hasn’t faced any backlash from local school leaders worried about losing students to a competing institution.

"We are all just trying to find the best way to educate our students," Louder said. "We have always tried to be a partner to school districts. We know our program works for some kids, but not every kid. If the traditional education setting isn’t working, then we offer an alternative."

Whether students who joined TTU K-12 to ride out the disruption of the pandemic will stay for the long term is unknown at this point, Louder said.

“We believe that many of these students are probably short term,” he said. “We don’t expect the majority to stay through high school graduation -- we believe many will eventually return to their local school districts.”

TTU K-12 encourages students to stay for at least one full semester if they are studying with the school full-time, Louder said.

“We know that moving schools can be difficult on a kid, on their family, and we don’t want them to lose credits and have to repeat things,” he said.

While the students joining TTU K-12 have been fairly evenly distributed in age, Louder has noticed more inquiries from students close to finishing high school who are interested in attending Texas Tech University as undergraduates. Graduating from TTU K-12 doesn’t guarantee a place as a student at Texas Tech, but a streamlined admissions process exists for the school's students, said Louder.

Unlike ASU Prep Digital and TTU K-12, Stanford Online High School has not added any new students this year due to the pandemic. As a highly selective independent school, Stanford OHS caps the number of students it admits each year, said Tomohiro Hoshi, the head of school.

Stanford OHS has received more inquiries about its programs this year than usual. But it is too early to say whether this will translate to increased applications, Hoshi said. Unlike at ASU Prep Digital and TTU K-12, where students can begin studying at any point in the year, Stanford OHS has a fixed enrollment date that follows the traditional school year. Applications for 2021 recently opened and will close in early spring next year.

Even if applications surge this year, it is unlikely the school will rush to increase capacity. “We operate on a fixed five-year plan,” Hoshi said.

Few universities have ventured into the fully online K-12 market, but it is possible more institutions may move in this direction if they are already comfortable offering online teaching and learning at scale, said Bree Dusseault, practitioner in residence at the Center on Reinventing Public Education, a research unit at the University of Washington at Bothell.

For institutions that are not experienced in online education, however, the experience of switching to remote instruction in the spring may have dissuaded college leaders from entering the online K-12 space, said Dusseault. Educating children online is not an easy thing to do well, and the online modality is not a good fit for all students, she said.

A recent Gallup survey suggests the proportion of U.S. children not enrolled in a formal school and being taught at home -- possibly using online programs -- doubled this year, with one in every 10 families with school-age children now homeschooling. In some cases, families are clubbing together to homeschool their children, forming microschools or school pods.

Until more enrollment data become public, it is difficult to know how many students left traditional schools in favor of fully online schools this year, said Dusseault. An increase seems likely, but the scale is unknown, and the effect may just be temporary, she said. Andrew McEachin, senior policy researcher at the Rand Corp., agreed.

“Online schooling, often at online charter schools, is a growing but niche area,” McEachin said. He noted that studies in multiple states have found that the learning outcomes of students who attend virtual schools are lower than those of students who attend traditional schools -- a factor that has hampered the popularity of online institutions in the past.

“In some circumstances, students going to online schools were already struggling academically,” McEachin said. “But those students who are struggling are going to need more support rather than less -- they may struggle in an environment that is more independent.”

Virtual schools set up to be fully online may be better in the short term for some families than schools that are struggling to adapt to remote or hybrid instruction, McEachin said. But changing your child’s school comes with downsides, he said.

"You’re moving your child into a system that doesn’t know them," he said. "They may lose relationships they had."

Both McEachin and Dusseault agreed many students benefit from the social interactions they have with classmates in an in-person setting. They may struggle with the self-directed nature of online learning, particularly if they are very young. Neither predicts that the majority of families will want to continue with online learning after the danger of the pandemic has subsided.

Dusseault does predict, however, that traditional institutions in public school districts may face increasing competition from online institutions as more families shop around for the style of learning that best suits their needs.

“Perhaps a silver lining of this situation is that public schools will be more willing to experiment,” Dusseault said.

Online and Blended Learning
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Willamette University plans to acquire Pacific Northwest College of Art

Just three years ago, Willamette University, a private liberal arts college in Salem, Ore., announced plans to acquire the Claremont School of Theology. That process is still underway, with Claremont so far unable to find a buyer for its California campus and regulatory approval pending.

Despite already managing one complex merger process, Willamette yesterday announced plans to begin another -- this time with the Pacific Northwest College of Art, a private institution in Oregon focused on professional art and design education.

Based in Portland, Pacific Northwest College of Art is located approximately 45 miles from Willamette’s main campus. The art college, like many small and highly specialized institutions nationally, has faced significant financial challenges in recent years and struggled to grow its student enrollment. It has also been negatively impacted financially by the COVID-19 pandemic.

Pacific Northwest College of Art currently enrolls 647 students and has 121 faculty members, according to its website. Willamette reports that it currently enrolls a total of 2,179 students and has 247 faculty members.

The art college's Board of Governors and senior leadership examined a wide range of options that would maintain the institution's viability, said Scott Musch, chair of the PNCA board, in an email.

“The decision by PNCA to enter into discussions with Willamette was intentional and strategic,” Musch said. “The board was decisive in making the determination that this path was the best one forward for the college’s future.”

Discussions about a possible merger between Willamette and Pacific Northwest College of Art began seven months ago, said Musch. The colleges had for several years discussed the possibility of beginning shared services agreements but realized in the past year that a "deeper level of integration made sense for both of us," said Stephen Thorsett, president of Willamette University, in a telephone interview. 

Under the merger agreement, the Pacific Northwest College of Art will become part of Willamette University but will retain its name, identity and campus in Portland. The college will operate largely independently of the university.

“We don’t have a single overarching governance structure for the whole university,” Thorsett said. Willamette currently has three colleges: an undergraduate college of arts and sciences, a law school and a graduate school. All have autonomy over, for example, local budget allocation and faculty hiring and promotion decisions.

This decentralized management structure “is a real strength, because each faculty can create its own culture,” Thorsett said.

Some program overlap exists between the art college and Willamette, but Thorsett does not anticipate any faculty layoffs at either institution. He added there would be no staff changes for at least a year -- the earliest the merger agreement would be approved is early 2021.

No money will be exchanged as part of the agreement, said Thorsett. When the Pacific Northwest College of Art joins Willamette, the university will take over both the assets and liabilities of the art college, including existing debt. Though the Pacific Northwest College of Art is struggling financially as a standalone institution, Thorsett projects that it will be cash positive in its first year as part of Willamette.

"They have enough tuition and gift revenue to support their operations and contribute to the general overhead of running the university," said Thorsett. "That's partly because the merger allows the elimination of duplicate costs. You only need one audit every year.  Insurance is less expensive for the combined organization. There are no longer separate accreditation fees. You don't need two full-time Title IX officers. Although you still need student support, you don't need the same structures." 

The art college had more than $19 million in long-term debt at the end of its 2018 fiscal year, according to its most recently available audit. It reported about $14.3 million in revenue and $16.5 million in total expenses that year.

Willamette recorded $96.5 million in revenue versus $93 million in expenses that same year.

On social media, initial reactions to the announcement were mixed. Some Pacific Northwest College of Art students questioned how the deal would benefit them and worried about the long-term impact of the merger on their institution's identity and culture. 

Both Musch and Thorsett acknowledged many questions exist about how the merger will work. At the Pacific Northwest College of Art, an email sent to students announced the plans yesterday morning. Later in the afternoon, leaders held a virtual Q&A session to answer questions.

“There are planned departmental meetings being hosted by faculty over the next several days to have one-on-one conversations with students and their cohorts,” Musch said.

In public messaging on the agreement, both the Pacific Northwest College of Art and Willamette signaled that little will change for PNCA students, at least initially. They stressed the college will retain its identity but students will have access to better support services, counseling and career planning, as well as access to a wider liberal arts curriculum that could make students more attractive to potential employers. Both institutions referenced the potential for enhanced collaboration, including the possibility of jointly developing new degree programs in areas such as arts management, exploring remote instruction options, or enabling students to divide their studies between the two campuses.  

“The combined community will continue to uphold the hallmarks of place and the social capital of each institution -- including creativity and culture in Portland and policymaking and government in Salem,” said a fact sheet on the agreement published by the Pacific Northwest College of Art.

“For PNCA students, Willamette offers a much great curricular breadth in areas like languages, the humanities and social sciences, and computational and data science, as well as new opportunities for collaborative work with the performing arts,” said the fact sheet. “For Willamette students, PNCA offers substantially broader opportunities in the fine arts, design and visual studies.”

Willamette began offering the first college-level arts programs in the Northwest in 1860. The institution’s College of Arts and Sciences offers undergraduate programs in the studio arts, theater, music and art history. Pacific Northwest College of Art, founded in 1909 as the Museum Art School, is known for its professional undergraduate and graduate education in art and design

‘A Unique Opportunity Right Now to Acquire’

The moment appears to be right for significant merger-and-acquisition activity in both the art college market and higher education more broadly. When the fit is right, colleges and universities are signing deals.

“It appears that the fit between Willamette and PNCA is a good one,” said Deborah Obalil, president and executive director of the Association of Independent Colleges of Art and Design, in an email. “While Willamette has some existing art programs, they appear to only offer Bachelor of Art degrees. PNCA will bring a much wider array of art and design programs to the combined institution, with the professional degree, Bachelor of Fine Arts, and graduate degrees in these fields not previously available at Willamette.”

Time will tell how the merger will actually impact the Pacific Northwest College of Art, but it is a positive sign that public messaging about the agreement says the college will retain its independence, Obalil said.

“The proposed autonomy that PNCA will maintain will be good for serious art and design students, as well as faculty, knowing that the culture, disciplinary breadth and rigor of an independent college can be maintained with a focus on art and design,” she said.

As typically small and highly specialized institutions, many independent art colleges have struggled with declining enrollment in recent years. Several have successfully merged with larger institutions, but some shut down after failing to convince bigger institutions their finances are stable enough to make them attractive merger targets. The Oregon College of Art and Craft, for example, closed in May 2019 after merger talks with the Pacific Northwest College of Art and later Portland State University fell apart.

The COVID-19 pandemic has impacted all of higher education significantly, and smaller art and design-focused colleges are no different, Obalil said.

“For those art and design colleges that have been forced by circumstances to remain fully remote for the semester, it is particularly challenging given the hands-on nature of most art and design courses,” she said. “For those that have been able to reopen, the additional expenses incurred to create a safe learning environment have been significant.”

Discussions between leaders of the Pacific Northwest College of Art and Willamette began before COVID-19 started to significantly impact higher education in the U.S., said Thorsett, Willamette's president. The pandemic made discussions a little more challenging since board members couldn’t sit in the same room together, but it didn’t speed or slow down the process, he said.

At other institutions, it is possible the impact of COVID-19 is accelerating merger decisions, said Kasia Lundy, managing director at the consulting firm EY-Parthenon’s education practice. Historical data for the past decade suggest five to ten university or college mergers are typically completed per year. So far this year, four mergers have been completed and another 12 announced, she said. 

“There is an uptick. Is it huge? No, but there is an uptick,” Lundy said. “Based on conversations we are having, anyone who was already financially challenged has been thinking about this."

Many college presidents are exploring different approaches to relieve the financial pressure their institutions are under right now, said David Attis, managing director of research at the consulting firm EAB. Enrollment pressure was high at smaller institutions before the pandemic. Now it has been exacerbated, he said.

For smaller colleges in dire financial health, a merger can offer financial stability and keep the lights on. But mergers hold benefits for both parties -- institutions with the resources to take on another college are typically looking to grow their enrollment quickly, without the need to build new programs from the scratch, said Attis. 

Lundy and Attis agreed, however, that it is unusual for an institution to be managing multiple merger processes at once. 

"There's huge logistical complexity in executing a merger, so there are probably some risks in trying to do them too close together or even at the same time. But I think some people would argue that there is a unique opportunity right now to acquire institutions that might not exist in another year or two or will be acquired by someone else," said Attis. "There might be a sense of urgency around pulling this together."

Thorsett acknowledges managing two merger processes will be a challenge. But he feels confident Willamette's leadership team can pull it off.

“We’ve learned a lot from Claremont,” he said. “We know how to approach this planning process now.”

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Willamette University announced plans Thursday to acquire the Pacific Northwest College of Art.
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Unpacking the University of Arizona’s deal with Ashford

Exactly how for-profit Ashford University will become the nonprofit University of Arizona Global Campus became a little clearer this month when the University of Arizona published its asset purchase and sale agreement with Ashford.

The 340-page contract contains new details of how Arizona will work with Ashford’s parent company, Zovio, formerly Bridgepoint Education, to establish and jointly operate Global Campus. The document outlines responsibilities each party will assume, describes governance and budgeting processes, and discusses issues such as legal liability.

But the agreement also leaves some key questions unanswered -- chiefly, what happens if things at Global Campus don’t go as planned.

Ashford University’s enrollment has been in decline for several years, and there is no indication from the contract that extra investment is planned to turn that trend around, said Phil Hill, partner at MindWires Consulting and publisher of the Phil on Ed Tech blog.

“I was expecting to see an outline of what the spend will be to establish the new institution in terms of marketing and what will be required to turn around the downward trend in enrollment. I thought there would be some indication of whether Zovio is going to invest more in the university than it did previously,” said Hill. “I don’t see that anywhere.”

The Ashford agreement seems to take “an optimistic view that the numbers are going to work out,” said Hill. “I don’t think it’s safe to assume based on this document that Zovio will dip into their own funds to make this work. Even if that were true, I’d be willing to bet Zovio will not do that for free.”

A spokeswoman for the University of Arizona said in an email that enrollment at the University of Arizona Global Campus is projected to grow “in part due to its nonprofit status and its affiliation with the University of Arizona.” The spokeswoman did not directly address how much investment the university expects will be required to turn around the downward enrollment trends at Ashford. “We are comfortable beginning with approximately 35,000 students and the potential to grow over time,” she said.

While some institutions that have converted from for-profit to nonprofit have seen a positive impact on enrollment, there is no guarantee that Ashford will see a sudden bump in interest when it becomes the University of Arizona Global Campus, said Hill.

There are many parallels between the Arizona-Ashford deal and Purdue University’s acquisition of Kaplan University, said Hill. Both Arizona and Purdue acquired the assets of for-profit institutions for $1 and signed long-term service agreements with the parent companies of those institutions, agreeing to pay them a sizable slice of tuition revenue in exchange for nonacademic services such as marketing and enrollment.

Kaplan University’s rebranding as Purdue University Global has not been a resounding success. Purdue Global spent more than $132 million on marketing and student recruitment in fiscal year 2019 and had a loss of $43 million, said Hill. Kaplan's enrollment fell from around 60,000 in 2013 to 45,000 in 2016. Since the Purdue takeover in 2017, enrollment has continued to decline, but at a much slower rate. Purdue Global's enrollment was 38,138 in fall 2019 according to federal data. “You’ve got to give Purdue credit that they’re pumping money into the school trying to stabilize enrollment,” he said. “It looks like Arizona wants to pump money out.”

A key difference between the Kaplan contract and the Ashford contract is that Arizona has negotiated that its expenses are covered before Zovio’s, said Hill. This “distribution waterfall” was described by Hill in a recent blog post as follows.

  1. "The first dollars go to UAGC to cover expenses for the academic side of things -- professors, administration, leases, etc.
  2. The next $25 million goes to UAGC under the contract, which guarantees $25 million per year for the first 5 years, and $10 million per year for the next 10. The $37.5 million cited in the news reports is a prepayment on the first 1.5 years of this.
  3. The next dollars go to Zovio to reimburse its costs of providing OPM services.
  4. Zovio then gets 19.5% the total revenue, if the residual funds are available.
  5. The remaining funds (if any) stay with UAGC, which it can invest in itself, or send back to the University of Arizona proper in the form of an affiliation / trademark licensing agreement, or some combination of the two."

Though this distribution waterfall is described indirectly in the contract, it does seem to be accurate, said Hill. “The public statements on the deal made the payments seem a lot more clear-cut,” said Hill. Money that is described as “guaranteed” in public statements, for example, becomes “minimum residual amounts” in the contract.

Much of the financial risk of the deal appears to be shouldered by Zovio rather than the University of Arizona, said Bob Shireman, senior fellow at the Century Foundation. “But that comes with a big asterisk, which is the reputational and opportunity risk to Arizona,” he said.

Arizona could have focused on growing its existing online programs. Instead, it is paying a company to manage an institution over which it will not have a lot of direct authority -- opening up the potential for things to be run in a way that could damage the institution's reputation, said Shireman.

The University of Arizona spokeswoman said that multiple steps have been taken to protect the institution's reputation. “The University of Arizona Global Campus (UAGC) will be governed by an independent board responsible for all aspects of operation. The University of Arizona will appoint four out of the nine board members, and certain acts of the UAGC board will require a supermajority vote, ensuring that the University of Arizona has significant influence in critical decisions of the UAGC board,” the spokeswoman said in an emailed statement.

The 15-year contract will automatically renew for up to two additional five-year terms unless one of the parties elects not to renew the agreement. The contract may be terminated without any fee after seven years if the net tuition and fee revenue generated in the applicable fiscal year is less than $400 million.

“There is one big difference between this contract and Purdue’s, which is that it appears after 15 years Arizona can terminate the contract with no penalty and will wholly own the assets it is buying. But it would be a very difficult thing to change contractors at that point or take over some of the operations directly,” said Shireman. “They are, in a sense, captive.”

The deal will guarantee Global Campus $225 million in revenue over 15 years, with 19.5 percent of tuition revenue flowing to Zovio on top of operating costs for services such as marketing, instructional design and technology. This is different from how most online program management contracts are structured, where the company providing the services takes a fixed percentage of tuition revenue -- for example, 50 percent -- as its total fee.

An analysis by Ariel Sokol, founding principal and managing partner at Kolari Consulting, conducted on behalf of the Century Foundation, estimates that Zovio could charge anywhere between 64 and 72 percent of the University of Arizona Global Campus's tuition revenue in 2021 as a service fee. The upper range, 72 percent, assumes the university generates $380.8 million of revenue and that Zovio generates $276 million of services revenue from the university. The lower range, 64 percent, assumes the university generates $418.5 million of revenue and that Zovio generates $267.6 million of services from the university.

“Does 64-72 percent pass the smell test? We think so,” wrote Sokol in a memo shared with Inside Higher Ed. “Recall that Zovio’s CEO in the Q2 2018 earnings conference call suggested that Zovio could see a 60-65 percent revenue share assuming that Zovio could convert Ashford to a nonprofit and sign a services agreement.”

“Yes, our calculated range is higher than what Zovio previously suggested that they would pursue. We note that unlike other similar online program management deals that have been signed to date (e.g., Purdue, Grand Canyon), this deal includes an assurance by Zovio of contractual profit minimums for UAGC through the life of the fifteen year contract,” continued Sokol. “It’s conceivable that the University of Arizona was able to negotiate the economic split of perhaps 60 percent and also get contractual profit minimums. Or alternatively it’s possible that the University of Arizona was willing for Zovio to receive a higher percentage of UAGC’s revenue in exchange for the profit minimums, which would also make sense. At this point outsiders can only speculate.”

Figuring out exactly how much money Zovio will make from the deal would require information that is not included in the contract shared by the University of Arizona, said Gary Rhoades, professor at the Center for the Study of Higher Education at Arizona and former general secretary of the American Association of University Professors. Rhoades expressed frustration at the amount of information redacted from the contract and noted that Arizona's Faculty Senate had requested additional documents.

Dozens of pages of the contract were blacked out, including details that might indicate the financial health of Ashford University, such as current contracts, net assets, intellectual property, the status of several legal proceedings against the institution, and details of multiple redundant functions that Zovio intends to "eliminate" from Ashford before the deal is scheduled to close later this year.

“There are elements of the contract that have been redacted that are important for us to know about,” said Rhoades. The Faculty Senate at Arizona recently created a group called the Global Campus Extended Advisory Committee, co-chaired by Rhoades, that will aim to evaluate the deal and “hopefully have some input into, at the very least, improving its implementation.”

The University of Arizona spokeswoman noted that the University of Arizona Global Campus is not subject to Arizona’s public records law, but said there would be “robust reporting and oversight built into the affiliation agreement between the University of Arizona and the University of Arizona Global Campus.”

“The University of Arizona has disclosed over 340 pages of agreements and related documents in response to faculty and Public Records Act requests. Additional disclosure will be within the discretion of the University of Arizona Global Campus and its independent board,” she said.

A particular concern for Rhoades is that there has been little outreach by the university to faculty teaching online programs at the University of Arizona’s online arm, Arizona Online, that overlap with programs currently offered by Ashford.

“If you’re in an academic unit that has overlapping programs, you’re already thinking about what this means for your website, what this means for developing new programs and what kind of relationship, if any, there will be with regard to students and faculty at Ashford,” said Rhoades. “The academic implications are profound, and there continues to be virtually no information provided. One of the aims of our committee is to reassert the importance of consultation not just about the initial decision, but implementation.”

The University of Arizona said in a statement that it had identified “transition teams” from both organizations to facilitate decision making “across all functional areas of business,” but added that overlap of online classes, academic pathways and related efforts would be addressed after the deal is closed.

The deal is projected to close Dec. 1 pending regulatory approval from the U.S. Department of Education, state regulators and Ashford’s accreditor, the Western Association of Schools and Colleges Senior College and University Commission.

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Adtalem wagers on Walden University in hopes of building health-care education powerhouse

Adtalem Global Education's plans to acquire Walden University, announced Friday, are part of an orchestrated push to become a national leader in health-care education.

Laureate Education will sell Walden University, a for-profit online institution that has for years stood out from Laureate's focus on emerging international markets, to Adtalem for $1.48 billion. The transaction is expected to close mid-2021, pending regulatory approvals by the U.S. Department of Education and Walden's accreditor, the Higher Learning Commission.

Walden is one of the largest U.S. for-profit online institutions by student enrollment, according to federal data, following the University of Phoenix and Grand Canyon University -- although Grand Canyon disputes the U.S. Department of Education's decision to label it a for-profit for federal financial aid purposes.

Walden enrolls around 52,000 students, 78 percent of whom are enrolled in health sciences programs, according to a university spokesperson. Walden offers more than 80 degree programs, mostly at the master’s level, in areas such as education, business and public administration. It also offers programs leading to health-care professions such as nursing and mental health counseling.

Adtalem, formerly known as DeVry Education Group, sold online for-profit DeVry University to a small private company in 2017. The publicly traded company has amassed a significant portfolio of health care-focused institutions in recent years, including the American University of the Caribbean School of Medicine, Ross University School of Medicine, Ross University School of Veterinary Medicine and Chamberlain University, which bills itself as running the largest nursing school in the country across 22 campus locations.

The acquisition of Walden will ensure Adtalem is “better positioned to increase the talent supply to address the rapidly growing and unmet demand for health care professionals in the U.S. and globally,” the company said in a news release. “Walden’s program offerings and technology, its strong online capabilities, and its focus on diversifying the health care workforce are complimentary with Adtalem’s existing strengths as a leading health care workforce solutions provider and long track record of providing superior outcomes for students.”

The combined institutions Adtalem will own will have 26 campuses in 15 states and four countries, the company said. They will have 6,100 faculty members and more than 90,000 students -- 34 percent of whom are Black. The company claims it will be the world's top provider of M.D.s, Ph.D.s and nursing degrees to African Americans.

For Laureate Education, the sale marks a long-signaled departure from the U.S. higher education market. The publicly traded Baltimore-based company used to be well-known for its global campus network but sold off many of its international institutions to focus on the emerging higher education markets in South and Central America. Earlier this year, the company entered into a $642.7 million agreement to sell three institutions in Australia and New Zealand to Strategic Education, the Minneapolis-based company behind Capella University and Strayer University.

Laureate Education has not been secretive about its desire to sell Walden. The company announced it was discussing a possible transaction with third parties in late 2018. In February 2019, the company said it had decided not to sell the university, stating that Laureate was best positioned to support Walden at that time. Then in January this year, Laureate indicated it was open to exploring "strategic alternatives for each of its businesses to unlock shareholder value" -- suggesting the university was again on the market.

The Walden acquisition is something Adtalem has desired for "some time," said Lisa Wardell, president and CEO of Adtalem, in an investor call on the deal last week. In the 12 months prior to June 30, Walden University and associated company Walden e-Learning had approximately $591.3 million in revenue and $146.5 million in operating income, according to a recent U.S. Securities and Exchange Commission filing.

Whether anything will change at Walden University under Adtalem’s leadership is unclear. An Adtalem spokesperson said there will be no changes before the transaction is closed, “and it’s too early to speculate beyond that time frame.” In a letter to Walden University students, Ward Ulmer, the institution’s president, said the sale “does not change anything about your educational experience at Walden.”

“Both Walden and Adtalem have made it a priority that you continue to have the same strong academic programs and experience you have come to expect from our university,” wrote Ulmer. “The transfer of ownership does not affect your financial aid or Walden’s Title IV financial aid authorization. Walden will retain its current accreditations with the Higher Learning Commission, as well as all of its current programmatic and national accreditations. There will not be any changes in your curriculum or additional time to graduation due to the change in ownership.”

Walden is expected to continue to be a stand-alone institution owned by Adtalem, according to Ulmer. It will keep the same name, and existing students will remain in their degree programs.

For Adtalem, selling DeVry and acquiring Walden is a reputational upgrade, said Trace Urdan, managing director at Tyton Partners, an investment bank and higher education consulting firm. Among for-profits, Walden has a good track record with regulators and is regarded as “one of the most spotless actors in the sector,” Urdan said.

Generally, investor interest in for-profit institutions has dwindled in recent years, but health care is “the one place where people are still interested and investing,” said Urdan. Walden has established online nursing programs and mental health programs that are not currently in Adtalem’s portfolio, he said.

“Adtalem seems to be charging deeper into health-care education and going up the value chain, which makes a lot of sense,” said Daniel Pianko, partner at University Ventures, a higher education investment firm.

Health-care education is tightly regulated by third parties and job opportunities are plentiful, he said. Some for-profit health-care education programs, particularly in nursing, are considered elite by employers. Demand for health-care professionals nationally is high, said Pianko. He said for-profit education seems to be more accepted in the U.S. for training health-care workers than it is in other fields.

“The public sector hasn’t been able to produce enough doctors and nurses for our society, especially during COVID,” Pianko said. “That makes it an area where it makes sense for for-profit institutions and private capital to operate.”

While health-care education is a relatively respectable facet of for-profit education, there is a still a risk of increased regulation if a Democratic administration is elected this November, Urdan said. In purchasing Walden University using a mixture of cash on its balance sheet and additional debt, rather than equity, Adtalem is taking a risk, he said.

“One of the truisms of managing through a hostile regulatory environment is that you want to have as much cash as possible on hand,” Urdan said. “This was the lesson of the demise of ITT and Corinthian. Those are both institutions that might still be in existence today if they hadn’t spent all their cash.”

As of June 30, Adtalem had $500.5 million in cash and cash equivalents, suggesting the company might need to borrow close to $1 billion to close the deal with Walden. The company has also agreed to pay an $88 million termination fee to Laureate if the acquisition cannot go through “as a result of the imposition by the U.S. Department of Education of certain specified restrictions” or if it fails to “consummate the transaction upon satisfaction of the closing conditions.”

That $88 million termination fee is a “pretty sizable bet” that the U.S. Department of Education won’t try to block the deal or require a letter of credit to secure continued access to federal financial aid, said Yan Cao, a fellow at the Century Foundation.

Adtalem’s acquisition of Walden is concerning to Cao. Under Laureate’s ownership, Walden was restricted from growing too quickly by regulatory controls imposed by the U.S. Department of Education.

The department imposed those controls because Laureate posted a financial responsibility composite score considered to be “in the failing range for at least the last decade,” Cao said. The regulatory controls may be lifted when the institution changes ownership, said Cao. Adtalem may have a better financial responsibility composite score than Laureate depending on the amount of debt it takes on, or the U.S. Department of Education might be convinced to consider the composite score of Walden University itself, rather than its parent company, when reviewing the transaction, said Cao.

Adtalem’s history of “failed stewardship” in managing DeVry University, an institution that “racked up student complaints of fraudulent practices,” should be of concern to regulators and Walden University stakeholders, said Cao.

DeVry in December 2016 agreed to pay $100 million to settle a lawsuit brought by the Federal Trade Commission alleging the institution misled prospective students about its graduates' job-placement rates. The university denied any wrongdoing. Earlier that year, DeVry announced student protection reforms in response to criticism of the for-profit sector, including voluntarily capping the federal financial aid the institution receives from the U.S. Department of Education.

"DeVry is in the business of democratizing access to education, helping students achieve career goals and being a part of the solution to the workforce skills gap," said Wardell, then president and CEO of DeVry Education Group, in an interview with Inside Higher Ed at the time.

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What happens when college social media influencers get COVID-19?

Social media stars Brooklyn and Bailey McKnight shared an unusually serious message with their millions of fans on Instagram last month.

Rather than modeling new outfits, promoting their YouTube content or posting wholesome snaps of themselves with family and friends, the identical twins announced that they had tested positive for COVID-19.

“We are aware this is going to raise a lot of questions,” said the McKnights in an Instagram post that has so far garnered more than 350,000 likes.

The twins had recently returned to Baylor University, a private institution in Waco, Tex., which is offering a mix of in-person and online classes. But the McKnights stressed that it was “NOT due to in person classes” that they became infected. The institution has “taken every precaution, including mandating masks, requiring students to test negative before coming back to school, and many, many more precautions,” they said.


A post shared by Brooklyn and Bailey (@brooklynandbailey) on Aug 28, 2020 at 4:48pm PDT

The influencers said they had been “unbelievably careful” -- wearing masks in public, limiting the number of people they come into contact with and following social distancing guidelines. They encouraged others to do the same in their post. Though Brooklyn traveled to Utah in early August to film a series of YouTube videos where she went on 10 dates in 10 days, the twins reasoned this could not have been the cause of their infection, as she tested negative for the coronavirus on her return.

“So this raises the question … how did we catch it? Brooklyn and I live with two other roommates, who have also been unbelievably careful. Baylor is contact tracing every positive case, and unfortunately both roommates were listed as contacts by someone who tested positive,” said the McKnights in their Instagram post. “Both were asked to quarantine at home and to stop attending classes. Within a few days 3/4 of us in our house started showing symptoms and immediately went to get tested.”

After they shared their announcement on social media, speculation began online that Baylor had played a role in shaping the twins' Instagram post. The twins sometimes post content sponsored by the university -- a growing trend in higher ed marketing. The McKnights did not respond to a request for comment, but a Baylor University representative denied that the institution had influenced the influencers’ announcement in any way.

Baylor has had a marketing relationship with the twins since 2017, prior to their arrival on the university's campus as freshmen, said Jason Cook, vice president of marketing and communications and chief marketing officer at Baylor University, in an email. The twins are paid to post once or twice per semester promoting the university, he said.

“We have been up front and visible in our marketing relationship with the twins, with sponsored posts indicated in accordance with FTC guidelines,” said Cook. “Brooklyn and Bailey have helped introduce Baylor University to an entirely new generation of prospective students who may have never heard of the university previously. With Gen Z, these students need to see themselves through others, and Brooklyn and Bailey provide glimpses into college life each and every week.”

Cook added that the twins applied to the university through the normal admissions and financial aid processes.

The twins are not “COVID-19 influencers” and have not been involved in any way in the university’s safety campaign, said Cook.

“Our COVID-19 safety campaign, Family First, features our mascots, Bruiser and Marigold,” he said. “Brooklyn and Bailey are not COVID-19 influencers for Baylor. With that said, like all other Baylor students, they are required to wear face masks and follow other university guidelines on campus at all times. If you look at their non-Baylor-sponsored content, however, they have promoted COVID-19 prevention strategies on their own, independent of Baylor.”

Since the beginning of August, Baylor has conducted more than 26,600 tests, with 888 people testing positive for the virus, according to a university dashboard for positive COVID-19 cases reviewed on Sept. 8.

Baylor is running an “extensive contact tracing process,” said Cook. When a student receives a positive test result, they are sent into self-isolation in a university-provided space for on-campus students, or their own private residence for off-campus students, he said. Cook added that students cannot “test out” of isolation or quarantine. They must remain in isolation for 10 days after a positive test or in quarantine for 14 days after contact with a positive individual, he said.

While some students have been vocal complaining online about how their university is enforcing COVID-19 safety practices, students with large social media followings are unlikely to disparage their institution’s reputation, said Steve App, business development manager at Campus Sonar, a higher education marketing company. That's true even if they do not have a paid relationship with their university, because it may discourage other brands from working with them, he said.

“Brooklyn and Bailey are really in a league of their own when it comes to college influencers. They have 6.9 million YouTube subscribers. Most college influencers have maybe a couple of hundred thousand,” App said. The twins, like many influencers, have built a brand that centers on positivity -- promoting happiness and healthy habits. Complaining doesn’t fit with the brand that they have built, App said.

“It’s students who are not influencers who are probably the greater risk to universities right now,” App said. “This is probably the hardest year ever to be a social media manager, certainly for higher education. They’re on the front lines -- facing nonstop questions, accusations, criticisms,” he said.

Videos of students sharing terrible cafeteria food or outing irresponsible classmates on platforms such as TikTok and Reddit create a real challenge for social media managers. But students are organically sharing good messages, too, App said. He pointed to a recent video of a student returning to Notre Dame University, where she documented the contents of a welcome pack containing a thermometer, sanitizer and masks.

“Institutions are sometimes waiting for influencers to post something negative, but if an institution is doing the right thing, if the messaging around in-person campus plans is clear, that can really help in terms of spreading a positive message,” said App.

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COVID-19’s impact on for-profit colleges still murky as second-quarter earnings arrive

A mixed picture is emerging of how for-profit colleges and the publicly traded companies that manage them have so far been impacted by the pandemic.

Past economic downturns significantly boosted enrollment at for-profit colleges, but if a countercyclical enrollment explosion is on the way, it hasn't materialized across the board yet.

Several for-profit colleges reported modest year-over-year enrollment increases in the second quarters of their fiscal years, which generally ran between March and June. The companies that own them boosted profitability, sometimes through careful cost management. That's important, because previously released data showed no sign of enrollment growth across all institutions in the spring of 2020.

Given how quickly the economic downturn happened, there may not be much impact on enrollment at for-profit higher education institutions for a few months, said Jeff Silber, an analyst at BMO Capital Markets Research. In the short term, lower-income students may be more worried about putting food on the table than completing Economics 101, he said.

“Historically we have seen countercyclical enrollment at for-profits, but because of the rough nature of the downturn, we may not see as much,” Silber said.

That said, demand for online education is growing, and students may start shopping for alternatives if their current nonprofit colleges provide unsatisfactory remote learning experiences.

“There’s a possibility we may see some decent enrollment numbers from these companies in the fall, but we’re still talking a very small percentage of the student population that is enrolled by for-profits,” Silber said. “The for-profit sector enrolls 5 percent of U.S. higher education students. That 5 percent is not going to increase to 20 percent. But I wouldn’t be surprised if for-profits gained back a little bit of that share this fall.”

The recession and pandemic is ultimately likely to increase student demand, said Trace Urdan, a managing director at Tyton Partners.

"But there hasn’t been anything in the second quarter that makes that obvious," he said.

Online for-profit colleges saw a lull in demand during March and April, which has since picked back up, Urdan said. This is in contrast to the surge in interest that nondegree online learning providers such as Coursera and edX saw early in the spring, which then leveled out. Viewed together, these online learning trends suggest some hesitancy among learners to commit to full degrees. But they also suggest overall interest in online learning is high and likely to persevere, said Urdan.

Results Vary by Company

Online for-profits lost ground to large online nonprofits in recent years, resulting in losses of tens of thousands of students at for-profit institutions such as Ashford University. Regulatory controls are much tighter on for-profits than they were a decade ago, and prospective students are wary of a sector that has been tarnished with accusations of predatory student enrollment practices.

Many publicly traded companies in the for-profit higher education sector have contracted significantly. Some of those that remain have attempted to diversify their income by moving into international education, nondegree online credentials or online program management and technology services.

At Ashford, for example, new enrollment was down 12.6 percent in the quarter ending June 30 compared with the same time last year. This was still “well ahead of our expectations for the second quarter of 2020,” said Andrew Clark, CEO of Zovio, Ashford’s parent company, in a recent investor call. He expects new enrollment to return to low single-digit growth in the third quarter of 2020.

Despite declining enrollment, Zovio turned a profit, reporting a net income of $7.2 million for the first six months of this year, compared with a net loss of $24.2 million in the same period last year, a period in which it acquired Fullstack Academy and The company cut its total costs and expenses by more than $37 million.

A reduction in the price of social media ads earlier this year helped to lower student lead-generation costs for degree programs. But student enrollment pipelines have been negatively impacted by strapped budgets at big companies. More than a third of students at Ashford University, for example, are enrolled through employer-assisted education programs, Clark said in the investor call.

Corporate partners began to cut tuition reimbursement programs as part of cost-saving measures to mitigate the financial impact of the pandemic earlier this year, Clark said. While some companies have since reinstated these programs, Clark expects “the velocity of new enrollments from this group to moderate in coming quarters.”

Zovio’s stock price rose by 28 percent on Aug. 3 when the company announced that the University of Arizona would acquire Ashford University, creating a new nonprofit institution called the University of Arizona Global Campus. As part of this deal, Zovio will continue providing services such as marketing, student recruitment, instructional design and technology.

“This is a monumental day for Zovio in our transition to a world-class education technology services company,” Clark said in the investor call. “Our strategic services agreement with the University of Arizona Global Campus will create a strong foundation from which we can pursue diversified growth, providing technology and services to other institutions, corporations and learners.”

Grand Canyon Education no longer owns Grand Canyon University but still manages the institution’s online programs through a services agreement.

“Grand Canyon University online had 87,959 online students as of June 30, 2020, and in the quarter just completed, new students grew in the high teens, while total students grew 8.2 percent year over year,” said Brian Mueller, president of Grand Canyon University and CEO of Grand Canyon Education, in a recent investor call. “We have definitely seen an acceleration of working adult students enrolling in our programs online. As this acceleration has taken place, the percentage of students that are studying at the graduate level has gone up.”

American Public Education, which owns American Public University, American Military University and the Hondros College of Nursing, reported that new enrollment was up by an impressive 30 percent at its institutions -- particularly driven by increased demand for nursing education at Hondros. This "largely organic" enrollment growth reflected "recent grants to military students, increased online demand, and enhanced visibility of American Public University System value," wrote Silber in a recent analysis. Net income for the company increased from $4.9 million for the quarter ending June 30, 2019, to $6.7 million for the same quarter this year.

Adtalem Global Education, the company behind Chamberlain University, Ross University School of Medicine and the American University of the Caribbean School of Medicine, also reported strong enrollment growth in its nursing programs in a May investor call. The company is scheduled to release earnings for its fourth quarter and full 2020 fiscal year Tuesday.

The American InterContinental University reported new student enrollment growth of 118.8 percent for the second quarter of 2020 ending June 30, compared to the same quarter last year. But this is explained by the institution's recent merger with Trident University International, which parent company Perdoceo purchased last year. Perdoceo, formerly known as Career Education Corporation, also owns Colorado Technical University, which saw a more modest new student enrollment increase of 4.5 percent.

Total enrollment at Strayer University grew by 6 percent year over year for the second quarter ending June 30, from 50,713 to 53,782 students, according to earnings figures released by parent company Strategic Education. But new enrollment was down 4 percent. Capella University, also owned by Strategic Education, saw a slight increase in enrollment from 38,979 in the second quarter of 2019 to 39,341 in 2020. Strategic Education on July 29 announced plans to acquire Laureate Education’s Australia and New Zealand academic operations for $642.7 million.

While Strategic Education is expanding internationally, Laureate Education, which manages Walden University, seems to be taking the opposite approach -- focusing on Latin America, the U.S. and increasing its liquidity. Laureate’s chief financial officer, Jean-Jacques Charhon, reported that the company’s revenue was more or less flat in the first half of this year, with new enrollments at Walden growing by 3 percent in the last quarter.

Historically, for-profit higher education companies have started to build up their cash reserves ahead of U.S. presidential elections -- particularly when there is a possibility of moving from a Republican to a Democratic administration, as Democrats look less favorably on the for-profit sector, Urdan said. Many companies want to diversify their income away from a reliance on Title IV federal financial aid and have invested in nondegree credentials or international education, he said.

Some of the most well-known for-profit colleges are online, but there are many for-profit colleges with ground-based programs, particularly those offering vocational training. The Universal Technical Institute and Lincoln Educational Services both offer automotive training that relies heavily on hands-on instruction. Both faced the challenge of pivoting to remote instruction this spring.

“When the pandemic forced us to close campuses in March, our team set out to proactively manage our operating costs,” said Scott Shaw, CEO of Lincoln Tech, in a recent investor call.

By asking landlords for assistance in lowering rents, freezing all travel and new hires, and asking campuses to be prudent with expenses, the company was able to turn a loss of $3.1 million in the second quarter last year to a net income of $783,000 this year.

“We continue to believe that with the dramatic rise in the unemployment rate and the increasing realization that many of the unemployed won’t have jobs to come back to once the nation’s economy is fully reopened, demand for our programs will increase even further as it has in past economic downturns,” said Shaw.

More students have enrolled at Lincoln’s 22 campuses this year than last year, said Shaw. But he predicts a large-scale enrollment boost won’t happen until later this year. Since June 2019, Lincoln has increased its student population by 7.5 percent, around 800 students. This excludes approximately 700 students who took temporary leaves of absence as a result of COVID-19.

“During the last recession between 2007 and 2010, we saw consistent increases in leads, enrollments and student population that peaked two and a half years after recession started,” said Shaw. “Given the dramatic and unprecedented rise in unemployment during the past five months, we continue to imagine a much faster ramp-up in our student population beginning in the fourth quarter of this year and continuing into 2021.”

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Pandemic drives increased interest in open educational resources

Initiatives to raise awareness of open educational resources -- free and openly licensed teaching and learning materials -- are having a measurable impact on the number of faculty members using OER in their classrooms.

Many colleges, systems, states and multi-state regional compacts have launched OER programs in recent years -- creating policies that promote the use of the resources, launching publicity campaigns to increase understanding of how to find and use them, and dedicating funding to help instructors work OER into their lessons or develop their own openly licensed materials.

These efforts to promote OER are working, according to new survey data published today by Bay View Analytics in partnership with the Western Interstate Commission for Higher Education's Cooperative for Educational Technologies (WCET).

The survey found that faculty members who are aware of one or more OER initiatives are much more likely to be adopters of OER. This is true regardless of the instructors' type of institution, the level of course they teach, or where they are located in the U.S.

"The surprising thing to me was not that these OER initiatives made a difference, it was that there was no group for which these initiatives did not make an impact," said Jeff Seaman, director at Bay View Analytics.

"If you're aware of an OER initiative, you're much more aware of OER in general, much more likely to adopt, and if you haven't adopted, you're much more likely to say that you will adopt in the future,'" said Seaman. The survey found that faculty members are three to four times more likely to adopt OER If they are aware of an OER initiative, no matter what type of initiative it is, or who is leading it.

It's not unusual for higher education leaders to launch initiatives and policies without really knowing if they have much impact on the people they're intended to help, said Tanya Spilovoy, director of open policy at WCET. "This is a study that shows that high-level initiatives on OER do make a difference," she said. 

Awareness of OER has grown steadily over the past five years, and faculty decisions to use OER as their required course materials have grown year over year, said Seaman. While awareness of OER is growing, 69 percent of faculty remain unaware or only "somewhat aware" of OER, down from 83 percent in 2014-15.

The number of faculty who are "very aware" or "aware" of OER and Creative Commons licensing rose to 31 percent in 2018-19, up from 17 percent in 2014-15. At the current rate of increase, it would take another five years before a majority of teaching faculty become "very aware" or "aware" of OER, said Seaman.

Just under half of faculty members surveyed at two-year institutions were aware of an OER initiative at their college, compared with 29 percent of faculty at four-year colleges. This difference is likely the result of a strategic focus by OER funders such as the William and Flora Hewlett Foundation on increasing the availability of free textbooks in introductory-level courses and at community colleges, said the report.

In future research, Spilovoy and Seaman said they would like to explore in more detail which kinds of initiatives have the biggest impact on OER adoptions. In general, Spilovoy said she would like to see more OER initiatives auditing their results to better understand where to dedicate resources. But given that the majority of faculty members are still unaware of OER, Seaman said he would encourage higher ed leaders not to overthink this process.

"Just do something. Get the word out -- it will make a difference," sad Seaman. "Don't wait for more research to tell you what to do. We know broadly that across all types of institutions and faculty, that once they're aware of OER, it makes a difference."

Successful OER initiatives can start anywhere, said Spilovoy. As part of the SPARC Open Education Leadership Program (which Spilovoy co-designed and teaches with Nicole Allen, director of open education at SPARC) all graduates are required to launch their own OER initiative. So far 64 people have graduated from that program, many of them librarians. But students, faculty, administrators and policy makers can all play a role. "We're seeing more and more interest in OER at the system, state and multi-state level," said Spilovoy.

A total of 4,399 faculty and 1,431 chairpersons responded to the survey, which took place in the fall of 2019. The results do not capture the impact of the COVID-19 pandemic on OER awareness and decisions, but OER proponents told Inside Higher Ed that they have seen a notable increase in interest since March.

"I'd describe the growth as off the charts," said Richard Baraniuk, founder of OpenStax, one of the leading providers of OER textbooks. "We're in a special moment in history -- a critical time for OER as course modalities are changing rapidly from in-person to hybrid to online," he said. 

More than 100,000 students and instructors have created OpenStax accounts to access additional free resources associated with OpenStax textbooks since the spring -- an increase of more than 200 percent compared to the same period last year, said Baraniuk. OpenStax has also hosted more than 30 webinars since March that have attracted over 3,000 instructors who are interested in finding out more about OER.

Many instructors are busy redesigning their curricula to work in new modalities and are open to experimenting with new course materials. Instructors and students want materials that are low-cost, accessible and flexible, said Baraniuk. Rajiv Jhangiani, associate vice provost of open education at Kwantlen Polytechnic University in British Columbia, agreed.

Faculty are aware that choosing affordable course materials is really important to students, especially now given the economic impact of the pandemic on students' finances, said Jhangiani. Kwantlen has seen a 25 percent increase in adoption of OER since the fall, and 35 percent of faculty now "actively engage in open education," said Jhangiani.

A Kwantlen program offering OER grants to faculty members who want to adopt, adapt or create their own openly available resources received three times more applications in May than it did in January, said Jhangiani.

It's not just the affordability of OER that is driving faculty decisions, explained Jhangiani. Some instructors have expressed frustration with long delays in students receiving print textbooks because of slower supply chains due to the pandemic. Additionally, Jhangiani and his colleagues have found that some publisher platforms for digital course materials are not accessible to students based overseas, particularly in China where firewalls can block international websites. "We know that we can embed OER in our learning management system and it will be accessible anywhere, regardless of geolocation," he said.

David Ernst, director of the Open Education Network, shared that many members of the OEN have seen increased interest from faculty in OER since March. Ernst forwarded anecdotes from representatives at Brigham Young University, Marian University, Roger Williams University, Rutgers University, Temple University, Oregon's community college system, the Private Academic Library Network of Indiana (PALNI), the University of Kansas, and the University of North Carolina System, all indicating increased demand among faculty for OER training and workshops. Many instructors are in the process of moving to digital course materials as they prepare to teach remote or hybrid courses, and are increasingly aware of the financial burden students are under because of COVID-19, they said. 

At Austin Community College, efforts to increase the number of courses with zero textbook costs have grown steadily. "We feel we've done some great work in the last four years, from offering 29 OER course sections in spring 2017 to 626 OER course sections in spring 2020," said Gaye Lynn Scott, associate vice president of academic transfer. 

Whether the pandemic has sped up adoption of OER is difficult to say, said Scott. "In the summer of 2019, we offered 117 zero textbook cost sections; in the summer of 2020 we offered 226," she said. "Is that natural growth, or partly a response to not only moving our instruction online but a heightened awareness of our students' financial challenges?" 

Sharing annual feedback from students who take classes using OER has helped to spread the word among faculty, said Scott. She notes it is also important to encourage faculty who have adopted OER to "preach the OER gospel" to their colleagues. "Faculty listen to faculty," she said. 

There are many steps that instructors and institutions can take to encourage the use of OER, said Jhangiani.

"One really obvious one is to integrate OER into institutional policies, procedures and practices," he said. Whenever a new course is developed at Kwantlen, faculty are required to check if there are OER materials that could be used to teach the course, though there is no mandate that these materials must be used. The institution's course catalog is organized so that students can filter for classes that have zero textbook costs. Faculty are also given dedicated time to spend investigating or creating OER for their courses, and are encouraged to explore the pedagogical benefits of open education.  

"Faculty need to know more than that using OER won't be penalized, they need to feel that use of OER will be actively supported and recognized," he said.

Books and Publishing
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Surge in alternative credentials holds steady, for now

When COVID-19 closed down school and college campuses in March, many children and young people were forced to start studying remotely. At the same time, interest in online training and certificate programs soared.

Several leading massive open online course providers, coding bootcamps and business schools offering non-degree credentials reported manyfold increases in web traffic, inquiries and enrollments. Though big surges took place in April and May, they quickly started to flatten for most providers. They did not, however, return to their original baseline.

Online learning leaders report that interest in both free and paid credentials is holding steady at a rate that is significantly higher than what many were seeing last year -- suggesting the pandemic and subsequent economic downturn may have a lasting counter-cyclical impact on online enrollment.

These new online learners are a mixture of recent college graduates looking to boost their résumés, current or prospective college students trying to get ahead, furloughed or laid-off workers looking to pivot to new careers, and people with stable jobs who are now working from home. Many are taking courses related to business, technology, and public health. 

"I think people are much more familiar with online learning now than they were before," said Simeen Mohsen, managing director of Harvard Business School Online. "Words like 'synchronous' and 'asynchronous' didn't use to be part of everybody's vernacular," she said. "Now I hear those terms tossed about on local news."

In mid-March, traffic on the HBS Online website started to rise, peaking in April with five times more visits than the January-to-March average. Traffic dropped slightly in May, June and July, but remains much higher than it was last year, Mohsen said.

This increase in web traffic has also translated to increased enrollments in HBS Online's 13 courses. HBS Online saw a 650 percent increase in enrollment between April and June compared to the same period in 2019, Mohsen said. She declined to share exact course enrollment numbers but said they now total thousands of students.

HBS Online's CORe course, which can be counted towards a full MBA at Harvard, saw the biggest gain in interest and enrollment -- likely because it has the broadest appeal of all the courses, said Mohsen. It is also the most expensive course offered by HBS Online.

"Many people are now at home with found time on their hands," said Mohsen. "Whether you're a college student whose summer job ended up being canceled or a working professional who no longer has to commute, people are saying, "Now is a good time for me to invest in my career and build new skills.'"

People appear to be more receptive to the idea of online education than they were before than pandemic, said W. Brooke Elliott, associate dean of online programs at the University of Illinois at Urbana-Champaign, which has also seen increased interest and enrollment in both degree-level and non-credit-bearing online programs offered through the Gies College of Business.

Working from home has forced people to become familiar with new technology and given them greater freedom to control how they spend their day, Elliott said. "Many people have moved to a remote work environment and that's not likely to change over the next 12 months, maybe the next 24 months. There will be likely a permanent shift in employees who will spend at least some time working from home," she said.

"There are people who may have never considered learning in a remote or online environment before all of a sudden realizing, 'Hey, it can be done,'" Elliott said. "People are looking for flexibility in education, the same way they're experiencing flexibility in their work environment."

Online degrees offered by the Gies College of Business, including an iMBA priced under $22,000 offered in partnership with online learning platform Coursera, have seen record applications this year, Elliott said. Applications have particularly increased among women. More than 2,500 applications have so far been submitted to the iMBA program starting this fall -- a 35 percent increase from August 2019.

"All of our degree programs were in the peak of fall recruitment when the pandemic started, and after seeing a two-week period of application submits slowing down, we ended up seeing record application numbers for our online portfolio of degree programs," Elliott said.

Non-credit-bearing options are also seeing a lot of interest. Demand is high for self-paced, skills-based, interactive programs that are shorter and more affordable than full degrees, Elliott said. Illinois began offering a 12-week certificate program called MBA Essentials in October 2019. The first run had 62 students. The most recent start data, in April 2020, had 119 learners enrolled, "showing strong growth in the midst of a pandemic," said Elliott.

Coding bootcamps, like online business schools, have seen increased interest in their online programs. At Flatiron School, applications are way up -- in part due to a viral TikTok video of a graduate showing off their first paycheck, said Adam Enbar, co-founder and CEO of the company. Flatiron was recently acquired by Carrick Capital from co-working company WeWork, and is in the process of hiring new instructors so that the school can take on more students.

The quality of Flatiron candidates has increased since March, with more people with coding experience applying, said Enbar. He has also noticed an increase in the number of young people expressing interest -- possibly because they don’t want to go to college this fall while COVID-19 is still prevalent. Flatiron offers both in-person and online instruction, but has pivoted to fully online in recent months. 

General Assembly, another coding bootcamp, saw website traffic increase from 175,111 visitor sessions in April 2019 to 313,559 visitor sessions in April 2020 -- an increase of 179 percent, said Liz Simon, co-chief operating officer. From an enrollment standpoint, General Assembly saw 30 percent year-on-year growth in its immersive courses in the second quarter of 2020.

"Our Software Engineering immersive remains the most popular full-time course, even as we've shifted to fully online courses," said Simon. "Across the board, we've observed a steady flow of students interested in immersive programs because many folks are going through transitions, have more time to commit to a full-time program or are recently unemployed."

Many more of General Assembly's prospective students are unemployed than were in previous years, said Simon. There has also been an uptick in interest for the company's income-share agreement program called Catalyst, an alternative tuition-financing program which has students start paying back tuition once they land a job, and not before.

Massive open online course (MOOC) providers also reported record web traffic and enrollment this spring, particularly for free or low-cost credentials. 

“In general, MOOC providers have really expanded their footprint, so I would expect all the providers to be a lot bigger post-pandemic,” said Dhawal Shah, founder and CEO of Class Central, a search engine for free online courses and MOOCs.

MOOC providers successfully built on a period of media hype in 2012-13, and are doing the same again but with much bigger results than before, said Shah. So far this year, top providers have been able to attract “25 to 30 percent of their lifetime registered users within a span of a few months,” he said. 

Between February and the end of March, course enrollments on online learning platform Udemy increased by more than 425 percent, said Shelley Osborne, vice president of learning. Unlike some other platforms, that enrollment growth has continued since April. 

"We have seen sustained triple-digit growth week-over-week," Osborne said.

Courses on Udemy range from $10 to $200, but there are also free courses available through the Udemy free resource center, said Osborne. At the end of March, there were "massive enrollment spikes on the Udemy marketplace in courses for both personal and professional development," she said. Enrollment in courses such as the ukulele and watercolor painting grew by more than 200 percent. Corporate learners on Udemy for Business focused on courses related to productivity. A course on telecommuting saw enrollment increase by 21,598 percent.

Both Osborne and Jeff Maggioncalda, CEO of Coursera, said they saw a huge surge in international learners on their platforms. Since mid-March, more than 18 million registered users have joined Coursera, a more than 400 percent increase from the same time period last year. Enrollments in India increased by 1,044 percent, followed by Italy at 519 percent and Brazil at 345 percent. 

More than 1.5 million of these new users are students at universities and colleges that signed up to Coursera for Campus, said Maggioncalda. In March, Coursera made it free for institutions to join this service, enabling students to take non-credit-bearing courses from other institutions -- and get certificates -- at no cost. The offer has been hugely popular, with students taking six courses on average. 

While Coursera has seen an uptick in the number of learners choosing paid credentials, the growth is nowhere near as high as for free credentials, said Maggioncalda. Adam Medros, president and co-CEO of edX reported a similar pattern.

An edX survey published in June of 904 adults working full-time from home found that 56 percent of respondents want to pursue additional education. But 29 percent felt they could not do so due to cost. Of respondents who said they were interested in taking a course online, 45 percent said they are looking for a course to help advance their career, compared with 30 percent who want to explore a new interest.

In past recessions, people have been driven to get additional education and better position themselves in the job market, said Medros. This time around, there are many more affordable and more granular credentials available -- reducing perceived barriers such as time, location and cost, he said. 

"There's only so much Netflix you can watch," said Medros. "People have more time, they are curious, and they are investing in themselves in terms of learning something new."  In April, edX saw 5 million new users join the platform -- more than it added in the entirety of 2019.

"We are in a huge acceleration of online learning," he said. 

Online and Blended Learning
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