For-Profit Colleges Being Hurt by MOOCs, Federal Oversight, and Competition by the Non-Profit Sector!

Dear Commons Community,

For-profit colleges and universities that were emerging as a major disruptive force in higher education are now being disrupted themselves. Due to a combination of federal government oversight, competition from the non-profit sector, and more recently, the emergence of MOOCs, enrollments have fallen dramatically at the for-profits since 2009.  To me, the major blow to the for-profit sector were federal investigations of financial aid improprieties by high profile operators such as the University of Phoenix and Kaplan.  The MOOC development is a more recent blow but the damage to the for-profit reputations had already been done.  The Chronicle of Higher Education reporting at the annual meeting of the Association of Private Sector Colleges and Universities (APSCU) commented:

“The sector that was once a major disruptive force in higher education is being disrupted itself.…judging by the subdued (call it glum) mood among many attendees at the Association of Private Sector Colleges and Universities’ annual convention here this month, its executives know it.

David Pauldine, chairman of APSCU’s board and executive vice president of DeVry Inc., said the industry faced stark choices. College companies that don’t take steps to make their programs more affordable will meet “a Darwinian end,” he said. “Those that are navigating the disruption can do quite well.” DeVry is among several that have begun offering scholarships and discounts.”

To turn their situation around, The Chronicle article quoted several individuals associated with the for-profit sector:

“The for-profit-education industry “has to go back to some things that were successful,” said Jack Larson [former executive with Career Education Corporation and American InterContinental University]. “People are a little bit in denial” about the competitive challenges they face.

In fact, Mr. Larson’s move may be just where for-profits ought to be heading. With all the competition afoot, “the sector really has to back to its roots and focus on jobs,” said Jeffrey R. Silber, an analyst with BMO Capital Markets (and one of the few stock analysts who attended this year’s convention).

The country still needs people working as sonogram technicians, auto mechanics, and in other good-paying jobs. You’re not going to find training for those jobs at Penn State, Mr. Silber said.

“I don’t think the sector is disappearing,” he added, but “it’s never going to be what it was.”


Comments are closed.