After years of explosive growth, for-profit higher education is shrinking fast, as evidenced by the news that the University of Phoenix, the country's largest university, is closing 115 campuses and satellite locations.
When the University of Phoenix, the country’s largest university, announced this week it was closing 115 campuses and satellite locations, it signaled more than a sudden availability of commercial real estate near highway interchanges, where for-profit colleges like to set up shop as a student convenience.
After years of explosive growth that really caught fire when the economy collapsed four years ago, for-profit higher education is shrinking fast.
That’s not a good thing for providers like Phoenix, at least in the short run. Whether it’s good for them, for students, and for the economy in the long run — well, that depends whom you ask.
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New data throw the trend into relief. First, government figures released last week showed that total enrollment in higher education shrunk nationally in the fall of 2011 for the first time in at least 15 years.
The overall decline was just 0.2 percent, but it was driven by a 2.9 percent drop in the for-profit sector, which offset an increase at four-year nonprofit colleges (for-profit colleges enroll about 11 percent of students overall).
Then came Tuesday’s announcement by Apollo Group, the University of Phoenix’s parent company, that it would shutter about half its physical locations, though current students will be able to continue in their programs.
University of Phoenix operates in Washington and said the company will retain its primary Western Washington campus in Tukwila, but will phase out “learning centers” in Bellevue, Lynnwood and Tacoma, as well as a student-resource center in Kennewick.
The company couched the move in terms of growing interest from students taking online courses, and emphasized just 4 percent of students were affected (most of its students are online).
But there’s no hiding its decline in enrollment — it currently enrolls about 328,000 students in degree programs, down from 381,000 a year ago and a peak of more than 475,000 in 2010.
On a yearly basis, enrollment is down 15 percent compared with a year ago at The Washington Post Co.’s Kaplan; down 21 percent at Career Education Corp. (which operates Le Cordon Bleu cooking schools among others); and down 16 percent at ITT Educational Services, according to data provided by BMO Capital Markets.
BMO managing director Jeff Silber says the Obama administration’s regulatory pressure has also been a major factor, particularly its aggressive enforcement of rules preventing colleges of any kind from paying recruiters based on the number of students they enroll — once a common practice by for-profits.
“Historically this had been a sector where it was a pretty hard sell,” Silber said.
For-profit colleges, though still annoyed by the regulations, say they are refocusing their efforts on enrolling students who can finish a degree and helping them find work when they graduate.
A report released in the summer by Sen. Tom Harkin, D-Iowa, who has led the criticism of for-profits from Capitol Hill, concluded for-profit colleges have been taking in upward of $32 billion annually from taxpayers even though most students don’t graduate; those who departed lasted just four months on average.
In 2010, the report found, leading companies employed nearly 10 times as many recruiters as career-services advisers and spent more on marketing than on instruction.
The latest government figures show for-profits still have twice the federal student-loan default rate of public colleges (23 percent of borrowers at for-profits have defaulted within three years).
For now, so-called “gainful employment” regulations that could cut off aid to colleges with poor job-replacement rates are on hold, struck down by a federal judge in June.
Silber says the broader initiative to crack down on schools that aggressively recruit students, cash their government financial-aid checks, then leave students and taxpayers on the hook when they fail to graduate, is changing the business.
“They’re going to measure outputs, not inputs any more. Many schools have restructured their program offerings, made them shorter, made them less expensive,” Silber said. “This is very painful right now, but in the long run I think it’s very helpful for this industry.”
Whether you think it’s good news that fewer students are attending for-profits depends what you think is happening to those who don’t enroll.
The sector often notes it serves disproportionately low-income, first-generation students who don’t find what they need elsewhere in higher education.
So are those students now thinking twice about whether they really need to take out large student loans to attend nonprofits, and asking whether they can get what they need at cheaper nonprofit institutions? Or are they just dropping out of higher education entirely?
Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, which represents the for-profit sector, says it’s the latter.
“You look at California, there’s almost 400,000 on the waiting list of the community-college system,” Gunderson said. “So they’re not going there. The community colleges are loaded to the brim.”
Gunderson says that forcing for-profits to end their open-enrollment practices only jeopardizes the president’s goal for the United States to regain its status as the world leader in higher-education attainment. Once the economy recovers and students are more confident an investment in education will pay off with a job, he predicts enrollment will grow again.
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