For Meets Non – the Merging of the Profit Sectors

For-profit schools have traditionally been at the cutting edge of online and distance learning. They are often a popular option for adult students who needed convenience and flexibility in order to balance all the responsibilities in their lives. Yet lower birth rates and the rebounding economy have caused declining enrollment throughout all sectors of post-secondary education. For-profit enrollment has been hit particularly hard. Increased regulations targeted specifically at for-profit schools combined with negative publicity have come together as a perfect storm that has led to a near crisis among for-profit schools. Each school has dealt with the challenge in different ways. Some have merged into one company. Others have converted to nonprofit status. Many have changed their focus to offering classes outside the United States. Some have even gone out of business. Yet a few high-profile schools have decided to change the ways they do business. These schools have found ways to embrace the hard times and partnered with non-profit schools for mutual benefit.

For-profit schools have long known that digital programs are cost-effective, technologically sophisticated, and successful modes of delivery for busy students. Nonprofit schools are now looking to reproduce these kinds of programs. This puts for-profit schools in a unique position as experts in the field. This comes at a time when for-profit schools are looking to make positive changes as the United States government reverses years of regulations. Because for-profits are mindful that regulations may eventually reemerge and are seeking to reinvent themselves through new business models. These parallel needs have led to some interesting collaborations. As nonprofit schools explore how to best expand their online offerings, they are looking to the for-profit institutions who have been pioneers in online and distance learning.

While some for-profit companies, such as Strayer Education Inc. and Capella Education Company, have merged to create one larger company, all eyes on the newly formed partnership between Purdue University and Kaplan University. Purdue University acquired Kaplan University in the spring of 2017. This includes Kaplan’s campuses, learning centers, students, and employees. By doing so, Kaplan was able to avoid the fate of schools such as the University of Phoenix, whose sale led to the eight per cent of its employees losing their jobs, and Zenith Education Group, who closed all but three of its Alterus Career College campuses. Meanwhile, Purdue increased its fortunes by acquiring Kaplan’s 32,000 students.

Purdue was one of the earliest to recognize that higher education must change the way it does business in order to meet the needs of our consumer-driven society. They recognize that the demand for more student-centered learning opportunities is increasing. They also understand that merely offering online programs no longer guarantee a school’s growth. Instead, schools with the most convenient mode of delivery combined with name recognition and the best price garner the most students. Other schools are looking to for-profit schools to provide much needed services. A growing number of nonprofit schools are entering into shared service agreements to capitalize on for-profit schools’ expertise in data management, technology needs, course management, and financial aid processing. A partnership with a for-profit school that already has these methods in place means that schools are not racing to reinvent entire programs. Although many for-profit schools have agreed to give up the ownership rights in order to provide these services, the exchange results in a guaranteed profit.

There may still be winners and losers, however. Large schools are perhaps in the best leveraging position as they have the means to adapt. Smaller schools, on the other hand, need to look for ways to make meaningful changes as quickly as possible. A 2015 report from Moody’s indicates that the rate of closures among small schools is predicted to triple as schools fail to adapt to the changing mode of education. In order to survive, small schools must look to expand their digital strategy from planning to operating to delivery. Regardless of size, schools that prove to be digitally sophisticated will expand their presence and reach, gain the most students, and enjoy global brand growth.

Early reports of the Purdue-Kaplan partnership are encouraging. Both the Indiana Commission for Higher Education and the United States Department of Education approved the merger. In doing so, Purdue gained Kaplan’s established digital presence and infrastructure. Kaplan, meanwhile, gained the financial stability that investors expect. In March 2018, the Higher Learning Commission gave the merger its approval and will review the arrangement again in September 2018.

This doesn’t mean that these levels of goodwill will last forever. The Department of Education is currently comprised of individuals who have worked in for-profit schools and understand the value that for-profit schools have to offer. They have been successful in rolling back many regulations, but this doesn’t mean that these regulations will not eventually be reinstated. In fact, the Government Accountability Office is closely scrutinizing the recent mergers of nonprofit and for-profit schools. This means that schools that are looking to enter into innovative and collaborative partnerships cannot take their time in doing so. The demand for high-quality digital educational programs will only increase. Schools that recognize the unique opportunity and leverage their strengths to embrace the changing face of post-secondary education will come out on top.