Administration

U. of Phoenix Looks to Shrink Itself With New Admissions Requirements and Deep Cuts

June 30, 2015

The University of Phoenix, losing profitability because of falling enrollments and high dropout rates, announced on Monday that it would eliminate most of its associate-degree programs, close even more of its physical campuses, and, for the first time, establish academic admissions requirements.

Those moves are likely to leave the university, which in 2010 had an enrollment of 460,000, with about 150,000 students by 2016. Phoenix is not all that far from that point now. For the period ending May 31, its enrollment was 206,900, compared with 241,900 a year earlier. The planned changes and enrollment figures were announced on Monday by the university’s parent company, the Apollo Education Group.

Apollo also disclosed that in June it bought a controlling interest in the Iron Yard, a so-called coding boot camp that offers nondegree training. Last year Kaplan Inc., a large for-profit education company that’s owned by Graham Holdings, bought a similar company, called Dev Bootcamp. Such boot camps are ineligible to receive federal student aid, but as they gain in popularity, many observers speculate that they soon might be in some way.

Gregory W. Cappelli, Apollo’s chief executive, said on Monday that the moves at Phoenix were designed to solve retention problems that have been "plaguing" the university since the mid-2000s, when it created an associate-level college called Axia, lowered the minimum age requirement for admission, and eliminated the requirement that students be employed.

Those moves, coupled with the expansion of online education and relentless marketing, helped to fuel years of booming enrollments at the university, but its graduation rate declined and increasing numbers of students defaulted on their student loans. Mr. Cappelli said changes the university had made over the past few years, including a mandatory orientation course, had helped to reverse some of those problems. But they weren’t enough to raise academic quality, and they still left the university with a cost structure that ate into profits.

We want to improve the university, said Mr. Cappelli, "its brand, its reputation, its ability to recruit at a lower cost." He said he also hoped the moves would eventually relieve some of the political, legal, and regulatory pressure that Phoenix has faced over the past five years, as public scrutiny of the entire for-profit-college industry has intensified.

‘Not Just a Test’

Mr. Cappelli, who discussed the changes during a conference call with stock analysts, offered little information on the nature of the admissions requirements. The company said they would involve a "diagnostic" of some sort, but Mr. Cappelli said, "It’s absolutely not just a test."

He said he expected most of the 50,000-student reduction in the university’s size would come from its elimination of associate-degree programs, a notable change considering that, at one point, Axia students accounted for 50 to 60 percent of the university’s overall enrollment.

Only a few career-focused programs at the associate-degree level will remain, he said, but both Phoenix and Apollo plan to increase their number of certificate programs, "some of which can stack into degrees." Company officials didn’t say which campuses they would close, but said they hoped to retain a physical presence in major metropolitan areas. The university will also offer fewer start times; currently, new students can start nearly every week of the year.

And after spending years and untold millions on developing its own digital course platform that it said would revolutionize online learning, Mr. Cappelli said the university would drop its proprietary learning systems in favor of commercially available products. Many Apollo watchers had long expected that it would try to license its system to other colleges, but that never came to pass.

Goldie Blumenstyk writes about the intersection of business and higher education. Check out www.goldieblumenstyk.com for information on her new book about the higher-education crisis; follow her on Twitter @GoldieStandard; or email her at goldie@chronicle.com.