Election Casts Spotlight on an Unusual For-Profit With Global Ambitions

Lebohang Sekhotla finally has a way out.

After growing up with her mother and two sisters in a one-room tin shack in one of South Africa’s most violence-plagued townships, Ms. Sekhotla now has a college degree, a job, and a rapidly brightening future.

It’s all thanks to the gleaming new university that set up just down the street: Monash South Africa, one of more than 70 campuses owned worldwide by the American company Laureate Education.

“I don’t know how to put it in words,” Ms. Sekhotla said, trying to describe the difference the 15-year-old Monash campus has made in her life. “It gives you a different feel to what you’re used to.”

It’s an exceptional story, but by no means the only one for Laureate, a Baltimore-based chain of for-profit colleges with some one million students in 25 countries. At a time when other for-profit colleges are collapsing under the weight of intense government scrutiny in the United States, Laureate appears to be reaping the benefits of a substantially different model.

The company does not rely chiefly on profits from U.S.-based students enticed by federally subsidized loans. Instead, Laureate mostly works overseas, hoping to answer a yawning divide between the global middle-class demand for higher education and the historically tiny supply of such offerings. It typically works in high-need countries, bringing modern management and top-rate accreditation standards to existing institutions. While upgrading facilities and approaches, it seeks to respect original missions and tuition levels, said Lloyd Armstrong Jr., a member of Laureate’s academic advisory board and longtime friend of the company’s founder and chief executive, Douglas L. Becker.

“They’re not trying to make Harvard, and they’re not trying to make MIT, but they are trying to make quality at a price point,” said Mr. Armstrong, a university professor emeritus and provost emeritus at the University of Southern California.

Other than in Chile, where the National Accreditation Commission revoked its approval of the Santiago-based Universidad de Las Americas in 2014, citing a decline in academic standards during a period of rapid growth, Laureate has largely met the demands of its accreditors. And the Chilean institution won a three-year accreditation renewal this past May. In many other instances overseas, Laureate uses some of the top U.S.-based accrediting agencies.

As for Laureate’s institutions in the United States, the biggest is its online-only Walden University, where graduates and former students boast average annual salaries of $59,700, well above the national average for those who attended four-year colleges, according to U.S. Department of Education figures. Washington Monthly just issued rankings that place Walden among the top 20 four-year colleges nationwide for adult learners.

Yet the company has recently drawn scrutiny for its close ties to the Clinton family, especially its history of paying former President Bill Clinton more than $17 million to speak on behalf of its colleges worldwide.

The payments have helped animate critics, including some of Laureate’s own faculty members, who have raised concerns about the company’s commitment to students over profits, and to academic freedom over its desire to expand in locations with autocratic leaders.

The performances of its overseas locations are especially difficult to judge because of factors that include the wide range of regulatory and social structures where it operates. Many of its host countries bar for-profit models, leaving Laureate to extract earnings by subcontracting many day-to-day campus operations, including curriculum and textbooks.

And while Laureate is now in the process of seeking public investment to help it cope with some $5 billion in overall debt, it is currently a private company that makes limited disclosures of its activities.

Laureate’s operational model is largely a “black box,” said Kevin Kinser, a professor of education at Pennsylvania State University who studies for-profit institutions. They work by “looking at places where they can do the most good, and at the same time earn revenue by doing so,” he said.

“To the extent we know anything” about Laureate’s net value to students in balancing those objectives, Mr. Kinser said, “it is based on assertions made by the company itself, which I take with a lot of salt.”

Inside the ‘Black Box’

One of the most extensive attempts to learn more was a 2012 investigation of the for-profit education industry by the U.S. Senate’s education committee, which found Walden among the best of the genre, while admitting that was a pretty low bar.

The committee’s report on the investigation said that, unlike many other for-profit colleges, Walden was competitively priced when compared with its online public and nonprofit counterparts. That was deemed to be especially true for the university’s graduate programs — the bulk of Walden’s activity — where the average cost of a master’s degree was less than half of the study’s comparison benchmark.

More recent data also show some positive elements. One study, published in June by the American Institutes for Research, found “little meaningful difference” between the average annual loan amounts of graduate-student borrowers at Walden and those in the nonprofit sector.

Yet current Education Department statistics, after crediting Walden with higher-than-average salaries for its graduates, show Walden students facing an average annual cost of $27,851, above the national average of $16,595. Only 33 percent of Walden students return after their first year, well below the nationwide average of 68 percent, and only 44 percent of its students repay any of the principal balance on their federal loans within three years of leaving school, below the average of 67 percent, the federal figures show.

Joseph Haefner, a reliability engineer at the medical-technology company Medtronic, recently gave up after six years of trying to earn a doctorate at Walden. Mr. Haefner holds a master’s degree in industrial engineering and statistics from the University of Wisconsin at Madison, where he also has taught statistics. He said he had come to Walden hoping to find an institution friendly to working professionals that gave credit for existing expertise. Instead, Mr. Haefner said, he found an environment of low-quality instructors that wasted student tuition by dragging out the doctoral process.

Several other Walden students have filed suit making similar claims. Mr. Haefner said he had declined to join them, out of concern for the potential costs, and would not return to Walden even if it offered to try again. “I don’t trust them,” he said.

Walden, though, does have its grateful admirers. Those pointed out by Laureate include Chris V. Rey, a U.S. Army veteran who used Walden to finish an undergraduate degree in business administration that he began at East Carolina University. For much of his time with Walden, from 2004 to 2007, he was stationed at various military bases, including in Iraq and Afghanistan.

“It wasn’t easy, I can tell you,” said Mr. Rey, who later graduated from William & Mary Law School and is now mayor of his hometown, Spring Lake, N.C. “The professors at the time were very understanding and were very accommodating,” given the circumstances, he said.

Concerns Overseas

Meaningful evaluations of Laureate’s performance are even tougher overseas. One of the strongest votes of confidence in Laureate’s mission has come from the World Bank’s International Finance Corporation, which invested $150 million in the company in 2013, impressed by its commitment to working in developing nations.

The International Finance Corporation is especially eager for Laureate to work in Latin America, where regulations are friendlier toward for-profit institutions, said Mohammed Ali Khan, an IFC education specialist.

The World Bank and Laureate together sponsored a performance analysis for Laureate’s two Mexican institutions, the Universidad del Valle de México and the Universidad Tecnológica de México. The 2015 study, by the Mexican consulting firm C230 Consultores, is so far the only published report done by the International Finance Corporation on its investment. It showed that graduates of the two Laureate institutions in Mexico found their first job more quickly than did graduates of other universities, and that most employers surveyed regard the profiles of the Laureate graduates as attractive.

But the study also showed that the Mexican alumni had remained unemployed for longer periods of time since their graduation, regard their undergraduate studies as less useful than do graduates of other universities, and are less satisfied with their current jobs than are their private-university peers.

Laureate’s approach is facing one of its toughest tests in Turkey, where in 2009 it took control of Bilgi University, one of the nation’s largest private universities, which had been left financially vulnerable by an aggressive campus expansion a decade ago. Some of Bilgi’s current and past instructors see an owner now prioritizing business interests at the expense of academic quality.

The faculty critics insist, over Laureate’s denials, that Bilgi has cut scholarships and weakened teacher-student ratios under the new ownership. Other irritants for faculty members include the honorary degree that Laureate’s Universidad Europea de Madrid bestowed on Turkey’s prime minister, Recep Tayyip Erdogan, in 2010. Mr. Erdogan roiled Turkish academics when he fired more than 2,300 university staff members nationwide as a response to an attempted coup this summer.

Bilgi also drew criticism for its dismissal in June of a communications professor, Zeynep Sayin Balikcioglu, after she criticized Mr. Erdogan during a classroom lecture. Turkish law forbids insulting the Turkish nation or its government officials and institutions, and the head of daily operations at Bilgi, Cagri Bagcioglu, told The Chronicle that Laureate was also not in a position to question laws set by the Turkish Parliament.

Educational quality at Bilgi “has gotten dramatically worse” under Laureate’s control, said one of the critics, Christopher J.K. Stephenson, a computer-sciences lecturer who was among the academics arrested this year in Turkey over speech violations.

A nonconfrontational approach to someone like Mr. Erdogan makes sense for Laureate as it works to bring higher education to the world’s underserved, said Mr. Armstrong, the advisory-board member. Similarly, he said, it made sense for Laureate to pay Bill Clinton millions of dollars: The globally popular former U.S. president has no peer, he said, when it comes to attracting both scientific luminaries and heads of state to visit Laureate campuses.

“The reality is when you look around the world in different places, a lot of the governments you may not wish you had to deal with,” he said. “But nonetheless if you’re there, you’ve got to deal with them.”

A Full Ride

That’s also reality for students such as Ms. Sekhotla here in Johannesburg, whose daily life is a continuing struggle to overcome her country’s apartheid past. Much of that life was spent in the Itsoseng township and a one-room shack with no electricity and no running water. Her father suffered from a mental disorder and abandoned the family during her childhood, leaving her mother to raise Ms. Sekhotla and two sisters.

Her tuition and campus housing were fully subsidized by Monash, making her one among about 100 students getting institutional aid at the 3,700-student campus, which was acquired by Laureate in 2013. Ms. Sekhotla started at Monash in 2012 in a program to help her prepare for college, then began her undergraduate work in 2013, finishing last November. She’s had work-study jobs throughout, currently helping place graduating students in their own jobs. At age 25, she looks forward to helping her mom buy her own house.

Ms. Sekhotla also runs a program to help motivate young people to stay in school rather than just taking a low-paying job. “It’s very easy for kids to give up on education and say, ‘All I want to do is work’ or ‘University is not a reality for me,’” she said. For her, the Laureate experience has been “overwhelming in a very good way.”

Even Mr. Stephenson, despite his deep disappointment with the changes he’s seen at Bilgi since Laureate’s takeover, admits that his grievances with the current state of higher education go well beyond one company.

Laureate behaves as a typical business, Mr. Stephenson said. “You can’t paint them as some kind of extraordinary ogres,” he said, “that are worse than what’s going on in the rest of the higher educational system in the world.”

Paul Basken covers university research and its intersection with government policy. He can be found on Twitter @pbasken, or reached by email at paul.basken@chronicle.com.

Correction (9/23/2016, 9:15 a.m.): The original version of this article incorrectly described Mr. Stephenson’s arrest as taking place after the attempted coup. In fact it was several months before; the text has been corrected.