How For-Profit Education Is Now Embedded in Traditional Colleges

It has come to this. A once-soaring for-profit college company, Career Education Corporation, recently announced that it expected to have to pay a buyer to take some of its struggling colleges off its hands. Then it decided to just close them altogether.

These days the fortunes of for-profit colleges are fading fast: Many face diving enrollments and shrinking market values. Corinthian Colleges Inc. went bankrupt this year, and several of the companies that remain are facing heightened legal, political, and regulatory scrutiny. Even the sector’s trade and lobbying group, the Association of Private Sector Colleges and Universities, has been hit by member defections that have forced it to cut its budget and lay off staff members.

Yet while for-profit colleges are on the wane, there is another type of for-profit higher-education company whose profile and influence continues to expand. These new for-profits aren’t seeking to run college programs themselves or win the traditional seal of accreditation. These companies do things like help traditional colleges start online programs, or offer colleges analysis on student behavior to help improve retention.

Call it the “Embedded For-Profit” sector in education, and it has become the darling of the venture-capital crowd and attracted billions in financial backing.

The emergence of this new sector also brings wide-ranging and yet-unexamined ramifications for colleges and policy makers, not to mention the taxpayers who indirectly subsidize these ventures.

It’s ‘Everywhere’

When for-profit higher education meant the University of Phoenix or an ITT Institute, many in traditional higher education largely dismissed it. It was “the other.”

But these newer educational for-profits — selling things like interactive courseware and academic-advising engines — come much closer to teaching and other educational activities that colleges have long done for themselves. (A whole other universe of for-profits is springing up along the edges of academe, including coding boot camps.)

“Now, ‘for-profit’ is everywhere,” says Jorge Klor de Alva, a former president of the University of Phoenix and currently president of the education-focused Nexus Research and Policy Center.

Most critics of for-profit actors in higher education have yet to take serious notice of the growing role the companies are playing on traditional campuses, adds Mr. Klor de Alva. “They’re flying under the regulatory radar and flying under the ideological radar,” he says.

But considering the profound impact the Embedded For-Profits will have, it may only be a matter of time before critics — and others — do start paying attention.

The difference between a University of Phoenix and, say, the University of Maryland University College, an adult-focused nonprofit, is primarily a difference in economic models, says Michael Goldstein, a lawyer who has represented colleges, companies, and accreditors for decades. The roles many of these new for-profit higher-education companies play at colleges create “a different educational model” entirely, he argues.

For-profit colleges operate apart from traditional colleges, under a distinct set of regulations. Many Embedded For-Profits, meanwhile, are more entwined in the fabric of what traditional colleges routinely do. That allows them to avoid much of the direct government and public oversight that a University of Phoenix faces, while still tapping into the $500-billion-plus that families, states, the federal government, and philanthropic organizations pour into higher education each year.

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They have a more “tangential relationship” with federal student-aid programs, says Kevin Kinser, an associate professor at the University at Albany who studies proprietary education. But ultimately, he says, they still “can extract the revenue,” indirectly.

The accountability regime for the new for-profit higher-education industry is also more attenuated.

They “aren’t regulated directly, but they’re selling into a regulated market,” notes Mr. Goldstein. It’s the institution that hires them that is “on the hook” to ensure that students are well served.

While it’s true that colleges have a long tradition of outsourcing campus services — like the bookstore or dining halls — this is different. Embedded For-Profit education companies hit more closely at the educational core.

Consider Pearson. The company once known in higher education primarily as a textbook publisher now manages and markets online-education programs for 43 colleges. It also sells so-called adaptive courseware used in mathematics, science, and reading courses, which personalizes material based on students’ demonstrated understanding. And it even produces what are essentially complete course-in-a-box kits in 130 subjects, through its CourseConnect series.

More than 800 institutions have used CourseConnect, which can be customized by faculty members or simply used as off-the-shelf curricula. In theory, colleges could hire an adjunct instructor at minimal pay, hand them the CourseConnect materials to teach, and simply collect the tuition, a scenario that some skeptics describe as a college renting out its reputation — and its accreditation — to a private company. A Pearson executive said the use of the course without any adaptation by an instructor “seldom happens, if ever.”

Yet Pearson illustrates how the changing educational landscape is dropping for-profit companies into new roles. As described by another executive, Matthew Leavy, the managing director of global services and direct delivery for higher education, Pearson sees itself “as a tool box at the disposal of faculty and the university.” Because of its size, the company can marshal a varied set of digital teaching resources that are “beyond the reach of an individual institution,” says Mr. Leavy, in the same way that publishers have long used their scale to bring a range of intellectual resources together by producing textbooks.

Another Embedded For-Profit is Civitas Learning, which recently received a $60-million infusion of venture funding and works with more than four dozen institutions. It sells a product that uses data generated by students as they undertake their classwork to create “dashboards” for professors and advisers to better monitor how students are faring in the course. At least a half-dozen other companies also sell similar kinds of “student-success services.”

A New Landscape

At the university-leadership level, the shifting landscape may require a new approach to oversight.

“If you’re contracting out for something approaching a core activity, you’d better do it with somebody you know is reliable and responsible, and you’d better do it with great oversight,” says Mr. Goldstein. At the same time, he says only part jokingly, the involvement of outside parties so close to the educational process could also make some things simpler for college leaders. “It’s a whole lot easier to tell a company ‘You’re not performing properly’ than to tell a tenured faculty member that.”

In reality, for many professors and academic advisers, these developments portend a fundamental change. “The learning experience used to be totally faculty controlled — at least that’s our nostalgic view of the past,” says Elliot King, a professor of communications at Loyola University Maryland. With the explosion of new companies selling learning analytics systems and adaptive courseware, he says, how long before “the whole classroom is being surrounded by vendors?”

While many of the new products may in fact be useful, Mr. King says many companies come to higher education with a different sensibility than do professors: “They’re not real stakeholders. They’ve identified a market opportunity.”

As the Embedded For-Profit industry develops, he predicts it will further curtail professors’ autonomy, already somewhat weakened by colleges’ use of outside companies to host learning-management systems — and more recently to help manage and produce online-education programs.

It “means the decisions of what you’re going to surround your learning with is going to be made by someone other than the professor,” he says. “It’s one more part of the shift of authority from faculty to administration.”

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.

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