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From: Goldie Blumenstyk
Subject: The Edge: 4 Key Questions About the University of Arizona-Ashford University Deal
I’m Goldie Blumenstyk, a senior writer at The Chronicle covering innovation in and around academe. As the Covid-19 crisis continues, here’s what I’m thinking about this week.
Four questions about the University of Arizona-Ashford University deal.
The University of Arizona announced this week that it was taking over the for-profit, 35,000-student Ashford University in a 15-year partnership that resembles Purdue University’s 2017 arrangement with Kaplan University. That Purdue-Kaplan deal is still raising questions. This one is too. Here are four questions that are top of mind for me (for now, at least).
Will taking over Ashford be a plus for Arizona on academic and reputation fronts?
A lot of this question revolves on how Ashford is viewed. Like Kaplan, Ashford has been losing money and facing falling enrollments. And perhaps even more so than Kaplan was around the time it made its deal, Ashford has been faulted for its misleading recruiting practices and poor completion rates.
The first takes haven’t exactly been raves, with Phil Hill, an IT consultant, blogging that Arizona’s move looks like a distraction that’s “solving the wrong problems,” New America’s Kevin Carey tweeting that Arizona should have called it “an exciting deal to rent the University of Arizona's prestigious brand name,” and the director of Arizona’s own Center for the Study of Higher Education, Gary Rhoades, decrying the deal as “a cynical partnership of convenience that is all about … the $” in a tweet.
Those harsh comments aside, it’s also worth looking at the only available precedent: Purdue. As Richard Garrett of the consultancy Eduventures noted to me, the connection with Purdue hasn't led to an enrollment turnaround for what is now known as Purdue University Global. “Nonprofit status, and a major university brand, can only help, but are not sufficient.” said Garrett, who remains a fan of Purdue’s ambition in making that deal. “It is too early to judge Purdue Global, but it has yet to find much momentum or clearly reinvent the brand (rather than just the name).” Arizona, he said, “will face the same issue.”
At the same time. though, Garrett noted that Arizona has an ace in the hole that Purdue doesn’t: its network of more than 130 international micro-campuses and partner institutions. That might permit some sort of hybrid model, Garrett noted, that could help Arizona offer something distinctive and potentially low cost.
Will it pay off for Arizona financially?
It’s never easy to know, especially on deals like this where the finances are so convoluted. The university is focusing on the upsides, of course. It highlights that it will be getting Ashford’s assets (its curriculum and staff members, plus $16.5 million in capital) for the nominal sales price of $1, along with guaranteed payments from Ashford’s parent company Zovio (formerly Bridgepoint Education) of $225 million over 15 years. University officials may already be banking on that money. In an FAQ, they said they hope to use some of the initial upfront payment of $37.5 million “to help alleviate the financial burden that we are currently facing.”
But the new Global Campus is also obligated to pay Zovio for all the costs of the services it will providing to the online institution, including marketing, technology, advising, and student recruiting. And, on top of that, the institution, to be named University of Arizona Global Campus, must also fork over to Zovio up to 19.5 percent of tuition revenue. That might not leave much of the pie for the Global Campus, judging by what it has cost Zovio to provide those services to Ashford. (If you’re into quarterly financial statements, you can look yourself.)
University officials who declined to speak with me but answered questions via email said the deal ensures that it doesn't have to pay Zovio until the campus receives its guaranteed annual payments (the equivalent of $25 million for the first five years and $10 million after that). That, they said, provides adequate financial protections.
I asked Arizona officials what their financial modeling projected about profit margins. They said that even under models projecting enrollment declines, they expect the arrangement "will generate positive net operating revenue."
(Oh, and for comparison, Purdue is obligated to pay Kaplan just 12.5 percent of tuition plus direct costs, but the payments it gets from Kaplan are just $10 million a year, at least for the first five years.)
Did the U.S. Department of Education put a thumb on the scale to help pave the way for the deal?
In 2019, when Zovio first sought approval to spin off Ashford as a separate nonprofit, the department said that as a new independent college it would have to post a $100-million letter of credit — the equivalent of 25 percent of the federal student aid that goes to the institution annually. Such letters of credit are intended to protect taxpayers’ interest. On July 7, the department lifted that requirement. Arizona officials said they had no input on that decision.
Does this deal say anything about the future of for-profit higher education?
This one's a little easier to answer, at least judging by investor sentiment. After Zovio announced the deal that would turn it from being an operator of a for-profit college to being a company that sells services to an online college, it saw its stock climb to a value sixfold higher than its 52-week low. (OK, it was pretty low at that point in mid-March, but still.) Even under a Department of Education that has been undeniably friendly to the for-profit college sector, the growing competition from nonprofit online colleges is sending companies to consider different paths to profitability.
Quote of the week.
— David J. Skorton
Skorton, president and chief executive of the Association of American Medical Colleges, in a Washington Post op-ed on how America needs to change course on testing, medical-supply chains, and other fronts to end the devastation of the pandemic.
Covid-19 is taking a toll on HBCU students.
Six historically black colleges made headlines last week after the billionaire MacKenzie Scott announced that they were among the recipients of the $1.7 billion she has donated over the past year. That was a rare bit of good news for a sector that has seen its students suffer academically, physically, and emotionally since the pandemic hit (I relayed some of those issues in last week’s newsletter). Now, a new survey of more than 5,000 HBCU students brings those challenges into fuller relief. The conundrum its findings raise for college leaders is vexing.
The survey, conducted by UNCF (the United Negro College Fund), focused on how students fared when they were sent home to complete the spring semester. More than 54 percent of them experienced financial challenges because of Covid-19, while 37 percent reported a decline in their mental well-being. Even among the 34 percent of students who said their well-being had improved, some of their comments suggest otherwise. One example: “I have taken time to work on my mental-health issues and become a better person. But it has also been hard to cope with the constant death and sickness around me.” Many other comments are equally heartbreaking.
More than 80 percent of students surveyed said they would prefer to return to campus for at least some in-person instruction in the fall. That didn’t surprise Brian Bridges, UNCF’s chief research officer. For many, he said, “the campus is the most secure and stable environment that many of these students have.”
That’s the conundrum, because having students together on campuses probably isn’t going to be safe either.
Two HBCU presidents joined a conference call where Bridges presented the survey results. Both will be offering courses online and in person this fall. So I asked them how they were balancing risks.
“I don’t think I’ve slept in weeks,” said Paulette Dillard, president of Shaw University. Walter Kimbrough, president of Dillard University, said, “I wrestle with that every day.”
As with other colleges, the financial implications of not having students on campus are huge, but the two presidents said they’re weighing a lot more than that. “These are students who need to be on our campuses,” said Dillard. The decision of when and how to reopen, she said, “is one we do not make lightly.” Ditto for Kimbrough, who worries about the longer-term educational and mental-health consequences that could arise years later as a result of the traumas students are dealing with today.
The “validation from parents” about Dillard’s decision to reopen its campus has been encouraging, Kimbrough said, despite New Orleans being a Covid-19 hot spot. Still, he knows it’s going to be a fall of high expectations. Students, he said, need to show “a different level of maturity to come here at this time.”
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