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From: Goldie Blumenstyk
Subject: The Edge: Colleges Focus on Graduates' Employability
I’m Goldie Blumenstyk, a senior writer at The Chronicle covering innovation in and around higher ed. This week I follow up on new expectations for higher ed and on the finances of an unusual online-university outsourcing partnership. I also share new thinking on the costs of federal student loans and how education and immigration reform factor into a new push on industrial policy.
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I’m Goldie Blumenstyk, a senior writer at The Chronicle covering innovation in and around higher ed. This week I follow up on new expectations for higher ed and on the finances of an unusual online university-outsourcing partnership. I also share new thinking on the cost of federal student loans and how education and immigration reform factor into new national investments in the semiconductor industry.
Higher ed’s “higher bar” includes more attention to graduates’ employability.
Last month I asked for your thoughts on my thesis that an emerging movement toward more-equitable hiring practices, based on skills rather than degrees, would raise the bar on the value proposition for higher ed. Reactions ran the gamut.
Some of you were skeptical, questioning whether the “skills-based hiring” movement was really that extensive or would have much of an impact — and raising doubts about whether those digital “learner and employment” wallets I highlighted would really ever be a thing.
Others wondered if changes in hiring might catalyze a broader conversation about the very role of college. “This may be a moment we can reclaim a ‘higher’ purpose for higher education,” wrote Dick Hersh, a former president of both Trinity (Conn.) and Hobart and William Smith Colleges.
Mostly though, the responses centered largely on ways colleges themselves will have to continue to improve graduates’ employability, by ensuring that students’ experiences include opportunities for internships and projects that help them build core skills, and by taking more steps to embed credentials into the traditional educational process. “Skills acquisition and alternative credentialing are long-term trends in hiring,” William Barnett, a retired professor and dean who now runs the Higher Ed Success newsletter wrote in a tweet. “Colleges should figure out how to demonstrate both within current degree programs. That, and cost, will shape the future.”
Barnett’s summary seems on point to me. And with that in mind, two new projects strike me as particularly timely. Both are focused on students’ postcollege outcomes — and headed by folks with undeniable cred. One is the Unlocking Opportunity: The Post-Graduation Success and Equity Network, sponsored by the Community College Research Center at Columbia University’s Teachers College and the Aspen Institute’s College Excellence Program. The other is the “Beyond Completion: Post-Completion Efforts at Hispanic-Serving Institutions” research conducted by Excelencia in Education.
Excelencia’s research looked at practices at seven colleges that produced positive results for graduates, such as deliberately forging partnerships with employers looking to diversify their work forces. The newer Aspen-CCRC project will develop models and conduct research with 10 community colleges to improve pathways for students to high-paying careers, directly or by efficiently transferring to bachelor’s programs. “Community colleges cannot advance equity solely by increasing completion by students of color and other underserved students,” the project organizers, Davis Jenkins of CCRC and Josh Wyner of Aspen, write in a blog post describing the project. “Those students need to complete credentials that meaningfully expand economic and educational opportunity.”
The trend isn’t new, but it’s solidifying and becoming all the more of an imperative. Assuring access to higher ed is no longer enough, nor are even access and completion. What happens after graduation is also becoming part of colleges’ mandate.
Following the money at University of Arizona Global Campus.
I have some answers, finally, on how the finances played out in the University of Arizona’s deal acquiring the for-profit Ashford University from Zovio. When it was first announced, university officials said it and its rebranded online college would receive $225-million in guaranteed payments, plus $15 million in working capital from Zovio over the 15-year life of the deal. The parties ended their contract this month, after just a year and half.
This deal wasn’t a typical online-program management relationship, so any lessons here may be limited. Still, with all the initial hoopla about this “transformational” deal, I thought it worthwhile to share the skinny I received. (This information is based primarily on a conversation with Paul Pastorek, president of the UA Global Campus, which took place after last week’s newsletter was published.)
The bottom line: Arizona and its rebranded University of Arizona Global Campus never ended up with more than an initial $52.5 million that Zovio paid them at the start of the contract in December 2020. (Essentially, that was an advance on the first 18 months of guaranteed payments, plus the $15-million). And the contract protected them from losing their shirts as enrollment fell.
UA Global Campus gave $20 million of that initial payment to the University of Arizona, in a one-time payment for, among other things, rights to its name. It spent some of the money on staff hires and student-retention programs, but Pastorek told me last week that it still has about $32 million on hand in cash reserves.
The deal called for Zovio to be the online-program manager for UA Global Campus, providing marketing, technology, administrative, and student-advising services. Under that arrangement, UA Global Campus was obligated to pay Zovio for its direct costs plus up to 19.5 percent of its tuition revenue. (Zovio was counting on that percentage to generate its profit, though one might suspect it built some profit into its billings for direct costs, too.)
If enrollment had grown, the percentage fee could have produced a windfall for Zovio. But the university never paid even half of that percentage. That’s because the Zovio contract gave UA Global Campus an out if it didn’t collect enough in tuition to cover that cost. It didn’t. Enrollment did fall. And so Zovio got less than it hoped for. After accounting for all the credits and payments back and forth, UA Global Campus paid Zovio about 8.5 percent, on annual revenues of about $290 million in the 2022 fiscal year. By my accounting, Zovio didn’t make enough off that percentage to even cover the costs of the guaranteed payments it made.
So basically, Arizona got UA Global Campus for nothing. (UA Global Campus may have indirectly paid some hidden price, if Zovio did actually generate income in excess of its expenses on those direct-cost billings. But that seems unlikely, considering that the company reported that it’s in the red.)
With UA Global now in full control of services it formerly outsourced, and free of obligations to share tuition revenue, Pastorek told me, the university can now operate under a lower cost structure without losing money.
But it still faces headwinds, as it aims to recover from a fall-off in enrollment of military personnel. The university had been on probation with the U.S. Department of Defense from mid-June until this week, which prevented it from enrolling new students using federal Military Tuition Assistance funds. The Defense Department had also been communicating with current students with military affiliation, “cautioning them to consider leaving” the institution, according to a Zovio filing with the U.S. Securities and Exchange Commission.
Zovio’s future looks far shakier. As it disclosed in that same SEC filing, substantial doubt exists about the company’s “ability to continue as a going concern” over the next 12 months. It’s now in the process of selling its last asset, the Fullstack Academy coding bootcamp, and looking to borrow money to cover its expenses, but said it can offer “no assurance” that those efforts will succeed.
Check these out.
Here are some education-related items from other outlets that recently caught my eye. Did I miss a good one? Let me know.
- A recent U.S. Government Accountability Office report on student loans received lots of attention for its finding that the federal government has underestimated the cost of federal student loans over 25 years. But, as the education-finance expert Art Hauptman writes in his blog, Hauptman on Higher Ed, that report “doesn’t examine how much more federal costs of student loans would have been if the federal government had continued to rely on banks and other private entities for student-loan capital.” His guess: The cost would have been “twice as high or more.”
- The Chips for America Act signed into law this week will be a boon and a challenge to colleges in Ohio, where Intel plans a major new facility, and in other parts of the country hoping to land semiconductor plants. But even if states and institutions step up, experts warn that the nation will fall behind economically unless it also takes on the third rail of immigration reform. As Politico noted in a recent special report: “In late July, nine major chip companies planned to send an open letter to congressional leadership warning that the shortage of high-skilled STEM workers ‘has truly never been more acute’ and urging lawmakers to ‘enact much-needed green card reforms.’ But the letter was pulled at the last minute, after some companies worried about wading into a tense immigration debate at the wrong time.”
- Collectively, support for historically black colleges and universities have been on the rise. But as this new Greater Funding, Greater Needs report from UNCF highlights, “the uptick in funding over the past two years doesn’t begin to make up for decades of neglect.”
Got a tip you’d like to share or a question you’d like me to answer? Let me know, at firstname.lastname@example.org. If you have been forwarded this newsletter and would like to see past issues, find them here. To receive your own copy, free, register here. If you want to follow me on Twitter, @GoldieStandard is my handle.
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