Domestic, For-Profit, Landscape, Markets, Private education, Required, University & College - Written by on Thursday, November 17, 2011 12:27 - 0 Comments

For-Profit Colleges Aim Closer to the Bull’s Eye. Will They Hit The Mark?

via Flickr by Giandomenico Ricci under CreativeCommons

For-profit colleges, fear not.  Enrollment and revenues are down, especially for Kaplan Higher Education and the University of Phoenix. But these dips are likely growing pains. The new federal regulations coupled with unfavorable media attention on ultra-loose recruitment practices could be the best thing that ever happened to for-profit colleges. It’s sink or swim. So they now have good reason to break bad habits that would have probably led to their demise. 

New Target Market: Trading Access-for-All for Quality…
In the higher ed space, for-profits have the potential to become a tour de force if they change their business models. Which is what Kaplan and U. Phoenix are doing. They are aligning recruitment strategies with retention goals. Kaplan offers a debt-free five-week trial period called the Kaplan Commitment. If students drop out in the trial period, they are only obligated to pay the application fee. Kaplan can also counsel out low-performing students during this period. While U. Phoenix provides an obligatory but free three-week orientation to entering students with less than 24 college credits. These policies are of course contributors to lower enrollment and revenues but they are not the main drivers.

Paul Fain, reporting for Inside Higher Ed, wrote a thorough and informative article about the new methods Kaplan and U. Phoenix are using:

Kaplan and Phoenix are trimming back their incoming classes to become more selective. Both institutions recently began new programs that make it easier for unprepared students to leave without taking on debt, and for the universities to show them the door.

Jerry R. Herman, who analyzes the for-profit-college sector for the investment firm Stifel Nicolaus, said the two companies had taken an innovative approach to improving student outcomes. He said other for-profit institutions have begun programs with similar retention goals, and that the enrollment shake-up could be good for the industry.

“This is in some ways a very painful process,” he said, “but a very helpful one as well.”

And the complex environment of the for-profit college:

Generalizing about for-profits is tough. Each college serves at least slightly different student markets and, as a result, faces a differing set of complex challenges. 

Not all for-profits are blowing up their business models. 

With 136 campuses, the ITT Technical Institutes have a physical presence that makes a trial period less effective. That’s because students who walk onto a campus are typically more serious about enrolling than those who just visit a website. And ITT’s relatively narrow technical focus helped it avoid the lure of chasing growth that for-profits with broader offerings were able to pursue. So the company has less of a market correction to deal with, but its new enrollment and revenue are also down this year.

For-Profit Colleges’ Most Recent Quarterly Enrollment and Revenue, 2011 vs. 2010:

Institution % Change in New
Student Enrollment
% Change
in Revenue
American Public University System 53% 35%
Apollo Group -34% -11%
Bridgepoint Education 27% 8%
Capella Education -36% -3%
Career Education Corp. -22% -18%
Corinthian Colleges -23% -17%
DeVry Inc. -12% -1%
Education Management Corp. 2% 2%
Grand Canyon Education, Inc. n/a 10%
ITT Educational Services, Inc. -14% -10%
Kaplan Higher Education -30% -33%
Strayer Education, Inc. -15% -8%

Source: Stifel Nicolaus and SEC filings;
most recent fiscal quarter






Time will tell which schools are serious about making long-term change and being responsible to students as well as to their share-holders. We think the two go hand in hand. The schools that treat students like cattle or chattel will end up being trampled in the mud themselves. Those that really care about their students, invest in their staff, practice good management principles and invest in technology… well, they have the opportunity both to make money long-term. And to chart new pathways in digital learning.


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