Are Students Turning Away From For-Profit Universities?

With enrollments and revenues dropping, the CEO behind Strayer University explains how for-profit institutions can lower costs for students and respond to rapidly changing workplaces.

National Journal
Sophie Quinton
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Sophie Quinton
May 5, 2014, 8:36 a.m.

About one-quarter of Stray­er Uni­versity stu­dents en­roll be­cause their em­ploy­ers have partnered with the uni­versity. Many stu­dents pur­sue gradu­ate-level de­grees. Both facts may help ex­plain why Stray­er gradu­ates tend to fare bet­ter in the labor mar­ket than gradu­ates of some oth­er pub­licly traded, for-profit edu­ca­tion in­sti­tu­tions.

As the Edu­ca­tion De­part­ment gears up to reg­u­late ca­reer pro­grams, it has its eye on for-profits. Com­munity col­leges and for-profits tend to serve sim­il­ar pop­u­la­tions, but for-profits charge much high­er tu­ition. They also ac­count for 13 per­cent of col­lege stu­dents but nearly half of all stu­dent loan de­faults, ac­cord­ing to the Edu­ca­tion De­part­ment.

Stray­er serves about 43,000 stu­dents na­tion­wide, both through on­line and on-cam­pus pro­grams. About 35 per­cent of stu­dents are eli­gible for fed­er­al Pell grants, and about two-thirds are non­white; a year’s un­der­gradu­ate tu­ition cur­rently costs $15,495. With reg­u­la­tion pending and en­roll­ments drop­ping — Stray­er an­nounced last fall that it will close 20 cam­puses in re­sponse to de­clin­ing rev­en­ues and en­roll­ment — what’s the path for­ward for the in­sti­tu­tion? Na­tion­al Journ­al asked Stray­er Edu­ca­tion Chief Ex­ec­ut­ive Of­ficer Karl Mc­Don­nell about Stray­er’s fu­ture. Ed­ited ex­cerpts fol­low.

Ca­reer pro­grams — at both for-profits and private non­profits — are un­der a lot of pres­sure to im­prove two things: stu­dent debt loads and post­gradu­ation earn­ings. With re­gard to stu­dent-debt loads, does Stray­er Uni­versity have any ini­ti­at­ives in place to make tu­ition more af­ford­able?

We do — in fact I think we’ve really been a lead­er in that re­spect. First, just a little back­ground. The me­di­an debt for a Stray­er Uni­versity gradu­ate is in the low to mid-$20,000 range, so call it $23-24,000. We also know — via sur­veys that we do with our gradu­ates, but also with data that the De­part­ment of Edu­ca­tion has re­leased — that Stray­er gradu­ates do very well. De­pend­ing on the pro­gram, they have salar­ies in the high $40,000 to low $60,000 range. So for in­di­vidu­als mak­ing that salary on about $23,000 in debt, there’s a very tan­gible pay­back.

That not­with­stand­ing, we con­tin­ue to see that af­ford­ab­il­ity is a big is­sue con­front­ing many fam­il­ies, many stu­dents, and we’ve done two things on that front. About a year ago, we in­tro­duced the Stray­er Uni­versity Gradu­ation Fund, which al­lows a stu­dent to ba­sic­ally earn their en­tire seni­or year of col­lege. We don’t just want to deal with af­ford­ab­il­ity, we also want to try get as many of our stu­dents through to gradu­ation as pos­sible. What we’ll do to sup­port you is for every third course you com­plete as part of your de­gree pro­gram, we will es­sen­tially grant you one of your last 10 courses in your seni­or year to be taken for free.

The oth­er thing that we did in late 2013 is we re­duced our un­der­gradu­ate tu­ition by about 20 per­cent. When you com­bine those two pro­grams — the gradu­ation fund and the re­duced un­der­gradu­ate tu­ition — we’ve re­duced that cost by al­most 45 per­cent in the span of a single year. We also work very hard with our stu­dents when they’re en­rolling in the uni­versity to make sure that they’re be­ing thought­ful around the amount of debt that they’re tak­ing on.

What about steps to im­prove em­ploy­ment pro­spects, or start­ing salar­ies?

About 25 per­cent of our stu­dents come to us from in­sti­tu­tion­al al­li­ances, which in large meas­ure are edu­ca­tion­al al­li­ances we have with about 250 For­tune 1000 com­pan­ies. They send us their em­ploy­ees and we of­fer them fur­ther dis­coun­ted tu­ition. The vast ma­jor­ity of stu­dents who come to Stray­er are already em­ployed, so we don’t have a place­ment func­tion the way that a vo­ca­tion­al school might have. But we do do a lot of work with em­ploy­ers to make sure that we’re of­fer­ing their em­ploy­ees a high-qual­ity de­gree af­ford­ably.

A lot of col­leges are tak­ing a harder look at their gradu­ation rates, in­clud­ing gath­er­ing data on what might help stu­dents gradu­ate. What seems to help Stray­er stu­dents?

When you’re think­ing about gradu­ation rates, you really have to think about them in vari­ous seg­ments of stu­dents, be­cause there’s massive vari­ab­il­ity. And so for ex­ample, gradu­ate stu­dents have very high gradu­ation rates — both here at Stray­er and na­tion­ally. The gradu­ation rate for our gradu­ate stu­dents is, you know, prob­ably 70-plus per­cent, and they also have in­cred­ibly low [stu­dent loan] co­hort de­fault rates. So gradu­ation rates at the gradu­ate level are es­sen­tially a non­is­sue. Then you have stu­dents who have been to col­lege be­fore, they just didn’t fin­ish their de­gree — and they ac­tu­ally have very high gradu­ation rates too, as well as very low co­hort de­fault rates.

Where you have the low­est gradu­ation rates, both at Stray­er as well as na­tion­ally — state schools and com­munity col­leges — are for stu­dents that have nev­er been to col­lege be­fore. And you see that — you see gradu­ation rates for that seg­ment of stu­dents that are very low, be­low 20 per­cent.

There are some early in­dic­at­ors of suc­cess on that front. For ex­ample, we know that if an in­di­vidu­al earns their first math cred­its with­in the first two terms that they’re en­rolled, that is a very strong pre­dict­or of fu­ture aca­dem­ic suc­cess. And so we put a lot of ef­fort in­to try­ing to provide coach­ing and tu­tor­ing for math­em­at­ics; we’ve ad­op­ted ad­apt­ive learn­ing labs to help with math. But we also have a policy that if they haven’t ac­quired those math cred­its with­in the first six months, they can’t con­tin­ue in the uni­versity. We es­sen­tially, for aca­dem­ic pur­poses, ba­sic­ally ex­pel them. Be­cause what we don’t want is to have a stu­dent who has, you know, per­haps the per­sever­ance to want to keep try­ing, but doesn’t seem to have the abil­ity at that point to be suc­cess­ful.

Stray­er saw en­roll­ment drop by 11 per­cent last year — the third straight year of de­cline. Na­tion­ally, few­er high school gradu­ates went on to col­lege last year than in years past. What are some of the forces that might be driv­ing down high­er edu­ca­tion en­roll­ment?

Clearly you’ve got a very slug­gish re­cov­ery to the re­ces­sion that we had in 2008. And so there’s a fair amount of un­cer­tainty around em­ploy­ment, and we hear that a lot from our stu­dents. And at the same time, you’ve got ac­tu­ally more and more state in­sti­tu­tions be­com­ing will­ing to of­fer edu­ca­tion­al pro­grams to work­ing adults, which is his­tor­ic­ally something they had not done. It’s good for stu­dents, in the sense that they have a lot more choices avail­able to them, but I think that’s had an im­pact on at least Stray­er’s en­roll­ment. 

It’s in­ter­est­ing that you think job in­sec­ur­ity is hold­ing people back from pur­su­ing more edu­ca­tion. Didn’t we see an in­crease in col­lege en­roll­ment dur­ing the re­ces­sion, be­cause people found it harder to find jobs? Did you see a trend like that at Stray­er?

I’ve def­in­itely seen it at Stray­er, and heard it from stu­dents. But I also think that the nature of work is evolving. Tech­no­logy re­places jobs faster than it cre­ates them, and that’s not a trend that’s go­ing to re­verse. People are weigh­ing the in­vest­ment in time and money for a col­lege de­gree, when there’s some un­cer­tainty around what the nature of my job might look like in six years, be­cause that’s how long it would take a stu­dent go­ing part-time. 

Par­tic­u­larly if you’re of­fer­ing ca­reer-ori­ented de­gree pro­grams.

Ab­so­lutely. And it’s a fair ques­tion, ac­tu­ally, on the part of a stu­dent to be ask­ing. Throughout his­tory, it’s sort of been taken for gran­ted that a col­lege de­gree is a very good value, and we con­tin­ue to see that vis-à-vis lower life­time un­em­ploy­ment and high­er life­time earn­ings. But in some sec­tors and some in­dus­tries, the gap between col­lege gradu­ates and non­col­lege gradu­ates is shrink­ing. And I think there’s clearly im­plic­a­tions for high­er edu­ca­tion in­sti­tu­tions in that data, which is that we al­ways need to be of­fer­ing pro­grams that are rel­ev­ant to people in their ca­reer pro­grams, and teach­ing skills that are in de­mand of em­ploy­ers.

There was a re­search study put out last year by McKin­sey that showed this shock­ing dis­con­nect between em­ploy­ers and edu­ca­tion­al in­sti­tu­tions. Edu­ca­tion­al in­sti­tu­tions be­lieve they’re do­ing a great job pre­par­ing gradu­ates to enter the work­force; only 20 or 30 per­cent of em­ploy­ers would agree with that. 

How do you see Stray­er evolving, giv­en both the pos­sible Edu­ca­tion De­part­ment reg­u­la­tion and the chan­ging nature of work?

We think reg­u­lat­ory over­sight is very healthy, and we ac­cept the fact that edu­ca­tion is and should be heav­ily reg­u­lated. And so we wel­come scru­tiny, be it from our ac­cred­it­ors, or state li­cen­sure agen­cies, or the fed­er­al gov­ern­ment. We might have a dif­fer­ent view of how it should be im­ple­men­ted, but we ac­tu­ally think that the in­tent of the reg­u­lat­ory en­vir­on­ment is good.

We’re really try­ing to take ad­vant­age of the com­ing big-data re­volu­tion, and work­ing to take the data and in­form­a­tion that we have on how our stu­dents learn to cus­tom-tail­or in­ter­ven­tions and les­son plans, and ad­apt­ive learn­ing ses­sions. Not plan­ning cur­ricula for 40,000 stu­dents, but how you could mi­cro-tail­or in­form­a­tion down to par­tic­u­lar classes, and seg­ments of stu­dents — and then us­ing that in­form­a­tion in a pre­dict­ive way to know when a stu­dent is most likely to get stuck. If you know with some level of pre­ci­sion when some­body’s go­ing to be stuck, you can be much more pro­act­ive about how you reach out to them, and in what ways you reach out to them. That’s a big part of the fu­ture of high­er ed: us­ing ana­lyt­ics and re­search to ad­apt learn­ing to in­di­vidu­al learn­ing styles.

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