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
See more stories about...
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.

What We're Following See More »
After Wikileaks Hack, DNC Staffers Stared Using ‘Snowden-Approved’ App
7 hours ago

The Signal app is fast becoming the new favorite among those who are obsessed with the security and untraceabilty of their messaging. Just ask the Democratic National Committee. Or Edward Snowden. As Vanity Fair reports, before news ever broke that the DNC's servers had been hacked, word went out among the organization that the word "Trump" should never be used in their emails, lest it attract hackers' attention. Not long after, all Trump-related messages, especially disparaging ones, would need to be encrypted via the Snowden-approved Signal.

Freedom Caucus Members May Bolt the RSC
9 hours ago

The Republican Study Committee may lose several members of the House Freedom Caucus next year, "potentially creating a split between two influential groups of House conservatives." The Freedom Caucus was founded at the inception of the current Congress by members who felt that the conservative RSC had gotten too cozy with leadership, "and its roughly 40 members have long clashed with the RSC over what tactics to use when pushing for conservative legislation." As many as 20 members may not join the RSC for the new Congress next year.

FDA Approves Emergency Zika Test
10 hours ago

"The U.S. Food and Drug Administration on Monday issued emergency authorization for a Zika diagnostics test from Swiss drugmaker Roche, skirting normal approval channels as the regulator moves to fight the disease's spread." Meanwhile, the Wall Street Journal reports that a new study in Nature identifies "about a dozen substances" that could "suppress the pathogen's replication." Some of them are already in clinical trials.

Medicare Advantage Plans Overcharged Government
11 hours ago

According to 37 newly released audits, "some private Medicare plans overcharged the government for the majority of elderly patients they treated." A number of Medicare Advantage plans overstated "the severity of medical conditions like diabetes and depression." The money has since been paid back, though some plans are appealing the federal audits.

Trump Not on Ballot in Minnesota
4 days ago