Two weeks into March, this has already been a busy month already for the transformation of for-profits and MOOCs. For-profit universities are in a race to become nonprofit by separating academic programs from behind-the-scenes services, and MOOCs are focused primarily on monetization and moving beyond free and open courses. The common thread tying these messy transitions together is the move to become new forms of Online Program Management (OPM) providers.
Best Way to Make Money? Go Nonprofit
Arguably the biggest news was March 5th when the Higher Learning Commission (HLC), the regional accreditor, approved the Kaplan University / Purdue University deal to create Purdue Global. This was the final approval step as Purdue acquires Kaplan, leaving Kaplan University, leaving Graham Holdings (Kaplan's parent company) to serve as a single-client OPM provider.
The following day Grand Canyon University announced that it had received approval from HLC to convert into a nonprofit institution. As described in their press release, the remaining for-profit company will become an OPM, even if they choose not to use that name [emphasis added]:
As part of the transition, GCE will sell certain academic-related assets to a non-profit entity that will carry the Grand Canyon University name. Following the sale, GCE will operate as a third-party provider of educational and related services to GCU and potentially, in the future, to other universities. The structure is similar to that at hundreds of non-profit universities in the country that outsource services to third-party providers.
And yesterday, Bridgepoint Education announced that they were formally seeking to convert Ashford University into a nonprofit in a similar deal as Grand Canyon. At least they are more direct about the OPM tie-in as described at Inside Higher Ed yesterday.
Bridgepoint will continue on as an online program management (OPM) provider -- a booming space in higher education. The company will negotiate with Ashford to enter into a shared services agreement, with Bridgepoint likely handling data management, course management software and services, technology, and financial aid processing for the nonprofit university.
“As an OPM, Bridgepoint Education will bring years of technological and academic innovation and intellectual property development to other colleges and universities that desire to serve students through online education programs,” Schray said in a written statement.
In an interview here at e-Literate when Purdue and Kaplan announced their acquisition plans last April, Trace Urdan (now at Tyton Partners) described the market forces involved in some of these moves.
- Non-profit entities - both public institutions and private non-profit institutions - "wanting to get into the adult market and the online market". This is the big push behind the Online Program Management (OPM) market, kick-starting these non-profits into online programs targeting adult education.
- For-profit entities "feel like they are being burdened by being for-profit". One part of this is the regulatory burden from the Department of Education and even accreditors. But there is also a marketplace burden as non-profits like Southern New Hampshire University keep growing enrollments while for-profits are dropping.
- There is a "the investor enthusiasm for the services model" with OPMS, "and this is a model that investors love - it gives you access to the growth in online education, affiliation with strong brands, and it's more or less free from the regulatory hostility" of the for-profit sector.
Beyond the market forces, however, there is another underlying factor affecting these moves. As described by legal team at Cooley Education:
So, why did this happen? First, and most obviously, we are in a different regulatory environment – at least as far as the federal Department of Education is concerned. In late 2017, the Department of Education dropped its opposition to for-profit conversions vehemently articulated by then-Secretary John King, most recently approving the sale of South and Argosy Universities and the Art Institutes owned by Education Management Corporation to a nonprofit created by the Dream Center Foundation. This change in federal policy shifted the emphasis on approvals back to the accreditors and the states.
At the accreditor level, the politics may be less important in understanding the outcome than the process. At about the same time that Kaplan-Purdue was first announced, HLC began working on revising its policies and procedures to establish new benchmarks by which such transactions would be measured. HLC made two significant changes: it updated its procedures for review of Change of Control transactions and, in a politically astute move, also established a policy that Department of Education approval must be obtained before HLC acts on a change of control application, thus insulating itself from second-guessing in Washington. (HLC’s change was telegraphed in late 2016 when it deferred acting on the sale of the parent of the University of Phoenix to a private equity group pending prior ED approval.)
Significantly, HLC now has relatively clear guidance governing what is needed for OPM relationships and for-profit conversions.
How Do We Make Money? The Answer Is Simple - Volume
Meanwhile Coursera announced their plans to further focus on the monetization of supporting online degrees, as described at EdSurge on March 5th.
These days, though, many MOOC platforms are courting the traditional higher-ed market they once rebuked, often by hosting fully-online masters degrees for colleges and universities. And today, one of the largest MOOC providers, Coursera, announced it’s going one step further in that direction, with its first fully online bachelor’s degree.
Coursera is not alone here - most notably Georgia Tech and Udacity launched an online master's of computer science in 2013. In a related move, edX has begun its work supporting online master's degrees through its MicroMasters program, and FutureLearn - spun out of the Open University of the UK - supports multiple degree programs.
While the Coursera news focused on the new bachelor's program, the bigger news was the expansion its graduate programs as described at Inside Higher Ed.
Online education platform Coursera has set a goal of offering 15 to 20 degree programs by the end of 2019. The company took another step toward that goal Wednesday, announcing new degree offerings from the University of Illinois at Urbana-Champaign and France’s HEC Paris.
“This is our coming-out party for online degrees on Coursera,” Nikhil Sinha, Coursera’s chief business officer, said in an interview.
FutureLearn announced their own expansion of online degrees last month.
For the MOOC providers, their move into the OPM space seems to be driven by their leverage of current registered learners as a marketing channel, as described in a separate IHE article.
Roughly half of the students in Coursera's current degree programs took one of the open online courses first, essentially enabling students to "try these degrees before they buy them," Maggioncalda says. So not only do students have a chance to see how they like a professor, or how well they perform, before enrolling in the for-credit program, but Coursera also asserts that it can drive down the cost of acquisition of students by tapping into its 31 million users.
Coursera's institutional partners "share a certain percentage of the learner fee with us in exchange for distribution to our world of learners, and the whole delivery of the system on our platform," Maggioncalda says.
New OPM Models
Two years ago we described how the OPM market has evolved beyond its full-service tuition revenue-sharing origins to add unbundled service offerings - not to replace the previous model but to augment it. What we are now seeing are two new models within the OPM market becoming much more clear: the remnants of for-profit conversions into nonprofit status, and MOOCs supporting online degree programs. Both of these models are driven by markets that need to move beyond their origins as well. A lot of changes happening in the education space.