This week ITT Technical Institute collapsed under the unbearable weight of multiple state and consumer advocate investigations, an SEC probe, an ongoing “show cause” from its accreditor, and heightened cash monitoring imposed by the federal government. Withdrawal of federal student aid eligibility for new students was the final straw. ITT was right to point out that none of these matters were resolved – even if the evidence looked damning – but the Department of Education was clearly unwilling to wait. ITT’s accreditor, ACICS, is itself at serious risk of loss of recognition, and if the history of lawsuits against for-profit higher education institutions tells us anything it’s that resolutions are rare, slow and ambiguous.
Now that two of the largest for-profit higher education chains have collapsed, has the rot been removed or is this just the beginning? In Eduventures’ view, Corinthian and ITT were most vulnerable, combining national accreditation tied to job placement, high prices and weak outcomes, little brand diversity, lack of international expansion and in ITT’s case at least, imprudent use of billions of dollars to buy-back shares instead of investing in the student experience or saving for an unpredictable future. Other major profits either focus at graduate level (Capella, Walden), are inexpensive (APUS), have cushioned domestic declines with international growth (DeVry) or have invested in a traditional campus and traditional students (Grand Canyon). Two firms- Career Education and Kaplan- sold off their career school divisions in favor of their university brands. The for-profit sector remains diverse, and includes many good institutions.
A few major firms may still face existential threats but generally the sector will ride the waves of change- more competition, savvier consumers and tougher regulations. The comments from ITT students and graduates- on the Department of Education’s announcement about the demise of the institution- question why the government took so long to act. There is no resume relief for alumni. It is hoped that the scale of the Corinthian and ITT implosions will seep into public consciousness and forearm future prospective students. Whether in the form of the College Scorecard, Gainful Employment regulations or pursuit of more transparent and quantitative accreditation, John King, Secretary of Education is searching for earlier triggers that would avoid rouge schools getting out of control or help them get back on track.
For-profit higher education works best when schools address persistent problems ignored by most nonprofits. Identifying that adult and other non-traditional learners needed higher education more than ever and were under-served, and a willingness to experiment with novel operational and delivery models, drove the for-profit enrollment boom now in the rear-view mirror. Nonprofits have caught up, but there is no shortage of problems left to solve. Taking next-generation technology to scale, finding the right balance between online and face-to-face study, standardizing the student experience in the interests of consistency without dumbing down, and improving the connection between study and employment are just some examples. The question is whether incumbent for-profits can pivot into new territory.
It is striking that the current surge of commercial interest in higher education sidesteps everything earlier for-profits thought most valuable- the degree, university title and accreditation- precisely in an attempt to drive innovation. Today’s entrepreneurs are dazzled by micro-credentials and bootcamps; but the situation is dynamic- some for-profit incumbents like Capella and Apollo Group have invested in these start-ups and the federal EQUIP program is blurring who and what is eligible for public funding. Times are changing, and innovation will continue to be messy. For-profit higher education is alive and kicking.