University of Phoenix, John Sperling, and the For-Profit Sector
John Sperling, founder of University of Phoenix and Apollo Group, is concerned for his legacy. That was noted in a December 29 Bloomberg News article that’s being discussed on LinkedIn by people in the Inside Higher Ed group. Earlier today I added a comment that, with a little editing, I’m adding here as well.
Sperling’s concern is fueled in no small part by Sen. Tom Harkin’s Senate hearings that suggest that the for-profit sector has placed profits over student success to an unusual and detrimental extent. But scrutiny of practices at Phoenix didn’t start with Senator Harkin. Wikipedia outlines a series of lawsuites and financial settlements from 2000 to 2010.
John Sperling’s Legacy
Excuse me, but I’m not crying just yet for any damage done to Sperling’s legacy.
The University of Phoenix in the mid-1990s did higher education and many adult students a service when it arrived on the national higher education scene and began offering degree programs for adults at times and in locations that most non-profit colleges and universities were not doing. There were exceptions. National University was already doing this throughout California. Here in Michigan, Central Michigan University was an earlier pioneer in paying attention to the needs of working adults.
I remember when Phoenix first received regional accreditation. The academic VP I worked for then was shocked. Phoenix, after all, had no library and few, if any, full-time faculty. He couldn’t imagine that anyone would enroll for a degree at a place like that. Meantime, I kept a list from the Registrar’s office of students asking to transfer for some combination of lower tuition and more convenient locations.
Competition from Phoenix was strong enough that more schools started giving classes in locations that were more convenient to potential students. Employed adults, especially those with families, were pleased. Phoenix had made an important contribution to shaking up a system that needed reinvention.
University of Phoenix in the 1990s
Remember the early days of admission to the University of Phoenix? You had to be employed (employer reimbursement was key to tuition payment then) and you had to be at least 23 years old.
One element in the financial model was key: almost all courses were staffed the way most institutions staffed summer sessions, with part-time faculty. With part-time faculty pay, the path to making money in higher education is not difficult if you can fill the classes with any reasonable enrollment level.
Sperling founded the Apollo Group in 1973 and University of Phoenix in 1976. By 1996, Phoenix enrolled about 38,000 students throughout the United States. Life was good. It was about to get better.
University of Phoenix by 2007
Phoenix had been a publicly-traded company since the early 1990s. Sometime after that 20th anniversary in 1996, in the period of go-go economic growth that crashed in 2008, came strong pressure to maintain a rapid pace of enrollment increase to sustain continued increase in the value of the stock. Online degree programs provided a far easier path to that growth than expansion of in-class programs. The gold rush was underway. Online enrollment zoomed past the in-class sector.
For several years, attention to whether or not people admitted were actually finishing their degrees was, to be charitable, lax. Wall Street was more interested in growth than profitability from a stable or modestly growing enrollment. The for-profit sector, it appears, bowed to that pressure. I still remember my conversation with an investment firm in 2007 that asked if the rate of enrollment growth over the past 5 years could be sustained. (It seemed unlikely by any reasonable measure.) Profitability was not nearly as interesting as the growth rate.
Enrollment Growth to Maintain Stock Price Growth
Executive leadership at Apollo Group made the decisions to generate the highest possible enrollment growth to fuel the highest possible stock prices. My opinion, of course, without access to any insider information. In the climate that prevailed until 2008, they could do that with little fear of serious oversight from either the Department of Education or an accrediting agency.
A correction was long overdue. The present hearings by Senantor Harkin’s Senate committee have contributed to the changes taking place now in the for-profit sector. Better admission screening, different compensation plans for recruiters, and more attention to retention are three elements that might restore the for-profit sector.
John Sperling: A Revolutionary
Weep not for John Sperling. He revolutionized attention to working adults in higher education when a revolution was needed. He isn’t as wealthy now as he was before Apollo Group stock prices fell. But he’ll get along. And, I suspect, University of Phoenix will thrive in coming years even if the stock price itself is slow to return to earlier high levels.
That’s all for now
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