Wednesday, October 10, 2007

Have the For Profit Schools Peaked?

By Richard Veddder

I have heard some educrats in traditional not-for-profit education say that the "fad" for for-profits schools is peaking, that they remain a minor threat, but only that. They cite financial scandals, government investigations, falling stock prices of companies like market leader Apollo Group (University of Phoenix), the saturation in the market for specialized degrees for adult learners, etc.

It is true that this sector took some lumps, as all rapidly growing enterprises do somewhere along the way. At the beginning of this year, the price of Apollo stock was about half of what it had been two years earlier, and some other companies (e.g., Career Education, Corinthian Colleges) had also seen similar, albeit smaller declines.

But I think the sector is still very much in a growth mode, and Wall Street agrees. If you invested an equal amount of money at the beginning of this year in the common stock of seven leading companies (Apollo, Capella, Corinthian, Devry, ITT Educational Services, Strayer, and Career Education), you would have seen a 59.6 percent increase in the value of your investment --four times the growth in the Dow Jones Industrial Average. The poorest performing of these companies had over a 21 percent price appreciation. Apollo gained back a majority of the losses of the previous two years, and that company's enrollments (over 311,000 in May) are picking up again after a lull.

Moreover, I think we may be understating the robustness of the industry, because significant portions of it are run by privately owned, non-traded companies. The recent aggressive expansion of companies like Bridgepoint Education and Randy Best's companies are evidence of this.

The industry's medium term growth is likely in part because the major competition, the not-for-profits, for all their talk of change, are still doing pretty much the same old thing, albeit with slightly less excess. Tuition charges are still on average rising faster than inflation rates, fundamental efficiency changes are still elusive, and the incentives to grab a growing market for adult education are still somewhat muted in the not-for-profit sector (although these institutions are starting to put some market incentives into their non-traditional programs, particularly those on line). The University of Phoenix may not have much of a football team (it has none, of course), but it is laughing all the way to the bank.

Meanwhile, CCAP is trying to explore the growth of this industry more extensively, and Whiz Kid Jim Coleman is working with me on a significant study of that industry's growth, prospects, and characteristics relative to the rest of higher education.


TC said...

Without any investigation or research on my part, from reading your blog it sounds as though what is happening is good old fashion market competition and evolution of modern business models.

Colorado State University, Fort Collins, has a Mechanical Engineering PhD program on line. But don't ask them about tuition and fees - that's a big no-no with them!

sciencedoc said...

Colorado State has an online Ph.D. program in mechanical engineering? I am very dubious. I logged on to their website and this is what I found

It sure doesn't look to me like they have an online Ph.D. program. Master programs, yes, Ph.D., no.

TC said...

You're all vine and no 'taters. I went to the website that you posted and there it was:

"Industrial Engineering and Operations Research" below that it says:

M.S., M.E., Ph.D. in Mechanical Engineering

Now read the above line very carefully. Do you see "Ph.D."? I do.

You can follow the link to:

And guess what it says there? Well, I'll let you read it.

You are indeed very dubious.

sciencedoc said...

To put it kindly, you're reading the wrong line on that webpage. The online program to which I believe you are referring is in Industrial/Organization Psychology. Click on it, you'll find the word "Online" on its page, and the fact that the program is not up and running.

Click on the program to which you refer, you'll find nothing that refers to Online, as far as I can tell.

Anybody who knows anything about a reputable Ph.D. program in mechanical engineering knows that doing it online would be very difficult, if not impossible.

Most of these online graduate programs are Master's degree programs in rather soft subjects or subjects that are amenabale to online treatment (the latter including mainly computer science).

Very dubious, indeed.

TC said...

How nice of you to put it kindly - Thanks.

But you are wrong - here it is right from the source - if you don't believe this, call them yourself:

Date: Mon, 15 Oct 2007 10:33:11 -0600
From: "Betts,Frances"
Reply-To: "Betts,Frances"
Subject: RE: Question Regarding Advanced Degree Programs

All of the courses are offered online. Four of the required courses also include mandatory attendance of 3 day on-campus workshops. For more information please contact Dr. Duff, Professor-In-Charge.

About the program, curriculum, or academic issues:

Dr. William Duff
(970) 491-5859

Frances Betts
Online/Distance Learning
Colorado State University
1040 Campus Delivery
Fort Collins CO 80523-1040
Direct Line (970) 491-0675
Toll Free 877 491-4336
Fax (970)491-7885

Sent: Friday, October 12, 2007 6:23 PM
To: Betts,Frances
Subject: Question Regarding Advanced Degree Programs

Under the Industrial Engineering and Operations Research Program, are the Masters of Science, Masters of Engineering, and the Doctor of Philosophy degrees offered as distance learning programs? Can they be completed on-line? I am referring specifically to the web page:

Thank you,

sciencedoc said...

Maybe that is what they are offering. I sure wouldn't take someone with an online Ph.D. very seriously. I can say that as someone who hires them for research positions. But if they can sell this stuff, I guess they can sell it.