COLLEGE INC.: contextualizing the PBS documentary on for-profit universities, Wall Street, and government regulation

Link here for access to PBS’s COLLEGE INC., which was aired on 4 May 2010. RAINmedia, which produced the documentary for PBS’s FRONTLINE, describes the show this way:

Higher education is a multi-billion industry fueled by taxpayer money. One of the fastest-growing–and most controversial–sectors of the industry is the for-profit colleges and universities. Unlike traditional colleges that raise money from wealthy alumni and other donors, many for-profit schools sell shares to investors on Wall Street. But what are students getting out of the deal? Critics say a worthless degree and a mountain of debt. Proponents insist they’re innovators, widening access to education. FRONTLINE producer and correspondent Martin Smith follows the money to uncover how for-profit universities are transforming the way we think about college in America…

This show, which is currently generating ripples across the higher education and investment landscapes in the US, is also relevant for readers in other countries, most notably the UK, Chile and Mexico (where Apollo Global is particularly active), and Australia (e.g., see ‘Commercial campuses ready to fill gap‘, The Australian, 5 May 2010).

And speaking of topical news, it is noteworthy (but purely coincidental, re. timing?) that former US President Bill Clinton “accepted the role of Honorary Chancellor of Laureate International Universities, the global network of leading private universities” one week ago. This is a paid position, “honorary” title aside, though Laureate has refused to disclose the sums involved.

And is it purely coincidental that the show is being released amidst vigorous debates about forthcoming US federal regulations that, according to Bloomberg news:

may reduce the amount of federal financial aid flowing to for-profit colleges, cutting the companies’ annual revenue growth by as much as a third.

In response, the $29 billion industry and its supporters including Republican Senators have enlisted top Washington lobbyists and are courting black and Hispanic legislators to fight the proposed rules scheduled to be released as early as this month.

While these debates may seem US-centric at first glance, their outcomes will have implications at a much large scale for these firms are establishing global agendas and networks.

Kris Olds

Developments in the world of private for-profit global higher ed

The private for-profit global higher ed world generated three news items of note this morning.

First:

LAUREATE EDUCATION, INC. ACQUIRES LEADING UNIVERSITIES IN MEXICO AND COSTA RICA

Baltimore, Maryland, July 8, 2008 – Laureate Education, Inc. today announced it has acquired the Universidad Tecnológica de México (UNITEC), one of the largest private universities in Mexico, and the Universidad Latina and Universidad Americana (UAM) in Costa Rica.

UNITEC has eight campuses throughout Mexico, including six in Mexico City, one in Guadalajara and one in Monterrey. The university has a 40-year tradition of providing higher education throughout the country, and today serves more than 36,000 students….

Universidad Latina, the largest private university in Costa Rica, was founded in 1989 and has more than 16,000 students. The university is widely recognized for its health sciences programs, including medicine and dentistry. UAM, founded in 1997, has more than 4,000 students, and specializes in business education. Combined, the schools have 13 campuses throughout Costa Rica.

Continue reading here

Second:

APOLLO GROUP, INC. APPOINTS STRATEGIC AND FINANCIAL ADVISOR CHARLES B. EDELSTEIN AS NEW CHIEF EXECUTIVE OFFICER

PHOENIX–(BUSINESS WIRE)–July 7, 2008–Apollo Group, Inc. (Nasdaq:APOL) (“Apollo Group,” “Apollo” or “the Company”) today announced the appointment of Charles “Chas” B. Edelstein as Chief Executive Officer and Director, effective August 26, 2008. Apollo’s founder, Dr. John G. Sperling, continues to act as Executive Chairman of the Board of Directors….

Mr. Edelstein, 48, has more than 20 years of experience as a strategic and financial advisor. He joins Apollo Group from Credit Suisse, where he served as a Managing Director and headed the Global Services Group within the Investment Banking Division, as well as the Chicago investment banking office. Mr. Edelstein founded and oversaw Credit Suisse’s leading advisory practice in the education industry, where he served as advisor to many of the largest education companies, including Apollo Group.

Continue reading here

Finally, the Wall Street Journal noted, today, that Marcus Brauchli, the former managing editor of the Wall Street Journal (now owned by Rupert Murdoch) will become the Washington Post’s new executive editor. The formal press release is here.

Why profile this topic? Recall that the Washington Post, despite its iconic status, is effectively being bankrolled by private for-profit global higher ed (aka Kaplan), as we noted in an entry titled ‘Pulitzer Prizes and the global higher ed industry‘. This point is reinforced in the Wall Street Journal:

But the Post has been struggling with the same forces that have devastated the newspaper industry in recent years — defections of readers and advertisers to the Web. Over the past 24 months, the paper’s weekday circulation has dropped 7.1% to 673,180, according to the Audit Bureau of Circulations. Print-ad revenue fell 13% in 2007, according to the Post. While Washington Post Co. has been somewhat insulated from the impact of these changes by its profitable Kaplan education business, the paper has lately taken steps to cut costs. It eliminated more than 100 newsroom positions, bringing the total newsroom count to about 700 from its peak of more than 900 in 2003. Some staffers worry that further cuts are coming.

These three news items are lenses onto three related development patterns:

  • Diversification, dependency, and cross-subsidy via for-profit private higher ed (in the case of Kaplan).
  • The extension of private higher ed networks into new ’emerging market’ geographies via the acquisition of private universities (in the case of Laureate).
  • Financialization, with institutions of for-profit private higher ed reaching into the calculative networks that enable global higher ed value chains to be designed and brought to life (in the case of Apollo).

Given the scale of education services on offer via Laureate, Apollo, and Kaplan – over 2 million students being served right now – these news items and development patterns are worth taking note of.

Kris Olds

Xi’an Jiaotong-Liverpool University and Liverpool International College

As has been noted recently in GlobalHigherEd (link here, here, and here), a number of educational institutions in the UK, including the University of Nottingham and the University of Liverpool, are forging relatively deep linkages with China. In this context I interviewed Kelvin Everest, former Pro-Vice-Chancellor and current Deputy Vice-Chancellor of the University of Liverpool, about the university’s venture in China.

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Xi’an Jiaotong-Liverpool University (XJTLU), located in Suzhou in China, opened its doors in September 2006 to approximately 160 students. Second year intake of students was 570, with an expected 900 for 2008. Currently, the university offers degree programmes in only four subjects: electrical engineering, computer science, financial mathematics and a combination of one or more of these with management. Four new programmes will begin in 2008, including finance with English and Biological Sciences. Degrees in civic design and town planning will be introduced in the near future. Two new buildings are currently under construction to support the anticipated expansion.

The initiative has involved a close partnership between the University of Liverpool and Xi’an Jiaotong University. The University of Liverpool also partnered with a large private corporation – Laureate Education Inc., based in Baltimore (a private provider of post-secondary education, with an income of $160 million in 2005). Laureate supplies online educational services and also owns a number of private universities around the world, with a global presence (see the figures below from one of Laureate’s Factsheets that is available on their Investor Relations site).

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The company provided the £1mn bond necessary for the University of Liverpool to operate in China. To proceed, the new university required the permission of both the Chinese national government (Ministry of Education) and the provincial government in Suzhou. As the Changing Higher Education blog noted this year, China is clearly on Laureate’s radar screen after using Latin America as its launching pad.

The university is located in China-Singapore Suzhou Industrial Park, which has been built with money from the Singaporean government, as part of Singapore’s attempts to develop an ‘external wing’ of its economy, and embed itself in China. The industrial park is 84 square miles with factories and other facilities but mainly new production plants for huge multinationals – Siemens, Samsung, Volvo, Zanussi and so on – particularly electronic communications and transport. It has been described as a ‘hub’ for foreign investors, including 53 Fortune 500 companies, and reflects the Chinese government’s desire to build ‘local’ R and D capacity. At one corner of the park is the ‘higher education town’ and the plan is to build five or six universities there with connections to other countries. This will then generate a workforce that will populate the science park and partly address the enormous projected demand for skilled graduates in China.

All teaching and assessment at XJTLU is carried out in English – the perceived global language – meeting a widespread demand for English-language skills. However, because it is an ‘independent’ university, XJTLU does not come under the auspices of the UK Quality Assurance Agency for Higher Education and the University of Liverpool will not be directly responsible for quality or standards. The university is run by a board, whose members include the US company Laureate, the Suzhou Industrial Park and the Chinese partner university.

The University of Liverpool is hoping to receive several benefits from this overseas development. In the long run, the University plans to sell various ‘products’ to XJTLU on a consultancy basis (such as curricula, quality assurance mechanisms, staff development experience, and so on). So some income will be generated in this way. However, the main advantage comes from an assured annual influx of Chinese students. Historically, the University of Liverpool has received significant numbers of international students from China studying in the Management School and in engineering and computer sciences. There has been a concern, however, that competition from other universities (especially from expanding HE capacity within China itself) threatens the long term dependability of these flows.

Starting next year, students at XJTLU will complete two years of their degree course in Suzhou followed by 2 years in Liverpool (with reduced international tuition fees). A four-year programme in Suzhou followed by a Masters degree at Liverpool is currently being developed and is attracting much interest. These structures ensure a constant and anticipated influx of Chinese students into the Liverpool university system. Electrical engineering at the University of Liverpool already has 50/50 home/overseas students and the new intake would change the balance to two-thirds overseas. This influx of students would allow the university to sustain itself and to grow as an institution.

The historic and cultural links between China and Liverpool are also deemed important to this development. Liverpool is twinned with Shanghai and has a higher profile in China than it does in Europe. Clearly, this initiative involves a high degree of risk and uncertainty. However, when it comes to China, possibilities would seem to outweigh the risks.

In a separate but related initiative, in May of this year the University of Liverpool announced an agreement with Kaplan Inc., another global educational and career services provider with an annual revenue of nearly $1.7 billion, and emerging interests in both the UK and China. Kaplan, Inc., is a subsidiary of the Washington Post Company. The joint venture between Liverpool and Kaplan will establish an international college located on the campus of the University of Liverpool. The aim is to prepare international students for entry into the University’s undergraduate and graduate degree programmes. Subject to meeting defined academic and English language standards, students who complete their course at Liverpool International College will be eligible for undergraduate and postgraduate degree programmes at the University. Such colleges are already in existence in partnership with the University of Sheffield, the University of Glasgow and Nottingham Trent University.

Johanna Waters