Purdue-Kaplan deal blurs lines between for-profit and public colleges

Purdue Global is the name of a new online education venture that involves Purdue and Kaplan universities. Shutterstock.com

As far as universities go, Kaplan and Purdue could not have been more different.

Kaplan University, which operated under parent company Graham Holdings, a $3.2 billion corporation, was part of the troubled for-profit college sector.

Purdue is generally considered one of the best public universities in the United States and the world.

Be that as it may, the two schools joined forces in a remarkable union that was formally approved this week by the Higher Learning Commission, the agency that accredits both institutions.

The move enables Kaplan to shed its for-profit status and the stigma associated with it. In a sense, you might think of Kaplan as having married up.

Many for-profit institutions have converted to nonprofit status, and vice versa. But this is the first time a publically traded for-profit university has become part of a state system of higher education.

Leaving the for-profit sector

It’s not hard to understand why Kaplan would want to ditch the for-profit label. The for-profit sector has declined dramatically since its height in 2010. Enrollment crumbled under accusations that for-profits provided low-quality education and used fraud and deception to recruit unwitting students, leaving many in debt and unable to get a job to pay back loans. After new regulations and oversight added unprecedented levels of accountability, large for-profits like Corinthian Colleges and ITT Technical Institute declared bankruptcy due to cash-flow problems related to legal issues and restrictions in access to federal financial aid. Kaplan gains a lot from turning to Purdue and leaving the for-profit world behind.

Last year, Purdue agreed to take over Kaplan University as its online education arm. Unlike Kaplan’s interest in moving away from for-profit status, Purdue’s decision to fold a for-profit college into its operation was surprising. But why would Purdue link arms with a for-profit institution?

In his presentation announcing the deal, Purdue President Mitch Daniels framed the move as an extension of his university’s public mission. He argued that as a land-grant university, Purdue provides broad access to higher education, but that there are still millions of students who are not being served. Online education can be a solution to this problem, but Daniels argued that Purdue could not build enough capacity quickly enough to address the need on its own. Daniels concluded that Purdue needed to buy that capacity from a school that already had it.

That school ended up being Kaplan University. For the bargain price of just one dollar, Purdue acquired Kaplan’s programs, students and faculty. A separate board of trustees will govern Purdue Global, the name of this new online education endeavor. Board members will be selected by Purdue, according to the university. Indiana students are eligible for in-state tuition for all Purdue Global programs just like at other public institutions in the state. Other than that and changing the name to Purdue Global on their diploma, most other aspects of the Kaplan University student experience will continue into Purdue Global.

The nature of the deal

Kaplan Higher Education – the for-profit company that remains after the transfer of Kaplan University – will enter into a 30-year contract with Purdue to provide support services. These services include not just technology and administrative support, but also central university activities such as recruiting, admissions and financial aid.

The service contract – and Purdue’s outsourcing of its online learning operations to a for-profit vendor – is key to understanding the deal. Dozens of prominent universities have made similar deals, usually with less transparency than what Purdue has provided.

For example, over the last decade, the University of Southern California has contracted with the for-profit company 2U. Under a long-term contract, 2U provides support for the technical development of courses and degree programs, admissions, student recruitment and student advising. The degrees are from USC but just about everything else that gets students into the programs and keeps them there comes from 2U.

Other companies, like StraighterLine, offer online general education courses to students directly. Over 100 partner institutions then accept them as transfer credit for their own degrees. The international student market is served by private companies like Navitas and Shorelight Education. They contract with universities via pathway programs to recruit foreign students and prepare them to enter into degree programs. Kaplan is a major player among pathway program providers but they are not selling that part of the business to Purdue.

The conversion of a for-profit university into a public institution of higher education is only half the Purdue-Kaplan story. The other half is about privatizing core aspects of higher education. The Purdue-Kaplan merger should put both issues in the spotlight.

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