For-Profit Colleges: Sound Taxpayer Investment or Wasteful Spending?

In Senator Harkin’s opening remarks during the recent congressional hearings on higher education, he stated, “We have a responsibility to ensure that taxpayer dollars are being spent wisely, and that for-profit colleges are serving students, not just shareholders.” As the CEO of TopSchool and previously serving as the president of eCollege, I understand the need to serve shareholders. However, I couldn’t agree more that the ultimate goal of those of us in education is to serve the student.

For-profit colleges have a huge opportunity to move education forward, and at a great value to taxpayers. They have already made great strides in driving access, innovation and a trained workforce.

ACCESS:
For-profit colleges make education possibilities a reality for the underserved, non-traditional student population. The Department of Education states that the Student Aid Objective is “to ensure that low and middle income students have the same access as high income students do.”

The for-profit education industry delivers an attractive alternative to students who are lower income, minority, older and/or more financially independent. Roughly 76% of for-profit college students are financially independent compared to 50% at public schools, and 45% of for-profit college dependent students come from families in the lowest income quartile compared to 24% at public and 22% at private non-profits.1 These for-profit college students are not choosing between paying their own way or getting federal financial aid – rather they are choosing between not getting educated and federal financial aid.

In fact, according to the U.S. Department of Education, the average Estimated Family Contribution for a student attending a four-year, non-profit school is almost $17,000, which is 123% greater than the $7,500 average for a student attending a four-year, for-profit school. Ironically, this is almost exactly the same ratio of the federal aid required by a student attending a for-profit school compared to a non-profit school.

INNOVATION:
For-profit colleges sit on the forefront of innovation when it comes to flexible delivery and schedules, giving more students the chance to succeed.

When you consider that 60% of for-profit college enrollments occur on a rolling basis, 2 meaning frequent intervals during the year, flexibility is key. For-profit colleges invest significantly in meeting the complex needs of their non-traditional students through online education, night and weekend offerings, and smaller suburban/satellite campuses. This consistent drive to satisfy their students has resulted in 65% of for-profit college students attaining a degree within six years after enrollment, slightly higher than students attending four-year, non-profit schools.3

SKILLED WORKFORCE:
For-profit colleges also focus on aligning their programs with the fields and jobs that are most in demand. According to Imagine America Foundation, for-profit colleges currently enroll more students (44%) in high demand fields than do public (18%) and private, not-for-profit (13%) institutions.2 In fact, 17 of the 20 fastest-growing occupations are in the key focus areas of for-profit schools, including the healthcare and computer/data processing industries, with an estimated 1.8 million jobs being created in these fields through 2016.2 These are positions that graduates of for-profit colleges can fill.

Not only are for-profit colleges training students, but they are getting them placed in the workforce. Consider the percentage of students who are employed within six months of graduation – in 2009, DeVry University reported a 90% placement rate for these students, while larger universities such as UCLA and Johns Hopkins reported only a 45% rate.4 And overall, 76% of for-profit college students who completed an award in 2005 were employed directly following graduation.2

WHAT DOES THIS MEAN FOR TAXPAYERS?
Before we jump into the numbers, I think it important to point out that both for-profit and non-profit models work effectively. For-profit institutions are similar to state systems of higher education in that graduates of both models step out into a demanding job market after earning such degrees as an Associate’s in Accounting, a Bachelor’s in Finance or Computer Engineering Technology, a Master’s in Business Administration or Education – and the list goes on and on.

That said, what do taxpayers invest in students at for-profit schools? And to round out the equation, what is the taxpayer investment to support students at non-profit schools as well?

For-profits
Let’s start on the for-profit side. I analyzed four large, publicly traded for-profit institutions – DeVry, ITT, Strayer and Corinthian Colleges. Using the data available in their most recent annual reports, I wanted to determine the taxpayer investment required to educate one student for one year. I calculated a “net taxpayer investment” by taking the annual Title IV revenue received for all four schools, in this case $3.5 billion, and subtracting the annual taxes provisioned by the institutions, in this case $377 million. As noted in the table below, this number, divided by the student population served, which was around 313,000, resulted in the net cost to taxpayers of roughly $10,000 to educate a student for one year at one of these for-profit schools.

Non-Profits
Keeping that equation in mind, let’s take a look at the non-profit side. In addition to federal financial aid, students enrolled in public, non-profit institutions reap the benefits of state funding for education. You’ll notice that no federal taxes are provisioned for these non-profits as they don’t pay them.

Since I reside in Colorado, I’ve used publicly available information about our own higher education system. According to the Colorado Department of Higher Education, in the Fall Term 2009, the state enrolled just over 240,000 students in its 28 two-year and four-year institutions. During that same year, the Department was allocated almost $2.8 billion in state funds and received over $1.2 billion in federal student financial aid. The table below shows that the net cost to taxpayers to educate a student in the Colorado Department of Higher Education in 2009 was almost $17,000, which is 66% greater than at the for-profit institutions.

Federal Loans
Of course, if we are looking at a net investment to taxpayers, we need to remember that much of the federal subsidies for higher education come in the form of loans. For a variety of reasons, students default on their loans. According to an analysis by the Chronicle of Higher Education, the 15 year loan default rate for for-profit students enrolled in four-year programs is 30%, as compared to 15.1% for non-profit students.5

Using the example from the Colorado Department of Higher Education, when you account for the percentage of education subsidies that are loans (compared to grants or state appropriations) and the difference in default rates, the adjusted taxpayer investment per student at a for-profit school is roughly $4,100, compared to $13,200 at a non-profit school, driving the State of Colorado non-profit education to a 224% premium over for-profits.

THE VALUE TO STUDENTS AND TAXPAYERS ALIKE:
Both for-profit and non-profit institutions play valuable roles in our country’s need to educate the masses. All aspects of our society benefit the more educated we become. The fact is that we need both choices to effectively serve our country’s diverse population.

We can’t deny that the high growth, for-profit college industry should be held accountable for its recent issues, including the misguided information given to students by admissions representatives, higher default rates and so on. However, we also can’t ignore the tremendous value these schools provide to students. I believe the overall value to taxpayers is well worth the growing pains.

The critical factor in both the for-profit and non-profit models should always be the students. Students need accurate and credible information to make an educated choice in determining their path. At the same time, schools need to use data to better understand the type of student who is a good fit for their program and the ways in which they can ensure the success of that student.

In my career in the education market, I’ve learned the importance of data in providing a quality educational experience, both in the way education is delivered and the way it is managed. This principle guides everything we do at TopSchool, as we have built a next generation student information system – and that is exactly what the leaders of both for-profit and non-profit schools like about our model.  The majority of the data and information that Senator Harkin and others want to provide to prospective students can be accessed through a system like ours. We believe the key is making it accessible and available to the right audiences.  In addition to the many uses for prospective students, access to data can also guide college and university leaders to better understand their students and drive stronger learning outcomes, student satisfaction and retention.

Regardless if the school fits the for-profit or non-profit model, those schools that rely on data to make decisions that benefit their students will deliver a tremendous value not only to their students, but also a high return to us as taxpayers, to our workforce, and to the future of our country.

TAXPAYER INVESTMENT IN HIGHER EDUCATION:

Taxpayer Investment in Higher Education

Sources:

1U.S. Department of Education, National Center for Education Statistics, “National Postsecondary Student Aid Study 2003-2004 (NPSAS: 2004).”
2Imagine America Foundation, “Economic Impact of America’s Career Colleges (2007).”
3U.S. Department of Education, National Center for Education Statistics, “1995-96 Beginning Postsecondary Students Longitudinal Study, Second Follow-up (BPS: 96/01).”
4Daniel Hamburger, DeVry University, “The Vital Role of the Private Sector Higher Education,” 2010, (data originally pulled from institutional websites, May 2009).
5 The Chronicle of Higher Education, “Government Vastly Undercounts Defaults” July 11, 2010.

Career College Technology Discussions at PAPSA

Last week, I spent a few days in Pennsylvania and have returned to Denver energized for things to come. Along the way, I was stuck behind a number of major traffic accidents and was re-routed extensively. It gave me an opportunity to see much of the PA country side and was worth the detour.

A colleague and I had a great meeting with a business college in the region. They have significant growth plans and are looking to utilize a student management system to increase operational efficiencies. We all look forward to further discussions with them.

I was honored to be invited to speak at the Pennsylvania Association of Private School Administrators Annual Conference.  I welcomed the opportunity to discuss the power of Software as a Service (SaaS) solutions to the attendees. SaaS solutions are flexible, low maintenance and can help schools focus on recruitment, retention and placement, rather than IT. It was great to see schools embrace the concept of SaaS.

In addition, I was excited about Mike Artim’s presentation, and he didn’t disappoint. Mike is the Executive Director of Cambria-Rowe Business College. Cambria-Rowe has been talking with employers in the region to better understand the skills and competencies they are looking for to fill positions. The school is evolving its program curriculum to adapt to the changing needs of the employers. Mike also discussed how Cambria- Rowe is leveraging technology in the classroom through the use of digital content, iPads and other vehicles.

Thanks to the efforts of the group at PAPSA for an enlightening career college conference, I look forward to participating next year.

I’m always looking for feedback, how is your school leveraging technology to create efficiencies?

TopSchool Raises $8 Million in Growth Capital Series C Funding

By now, you may have heard the good news here at TopSchool. We’ve raised an additional $8 Million in Series C funding. The funding was led by MK Capital, and Karen Buckner, partner and Chief Operating Officer at MK Capital, will be joining our board.

This funding will allow us to continue to advance our products and infrastructure for increased performance of the TopSchool SaaS Student Lifecycle Management system. We also will use the funds to invest in increased account management support.

We are poised for growth and look forward to supporting the growth of our college and university customers.  We recognize a need for an alternative to traditional college student information systems, and our unmatched capabilities are meeting and exceeding this demand in the market.  The Series C funding will be instrumental in enabling us to better serve our clients and embrace this market opportunity.

Building Successful Student Profiles

I recently presented at the Distance Education and Training Council Annual Conference, and there was quite a bit of talk about student profiles.  So, I ask you this…

1)     How important are student profiles in helping schools meet learner demands? 

2)     And if you believe these profiles can contribute to both student and institutional success, how do you even go about building them?

I believe there are both a tremendous need and an exciting opportunity to better understand your students.  How are they changing?  How can you create models that meet their needs?  And how can you communicate with them based on their needs? 

I happen to be one that believes student profiles are of absolute importance when it comes to providing your students a unique and productive experience.  And the most effective profiles are those that include information from across the student lifecycle.  Schools that not only build, but more importantly use these student profiles will be able to 1) recruit the right kinds of students, 2) quickly launch new programs, and 3) tailor offerings and delivery modes. 

Student profiles can encompass demographic, behavioral and psychological information.  For example, how old is the average student, how ready are they to enroll, what risk factors to they have, what programs are they most interested in, and what are their career goals?

I propose three steps that will help you gather the necessary data in order to build your successful student profiles:

  • Report on student activity from prospect to placement
  • Monitor student inflection points
  • Deliver education where and when students want it

Student profiles can be critical in analyzing where, when and how students can be most successful at your school.  By building a complete picture of each unique student, your school can best meet a particular student’s needs and the student can maximize the education experience.

Webinar Re-cap: Fight for Your Budget: How to Track and Justify Your Admissions Marketing Efforts

TopSchool co-hosted our first webinar this week with MyUsearch.com: Fight for Your Budget: How to Track and Justify Your Admissions Marketing Efforts.

Derek Kraus, the former director of operations for Westwood College and Justin Sloan, the former senior director of admissions for the College of Wooster, both of TopSchool, were our presenters.

If you weren’t able to attend, a copy of the presentation can be found here.

In short, here are seven easy steps to track and analyze your admissions marketing efforts so you can fight for and secure the appropriate budget:

  1. Identify your student profile: Know who your students are. Brainstorm with groups to provide one word adjectives that describe your students. Be clear in describing your students and displaying your knowledge of your campus.
  2. Determine costs (CPL, CPA, CPS): Know what all of your expenses are within each measuring category of CPL (Cost per Lead), CPA (Cost per Application) and CPS (Cost per Start).
  3. Set metric goals: Set your goals for each metric identified, plus you may have additional ones, such as the number of student leads you will need each week or month, to help reach your enrollment goals.
  4. Find your students: Which websites do your students visit? Which vendors can help you find your student profile? Identify these websites and vendors and have a clear plan of how you’re going to work with them.
  5. Diversify your vendor list: Always diversify the list of vendors you utilize. This will help you  not only access a broader prospective student base, but also diversify the resulting student population.
  6. Create data tracking: Make sure you have the right tools in place for tracking all the necessary information such as the number of student leads, applications, starts and all related costs.
  7. Standardize measurements and reports: Lastly, standardize all of your measurements and reports. Consistency allows for greater understanding and transparency of what’s going on in your processes and the ability to clearly and easily indicate how your changes are effectively improving costs, revenue, employee morale and the overall experience of your students.

Following these seven steps will lead you to increased enrollment and operational efficiencies.

Are you already addressing each of these steps in your admissions process?

Insights from the CAPPS Conference

I was fortunate enough to be able to attend the CAPPS (California Association of Private Post Secondary Schools) Conference in Los Angeles this week.  This year the conference had a record number of attendees for various reasons.  One of the primary reasons was that many of the Private Post Secondary schools were looking for answers on how the recently passed California Private Postsecondary Education Act of 2009 would affect them.  A summary of this bill and details of the act can be found at the following link:  http://www.aroundthecapitol.com/Bills/AB_48.

Of the many interesting sessions being conducted at the conference I was able to sit in on the Internet Leads Panel discussion.  This discussion offered best practices from experts on ways to create more effective internet lead acquisition strategies and how to best convert those leads.  The session included guidance from Fred Carini, an industry veteran and  well regarded Vice President of Sales and Marketing for Milan Institute which operates 16 schools in four states, Craig O’Neil who is VP of Product Management of one of the nation’s largest wholesale lead generators and TopSchool’s very own Justin McMorrow, SVP of Sales and Marketing.

The panelists discussed how the use of Internet leads providers and aggregators can be an extremely effective mechanism for increasing starts.  For some higher education institutions,  over 70% of starts can be attributed to internet leads.  In summary, the key takeaways from the session from the three different perspectives were as follows:

  • From the School’s Perspective
    • Make sure Admissions Staff are trained and have the right tools to follow up with Internet leads
    • Share all of the lead information success/failure rates frequently with your lead providers to give them insight into which leads are converting and which ones are not
    • Immediacy – Admissions staff must follow up with leads quickly and effectively, especially given the nature of how internet leads are generated
  • Lead Provider’s Perspective
    • Schools must understand the different channels of internet leads, such as:
      • Web searches, email campaigns, social networking, call center, banner ads, hosted affiliate websites and institutional website
    • Schools must clearly understand how each of these different channels behave and have realistic expectations on how lead performance varies based on channel
    • Importance of providing transparency to the school by providing metrics to the schools on campaign, lead source and channel
  • Educating the schools on the inherent issues associated with working with internet leads
    • Web Amnesia – when students forgot that they submitted an inquiry form or opted in
    • Duplicate Lead information
    • Offered Incentives (ipods, electronics, etc) which create interest, for the  wrong product/brand
    • Shared Marketing data – the case where a student opts in to receive marketing information for multiple sectors not just higher education
    • Promise of Scholarships or Financial Assistance – another form of incentivizing prospective students which is very deceiving but does happen
  • From the Student Lifecycle Management System Perspective
    • Speed to first touch is important (Immediacy)
    • Ensure lead distribution rules are mapped effectively during business and off hours to ensure complete coverage
    • Establish business processes to support technology and ensure proper training and understanding around that process

The feedback from other attendees was very positive and the session overall was very informative.  Everyone appreciated the opportunity to gain insights from three different perspectives of working with internet leads – not just from the school’s vantage point.

 It is clear that the challenges of working with internet leads are multi-faceted and can be extremely complicated but employing the key strategies mentioned above can be effective in increasing the conversion of these leads.

 What measures have you employed to help increase lead effectiveness at your institution when working with internet leads?  How do you track internet leads that actually heard about your brand via word of mouth, t.v., radio or billboard ads?