By Peter Galuszka

The pioneer of for-profit, digital education that we all so love and respect on this blog is in trouble.

The University of Phoenix, a behemoth, has announced it is closing down 115 of its on-site locations, including 25 main campuses and 90 smaller ones, according to The New York Times.

About 800 Phoenix workers out of 17,000 will be laid off and 13,000 of its 328,000 students will be affected.

One reason for the downsizing is competition in the fast-growing world of digital ed, but there’s another reason. Phoenix and its owner Ap0llo have been trashed repeatedly for recruiting scams, low graduation rates and high defaults on its pricey tuition. Its not alone. Kaplan Higher Education (owned by The Washington Post where I sometimes contribute and write on a freelance basis) is in similar trouble.

These are warning signs in the mad dash towards praising digital ed as the only thing worth talking about in higher ed. My view is that the new form has its place but cannot replace entirely old-fashioned classrooms with real professors and real students and real debate and lab sessions.

It is incomprehensible that a lower tier school like Liberty in Lynchburg that is only now shaking off the reputation of Rev. Jerry Falwell boasts of having a student body of more than 80,000. Translated, they have found 80,000 people with credit cards willing to sign up for a course without showing any credentials. It’s not exactly like getting a fat envelope in the mail from Harvard.

I know DigEd boosters will tell me that it’s the magic and the market and all that. But be warned.

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  1. when students like ex-military with govt benefits or govt-subsidized student loans are involved – the private sector is going to figure out how to get’s it’s hands on that money.

    that’s what many of these companies like Phoenix rely on – and just think what would happen if we voucherize K-12 education.

    The issue is not online vs bricks/mortar private education institutions – it’s company’s – both online and bricks/mortar who recruit those who have govt benefits and subsidies and sell them non-accredited or non-accredible education.

    this will be the same problem with vouchers – private companies will also recruit the least sophisticated who have benefits and subsidies and without regulations to require performance standards – just run scams – both online and bricks/mortar.

  2. there are two basic paths here.

    Do we get rid of education benefits and subsidies because we don’t want them squandered on scams OR do we have to tighten regulations and promulgate rules that require all courses offered by private institutions purchased by people with govt benefits or subsidies be certified as accreditable? no matter whether it is bricks/mortar or online – higher ED or K-12?

    this is how some of those nasty “job killing” regulations come to exist and you can bet your sweet bibby that these “institutions” will lobby with all their might to keep such regulations from happening and part of the way they will do it is by giving campaign contributions to like-minded legislators.

  3. One thing you can say about the University of Phoenix: When demand falls short of expectations, the enterprise actually cuts marginal operations. Not something you see very often in traditional higher-ed.

  4. If we REALLY wanted to rein in higher ED costs with true competition, we require some kind of accreditation of courses – no matter who offered them, public, private, online, bricks/mortar.

    what we do instead is set up conditions where tax dollars are gobbled up by companies posing as providers of education but more like payday loan companies. They prey on the unsophisticated to steal money that is ostensibly provided to help them ultimately be able to find jobs but the courses are not legitimate.

  5. DJRippert Avatar

    You guys are confused.

    Online education vs “for profit” education.

    Online education is here to stay. It will be used by traditional universities to cut costs. The endless array of redundant professors at various universities will be reduced as large lecture courses and introductory courses (especially in quantitative subjects) are replaced with online classes. Hopefully, even the grossly mismanaged traditional colleges and universities will be able to use these efficiencies to reduce the absurd and inexcusable costs of tuition at those institutions.

    “For profit” education, a free enterprise endeavor, will ebb and flo as demand dictates. They are under pressure now but they are already signing contracts with companies which guarantee a number of jobs for students who meet requirements at those schools. A direct tie between education and employment. Something the traditional universities couldn’t figure out over the last 2,000 years.

    The best “for profit” model is in India where “for profit” colleges take the unemployable liberal arts graduates being churned out by traditional universities and teach them skills that the market wants. It a tough curriculum and it’s expensive. However, if you make it through (and many don’t) there is a guaranteed job at the end.

  6. re: ” One thing you can say about the University of Phoenix: When demand falls short of expectations, the enterprise actually cuts marginal operations. Not something you see very often in traditional higher-ed.”

    totally agree. But you know there are higher ed schools that do downsize and do go broke.

    but there is no question that companies like Phoenix profit enormously from govt subsidies and it’s an open question what their business model would look like if they did not have access to govt subsidies and customers had to spend their own money for what kind of education?

    The real point here is that both public and private education providers depend on govt subsidies but most public providers do deliver a credible education and many private providers do not.

  7. private online will fail if they have to meet accreditation standards and customers are buying with their own money instead of govt subsidies.

    “Online” will succeed if offered by institutions whose courses are accredited (and transferable to bricks-mortar providers).

    what we have right now in the private sector online education world is a lot of scams – the educational equivalent of payday loans except many customers are not spending their own money but “spending” govt subsidies.

    It’s such a mess that the Armed Services are warning serviceman what a scam some are.

    take a look:

    Now the business types will tell you that this is more “socialism” from Obama… and more regulations are not needed … and they’ll see to it that anti-regulation GOP types will get campaign donations.

  8. this is an interesting and provocative article about how other countries are using US-provided online courses and what happens to the internet.

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