Fate of EDU For-Profits: A look into recent enrollment changes and shut downs

One month ago the Education Corporation of America (ECA) was the latest for-profit system to shut down, as described by Inside Higher Ed:

Education Corporation of America owns more than 75 campuses and enrolls at least 20,000 students in mostly certificate-granting professional disciplines such as cosmetology, culinary arts and medical and dental assistant programs. It operates chains including Virginia College and Brightwood College.

A week later Adtalem Global Education completed their sale of for-profit systems:

Adtalem Global Education (NYSE: ATGE), a leading global education provider, today announced the completion of the transfer of ownership of DeVry University (DVU) and its Keller Graduate School of Management to Cogswell Education LLC. Today’s announcement closely follows Adtalem’s disclosure of the transfer of ownership of Carrington College to San Joaquin Valley College, Inc. (SJVC Inc.) which was completed on Dec. 4, 2018. Post divestitures, Adtalem Global Education’s U.S. postsecondary degree-granting institutions serve the high-demand, rapidly growing medical and healthcare markets.

The centerpiece of Adtalem’s remaining portfolio1 is Chamberlain University, a growing system of nursing-based programs, and a look at the underlying data reveals that Chamberlain is one of only two large for-profit systems with significant growth.

Given all the changes in for-profits, we tend to see either anecdotes about specific institutions or aggregate data on all for-profits combined. What is missing, though, is a view in between, showing enrollments and changes to a select group of for-profit schools, to help understand the different fates of different institutions.

Why does this matter? For one, many for-profit chains are accredited as a number of different institutions, and they need to be combined to understand overall company strength. Second, following Tolstoy’s idea that “All happy families are alike; each unhappy family is unhappy in its own way”, the decline of for-profit institutions has a number of unhappy families with different lessons. In the case of ECA there is something unseen in other cases – ECA abruptly shut down despite growing enrollment by 32% year-over-year across Virginia College and Brightwood Colleges in the most recent IPEDS.

The chart below shows differences from the Fall 2012 IPEDS enrollment report (grad + undergrad) for the 13 largest degree-granting systems as of that date, running through the Fall 2017 report (the most recent data available). I’ve added notes to show the various changes in ownership, control, and status for these systems – converting to non-profit status with a for-profit operating entity, merging of institutions, sale of institutions as with DeVry, going bankrupt withy full shut-down of systems, or taking the company private as with the U of Phoenix. Click on image for full size version.

Some notes:

• To read the chart properly, note that Chamberlain University had almost 20,000 more students in Fall 2017 than they had in Fall 2012, while DeVry University had roughly 50,000 fewer students in that same time period;
• Seen together, it is startling the extent of changes in ownership, control and status among these former high-flying for-profit systems;
• The only significant growth for these large systems came from Grand Canyon University and Chamberlain;
• The changes to Virginia College and Brightwood College are not that significant; and
• By far the largest decrease in enrollment has been the University of Phoenix.

While that view shows enrollment changes in total numbers, it is also useful to see relative changes for these same systems since 2012 to take into account the different enrollment sizes of the systems.

Some notes:

• To read the chart properly, note that Chamberlain University grew roughly 120% from Fall 2012 to Fall 2017, while DeVry University shrank more than 60% in that same time period;
• In percentage terms, Chamberlain’s growth exceeds Grand Canyon University’s, which surprised me, but it seems to be leveling off;
• Likewise, in percentage terms, DeVry University’s decline is roughly the same as the University of Phoenix’s;
• Virginia College and Brightwood College actually grew from Fall 2016 – Fall 2017; and
• We can see the shutdown of Corinthian Colleges (Everest) and ITT with 100% declines (ITT reported data in 2016 and 2017 even with no students).

Let’s focus on just the four brands mentioned in last month’s stories – DeVry University & Chamberlain University for Adtalem, and Virginia College and Brightwood College for ECA.

With this view, Adtalem’s strategy of selling DeVry while keeping Chamberlain makes a lot of sense, even if several years late and if they essentially gave away DeVry.

ECA’s shut down, however, is not easily explained by the data. Unlike ITT and Everest, Virginia College and Brightwood College were not in enrollment free fall, and in fact there was instead recent enrollment gains getting them roughly back to 2012 levels. So why such an abrupt shutdown of ECA? The answer seems to lie with how the Department of Education and its accreditor handled recent troubles, based on IHE reporting.

The shutdown follows years of declining enrollment for the chain. More recently, the privately held company scrambled to turn around its troubled finances by closing about a third of its campuses and pursuing a corporate overhaul through a court-approved receivership. But ECA continued to be dogged by creditors after falling behind on payments and rent for many campus locations. In October the company filed a lawsuit, which was later dismissed, against the U.S. Department of Education in an attempt to maintain its access to federal student aid.

In an email to campus employees Wednesday morning, ECA CEO Stu Reed said that the Department of Education had added new restrictions on its access to Title IV student aid. And on Tuesday night, the Accrediting Council for Independent Colleges and Schools suspended the colleges’ accreditation. Those steps meant the company couldn’t secure the additional capital needed to operate its campuses, he said.

I do not have enough knowledge to judge whether the ED should have shut off access to financial aid at the time that they did, but it does appear that students are paying the price despite signs that the schools were making significant enrollment gains. From the news coverage, there were significant outcomes issues beyond financial health of the parent company, but to my knowledge, this is a new situation among for-profit colleges in having a shut down despite very recent enrollment gains.