Innovation of the Year: Purdue-Kaplan deal
April 27, 2017
The landmark deal would bring Kaplan's 32,000 students and 2,500 instructors under the school's umbrella for $1. Kaplan's parent company would remain in charge of administrative functions, like marketing, while Purdue would take over the academic functions.
Faculty and higher ed advocates have cried foul, saying the deal will allow the for-profit company to continue to operate without facing scrutiny from federal regulators. But supporters say it will allow the university to incorporate a strong online infrastructure which would allow it to meet the needs of more students.
The news of Purdue University's plan to acquire online and for-profit Kaplan University shook up the entire higher ed industry when it was announced in April.
“This is a critical, historic step in the future of college education” says Peter Smith, a former U.S. congressman who held top positions with public and private universities, including Kaplan University prior to his arrival at the University of Maryland University College. “I thought it was a brilliant move the first day I read about it – and I still do.”
The deal would bring Kaplan’s 32,000 students and 2,500 instructors under the school’s umbrella for $1, and give Purdue an experienced partner in the online realm where former Indiana Governor and Purdue President Mitch Daniels says it can make education accessible and affordable to a broader range of students.
Smith and others back Daniels in his belief that colleges must move online to survive and that Kaplan’s track record as a for-profit school with graduation rates and student debt has been pretty good, though its reputation has been tarnished by misdeeds of other similar institutions.
Universities must do more than dabble in the online world, Daniels says, and collaborating with an existing school with a good track record powers Purdue ahead quickly, providing an existing structure and expertise.
“None of us know how fast or in what direction online higher education will evolve, but we know its role will grow,” he told the education writers. “Could we do it ourselves? We considered whether we could catch up with the people who were at the front end of online education. And the honest answer was no.”
In the complex agreement Purdue reimburses Kaplan’s parent company 12.5 percent of revenue and makes the new school (now called NewU) in effect another branch campus, says Frank Dooley, senior vice provost for teaching and learning.
Some experts believe that while the U.S. Education Department approved the move this summer, it faces a bigger hurdle with the accrediting process through the regional Higher Learning Commission (HLC), which is reviewing the deal now and should rule in February.
It recently accredited Kaplan without much criticism, however, Russell Poulin, director of policy and analysis for the Western Interstate Commission for Higher Education, says the HLC is now likely to be concerned about the lack of transparency in the unique private/public partnership and about ways the agreement limits Purdue’s ability to make changes in the new school without the parent company’s approval.
He says to succeed the school will have to charge students “much, much more”, though Dooley says the NewU board has approved a $220 per-credit-hour fee for Indiana residents, a 45-percent discount
“Frankly, I’m still a bit confused about how this acquisition will work and meet student, accrediting, and regulatory needs,” Poulin says. “I think that those who perceive it as a threat are very worried about for-profit institutions suddenly transforming the oversight that they receive simply by changing their tax status”.
He also is concerned about a recent disclosure that with its approval the Education Department required Purdue assume responsibility for Kaplan’s debt and liability, which critics say could cost Indiana taxpayers in the end.
He says Kaplan has faced at least 12 lawsuits, disproving Daniels claim about its high standards. He is most concerned with provisions that require Purdue to make payments if it changes the Kaplan structure and makes it hard and expensive for it to move away from Kaplan.
“The secrecy, the headlong rush, the hype, the carefully orchestrated political momentum, the defensiveness – it’s very worrisome,” Shireman writes. “It’s certainly not the manner in which public institutions should operate when making bets with taxpayer dollars, and Mitch Daniels should recognize the path he is on.”
These approvals are a good sign for the rest of the industry, as more for-profit institutions consider converting to non-profits as a way to revive the struggling institutions. Marrying together for-profits and traditional nonprofit institutions would bring the administrative capacity and strengths of the for-profit sector to the academic strengths of the nonprofit sector and theoretically create a model which better serves students.