Ashford Seeks to Become a Nonprofit

Ashford University is the latest big for-profit bidding to become nonprofit. The university's owner, Bridgepoint Education, will seek to become an online program management company.

March 14, 2018
 

Another large for-profit university is seeking to become a nonprofit.

Bridgepoint Education on Tuesday announced a planned merger of its University of the Rockies with the larger Ashford University. And Ashford, as the combined institution, will seek to convert into a nonprofit.

“They will be able to focus on what they do best, which is academics,” said Vickie Schray, Bridgepoint’s executive vice president of regulatory affairs and public policy.

The conversion and merger will require approval from state and federal regulators as well as the WASC Senior College and University Commission, which is Ashford's regional accreditor.

Bridgepoint will continue on as an online program management (OPM) provider -- a booming space in higher education. The company will negotiate with Ashford to enter into a shared services agreement, with Bridgepoint likely handling data management, course management software and services, technology, and financial aid processing for the nonprofit university.

While many decisions have yet to be made about the transaction, the company said Tuesday that it expects “Bridgepoint will be compensated for relinquishing its ownership rights to the new nonprofit Ashford as well as receiving compensation for negotiated services that Bridgepoint will provide under a new services agreement.”

If approved by regulators, the contract between Bridgepoint and the new Ashford will in some ways resemble other major for-profit conversions or acquisitions, including Grand Canyon University’s ongoing attempt to become a nonprofit and the high-profile acquisition of Kaplan University by Purdue University, which is creating the new Purdue University Global.

End of Big For-Profits?

The structures of for-profit conversions have been controversial. The Century Foundation, for example, has criticized some of those moves as being attempts by for-profit owners to escape federal regulations, which tend to be tighter on for-profits, while still reaping personal benefits from owning the colleges.

David Bergeron is a senior fellow at the Center for American Progress and former longtime official at the U.S. Department of Education. He said conversions by Ashford and other large for-profits, if done well and with proper oversight from regulators -- both big ifs -- might not be problematic.

And while Bergeron described such moves as a “backdoor way to privatize higher education,” he said the conversions would be an improvement from what he and other critics have described as bad-actor for-profits that issue degrees.

“It is a step forward,” he said. “We’re drifting into a better place.”

A key sticking point for critics of conversions will be Ashford’s independence from Bridgepoint. The company said Ashford will be more independent from its former corporate owner than is the case for some other former for-profits. For example, company officials stressed that the university’s current Board of Trustees does not include any officers from Bridgepoint.

“The company and Ashford's board of trustees are taking steps to protect Ashford's independence in considering this transaction in order to enable Ashford to act in the best interests of Ashford University and its students,” Bridgepoint said in a corporate filing.

The university’s regional accreditor has scheduled a site visit for April and may decide on the proposed changes as soon as June. The U.S. Department of Education, the Internal Revenue Service and regulators in California, Colorado and other states also will need to approve the merger and conversion.

If successful, Ashford's conversion will leave just a handful of remaining large, degree-issuing for-profits.

The industry has struggled with years of severe declines in revenue and enrollments. Its problems were compounded by the Obama administration’s regulatory crackdown as well as by a related marketing hit to for-profit higher education. Two of the sector's biggest players -- Corinthian Colleges and ITT Technical Institute -- collapsed in recent years, while other big for-profits merged, went private or concentrated more on offerings in other countries.

Bridgepoint, which has been working on its conversion bid for two years, will remain publicly traded and plans to offer its program management services to other universities as well as Ashford.

Colleges have gotten more sophisticated in working with OPM providers, said Michael Horn, a senior partner at Entangled Solutions and a co-founder and distinguished fellow at the Clayton Christensen Institute for Disruptive Innovation. As they seek to expand online offerings, Horn said, colleges are less likely to sign away more than half of that revenue to outside companies, as was often the case a few years ago.

“The OPM space is ripe for disruption,” he said.

But while Horn said Bridgepoint has invested heavily in online learning, breaking into the increasingly crowded OPM market won’t be easy. “They’re going to have to get creative, strategically.”

History Repeats

Bridgepoint said the conversion bid for Ashford will bring the university back to its nonprofit roots.

Ashford has had an eventful 13 years since Bridgepoint in 2005 bought the Franciscan University of the Prairies, a religious college in Iowa that was on the verge of closure. Ashford grew rapidly after Bridgepoint’s purchase, eventually peaking at more than 90,000 students. But the sale also drew plenty of criticism, most notably from Democrats in the U.S. Senate, for having included the former religious college’s regional accreditation as part of the purchase. The debate over Ashford’s accreditation and physical location continues, outlasting the Iowa campus, which was shut down in 2015.

The combined enrollment of Ashford and the smaller University of the Rockies was roughly 41,000 at the end of last year. Doctoral programs offered by the University of the Rockies will become a new, yet-to-be-named doctoral college within Ashford, Bridgepoint said, while its master’s programs will be integrated into Ashford’s existing colleges.

Lawyers and for-profit industry analysts have said that as many as a dozen nonprofit conversion bids are in the works. Several attempts languished at the Education Department during the Obama administration, which also rejected one bid. But more for-profits are seeking to make the change during the deregulation-minded Trump administration.

The timing might seem odd to some, given that the administration’s Education Department is rolling back or pausing regulations aimed at for-profits. But most observers expect that the regulatory pendulum will swing back in coming years. So for-profits are looking to make structural changes while they can, and before gainful employment or other regulations re-emerge.

Demographics are also a challenge for a for-profit sector that remains in free fall. Low unemployment in particular has hurt for-profits and community colleges, which enroll more working adults than do traditional, four-year colleges.

“The market is forcing them to do this,” Horn said of for-profit conversions.

Meanwhile, nonprofit institutions like Western Governors University, Liberty University and Southern New Hampshire University are increasingly dominating the national online space.

“The collapse of the for-profit sector created a vacuum,” said Horn.

As for Ashford, the university’s president, Craig Swenson, said the conversion will benefit students.

“As the higher education environment continues its rapid evolution, Ashford University believes this transformation will enable us to serve students even more effectively as they pursue their academic aspirations,” he said in a written statement. “We also believe that the synergies arising from the merger of Ashford University and University of the Rockies will allow us to make an even greater contribution to the public good.”

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