Coverage: Purdue acquires Kaplan University

Purdue University said Thursday it has acquired for-profit Kaplan University to extend its reach into online and adult education, an unusual move for a public institution.

Danielle Douglas-Gabriel of the Washington Post had the news:

Instead of folding the for-profit school into its operations, Purdue plans to form a new university comprised of all 15 campuses and learning centers of Kaplan University, as well as 32,000 students and 3,000 employees. All existing Kaplan students and faculty will transition to the new school that has yet to be named.

The newly formed school will rely on tuition and fundraising to cover operating expenses, not state appropriations. It will primarily operate online, with no plans to expand the physical footprint beyond the existing 15 locations. Indiana residents will receive discounted tuition.

“Kaplan and Purdue share the critical mission of expanding access to education,” Donald E. Graham, chairman of Graham Holdings Company, the parent company of Kaplan Inc. and Kaplan University, said in a statement. “Purdue takes its land-grant mission very seriously, and I’m deeply impressed by this great university’s commitment to meeting the needs of non-traditional students.”

Purdue must receive approval from the Education Department and its accrediting agency, the Higher Learning Commission.

Two years ago, Kaplan sold 38 campuses to the Education Corporation of America, but held onto the 15 locations that will now be transferred to Purdue. Like other for-profit schools, Kaplan has seen its enrollment slide recently, with a 22 percent drop in the last year. Revenue at Kaplan Higher Education also fell 27 percent during that time, according to Graham Holdings’ annual report.

Jillian Berman of Marketwatch.com reported why Purdue made the deal:

Mitch Daniels, Purdue’s president, framed the acquisition as a “national first” and an opportunity for the university to become a “21st century land grant school.” Folding Kaplan into Purdue, the school will be able to reach working adult students who typically would not have access to Purdue, Daniels said in a presentation to Purdue’s board of trustees. The acquisition will also allow Purdue to ramp up its online offerings at a time when that market appears to be growing rapidly, he added.

But the acquisition comes amid growing skepticism of the for-profit-college sector. Two major for-profit college chains have shut down over the past few years, amid accusations that they lured students into taking on high debt loads with misleading promises about future earnings. Kaplan has its own controversial history, including probes by multiple state law-enforcement officials and the U.S. Department of Justice into its practices.

The Obama administration tried to crack down on bad actors by requiring for-profit colleges to prove they prepare their students to earn a decent living. Kaplan was one of more than 200 schools that appealed the government’s ratings of some of its programs under the law. If the Purdue acquisition is approved, Kaplan will no longer be subject to that oversight.

“It’s not surprising that Kaplan was looking for a way out,” said David Halperin, a lawyer and advocate who works on for-profit-college issues. “It’s admirable that Purdue wants to do more to get into career education — helping students train in careers like health and information technology — but what it means is that Purdue may well be acquiring toxic assets.”

Paul Fain of Insider Higher Ed reported on the problems in for-profit higher education:

Purdue will join several nonprofit institutions that are increasingly dominating online education, including Arizona State, Liberty, Southern New Hampshire and Western Governors Universities.

“None of us knows how fast or in what direction online higher education will evolve, but we know its role will grow, and we intend that Purdue be positioned to be a leader as that happens,” Daniels said in a written statement. “A careful analysis made it clear that we are very ill equipped to build the necessary capabilities ourselves, and that the smart course would be to acquire them if we could. We were able to find exactly what we were looking for. Today’s agreement moves us from a standing start to a leading position.”

The Kaplan news follows several dramatic changes for large, publicly traded for-profits, including the collapse of the controversial ITT Technical Institute and Corinthian Colleges, the sale of the University of Phoenix to private investors, and the so-far unsuccessful attempt by Grand Canyon University to go nonprofit, with the company saying it wants to avoid the “stigma” for-profits face.

Likewise, Education Management Corporation, a major for-profit chain, last month sold to the Dream Center Foundation, a religious missionary group, that plans to run the former EDMC as a secular, nonprofit institution. And a large chunk of the remains of Corinthian was purchased less than three years ago by ECMC Group, a student loan guarantee agency, that created the Zenith Education Group as a new nonprofit career college chain.