While other colleges struggle, for-profit schools hope for revival

Some of the nation’s largest for-profit colleges are ramping up advertising, hiring recruiters and offering discounts for online classes as they predict the coronavirus pandemic will push unemployed workers back to school, helping revive the industry.

New marketing campaigns target Americans who have been ordered to shelter at home. Capella University, an online college, is promising “flexible education for uncertain times.” The University of Phoenix is telling students that they’re “online, but never on your own.”

Some chains are offering scholarships for students whose finances have taken a hit or for those pursuing careers in nursing, teaching and other fields expected to be in high demand after COVID-19 cases subside.

To critics, it’s nothing more than a marketing ploy to capitalize on crisis. But leaders of some for-profit colleges say they’re preparing for what they believe will be a surge in demand for online education.

Millions of Americans are at home and out of work, and those college leaders believe more people will try online classes. Even after traditional campuses reopen, they think students will be reluctant to return to dorms and classrooms buzzing with students.

“Hundreds of thousands of students are either going to be concerned about their health, or they’re literally not going to be able to go back to their dorms,” said Karl McDonnell, CEO of Strategic Education, Inc., the owner of Capella and Strayer universities. “We expect that demand, broadly, is going to dramatically increase as a result of this.”

The industry’s opponents are raising alarms about the potential upturn, saying it could come at the expense of students. They warn that the sector has a history of using aggressive marketing tactics to lure students into programs with little academic value.

Even as critics call for greater scrutiny, the federal government is giving the industry a financial lift. Last month, the Trump administration and Congress allotted more than $1 billion to for-profit colleges as part of a $2.2 trillion rescue package.

During past recessions, colleges of all types have seen their enrollments rise. Workers who lose jobs often turn to colleges to update their skills or change careers. But this time, traditional colleges are bracing for losses. Schools are scrambling to move their classes online, but many fear that students will be unable to afford tuition next fall, and that others will want to stay closer to home.

For online colleges, a market dominated by for-profit schools, the conditions could be ripe for a resurgence, analysts say.

The American Public University System, a for-profit online college, is offering a 50% discount for up to two online classes this summer, a deal directed at students at schools with limited online courses. Students will be encouraged to the transfer credits back to their home schools, officials say, but the company believes some will want to stay at the online college.

“We don’t want to hurt institutions. But if fall enrollments at traditional face-to-face institutions are deferred, I think you’ll see students either take a year off or they’ll say, you know what, I’ll study somewhere online,” said Wallace Boston, the school’s president.

At Strayer and Capella, officials are telling students at historically black colleges that they can take free online classes this fall if their campuses don’t reopen on time. Capella is also offering a new “Front Line Heroes” discount for students in teaching or nursing.

“Now is not the time to make a quick buck on anyone,” said McDonnell, chief of the schools’ parent company. “We think we’ll be in a good position to continue to serve the country. But now our view is, let’s just do whatever we can to be helpful.”

Other companies are hiring more recruiters. As unemployment began to surge last month, Zovio, the parent company over the online for-profit Ashford University, announced it would add 200 enrollment advisers.

Any upswing would be an improvement for the industry, which reached its peak enrollment in 2010 before going on to lose half of its students by 2017. During that span, major chains, including Indianapolis-based ITT Educational and Corinthian Colleges, collapsed as the Obama administration cracked down. Others have gone bankrupt even with allies under President Donald Trump.

Before the pandemic, education analysts saw little hope for a major turnaround. But the scale of unemployment has been so dramatic that it could outweigh other factors working against the industry, said Trace Urdan, managing director at Tyton Partners, a consulting firm and investment bank.

Urdan expects for-profit colleges to see a boost, although it could be curtailed by rising competition from nonprofit schools and other companies in the online market. Some competitors have also boosted marketing, including Western Governors University, an online school that’s offering $3,000 scholarships for those affected by the pandemic.

To critics, the flurry of activity brings echoes of the 2008 recession, when for-profit colleges enrolled record numbers of students but left many of them with heavy debt and few job prospects.

A new study by the advocacy group Veterans Education Success found that some chains have been spending more on Facebook ads during the pandemic. “This aggressive and deceptive targeting will once again harm veterans’ academic and economic prospects,” the group said.

In an open letter to state and federal politicians, two student advocacy groups are calling for sharper oversight as colleges are given flexibility to move programs online. The letter warns that for-profits will be tempted to create programs that boost revenue but do little to prepare students for jobs.

“A perfect storm is brewing for a rip-off revival to parallel the predatory for-profit college boom of the 2000s. And the most vulnerable students will inevitably pay the heaviest price,” said the letter, signed by leaders of the National Student Legal Defense Network and the Institute for College Access and Success.

The letter draws attention to the industry’s history of poor outcomes, noting that students at for-profit colleges default on their loans at nearly four times the rate of students at public community colleges.

But supporters say the industry has improved. The worst schools have closed, and those left are more concerned about graduation rates than enrollment levels, said Steve Gunderson, president and CEO of Career Education Colleges and Universities, an industry lobbying group.

Gunderson said he expects a modest boost but nothing like the surge a decade ago. While some institutions grow, he predicts some others will have to shut down.

“Our schools are suffering just like everybody else in the American economy,” Gunderson said. “The era of double digit growth in this sector is long gone. And it will not be coming back.”