For-profit Education Sector – Q3 2021 Update & Outlook –
30 June 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Christopher Dwyer (CD)
Former VP, Corporate Education Solutions at Collegis Education
Agenda:
1. Academic programme assortments
2. Higher education enrolment trends
3. Digital infrastructure and e-learning capabilities
4. For-profit education risks and outlook
Contents
Q: Could you give an overview of the for-profit higher education industry and how it’s evolved throughout
your time in the industry?
Q: How blurred are the lines between for-profit and non-profit education? If I’m applying to a seemingly
prestigious university, are there any disclosures that tell me it is for profit, or do I think it’s just another
school that owns a reputable name?
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Q: Could you elaborate on the technical capabilities that non-profits seem to be a bit slow-moving on? Could
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you name a few for-profit universities that have done very well in providing an online experience?
Q: How would you segment the market by total enrolment? Would you say 10% or 15% community college,
60% non-profit, and the rest is for-profit?
5
Q: Do the platforms that offer certifications and programmes that are not necessarily full degrees offer some
value to a prospective enrollee? Are they competing with the four-year degree higher education for-profit
sector as well? Is that another segment that you can section off in terms of competition?
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Q: How have degree assortment trends developed over the last few years on the undergraduate level? Do you
have any thoughts on the tech sector and where for-profit colleges or universities should allocate capital to
be better equipped to service some of these students?
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Q: How does the dynamic around building relationships with employers cultivate even further? Why have
for-profit universities been so successful in cultivating these pipelines? What is the difficulty or lack thereof
for a for-profit university to establish or cultivate those relationships?
Q: Could you expand on affordability and the role it plays in for-profit higher education compared to non-
profit? Both are very costly, so I don’t think there’s much difference on that.
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Q: It seems for-profit universities are a very cost-friendly option. It seems they have more tech, more
resources and more opportunities. Could you talk about the perception of for-profit universities and some of
the damages done for students seeking to enrol in these types of universities or programmes when, in reality,
it seems they offer services with superior operational efficiency? They may not have the prestige, but
students still get a decent programme.
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Q: What are some tactics or areas where for-profit higher education is focused to increase reach, to take
share from not the most prestigious universities, but other demographics that it could probably have more
students enrol from? What might be the next big thing to act as a determining factor to help enrol more
students, and how does that compares to non-profits?
Q: Since some universities now understand the looming risks and are getting more aggressive, how do
educational services tie into that? Why hasn’t there been more of a tie-up between educational service
platforms and for-profit higher institutions, perhaps through parent ownership?
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Q: Why hasn’t there been more of a tie-up between learning management systems or more partnerships with
content producers or publishers to try to bring some of those things in-house? What is your overall
perspective on owning an e-learning platform while owning a university and how popular it’s become? I
think it makes sense for the two to converse. It may not offset revenues from a 90/10 perspective, but it may
offset revenues from a traditional enrolment perspective.
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Q: You mentioned coronavirus put a big strain on enrolment rates at non-profit institutions. How do you
expect enrolment rates to develop and what factors might play into that? As the costs of traditional non-
profit institutions continue to rise, is that an indicator that for-profit institutions priced at a much lower
point will continue to increase their market share?
Q: How ahead was the for-profit higher education industry with digital marketing and the avenues that
opened up? When you are a for-profit higher education institution allocating marketing dollars, what is the
importance of the digital channel?
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Q: Could you elaborate on setting yourself apart as a for-profit college? How are for-profit institutions
differentiating themselves from other for-profit institutions?
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For-profit Education Sector – Q3 2021 Update & Outlook
Transcription begins at 00:00:01 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview, entitled For-profit Education Sector – Q3 2021 Update and
Outlook. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Christopher Dwyer, former VP,
Corporate Education Solutions at Collegis Education.
Christopher, before we get started with today’s Interview, please state I agree or I disagree to the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information, or any other information which is confidential, during this Interview.
CD: I agree.
NH: Could you start by giving the audience an overview of your background and various roles you’ve held in
the industry?
CD: I have over 20 years now in the higher education industry, and various fields from selling technology into
the industry, to working at Sallie Mae for almost the better part of a decade as a Vice President over a large
region there, managing over USD 2bn in student loan originations through the 2000s. That was USD 2bn
annually. Then, working actually in the for-profit sector at companies like Apollo Group which owns the
University of Phoenix, Career Education Corporation which is now Perdoceo, and then Collegis Education
which was a sister company to Rasmussen, now Rasmussen University. I managed the corporate team for
Rasmussen and had other responsibilities there as well, as their provider. Now, working at a company where
we are serving colleges and universities, helping them recruit international students and collect domestic
payments as well, so lots of experience in the industry.
[00:01:59]
Q: Could you give an overview of the for-profit higher education industry and how it’s evolved throughout
your time in the industry?
CD: I’ll just say as a whole, and historically, my take on the for-profit industry is they’ve always been, at least
historically, the leaders in technology and innovation, particularly as it relates to adult learners or degree
completers, and also military students. There have been some recent changes, and I’ll go into that in a little bit,
but what we’ve seen over the last number of years is you’ve got some of the non-profits like Arizona State
University, Western Governors, Southern New Hampshire, etc. That are acting more and more like the for-
profit universities, and starting to gain some traction where for-profits had historically been strong, like with
employers and adult learners and in military students.
The industry as a whole is very susceptible to changes in the political environment. You would see this, you
could track the stocks of any of the companies. Typically, when you have a change in administration from
Republican to Democrat or vice versa, it’s good in a Republican administration and not quite as strong in a
Democratic administration, and that’s been demonstrated over the last couple of decades now. There’s always
that risk of political changes impacting the industry and the ability to enrol students or to make sure that
they’re meeting any legislative changes that might happen.
COVID, while most schools got hurt, interestingly, it appears that broadly the for-profit sector benefited, and
one of the stats I saw that they saw undergraduate enrolments go up 3% compared to a -9% at community
colleges for 2020. I guess that would make sense, considering that for-profits have historically been, when I
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was at career educator Perdoceo now, formerly Career Education Corporation, roughly 85-90% of our students
were online students. They were already set up for years to take online students, although many of their for-
profit, or non-profit competitors, excuse me, were not, so I think that they benefited, at least in the short term
from that. Those are some of my takes. I’m happy to expand on anything if you’d like.
[00:04:58]
Q: How blurred are the lines between for-profit and non-profit education? If I’m applying to a seemingly
prestigious university, are there any disclosures that tell me it is for profit, or do I think it’s just another school
that owns a reputable name?
CD: Having worked in the industry, you can find it on Wikipedia. To my knowledge, and having been in there,
there was never a warning. We never, one, felt like we had to tell somebody what our tax status was, no matter
where I’m at. We always felt like we were delivering a quality education and our tax status had no impact on
what that is. Obviously, the students can do their own research, and there can be a stigma. A lot of this goes
back to things back from the ’80s and ’90s of degree mills. Particularly in the advent of the internet in the
mid ’90s and early 2000s, where people were actually, in some instances, able to get degrees without doing
much of anything. That has largely changed and, with most of the universities, as I’m thinking of them now
and those that I’ve worked for, were regionally accredited. That really means that they’re playing on a level
field. If they’re able to meet their regional accreditor’s standards, then you know you’re getting a good
education. I think from that standpoint, from a quality of education standpoint, that they’re right there.
As far as those blurred lines are concerned, as I stated earlier, it used to be, and it still is, the for-profits do a
great job, in my mind and in many’s mind, of serving adult learners and degree completers and military
students. What you’ve seen, and I think that some of this is driven by increased competition and shrinking
graduating classes, that you’ve got more non-profits. I had mentioned some already like Arizona State and
Western Governors, Southern New Hampshire and a handful of others, have gotten very aggressive and have
some pretty large marketing budgets that are going after some of the online. They’ve invested in technology,
they’re investing in marketing, and they’re going after a national online adult learner audience. That’s putting
some pressure on the for-profits, and I think that’s going to continue. I think that COVID may have
accelerated that, because you’ve got a lot of other schools that have increased their capabilities and technology,
and are now better set to go after that market.
[00:08:05]
Q: Could you elaborate on the technical capabilities that non-profits seem to be a bit slow-moving on? Could
you name a few for-profit universities that have done very well in providing an online experience?
CD: Examples of it, the big example, and I know this having come from Collegis and some of the demand that
they started seeing immediately as shutdowns were happening for COVID, was how do they get their courses
online? There were a number of universities, and I don’t want to name any names out of confidentiality, but
they did not have the capability of putting their courses online. There was a large demand of students or,
excuse me, schools coming in, saying, “We need to figure out a way to put our courses online by fall,” really by
spring, but they needed it by the fall so that they weren’t going to lose their classes for fall ’20, where they
needed to be able to present their courses via the web. You had a large, large number of institutions that
quickly developed online capabilities that were very slow to do that.
To give a specific name, I know some. I don’t want to name them, because it was with an employer I was at,
but I’ll just say there were a lot of them, and there were a lot of schools that were in the same bucket, because
they already had deposits or whatever for their fall classes. They needed to be able to deliver education but
they weren’t going to be able to have them in the classroom. It just forced a change that many were slow to
take on, for various reasons. COVID, in that case, had a positive impact on some of the non-profits that maybe
they weren’t looking for.
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Regarding some schools that were already well-set up, I think it’s really the big national players that this
audience probably already knows about in the for-profit world. Certainly, University of Phoenix had always
been a leader, Strategic Education with Strayer and Capella, DeVry, Chamberlain and Perdoceo schools with
AIU and CTU all had very strong online capabilities, and I think that they were able to reap the benefits of
being there already. That’s why you saw the lift in undergraduate enrolments for them last fall, where other
schools were suffering. The ones that suffered I think, that probably didn’t have the budgets to make the
changes, or at least as quickly, were probably in the community colleges, where they saw a decline in
enrolments.
[00:11:11]
Q: How would you segment the market by total enrolment? Would you say 10% or 15% community college,
60% non-profit, and the rest is for-profit?
CD: I don’t have a great number off the top of my head. I’d be afraid to throw something out there, because it’s
been a number of years since I’ve thought about that, but the last I checked, the vast majority, at least from a
dollar standpoint, your four-year traditional schools are the lion’s share. There has been a big push obviously
to the community colleges. The for-profits, last numbers I saw, and I’m not looking at it from an enrolment
standpoint, and I could probably dig that up, but from a dollars standpoint in 2021, it was estimated that this
year, they’ll do about USD 13bn in revenue in the for-profit sector. I don’t know how that compares, and I’d
have to look at the non-profits. It’s easier to get some of those for-profit numbers, because most of them are
publicly traded companies. Schools, or your non-profits, don’t necessarily publish everything, but I’m sure that
data is out there to get. Sorry, I don’t have a better answer on that one for you, right now.
[00:12:44]
Q: Do the platforms that offer certifications and programmes that are not necessarily full degrees offer some
value to a prospective enrollee? Are they competing with the four-year degree higher education for-profit
sector as well? Is that another segment that you can section off in terms of competition?
CD: To an extent, and anecdotally, I’d say that they’re competing more with graduate degrees than
undergraduate degrees, except for maybe in the IT field at this point. I think that that might change, by the
way, and I’m happy to talk about this a little bit more, but to make sure I’m answering your question succinctly
here, the vast majority, and much of my career, especially over the last decade or so in higher education, was
helping to grow enrolments through the corporate channel. At the end of the day, most employers are still
requiring degrees to get jobs, so the degree is still very important, and you really haven’t seen big drop-offs in
people going after degrees I don’t think, because it’s really dependent upon employer demand. As employers
require degrees to get entry-level jobs or first jobs in the company, people are going to pursue those degrees.
Once they’ve got those degrees and they want to add skills onto that, that’s where I’m seeing, at least right
now, the certificates coming in and perhaps taking over some of the demand for a master’s degree. Where
instead of going on and doing that, if I want to learn something about machine learning or artificial
intelligence, etc, I might just do a certificate programme vs getting a full master’s degree programme.
I don’t think that the employers are differentiating those as much as they are on the front end on an entry level
to get in with a job with a bachelor’s degree, if that makes sense. I would suspect it’s putting more pressure on
the master’s degree market. I know that some of those schools, some of the high end, if you think about your
high-end business schools like a Chicago Booth, a Northwestern Kellogg or others where they’re allowing
students access to standard alumni services that would have come with a degree with their certificate
programmes, that’s putting more pressure on their master’s degree programmes as well. The students are
getting the same sorts of benefits of the network and everything, without having to do the full degree
programme.
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What I think now, if you’re okay with me expanding on this a little bit, I think that that could change. You’re
hearing more, and I think that companies like Google, if a company like Google and, say, Apple, I know Google
in particular, I hear them advertising all the time now about their certificates. If those become to the point
where Google and other companies will hire people who’ve gone through their certificates that don’t have a
degree already, then that could change that significantly and start to put pressure on the undergraduate
market too. If the employers will accept those over a degree or without a degree, then that could put significant
pressure over time on the undergraduate market, in my opinion.
[00:17:01]
Q: How have degree assortment trends developed over the last few years on the undergraduate level? Do you
have any thoughts on the tech sector and where for-profit colleges or universities should allocate capital to be
better equipped to service some of these students?
CD: I think certainly anything in computer science or information technology is strong. Having been at
Colorado Technical University, the fact that they had an engineering school and strong computer science
school, they had an Abet-accredited engineering school, that was a great selling factor to companies and to
students. Whether they were going into those types of programmes or not, the fact that the university could
have that level of accreditation in those types of programmes was a differentiator to students and to
employers. They appreciated that, so anything in the STEM fields is very good. I know that CTU is very strong
there, CTU out of Perdoceo. That’s good. Nursing is still very strong. Most schools have rushed to the RN, to
BSN, which, in my mind, is essentially a commodity degree at this point, but the schools that can provide the
true big nursing degrees, where they’re doing all of their clinicals and everything, that nursing demand is
going to stay in place, so healthcare informatics, that’s important. Business remains important.
Another thing, and one of the questions that was further down on your list and it ties into this, is how in tune,
one of the big advantages that the for-profits tend to have, and if you look, a lot of them have many of the same
sorts of degree programmes, they don’t vary a whole lot from school to school broadly, is that they’ve done a
nice job in building teams that have gone out and talked to employers. Building those relationships and
understanding what they’re hiring for and what their internal needs are, and building things around that. I
know in some cases, like at CTU, they’ve been able to develop customised degrees for specific employers, when
they’re large enough, that that can drive demand and meet an employer’s needs. Schools that can do that and
be nimble, but getting back, making sure I’m not rambling on too much here, I think anything in STEM, IT,
business, healthcare, are all critical areas that most of them are already doing decent in anyway, and that will
continue to get stronger.
[00:20:02]
Q: How does the dynamic around building relationships with employers cultivate even further? Why have for-
profit universities been so successful in cultivating these pipelines? What is the difficulty or lack thereof for a
for-profit university to establish or cultivate those relationships?
CD: This was my wheelhouse for about a decade, so yes, I can speak at length about this here. Really, I’d say
some schools, it’s easier than others, but the way that the job market had been, especially over the last few
years until COVID hit, and things are obviously bouncing back now, one is that there’s wind at the backs of the
schools, cultivating these relationships right now. Employers can’t find enough employees and they can’t
retain the ones that they have, and unemployment is up a bit. When it was at 3% though, you basically almost
have a negative unemployment, and that drove a lot of demand for employers to offer better benefits and
training, etc, which fed right into the growth of the corporate partnerships for the for-profits, and some of the
non-profits as well. Companies were hungry and eager for it. You’ve seen companies like Guild Education
grow exponentially over the last few years because of that demand. You’ve had others like InStride get started
to feed that demand.
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The for-profits have done really well there, and I’m not saying they’ve been able to get 100% of everything
they’re going for, but never had a problem hitting goals, because they, one, invested a lot of money. Every
company I was at was investing millions of dollars out of their marketing budgets into their corporate teams.
That’s not changing. I think it’s going to increase, and I can go into why if you’d like, but they’ve spent a lot of
money doing it and hiring some good talent and paying them good money, and hiring really good business
development people to go out and run and manage and do these. Also, because they’ve got degrees that align
very well with employers’ needs, it’s a nice fit.
How does that fit in? When you talk about target schools, I’m assuming you’re talking about some of your
Harvards or your large state schools that a student out of high school might be looking at, but that’s a different
market. That’s not what they’re going after in this arena. What they’re going after are degree completers.
You’ve got people who have hit a ceiling at work, or have started a degree and want to finish it so they can
prove to their kids that they can get a degree done, and so your learners are often in their late 20s, early 30s or
beyond, and they’re not as concerned about the big name of the school. It’s more of a, who can I get it done
with that’s high quality enough that my employer will appreciate what I’ve done, will accept it that this was a
good degree, and will help me advance in my career at my company? That’s who the for-profits are going after
and they had a lot of success going after. If you get the employer to essentially put their brand next to yours
and endorse you by becoming a partner, which is what happens, it makes it a natural selection for the
employees to want to go there.
There are typically financial benefits then put in as well to make that happen, and there’s been a driving down
of pricing down to that USD 5,250 cap that’s non-taxable, up to USD 5,250 for employers to pay that for the
tuition assistance. A lot of schools are now setting their pricing at that, and I know for sure that CTU has done
that, and that’s public information. You could find it on the website, that many of their employer relationships
they’re just going after, they’re pricing at USD 5,250 a year, so the employer there, the employee, excuse me,
has zero out-of-pocket expense for an employer that’s providing that amount of money and tuition assistance.
It becomes a very attractive option for an employee of one of the partner companies.
[00:25:20]
Q: Could you expand on affordability and the role it plays in for-profit higher education compared to non-
profit? Both are very costly, so I don’t think there’s much difference on that.
CD: I think that the for-profits have been able to do it better than the non-profits on the affordability
standpoint. Take everything you about the list price of a for-profit university and throw it out the window
when you’re talking about what the corporate pricing is going to be, because it’s completely different. They’re
writing up completely different grant programmes and everything, and I’ve done these myself and it’s pretty
complex at times, but you’ve got typically a completely different pricing model. You’re giving away tuition
dollars in the sense that you might be charging half of what you’d be charging a student who’s coming through
the door normally. Let’s just say it’s 50% discount at USD 5,250, and that might vary, but what you’ve got, and
one of the key expenses for any education company, but specifically in for-profits, is your cost of starts. Those
commercials and online advertisements and everything cost. Most schools are spending thousands of dollars
to get any single student through the door. When you’re able to get hundreds or thousands of students coming
through a single channel or a single employer, your cost per start, your marketing costs go down significantly,
so you’re taking away thousands of dollars off of that.
They’ve got the technology and the scale to be able to enrol hundreds or thousands of students at a time that
would probably put a lot of pressure on the offices and staffs of most of the traditional colleges and
universities, so for-profits largely have very large admissions and marketing teams, and lots of economies of
scale. Where they can enrol lots of students very quickly, and I’m talking about the volumes that would make
most non-profit schools choke. They wouldn’t be able to get the students in in time or give them a very good
service, so that’s where all the technology and shared services and everything help the for-profits really shine,
is that they can enrol a lot of students very quickly. They can do it less expensive than the non-profits, because
they have the economies of scale and they’re able to do that. Then if they’re able to save the marketing costs
and they don’t have to pay Google, many of them are paying millions and millions of dollars to Google, and
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you have zero marketing costs when you get an arrangement like that put in place, so you’re able to discount
the price significantly and still maintain some decent margins doing it.
[00:28:36]
Q: It seems for-profit universities are a very cost-friendly option. It seems they have more tech, more
resources and more opportunities. Could you talk about the perception of for-profit universities and some of
the damages done for students seeking to enrol in these types of universities or programmes when, in reality,
it seems they offer services with superior operational efficiency? They may not have the prestige, but students
still get a decent programme.
CD: I’ll say, and having worked at some of the largest players in the industry, and I’m not calling out any
single one of them right now, I’d say that all the schools I’ve worked with or for that were going after this, and
they were largely in the for-profit world, do a very good job of hand-holding and providing a great customer
experience for their students, a great student experience I should say, excuse me. That’s from the first touch
point, which could be an advertisement that leads to an enquiry, all the way through alumni. The schools that I
worked with were all very focused, and I’ll put the schools at Perdoceo as part of this as well, on student
success, (1) because it’s the right thing and (2) because it’s retention, at the end of the day, that drives revenue
and profitability. If you spend all those marketing dollars up front and then you get the student and they only
stay for a semester, excuse me, a quarter or two, you’ve broken even if you’re lucky, or you’ve lost money on
that. You’ve got to really be good, so I think the for-profits do a very good job, both leveraging the people and
the services they provide, and the technology in the classroom, whether it’s adaptive learning that Perdoceo
uses or other sorts of learning technology that I’ve seen. To make sure that students are successful, they’re
well-taken care of, there are regular check-ins with faculty.
Everybody, I’ll say, within the for-profit world, anybody who works at Perdoceo I know for sure is on the hook
for student success and student retention. They want to see the students doing well, and the for-profits have
been, I would say they’re much more focused and concerned about it than some of the non-profits, because
they just had to be. They’re dealing with a different level of student though, so you’ve got people who have
been out of school for 10, 15, 20 years coming in and enrolling, and they’re scared, they’re nervous, they
haven’t done it, and now they’re doing it online, so they’ve had to do that, but they’ve done a really nice job of
scaling up their services to make sure that they can retain as many of those students and graduate them as
much as possible. It’s still always a challenge, but I would agree with what you said, that they’ve made that
now.
The stigma, of course, is if you go back to university rankings, if you go to US News & World Report, you’re not
going to find any for-profit universities, even some of the bigger ones, in there in any rankings. They’re not
seeing them in any mailings that come out. They’re not getting the traditional, “My child is about to graduate
high school and colleges are coming in.” They’re not one of those names, so that’s one thing. They don’t have
that recognition that people think of when they’re growing up that they’re coming in. Two, it goes back to a
comment that I made a while ago that you’ve got this stigma of there were some bad players in the industry,
and this is going back probably 20 years plus now, where you had degree mills, and there was some legislation,
some things that came in, and some of it that just had to happen to clean things up. Now, by and large,
everybody you’re seeing, and the ones I’m talking about, those are all regionally accredited schools that are
having to jump through the same hoops that places like Harvard and Columbia have to jump through to make
sure they have their accreditation. I think it’s a bit unfair, but the for-profits still exist.
I’ll say the other thing. Just frankly, the admission standards are much lower at the for-profits. They’re all
about accessibility. It’s more akin to a community college, in the sense that everybody gets a chance in most
programmes. There are some exceptions to that. Some of their master’s degree programmes and perhaps
nursing and others, there are some higher bars you’ve got to climb, and then some of the medical schools
obviously run by Adtalem. They’ve got some pretty high standards, but for the most part, they’re going to let
everybody have a chance, and so you end up having a different type of student. Your large prestigious schools
love being able to say they only accept 6% of their applicants, and that builds prestige for them. That’s not the
case for, the for-profits don’t have that advantage and they can’t market that, so it creates a bit of a stigma,
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along with the historical degree mills that existed years ago. I think some of that stigma still follows them
around.
[00:34:31]
Q: What are some tactics or areas where for-profit higher education is focused to increase reach, to take share
from not the most prestigious universities, but other demographics that it could probably have more students
enrol from? What might be the next big thing to act as a determining factor to help enrol more students, and
how does that compares to non-profits?
CD: I’ll just go off trends that I’ve seen. It’s a great question, and I wish I had a wonderful answer for it. I think
some of the things that are happening, I think you’ll see continued investments in technology and systems like
Salesforce, and making sure that they’re able to have as much data that they can share throughout the schools
and the companies to know as much, to really get to know their students as well as possible. I think data, data
analytics and CRM is a big piece of that, and making sure that they know their student populations as well as
possible. That already, in and of itself, is better than what most non-profits would have. I think that you’ll
continue to see them getting more and more aggressive in some of the corporate markets, particularly in light
of the 90/10 changes that were signed earlier this year, and I’m happy to talk about that a little bit, for what
I’m aware of.
I know that some things might still be in flux, but there are some big changes that happened to the way that
for-profits are judged financially, and I can talk about that a little bit if you want, that happened and were
signed in March that are going to push them more towards. I think what you’re going to see, largely, and
corporate and other markets could be a piece of this, so you could see more corporate, and I think it would also
feed more into the certificate or stackable certificate credentialing-type programmes that we were talking
about 10 minutes ago. What you’ve got, and I don’t know how familiar you are with the 90/10 rule, but the
crux of it is that it only applies to for-profits, so non-profits don’t have this issue. For-profit universities can
only receive 90% of their revenue through federally funded programmes. Typically, that had been defined as
what’s known as Title IV programmes. That’s your Pell Grants, your Stafford Loans, your Plus Loans, Parent
Plus Loans, etc. That all was Title IV, so for every USD 1,000 you brought in, USD 900 could be that and USD
100 had to be cash or some sort of cash.
Until March, part of the 10% side of that included anything coming from military, so VA DoD dollars, so
veteran and active duty military counted as the 10% side, which is the good side, which is cash. That changed,
and I’m not sure how the final ruling, I don’t even know if it’s been completely determined yet, what the
complete impact of that is going to be, but there’s a big change. Now, at least potentially, all the schools,
anything that they’re getting from the military counts on the 90% side. You have schools that were sitting
there, maybe at 87-88% Title IV and 12-13% cash and other sources, that included that military money that
suddenly all that military money now, say half of that was coming from military, now that could potentially be
part of the 90% side. That could push them to 95/5 or something, so if you’re beyond that 90/10, then you’re
no longer eligible for Title IV funds after a certain point.
That creates a huge risk for a lot of the players in for-profit, because most of the students that they serve, going
back to adult learners and people without degrees, these aren’t people that necessarily grew up or have the 529
savings plans. You’re serving, very frequently, lower-income students or people without the means and the
savings to do that, and so you end up with a lot of people that get Pell Grants and that end up getting Stafford
Loans, that can essentially fund the entire education that way. They were able to offset that with military
dollars. They might not be able to do that anymore. That’s going to force them to aggressively go after more
cash resources like corporate tuition assistance dollars, and perhaps other dollars, to offset that change,
because it’s a huge risk. I know that schools are already investing a lot more money, I’m not going to name
names, in their corporate teams because of this, because it’s a huge change for the schools, and it puts some of
them at a huge risk, especially those that have been serving a lot of military students.
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[00:41:32]
Q: Since some universities now understand the looming risks and are getting more aggressive, how do
educational services tie into that? Why hasn’t there been more of a tie-up between educational service
platforms and for-profit higher institutions, perhaps through parent ownership? It may be counterproductive
to own a company such as Quizlet when you’re struggling to push out degrees, but some of the synergies seem
so one-to-one.
CD: Some do. I’m not certain, though. When you’re looking, and I would advise someone who wants to know
more about that to talk to a Title IV attorney or expert on that, but my understanding, it’s not by the company.
You’ve got companies like Adtalem, like Strategic Education and others that do have other subsidiaries that
offer different, that are fully cash services, but that’s not how they get judged. It’s not done, and I hope I’m
answering your question here, and correct me if I’m wrong, but 90/10 is not a Perdoceo issue. 90/10 would be
a CTU issue or an AIU issue. It’s at the university level, so you can’t just combine your schools or combine your
holdings and say, “Every USD 1 we’re bringing in, 25% is cash and 75% is not cash.” Yes, but if AIU is 95%
Title IV and 5%, then it’s only an AIU thing.
I don’t know, what I’d want clarity on, and I think that it’s still being determined and you might get different
answers from different people, is can you count, if it’s really non-course, non-degree offerings, I don’t think
you can count that in your 90/10 calculation. I think it is degree-seeking students, so you really have to look at
where are your cash sources for your degree-seeking students? If someone really wants to understand, there
are probably better experts than me, probably an attorney, on exactly how you have to calculate it. There’s not
a ton of clarity out there, but it’s at the university level, not the holding company level, if that makes sense.
Then, I believe it is your degree programmes are what gets counted in there. It makes it very difficult, I guess
is the point on there, to offer ancillary services or something to offset that, outside of seeking cash sources.
Otherwise, I’d think they would all own other subsidiaries that could count as cash coming through the door.
[00:45:35]
Q: Why hasn’t there been more of a tie-up between learning management systems or more partnerships with
content producers or publishers to try to bring some of those things in-house? What is your overall perspective
on owning an e-learning platform while owning a university and how popular it’s become? I think it makes
sense for the two to converse. It may not offset revenues from a 90/10 perspective, but it may offset revenues
from a traditional enrolment perspective.
CD: I would say that some do, and I believe this is public knowledge. Perdoceo itself has an ownership stake in
Realizeit Learning, which is their adaptive learning platform. That also gets marketed and sold to other
university systems, so that is happening. I don’t know if it’s as well-known or not, but certainly, that’s a big one
that I’m very well aware of, because I’ve worked very closely with them in particular in doing that and rolling
out other programmes, using that specific LMS for corporations to roll out specific custom-developed training
programmes, etc. It is happening. I’d say not everybody has that. Some are using Blackboard and others, and
you really haven’t seen a company like a Strategic Education buying a Blackboard yet, but it’s happening at
some level.
There are intricacies, though, involved in running education companies, especially when you get into
accreditation and stuff, to just make some things that would seem easier more difficult to do. I don’t know all
the reasons behind that. They would be more for a compliance or legal person, and I was more on a marketing,
business development side of things, but because of the challenges and some of the regulatory things that you
face, there are certain ways you’ve got to do things in the education industry as well, that make some things
that would seem simple a lot more difficult than you would think. I will say I know that Perdoceo, at least at
the time when I was there, they had an ownership stake in their LMS, and one of the people that had helped
develop it was working there. It’s a great system. It’s really one of the top systems I’ve seen, and they’ve had
some success selling it to other education companies. I think what you’re saying is happening. It’s not doing
anything to offset 90/10 though, back to that question.
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[00:48:53]
Q: You mentioned coronavirus put a big strain on enrolment rates at non-profit institutions. How do you
expect enrolment rates to develop and what factors might play into that? As the costs of traditional non-profit
institutions continue to rise, is that an indicator that for-profit institutions priced at a much lower point will
continue to increase their market share?
CD: Minus any nasty legislative or regulatory changes outside of what I just discussed, I think that they’re
pretty well-poised for growth, especially as technology, the rate of change is just increasing. People are going
to continuously need to be retrained and reskilled and upskilled, and you still have a very large portion of the
population that does not have a college degree that, at some point or another, may hit some sort of ceiling
within their job that’s going to need that. It’s not going to be necessarily some sort of a hockey stick. It may be
coming out of COVID, but I think that the for-profits benefited from that, certainly last fall. From my
standpoint, I think there’s still lots of runway for growth. I think it’ll be steady, slow growth, but I think that
there’s plenty of room for growth still, because employers are still actively looking to re-educate their
employees. This I know, and that, to me, says there is going to be lots of demand out there for the degrees that
they offer.
The interesting thing that we’ll see, that over the next number of years coming out of COVID, will be how
much do the other non-profits that weren’t really in the game, how much are they going to jump into the fold
now, as they’ve increased their technological capabilities to go after this market? Are they going to be willing to
put the marketing dollars in? You are seeing companies like Guild Education and InStride and others that are
acting as a conduit for many of your non-profits that don’t have the money to invest. Like I said, the for-profits
are investing millions of dollars and lots of dollars in marketing, lots of dollars in corporate teams to get these
students coming into the door. You’ve seen companies like Guild and InStride, and there are others out there
like Bright Horizons’ EdAssist, that are basically conduits for other schools to break into some of these
markets, and are they going to push more aggressively to get in there and try to get more students that way?
That could put some pressure on the for-profits, but I think as long as they’re playing in the right degree areas
we talked about earlier, and they keep investing in the technology in these marketing teams and in sales teams
in the corporate market, that they’re going to keep driving growth. I know most of them in the corporate
world, as I’ve talked to people, without naming names and I can just tell you, the places I had been, we were
often seeing, from the corporate side, it wasn’t unusual to see 40%, 50%, 60% growth YoY for the schools I was
working with. That wasn’t slowing down at all, at least while I was in it. I don’t think that’s going to change any
time soon. COVID probably took a chunk out of that temporarily. I think it’s picking right back up, though. I
just saw that Guild Education’s valuation has jumped to over USD 3bn. It was just USD 1bn in late ’19, so
clearly that’s an indication that there are strong prospects for growth in this adult learner market that they
serve.
[00:53:17]
Q: How ahead was the for-profit higher education industry with digital marketing and the avenues that
opened up? When you are a for-profit higher education institution allocating marketing dollars, what is the
importance of the digital channel?
CD: I don’t know, from a technology standpoint, the last company I worked at, at Collegis, they were a
martech company serving higher ed, and so as schools are hiring companies like that, they’re getting access to
the same sort of expertise, they’re just paying a different way for it, that the for-profits have by hiring so many
agencies. Outside of what they’re willing to spend, and the for-profits have larger budgets, it’s really tough to
drive, in my opinion anyway, and from what I’ve seen on the digital marketing side, it’s table stakes now. It’s
difficult, 10 years ago, it was easier, 15 years ago, getting into digital and driving that, but the marketing cost
per lead and start continued to go up, for most anyway. It’s getting more and more challenging to drive those
good enquiries through the digital market, so they’re going to have to look at other ways to do that. You’ve got
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to be there and you’ve got to push, but it’s not like it used to be. You’ve got a lot more schools in there now,
and the non-profits have jumped in there and they’re not spending the same money but they’re getting the
same level of expertise that the for-profits have now in that marketing.
I think that you’ve got to be there. Some people might disagree with me, for sure, but from a digital marketing
standpoint, it’s really difficult to say you’re that much better than anything, because there are no real secrets
out there any more. If you’re willing to spend the money, you can get into the game, so I think that the spend,
what you’re seeing is a lot of schools are trying to drive a lot more traffic to their website, or through corporate
or through others, because they’re spending 70-80% of their marketing budgets on Google. Google is making
all this money off of this industry, and it’s really tough to differentiate out there any more, so I don’t know. It’s
really tough for me to see an advantage that any one school could have over another in digital marketing,
except that it’s just table stakes and you have to be there and you’ve got more schools jumping into it because
of that, and it’s making it harder and harder to differentiate.
[00:56:21]
Q: Could you elaborate on setting yourself apart as a for-profit college? How are for-profit institutions
differentiating themselves from other for-profit institutions?
CD: They would all say they’re differentiated, and I’ve worked for a number of them and they all say the same
things. There are some unique things between each one, but I used to call it the sea of sameness. If you looked
at the advertisements from one to the other to the other, you’d say they’re online, as far as they’ve got adult
learners, they’re inexpensive. They all say that. They all say they’ve got the best service. What could really
differentiate them, in my mind, is having top faculty or well-renowned. For instance, I thought it was a really
good idea that Strayer, now Strategic Education, got Jack Welch behind their school, and put one of the
biggest names historically in business behind their business school. I think that it helped that entity grow quite
a bit, so you can have your quality of faculty, renowned faculty, people who’ve done something big. I know
when I was at Phoenix, some of the things we were doing, Clayton Christensen, and this is public stuff, this is
10 years ago too, from Harvard, their large innovation guru, he was helping develop some of the programmes.
You can differentiate through that sort of renown and get that out there. You can differentiate by having great
relationships in the community, particularly with employers and getting the word out there and getting those
types of things, getting degrees that really align to employers’ needs, and then at the end of the day though, it’s
going to come down to outcomes. Are the people graduating and are they getting employed when they’re
done? That’s the best way to get people through. You’ve got faculty, programmes, technology I’d add in there,
but everyone says they’ve got the best technology. Some do, some don’t, and outcomes, at the end of the day
will drive the success of it, but it’s really challenging. There are a lot of competitors out there, and I would tell
you, they won’t say it probably on a call like this, but every single one of them struggles to differentiate. That’s
not a for-profit issue, that’s a for-profit and a non-profit issue. Those are ways that I could see them doing it,
though.
[00:59:42]
NH: Let me close by saying thank you, Chris, for your input. Clients, if you would like to speak to Chris in a
private call or meeting, please let your relationship manager know. Thank you again for joining Third Bridge
Forum's Interview today, this now concludes our meeting. Goodbye.
CD: Alright. Thanks so much.
Transcription ends at 00:59:58 of the recorded material
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