U of Arkansas System combines 2 online colleges to drive growth. Will it work?

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Last summer, the University of Arkansas system made waves when it announced plans to acquire Grantham University, a for-profit online institution for students affiliated with the military, for only $1.

At the time, the system already had an online-only college, eVersity, which launched in 2015. The idea was to eventually combine Grantham University with eVersitya plan that materializes less than a year later.

System administrators voted late last month to approve eVersity’s closure and transfer its assets to the acquired institution, now called the University of Arkansas Grantham, or UA Grantham. UA Grantham is now a public institution.

The system began the transition process in January, when eVersity stopped accepting new applicants and communicated with existing students about their options to complete their programs before the summer term or transfer to Grantham at the same rate of schooling. About 200 students have graduated since the transition began, and nearly 300 students have “engaged and enrolled in” Grantham, Nate Hinkel, the system’s communications director, said in an email. About 120 students are in their final session of eVersity and will graduate or transfer.

In total, the system is closing about two dozen study programs at eVersity, all of which have parallel programs at Grantham.

The plan builds on eVersity’s efforts by expanding the system’s online degree offerings, expanding its graduate-level footprint and creating a greater national presence, Hinkel said.

“In short, it allows us to rapidly accelerate our growth,” Hinkel said. It also aligns with the mission of the system, he added.

It also comes at a time when several other public systems or universities are buying online colleges to beef up their virtual offerings. The University of Massachusetts and the University of Arizona are just two other colleges that have recently acquired or affiliated with online colleges to serve more mature students – an important market, but one that can be difficult to break into.

The online market is much more competitive than it was a few years ago, said Michael Horn, who has written books on the future of education.

“And so the cost of entry is often significant,” Horn said. “You don’t see many universities these days that are able to do it themselves from scratch. You either need real momentum or an experienced partner.”

While buying colleges online can accelerate growth, these deals aren’t always slam dunks. Higher education experts warn that buyers may struggle to integrate the ethos of online colleges with the culture of public universities. Colleges may also face increased public scrutiny if they acquire a for-profit institution. And they will still have to carve out a place in a competitive online market.

Merger of for-profit and public institutions

College mergers and acquisitions are typically tricky, with leaders navigating the complexities of combining two different cultures and business operations. Buying a for-profit business can pose even more challenges.

In 2017, Purdue University announced plans to purchase Kaplan University for $1, bringing approximately 32,000 students and 2,500 instructors into its fold. Purdue used the purchase to create an online college for mature students, called Purdue University Global. Meanwhile, the former parent company, Kaplan, provides services such as marketing to the new online college in exchange for a share of its revenue.

The University of Arizona entered into a similar deal in late 2020, buying the for-profit University of Ashford and renaming the school as the University of Arizona World Campus. The University of Arizona also retained Ashford’s parent company, Zovio, as a service provider in exchange for a reduction in tuition revenue.

Both agreements have raised concerns among policy advocates and lawmakers. They worry that online colleges’ ongoing relationship with their former owners will end up prioritizing the needs of shareholders over students.

In the case of the University of Arkansas, UA Grantham has no ongoing relationship with its former owners, Hinkel said.

The system, however, assumed the responsibilities of the acquired university. Financial documents released by the system mentioned the transfer of assets totaling $4.6 million and a similar amount of transferred liabilities, the Arkansas Democrat-Gazette reported.

By avoiding an ongoing relationship with previous owners, the university can avoid some of the concerns that other institutions have faced when entering into these agreements.

“They get the revenue and really control the entity,” Horn said. “They have no questions about who else the entity serves.”

“You don’t see many universities these days able to do that on their own from a standing start. Either you need real momentum or an experienced partner.

But he and other experts have raised concerns about cultural issues, such as professors retaining autonomy over the courses they create.

EVersity has just over a dozen workers, most of whom have already started taking on roles at UA Grantham. All will leave college online this summer and begin working entirely at UA Grantham, which has about 146 full-time workers, Hinkel said. No jobs have been cut.

In the coming months, faculty members who previously taught for eVersity will begin teaching at UA Grantham. The online institution’s courses are co-developed between instructional designers and faculty members, who act as subject matter experts.

“There is standardization around course design, but the faculty member still remains in control of the course content,” Hinkel wrote.

Carve out a niche

Other colleges that bought for-profit universities to expand their online offerings got off to a rocky start. Purdue University Global, for example, only broke even in fiscal 2021 and lost tens of millions of dollars in its first two years. The University of Arizona’s Global Campus struggled to enroll in its first year, though Zovio officials hope to reverse that trend.

“The examples we’ve seen so far, like Purdue and the University of Arizona, are really big cautionary tales that you’re unlikely to generate a ton of revenue,” said Brendan Cantwell, professor higher education at Michigan State University. The hope that combining a for-profit institution with a well-known public university brand will boost demand has not materialized, he said.

Grantham University faced years of declining enrollment before the University of Arkansas acquired the institution. It enrolled about 12,600 students in fall 2014, which fell to 6,500 in fall 2020, according to federal data. This period was marked by a sharp decline in enrollment at for-profit institutions and increasing competition for online students.

Today, Grantham has nearly 4,200 students, Hinkel said.

On the other hand, eVersity had only 1,200 active students, according to figures provided by Hinkel.

He has faced recent challenges. System budget documents say the coronavirus pandemic prevented eVersity from breaking even in fiscal 2020, and it did not generate enough cash flow to make the first debt payment in fiscal 2020. fiscal year 2021 on a $5 million loan from other system campuses. In January, University of Arkansas trustees approved a resolution giving eVersity an additional 10 years to repay the loan, the Arkansas Democrat-Gazette reported.

“The examples we’ve seen so far, like Purdue and the University of Arizona, are really big cautionary tales that you’re unlikely to generate a ton of revenue.”

Brendan Cantwell

Professor of Higher Education, Michigan State University

Richard Garrett, director of research at Eduventures, said it made sense to integrate eVersity with UA Grantham. This is because UA Grantham generates more revenue and can bring valuable experience to the combined operation.

But the resulting online college will have to find its footing in the market, perhaps by catering to local students or offering hybrid programming, he said.

“It’s still a struggling asset, and eVersity was also struggling to find its niche,” Garrett said. “It raises a lot of questions about, well, ‘Where’s the niche? What’s going to be different in the future?'”

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