For-Profit Colleges Capitalize on California Education Woes

By Melissa Korn of Dow Jones Newswires

For-profit educators are taking advantage of California’s fiscal crisis and alleviating pressure on the state’s overwhelmed and underfunded higher-education system by tapping the state schools for new customers of their own.

Washington Post Co.’s (WPO) Kaplan University is allowing the state’s community-college students to take courses at its online school while still graduating from their home campuses, and Bridgepoint Education Inc.’s (BPI) Ashford University promised to accept up to 90 credits from community-college students looking to complete their bachelor’s degrees at places other than the state’s distressed public colleges.

The moves, announced last month, come as California’s two-year schools face increasing demand from students being turned away from crowded universities, as well as from displaced workers looking to retrain. Enrollment at the state’s community colleges rose 4.9% in the 2008-2009 academic year. At the same time, budget strains have forced some schools to reduce their course offerings by as much as a fifth. (California Community Colleges Chancellor Jack Scott said last week that 2009-2010 enrollment may actually drop 1% as schools are forced to cut back.)

"Community colleges are probably more open to it than at any other point," Signal Hill Capital Group managing director Trace Urdan said of the relationships with for-profit institutions. "It makes sense for the schools to be making these partnerships right now."

Kaplan’s innovative approach could help bring immediate revenue and establish a long-term client base. The company’s Community College Connection program would allow students to take classes at a 42% discount, in line with what many community colleges charge.

"While our focus is around degree enrollments, this is an opportunity to help California," said Gregory Marino, president of Kaplan University Group.

Kaplan doesn’t get any upfront financial benefit from the agreement and must still sign individual pacts with community colleges to ensure its courses match up with each school’s requirements. Marino said that while the school hasn’t made any of those agreements yet, it is in conversations with a number of colleges.

Kaplan will also allow graduates of those community colleges to transfer in, at a 10% discount, to complete their bachelor’s degrees. By agreeing to accept California’s community-college students into its school, Kaplan will gain exposure to an enormous market. The school currently has 56,000 students nationally, while the state’s community-college system is more than 50 times that size, with 2.89 million enrolled.

Bridgepoint’s Ashford University could also see big benefits from its agreements allowing students to transfer credits from the Yuba Community College District, Folsom Lake College and College of Alameda. This is Ashford’s first foray into California, but it has 36 such agreements elsewhere, mostly with schools in Illinois and Iowa. The school has a bricks-and-mortar campus in Clinton, Iowa.

Ashford, which Wednesday announced new articulation agreements with community colleges in Georgia and Wyoming, sees additional pacts with other California institutions on the horizon, according to Jane McAuliffe, president and chief executive of the school.

With the University of California considering a wait list to help control capacity, and with public college fees skyrocketing, students are seriously considering alternatives. Articulation agreements, as these credit-transfer pacts are called, can help legitimize a for-profit school by placing it among the state’s flagship institutions as a place where students can complete their bachelor’s degrees.

"There’s an implicit stamp of approval" when a community college signs an articulation agreement, Urdan said. He explained that it’s a form of marketing, as schools can get their names onto campuses without paying for air time or ad space.

Folsom Lake College, for example, has agreements with the UC and CSU systems on a major-by-major basis, as well as with 19 private colleges, four of which are for-profit. While other schools may accept credits from the school, says Sue Lorimer, vice president of instruction, an articulation agreement has the power to steer students toward specific institutions.

By Melissa Korn of Dow Jones Newswires

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