Business

Public College Opens New Frontier In Education Privatization

For the first time, the world’s largest education company will handle the entire student recruitment process at a college, pushing the boundaries of privatization at public schools.

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A community college in Ohio has opened a new frontier in the outsourcing of public education to private companies, striking an unprecedented deal for its student marketing, recruitment, admissions, and retention efforts to be handled by Pearson, the world’s largest education company.

Pearson’s deal with Cincinnati State Technical and Community College, a two-year school of some 9,000 students, is the first time the company has taken over recruiting for an entire university. It’s also the first time Pearson will handle recruiting for a community college — earning as much as 20% of the school’s tuition revenue from new students.

“This deal really represents the pushing of boundaries in a bid to combat declining enrollments and weak finances,” said Phil Hill, an industry analyst. “This deal gets into uncharted territory.”

Cincinnati State is partnering with Pearson, which had a valuation of $10.5 billion as of Monday, for one main reason: money. Like thousands of community colleges across the country, the school needs more students, and it needs more of them to graduate.

The school’s enrollment has slid sharply in recent years, prompting widespread concerns over its finances that led to the resignation of the school’s president last year. And a looming funding provision in Ohio will soon tie more of Cincinnati State’s funding to its performance — metrics like the percentage of the school’s students that graduate, an area that Pearson is promising to improve with its retention plans.

Pearson has long handled marketing and recruiting for online programs that make up only a small fraction of a school’s total enrollment, like Arizona State University’s. But a contract obtained by the website Inside Higher Education shows that at Cincinnati State, Pearson will be at the end of virtually every interaction between students and the college, outside of academic programs: the company will create and direct marketing and advertising and handle recruiting and enrollment services once students reach out about signing up for classes. Once students enroll, Pearson will be in charge of retaining them.

Facing flagging sales, Pearson has been working to make itself into more than a textbook company, investing deeply in businesses that provide services to colleges, like recruiting and managing of online programs at schools like ASU. If it can figure out how to translate those businesses to in-person students, as it is experimenting with at Cincinnati State, the company could significantly expand its footprint in education services, working with colleges that don’t have or want robust online programs.

But Pearson’s business recruiting students for online programs hit some snags in the past when the company failed to live up to its promises. Two schools, the University of Florida and Cal State, ended lucrative contracts with the company after it couldn’t recruit enough out-of-state students. A University of Florida spokeswoman called the inability to bring in out-of-state students a “significant failure.”

The Cincinnati State deal, which was first inked in October 2015, will leave the two institutions closely entwined, with a financial relationship that is especially complex. Pearson will collect fees based on how many new students it brings into Cincinnati State, as well as how many existing students remain enrolled in the school. Pearson even pays the salaries of some Cincinnati State employees.

Among the questions raised by Pearson’s new business, Hill, the analyst, said: “What does it mean to have an open-access institution compensating a company to increase enrollment?”

The deal could strain some Education Department rules meant to rein in the unrestricted recruiting of students — a practice that led in the past to serious violations by for-profit colleges. While Department regulations allow schools to pay outside companies, like Pearson, based on the numbers of students they enroll, it justifies those rules because the college — not the recruiter — is the ultimate arbiter of admissions criteria and enrollment numbers.

The problem arises, Education Department rules say, “when the recruiter is determining the enrollment numbers and there is essentially no limitation on enrollment.”

But because it is an open-access community college, Cincinnati State has no limitation on its enrollment, and almost no admissions criteria beyond rules about materials applicants must supply, like high school transcripts. That means that Cincinnati State must accept virtually every student Pearson recruiters send its way.

“When we say that community colleges are open admissions, we don’t mean that literally,” said Todd Hitchcock, a Pearson executive overseeing the Cincinnati partnership. “There are still requirements that students must meet, and Cincinnati oversees all of those.”

The Education Department declined to comment on specific colleges’ adherence to regulations.

Trace Urdan, an analyst at Credit Suisse, pointed to echoes between Pearson’s arrangement with Cincinnati State and several arrangements that have run afoul of accreditors, the third-party organizations that give colleges a stamp of approval on behalf of the government.

Earlier this month, the Higher Learning Commission, which also accredits Cincinnati State, rejected a plan that would have had Grand Canyon Education, a for-profit company, handling many of the services for a nonprofit, Grand Canyon University, in a complicated spinoff plan. And the HLC also killed a 2013 partnership between a community college, Tiffin University, and a for-profit company over concerns about the school’s independence.

But both of those plans involved a private company’s involvement with university academics, according to HLC statements — something Pearson is carefully avoiding.

“We’re very aware” of regulations, said Hitchcock. “We’re offering a very finite set of resources that don’t cross those lines.”


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Molly Hensley-Clancy is a business reporter for BuzzFeed News and is based in New York. She covers the intersection of business and education.
Contact Molly Hensley-Clancy at molly.hensley-clancy@buzzfeed.com.
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