University of Arizona 2020 purchase The previously for-profit Ashford University has been controversial for many reasons, including faculty fears that buying a former for-profit college with a checkered past will damage the university’s reputation.
Perhaps for no greater reason than the fact that the arrangement will continue to deeply involve Ashford’s former parent company, Zovio, in the management of the newly created University of Arizona Global Campus. According to the agreement, Zovio, which had come under scrutiny from accreditors, federal officials and Attorney General of California for allegedly false enrollment history and financial practices, continued to provide enrollment, marketing, and student services services to Arizona Global in exchange for 19.5 percent a cut in tuition revenue for the first 15 years of the deal.
A model similar to Purdue University’s arrangement struck Kaplan when it transformed Kaplan University into Purdue Global University in 2017 drew criticism from consumer advocates who argued that UAGC was putting itself and its students at risk by handing over much of the online program’s operations to publicly traded company Zovio.
Today, the University of Arizona Global Campus took what it hopes is an important step toward regaining control of its new online division and mitigating this major objection to the partnership. announcing that it is buying the online program management assets of Zovio and incorporating some of its operations and employees into the university. (Editor’s note: This paragraph has been updated from a previous version to clarify the nature of the transaction.)
“By terminating the OPM agreement but bringing key personnel and systems to UAGC, we are ensuring that all UAGC staff are focused on a single goal—the success of our students—and our mission to serve working adults and promote their social and economic mobility by offering affordable, high-quality university degree,” Paul Pastorek, president of the University of Arizona Global Campus, said in a news release.
“It really separates our present from our past,” Pastorek added in an interview. “The [U.S.] The Department of Education believes that having such a large part of the business as a commercial one is unseemly. This change relieves the anxiety felt by the department.”
In making the decision, Pastorek said university officials recognized the “internal conflict” that arises when colleges and universities contract with outside companies to launch and operate their online academic programs.
“Our arrangement with Zovio was built on a model that measured new enrollments,” Pastorek said, adding that revenue-sharing arrangements typically force online program management companies to “almost exclusively focus on new enrollments,” with little incentive focus on whether students persist with programs.
A mistake from the start?
The University of Arizona’s purchase of Ashford and its relationship with Zovio have been, for many critics of higher education’s for-profit ties, a prime example of what’s wrong with such alliances. That’s largely because Ashford and Zovio have, at various points over the past 17 years, been considered the poster men of for-profit online education gone wrong.
Ashford appeared in 2005 when the company that would eventually become Zovio is bought Franciscan University of the Prairies, a faith-based college in Iowa that was on the verge of closing. The sale was one of the first for a nonprofit college’s regional accreditation to be transferred as part of a purchase.
Over the next 10 years, Bridgepoint Education, the company that would eventually become Zovio, began a takeover of Ashford that became an exhibit of A one of the perceived questionable tactics of for-profit higher education: “buying” accreditation, by annexing an existing institution and turning it into something completely different (almost always online and usually on a massive scale—Ashford peaked at 90,000 students). Iowa State’s small campus has become a springboard for a public student company with (at one point) a surge in online enrollment and hefty profits, drawing the ire of U.S. senators and intense scrutiny from the accrediting agency that approved the original deal.
In 2018, Ashford once again exemplified a trend: for-profit colleges seeks to become a non-profit organization. The companies described the moves as better serving students and more sustainable, but critics like the Century Foundation criticized some of these moves as attempts by commercial owners to avoid federal regulations that tend to be tougher on for-profit companies, especially when Democrats run governments.
In most of these arrangements, the colleges themselves were spun off as nonprofit institutions from holding companies that remained for-profit, and the companies continued to provide a range of services to the institutions—whether they remained autonomous or were acquired by public universities, as in the case of Purdue and Kaplan.
Arizona character acquisition of Ashford for $1 in 2020 as an attempt to catapult itself into the realm of the primary educator of adult online students as the university went from having a few thousand students studying virtually to absorbing Ashford’s roughly 35,000 students overnight. A key part of the agreement was that Zovio would continue to be actively involved in managing the new institution’s online programs — managing marketing, student recruitment and retention, student success, instruction, financial services, instructional design and technology. Faculty were to retain ownership of course curricula and make decisions about the programs and courses offered by the university.
Under the contract between UAGC and Zovio, the nonprofit institution will share 19.5 percent of tuition revenue with Zovio, and Zovio will guarantee the university $225 million in revenue over 15 years and reimburse it for operating costs.
In many ways, the timing couldn’t have been worse: fall 2020 saw the start of a decline in after-school programs of all types, first due to the pandemic and related recession, and then due to an improving economy and labor market. Adult learners, such as those served by UAGC, were particularly likely to choose work over education.
Arizona Global’s declining student enrollment significantly reduced the value (and threatened the viability) of Zovio, which was left on the hook for online university costs but not generating significant enrollment revenue. In May, the company announced that it would consider selling its various partswhich include bootcamp provider Fullstack and TutorMe, an online tutoring service.
Also, a California judge ruled against Zovio and the former Ashford in March, in a lawsuit initiated by the state attorney general, requiring Zovio to pay $22 million for encouraging students to enroll by providing them with misleading information about cost and financial aid, job market outcomes, curriculum pace and transfer credits.
Arizona Global Solution
Zovio issues and continued scrutiny by accreditors and federal officials put UAGC at a standstill. Some thought the university might cut ties with Zovio, and Pastorek said UAGC was considering that option.
“But if I fired them, I wouldn’t have the marketing, admissions, student services department that we need,” he said. Left with two options, he said, “Go find another one [online program management company]or purchase [Zovio’s] assets and the people I want from them in a way that makes it seamless.”
Pastorek said it became clear to him when talking to other OPM businesses that “they’re always going to have some goals that are different than mine” because of “internal conflict” that they have to “make a profit” and because they get compensation depending on the number of students.
It sounds a lot like what critics have long said about such partnerships, including in Arizona.
“The university was aware of the potential conflict, but I think the perception was that we would be able to handle that conflict,” he said. “I think it was a smart risk going forward.” Pastorek said UAGC has worked with Zovio to change leadership and push the company to focus more on student retention, such as directing students to apply for federal student aid upon admission rather than waiting until they’ve proven themselves (or not) by completing a free three-week program.
But the basic economic aspects of the arrangement made it impossible to continue, and the choice was clear before entering into a new relationship with OPM or creating a new arrangement in which UAGC would bring Zovio’s services and employees in-house, Pastorek said.
Pastorek said he knows some critics might think it’s a “terrible idea” to hire Zovio, given that the company’s found in the past mislead students. He said the UAGC has helped monitor Zovio employees who have been with the university for 18 months, and that he will make wise decisions about who to hire. And under the leadership of the University of Arizona Global Campus, he said, former Zovio employees will get the “right” incentives.
In the end, Pastorek said, Arizona is in a good place despite the bumpy road to this point.
“I hope we get credit for taking 28,000 students,” he said, “and bringing them to the University of Arizona without Zovio in less than two years.”
This is a developing story.
