Dive Brief:
- The University of Arkansas System’s governing board approved plans Wednesday to acquire Grantham University, an online for-profit institution based in Kansas, for $1 to build out the system’s virtual offerings.
- The system will gain around 4,000 Grantham students through the deal. The purchase will surpass the unique credentials offered by U of Arkansas’ online platform, called eVersity, to 60.
- The acquisition will help the system “reach beyond the borders of Arkansas” and diversify its educational offerings and revenue sources, U of Arkansas System President Donald Bobbitt said.
Dive Insight:
The acquisition will help expand the U of Arkansas’ eVersity platform, attracting students who left college before earning their degrees. The system joins the ranks of other higher education institutions that have bought for-profit universities to bolster their online offerings amid nationwide enrollment declines.
The number of traditional-age students is expected to decline sharply after 2026 due to lower birth rates during the Great Recession. Colleges have been preparing for this enrollment cliff by looking to recruit other types of students.
“With the declining number of traditional-age students — 18- to 22-year-olds — we need to find additional markets to be successful,” Michael Moore, the system’s vice president for academic affairs, said during a board meeting Wednesday. “The adult student market is the most attractive market.”
That includes learners with some college, but no degree, often called stopped-out students. One 2019 report estimated that roughly 36 million students had left college without completing a credential. The U of Arkansas System has identified 200,000 former students who didn’t graduate in the last seven years.
System officials said the acquisition of Grantham, founded in 1951 and heavily recruited veterans, will help it reach adult and stopped-out students.
The acquired college will join the U of Arkansas System as a “unique new campus,” according to a system statement. It will become a nonprofit under the deal and eventually combine with eVersity.
OPMs help colleges launch and grow their virtual offerings, often in exchange for a cut of their tuition revenue, typically between 40% and 60%. The system launched eVersity in 2015, and the online university now enrolls around 700 students per semester. The deal means expanding the university’s online presence without relying on the help of an online program management company.
“Unlike often-criticized OPM relationships, there would be no long-term service agreement, revenue sharing, or ongoing relationship with the current university owners after the transaction is complete,” a proposal states.
The system plans to take on the for-profit school’s “discrete liabilities,” though the purchase agreement draft doesn’t include them. An official said during the meeting that the liabilities include ongoing service agreements.
It may have made more sense to acquire an online institution than to work with an OPM, as OPMs tend to focus on graduate programs, said Trace Urdan, managing director at investment banking and consulting firm Tyton Partners. “If you’re a public institution and want to be at scale in the degree-completion business online, the more obvious path is to acquire that institution,” Urdan said.
Other universities have taken a different approach. They’ve bought for-profit institutions for nominal fees needed to make the acquisitions official, but in return, they’ve also entered long-term service contracts with the for-profits’ former owners.
The University of Arizona last year bought the for-profit Ashford University for $1 to create a new online institution. In exchange, the university contracted with Ashford’s former parent company for educational services.
The deal is similar to Purdue University’s acquisition of Kaplan University to create Purdue University Global for $1. Kaplan’s parent company likewise provides educational services to the online university under a 30-year agreement.
The Arkansas deal may also help Grantham. The university would struggle if it continued to operate independently, said Thomas Macon, CEO of the company that owns Grantham.
According to federal data, Grantham’s enrollment slid from a high of nearly 12,600 students in the fall of 2014 to around 7,100 students five years later. During the Wednesday board meeting, Macon said that recent federal regulatory changes targeting the for-profit sector would make it harder for the university to operate independently. Grantham University’s governing board must still approve the deal, which will review the matter Thursday.
