how for-profits will sneak back into the game….

An article by Paul LeBlanc, president of Southern New Hampshire University (a non-profit, read this Business Week article for background) analyzing how for-profits will continue to put pressure on non-profits. I like his proposed solution, but it’s currently unworkable due to DOE rules:

Though for-profit colleges themselves are reeling and seeing steep declines in enrollment, bundled services providers (BSPs), as I call these entities, represent a new for-profit sector quietly gaining substantial ground in higher education. Because this sector is doing so in willing partnership with nonprofit institutions, its presence is largely unrecognized and poorly understood. A new generation of owners and shareholders is being enriched with tuition dollars, and the nonprofit higher education sector may well be compromising its integrity and values. This major new for-profit presence is now becoming established, is a magnet for investors, and in many ways raises more difficult questions for higher education and for regulators than did the for-profit institutions that have been so often vilified.

Bundled services providers are for-profit companies that help institutions establish and grow online programs. While they can help with course development and conversion, platform and IT needs, compliance and reporting, their real added value is marketing and student recruitment….

I propose a BSP cooperative, a nonprofit entity in which nonprofit institutions can be owner/members. From such an entity an institution could buy all the services it needs at a lower cost with a number of benefits:

  • Because it is a co-op it would have to distribute any “profits” back to the members, thus keeping all tuition dollars within the nonprofit sector;
  • Institutions would have not have to surrender such large portions of their tuition revenues and, by extension, federal financial aid dollars would stay within the nonprofit sector;
  • All co-op “profits” could be funneled back into institutions as need-based scholarship support.

Because all members are owners, the earlier cited Department of Education bundled service affiliate rule would prohibit a co-op as just outlined, but I think the idea is compelling enough that (a) the department should find a way to make such a co-op possible and (b) institutions would readily sign on if they could. In the end, a partnership of accredited nonprofit institutions might not address all the boundary and definitional questions that the new for-profit BSP sector raises, but I would find such a partnership more reassuring than our current state of affairs.

Read the full article here.

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