Some people try to profit from adversity, and not always in legal or ethical ways. I chatted Monday with an outstanding higher education entrepreneur, Andrew Clark, CEO of Zovio, formerly Bridgepoint Education. Andrew pointed out that both with the 2008 financial crisis and with the COVID-19 pandemic, unanticipated and unwanted events lead to behavioral changes that unscrupulous individuals will exploit for personal gain. In economic downturns, unemployed persons often turn to higher education to burnish their job credentials, increasingly through online programs. According to Clark, following the 2008 financial crisis shady fraudsters enrolled (often using stolen IDs) individuals in online programs, and then federal largess (student loans, Pell Grants) was distributed to the so-called students, who, in reality were criminals.
Clark predicts this will happen again in a virulent form, particularly with the Feds dropping goodies out of airplanes (or the equivalent) to aid those aggrieved by the pandemic. With its long experience in online education and dealing with shady operators, Clark asserts that Zovio has learned a few things, including how to reduce fraud. Always the astute businessman, I suspect that for a fee Clark will offer others some useful tips on combating this fraud problem, as Zovio moves away from being primarily a degree provider towards delivering support services for traditional universities relatively new to online learning.
Clark and others created Bridgepoint in 2004, jump-starting the company by buying a financially challenged Roman Catholic school in Iowa (and with it, needed accreditation), converted it into Ashford University with a massive online presence, and for several years boomed along with the rest of proprietary higher education. But it was adversely impacted by the dual impact of the financial crisis and the complete Democratic takeover of the federal government.
The Obama Administration began an ideologically driven effort to end for profit-higher education, and largely succeeded, with major names such as Corinthian Colleges and Kaplan ultimately going broke or exiting their traditional educational provider business. Although the Trump Administration has adopted a level playing field approach to regulating all educational providers, the for-profit industry is now a shadow of its former self.
Yet by being adaptable, some for-profit players have slashed costs and continue to exist. Bridgepoint, for example, changed its name to Zovio and moved its headquarters from expensive San Diego to lower-cost Chandler, Arizona (a Phoenix suburb) to save millions in rent, an adaptability not possible with traditional not-for-profit universities with their vast building portfolios. Seeing declining traditional college enrollments nationwide but an upsurge in interest in specialized vocational training requiring less than a formal academic degree, Bridgepoint bought a rapidly growing coding academy, Fullstack Academy. Presciently foreseeing increased use of online education, it also bought a student tutoring company, TutorMe, a growth field in this era of enhanced distance learning.
By being nimble, flexible, innovative and willing to take some risks, Zovio has survived, and despite a near death experience in the eyes of investors, its stock is higher today than three months ago. Leaders like Clark not only lose their jobs but a sizable portion of their life savings if the business fails, so they work harder and innovate more. Creative destruction (Joseph Schumpeter) or disruptive innovation (the late Clayton Christensen) have worked to make America the most successful large economy the world has ever known.
For-profit higher education has one big advantage over not-for-profit universities in periods of momentous change: it is inherently more adaptable. It doesnt have huge fixed costs associated with massive buildings or lifetime employment contracts for faculty. If a certain city tanks, or if a certain field of study booms, companies like Zovio can respond quickly, closing down campuses or hiring new faculty to offer expanded offerings in high-demand fields.
Contrast that to traditional higher education. It is dominated by self-serving faculty unions, bloated overpaid administrative staffs, inflexible tenure arrangements, and massive subsidies of dubious activities, from ball throwing exercises (intercollegiate athletics) to academic programs that are politically correct but economically disastrous and intellectually more ideologically driven rather than fact based (like majors in gender studies). It is less nimble and creative than enterprises like Zovio. America benefits from educational diversity, including for-profit firms.