- Strategic Education Inc., the parent company of the for-profit Strayer and Capella universities, is planning on providing educational services to other higher education institutions, its executives announced on a call with analysts Wednesday.
- The company expects more colleges will seek to offer their online courses at scale in the wake of the coronavirus pandemic. It plans to provide only technology and instructional support — not marketing, admissions or enrollment help.
- With this move, Strategic Education will join other for-profit college operators that are providing educational services to colleges.
The decision stems from Strategic Education's recently announced plans to help historically black colleges and universities provide online instruction.
The company has partnered with UNCF, which advocates on behalf of dozens of HBCUs, to let students attending schools that request support to take traditional credit hour classes at either Capella or Strayer, as well as on its online learning platform, Sophia, a spokesperson told Education Dive. It's also offering professional development training for faculty to transition to online learning.
As the pandemic forced colleges nationwide to shut down their campuses and transition to virtual instruction, it prompted the company to consider expanding its efforts, Strategic Education CEO Karl McDonnell said during a call with analysts.
"It's pretty clear that both the popularity and the legitimacy of online instruction — something we've always known and believed in — will be more broadly accepted across the country," McDonnell said. "Having already been focused on it with HBCUs, it was not that much of an additional stretch to think through how we might be able to help other institutions similarly."
Strategic Education is speaking with "dozens of institutions" about their challenges to inform its future offerings, a spokesperson told Education Dive.
Although the company can't support multiple universities currently, McDonnell said he expects it could begin working with other institutions once the U.S. government allows businesses to operate more normally.
Creating revenue streams that don't rely on Title IV funding could help the company, said Trace Urdan, managing director at investment bank and consulting firm Tyton Partners, in an interview with Education Dive.
As the pandemic spurs widespread job losses, students may have to rely more on federal aid to cover the cost of tuition. That could be concerning to some for-profit schools, which are barred from receiving more than 90% of their revenue from Title IV funding, Urdan added.
In 2018, Strayer and Capella received about 79% and 73.5%, respectively, of their revenue from Title IV funds.
However, it's unclear whether colleges will be interested in contracting with a for-profit college operator.
"There is still going to be some antipathy towards dealing with them, buying from them, implicitly endorsing anything having to do with how they deliver (their) educational product," Urdan said.
Strategic Education likely won't become a "major player" in providing educational services, said Jeff Silber, managing director at BMO Capital Markets, in an interview with Education Dive. "It's a very competitive market," he said. "They're not the only one trying to provide services to other (colleges)."
The market for education services providers is expected to reach $7.8 billion by 2025. It spans online program managers (OPMs) that help colleges with nearly every aspect of running an online program — including recruiting, marketing and technology support — to companies that specialize in certain areas, such as instructional design.
A handful of for-profit college operators have been moving into this market.
Zovio, which owns the for-profit Ashford University, hopes to spin off the school as a standalone nonprofit public benefit corporation by June 1. It then plans to become an educational technology and business services provider for the university in exchange for 19.5% of its tuition and fees revenue.
Grand Canyon Education continued to provide educational support services to Grand Canyon University after the two split in 2018. It receives roughly 60% of the university's revenue from tuition, fees and other income sources. It since acquired healthcare education company Orbis and says it is looking to add more university partners.
Although Grand Canyon asked the U.S. Department of Education to reclassify the university as a nonprofit, it declined to do so. The department contended that the primary purpose of the agreement between the two entities was to "drive shareholder value" for GCE, with the university as its "captive client."