Last summer, the University of Arkansas System made waves when it announced plans to acquire Grantham University, a for-profit online institution catering to military-affiliated students, for just $1.
At the time, the system already had an online-only college — eVersity, which was launched in 2015. The idea was to eventually combine Grantham University with eVersity, a plan that's coming to fruition less than a year later.
System trustees voted late last month to approve the shutdown of eVersity and transfer its assets to the acquired institution, now called the University of Arkansas Grantham, or UA Grantham. UA Grantham is now a public institution.
The system began the transition process in January, when eVersity stopped accepting new applicants and communicated with existing students about their options to finish their programs by the summer term or transfer to Grantham at the same tuition rate. About 200 students have graduated since the transition began, and nearly 300 students have "engaged with and enrolled in" Grantham, Nate Hinkel, the system's director of communications, said in an email. About 120 students are in eVersity's final session and will either graduate or transfer.
Altogether, the system is closing about two dozen degree programs at eVersity, all of which have parallel programs at Grantham.
The plan builds on efforts at eVersity by expanding the system's online degree offerings, growing its footprint at the graduate level and creating a larger national presence, Hinkel said.
"In short, it allows us to rapidly accelerate our growth," Hinkel said. It also aligns with the system's mission, he added.
It also comes at a time when several other public systems or universities are buying online colleges to supercharge their virtual offerings. The University of Massachusetts and the University of Arizona are just two other colleges that have recently acquired or affiliated with online colleges to serve more adult students — a large market, but one that can be difficult to break into.
The online market is much more competitive than it was several years ago, said Michael Horn, who has written books on the future of education.
"And so the cost of getting in is often significant," Horn said. "You don't see a lot of universities these days being able to do it themselves from a standing start. You either need real momentum behind it or an experienced partner."
While buying online colleges can accelerate growth, these deals aren't always slam dunks. Higher education experts warn that buyers might struggle to mesh the ethos of online colleges with the culture of public universities. Colleges may also face heightened public scrutiny if they acquire a for-profit institution. And they will still have to carve out a niche for themselves in a competitive online market.
Merging for-profit and public institutions
College mergers and acquisitions are usually tricky, with leaders navigating the complexities of combining two different cultures and business operations. Buying a for-profit can pose even more difficulties.
In 2017, Purdue University announced plans to purchase Kaplan University for $1, bringing roughly 32,000 students and 2,500 instructors into its fold. Purdue used the purchase to build an online college for adult students, called Purdue University Global. Meanwhile, the former parent company, Kaplan, provides services such as marketing to the new online college in return for a share of its revenue.
The University of Arizona closed on a similar deal in late 2020, purchasing the for-profit Ashford University and rebranding the school as the University of Arizona Global Campus. The University of Arizona also retained Ashford's parent company, Zovio, as a services provider in exchange for a cut of the tuition revenue.
Both of these deals have drawn concern from policy advocates and lawmakers. They worry that the online colleges' ongoing relationship with their former owners ends up prioritizing the needs of shareholders over students.
In the University of Arkansas' case, UA Grantham has no ongoing relationship with its former owners, Hinkel said.
The system did take on the acquired university's liabilities, however. Financial documents released by the system listed transferring assets totaling $4.6 million and a similar amount of transferring liabilities, the Arkansas Democrat-Gazette reported.
By avoiding an ongoing relationship with the former owners, the university may sidestep some of the concerns other institutions have faced when forging these deals.
"They get to have the revenue and to really control the entity," Horn said. "They don't have questions about who else the entity is serving."
“You don’t see a lot of universities these days being able to do it themselves from a standing start. You either need real momentum behind it or an experienced partner.”
But he and other experts raised concerns about cultural issues, such as having faculty retain autonomy over the courses they create.
EVersity has a little over a dozen workers, most of whom have already begun taking on duties at UA Grantham. All of them will depart the online college this summer and begin working entirely at UA Grantham, which has about 146 full-time workers, Hinkel said. No jobs were eliminated.
In the next few months, faculty members who previously taught for eVersity will begin teaching at UA Grantham. Courses at the online institution are co-developed between instructional designers and faculty members, who serve as subject matter experts.
"There is standardization around course design, but the faculty member always remains in control of the course content," Hinkel wrote.
Carving out a niche
Other colleges that have bought for-profit universities to expand their online offerings have faced a rocky start. Purdue University Global, for instance, didn't break even until fiscal 2021, and it lost tens of millions of dollars in its first couple of years. The University of Arizona Global Campus has been struggling with enrollment in its first year, though Zovio officials are hopeful they can turn that trend around.
"The examples that we have seen so far, like Purdue and University of Arizona, are pretty big cautionary tales that you're unlikely to generate a ton of revenue," said Brendan Cantwell, a higher education professor at Michigan State University. The hope that combining a for-profit institution with a well-known public university brand will kickstart demand hasn't been borne out, he said.
Grantham University faced years of enrollment declines before U of Arkansas acquired the institution. It enrolled around 12,600 students in fall 2014, which fell to 6,500 in fall 2020, according to federal data. That period was marked by sharp enrollment declines at for-profit institutions and growing competition for online students.
Today, Grantham has almost 4,200 students, Hinkel said.
On the other hand, eVersity only had as many as 1,200 active students, according to figures provided by Hinkel.
It's faced recent challenges. System budget documents say the coronavirus pandemic prevented eVersity from breaking even in fiscal 2020, and it did not generate enough cash flow to make the first debt payment in fiscal 2021 on a $5 million loan from other system campuses. In January, U of Arkansas trustees approved a resolution giving eVersity another 10 years to pay back the loan, the Arkansas Democrat-Gazette reported.
“The examples that we have seen so far, like Purdue and University of Arizona, are pretty big cautionary tales that you’re unlikely to generate a ton of revenue."
Higher education professor, Michigan State University
Richard Garrett, chief research officer at Eduventures, said it makes sense for eVersity to be folded into UA Grantham. That's because UA Grantham brings in more revenue and can lend useful experience to the combined operation.
But the resulting online college will need to find its place in the market, perhaps by catering to local students or offering hybrid programming, he said.
"It's still a distressed asset, and eVersity was also struggling to find its niche," Garrett said. "It raises a lot of questions about, well, 'Where is the niche? What is going to be different going forward?'”