Memo

From: Thomas Sayre

To: Cheryl Brodersen, Supervisor
Subject: For-Profit University Industry Overview
Date: April 20, 2017

Per your request, this report presents context relating to the for-profit university industry. This
report will inform you about the aspects involved in this industry, so you will be able to use this
information in future client meetings. In this report, you will read about this industrys services,
target market, notable trends and its themes in domestic and international markets.

Services

Associates Courses
The demand for associates courses at for-profit universities has declined and is not as
profitable of a service as it used to be. According to McCormack 2016), the industry has
increasingly received negative public attention regarding recruitment methods, loan practices
and general business practices, the number of individuals pursuing associate degrees at for-
profit institutions has decreased. The for-profit university industry can expect to see future
declines in demand for their associates course if they do not discontinue their unethical
practices.

Bachelors Courses
For-profit universities are able to attract a growing number of students seeking bachelors
degree courses. The rising number of high school graduates unable to obtain admission to state
and private schools contributed to the increase in demand for bachelors courses offered at for-
profit universities (McCormack, 2016). This information stipulates that for-profit universities
will continue to see a growing demand for bachelors courses given that their admission
standards remain less stringent than those of traditional universities.

Masters Courses
For-profit universities have attracted an increasing popularity in their masters courses and
students have followed this trend. The number of degrees available in combination with, The
rising number of students taking higher education courses at for-profit schools has generally
made the degrees more acceptable in the eye of the public (McCormack, 2016). When
deciding where to get their masters degree, students have placed a greater emphasis on what
the popular trend is for obtaining this degree. The growing number of students taking higher-
education courses at for-profit universities has indicated that obtaining a masters degree from
a for-profit university would fit the popular trend.

Doctorates Courses
Students tend to take doctorates courses at for-profit universities due to the convenient
online-class format; however, the byproduct of this distance-learning format is a quality of
education not comparable to the postgraduate courses offered at traditional institutions.
According to Canchola (2011), the distance-education structure, as it is presently executed at
most for-profit institutions, does not foster relationships of trust between graduate students
and professors (para. 20). If for-profit universities continue to fail at fostering the trust
between students and teachers, this industry can expect to see a decrease in demand for their
doctorates courses.

The chart below depicts the services provided in the for-profit university industry, what
percentage of specific services are provided and its total annual revenue in 2016.

(McCormack, 2016)

Based off of the chart depicted above, bachelors courses provide 40.7% of the for-profit
university industrys annual revenue and doctorates courses provide the least amount of
revenue at 15.2% of this industrys total annual revenue.

Target Market

Nontraditional Students
The for-profit university industry targets nontraditional students as their main consumer. The
nontraditional student is described with a variety of characteristics such as being over 24 years
of age, working full time, and often having dependents to support. Many non-traditional
students attend college part time (Forbus, Newbold & Mehta, 2011, p. 110). These types of
students do not have the time to attend traditional universities where their physical presence in
a classroom is often required; therefore, for-profit universities are a more viable option for
nontraditional students
For-profit universities are able to identify the needs of their nontraditional students because
their administrators are able to empathize from their own experiences as nontraditional
students. Strayer University is a for-profit university and has a top administrator that can relate
to his students. Strayer University President, Michael Plater states "I know what it's like to
juggle working, going to school, and raising a family... A lot of my students can relate to me as a
role model, and that's inspirational both for me and for them."(K. Mangan, personal
communication, November 26, 2012). For-profit universities are able to provide the classroom
setting that is most desirable for nontraditional students. Administrators of for-profit
universities had similar experiences to that of their nontraditional students, so they can easily
identify what setting best suits their students.

Notable Trends

Acquisition of For-Profit Universities

Traditional universities have taken note of the convenience for-profit universities are able to
offer through their distance-learning format and seek to follow that trend of convenient
learning methods. Kaplan University, a for-profit university which has a large base of students
who also serve in the military, was recently acquired by Purdue University. Purdue University
seeks to reach out to nontraditional students, such as military students, just as Kaplan has.
Mitch Daniels, President of Purdue University was quoted saying, None of us knows how fast
or in what direction online higher education will evolve, but we know its role will grow, and we
intend that Purdue be positioned to be a leader as that happens (N. Gross, personal
communication, April 28, 2017). As evidenced by Purdue Universitys actions, traditional
universities are realizing the distance-learning format that for-profit universities have honed is
becoming a more notable trend; furthermore, for-profit universities can expect to have their
teaching formats mimicked by traditional universities or be acquired by traditional universities.

Transition to Benefit Corporations

For-profit universities struggle to compete with traditional universities because they bear a
heavier tax burden due to their for-profit status. To fix this problem, for-profit universities have
shifted to a for-profit benefit corporation. According to Riddell (2015), The idea behind
becoming a benefit corporation is that an institution's social mission remains protected and it
remains publicly accountable while still taking private funding (Benefit Corporation Status
section, para. 3). For-profit universities are transitioning to a for-profit benefit corporation
status, so they are able to conduct their business operations while being able to avoid paying
the heavy tax burden as a pure for-profit institution.

Market Trends

Domestic Market
For-profit universities can expect a brighter outlook with Donald Trump as President. Under
former President Obama, for-profit universities were facing a bleak future due to new rules that
were set during Obamas administration. Under President Obamas administration, for-profit
universities would lose federal funding if multiple classes of their graduates spend at least 20%
of their discretionary income, as defined by a formula, or 8% of their total earnings each year,
paying off student debt (Mitchell, 2017). Mitchell also states, The Trump administration said
Monday it would delay implementing new rules designed to punish career-training schools that
leave students with high levels of debt but weak job prospects (p. 118). For-profit universities
were originally facing a big challenge when President Obama enacted the punitive rules. For-
profit universities can expect to see greater growth if the Trump administration follows through
with their plan of delaying those rules set by the Obama administration.

The chart depicted below shows the for-profit university industrys expected annual revenue
from 2017 to 2022. Also depicted is the percentage of growth this industry can expect to see in
those coming years.

(McCormack, 2016)

As referenced in the chart above, the expected revenue in 2017 will see a 2.8% decrease in
comparison to the revenue in 2016 for the for-profit university industry. The for-profit
university industry can expect to see similar declines in growth between the years 2018 to
2022.

International Market
The international labor market has seen significant growth due to the recent surge in
globalization. For-profit universities are able to provide flexible courses for students to take
which makes those courses more marketable in a globalized market. Gupta (2008), states We
find a surge in online and for-profit private in the wake of massification of higher education
consumption due to the hyper-mobility in the wake of globalization (p. 23). The rise in demand
for workers to be able to operate in a globalized market while having the flexibility to take
online courses contributes to the growth for-profit universities will see in the future.

In this report, the for-profit industrys overview was covered utilizing its services, target market,
notable trends and its themes in domestic and international markets. If you have any further
questions pertaining to this article, please feel free to contact me at
tsayre46@email.arizona.edu.
 References

Canchola, Y. (2011, November 02). "How for-profit colleges fail their graduate students." The
Chronicle of Higher Education. Web. 26 Apr. 2017.

Cellini, S. R. (2012, March) For-profit higher education: An assessment of costs and benefits.
National Tax Journal. 65(1), 13-27. Retrieved from ABI/INFORM Complete database.

Cottom, T.M. (2017, February). Lower ed.: The troubling rise of for-profit colleges in the new
economy. Library Journal, 142(2), 89. Retrieved from Business Source Complete
database.

Forbus, P., Newbold J.J, & Mehta, S.S. (2011) "A study of non-traditional and traditional
students in terms of their time management behaviors, Stress Factors, and Coping
Strategies." Academy of Educational Leadership Journal, 15, 109-125. Retrieved from A
ABI/INFORM database.

Gross, N. (2017, April 28). Purdue University acquires Kaplan, a popular vet destination.
Military Times. Retrieved from http://www.militarytimes.com/articles/purdue-u
university-acquires-kaplan-a-popular-vet-destination.

Gupta, A. (2005) "International trends in higher education and the Indian scenario." Federal
Reserve Bank of St. Louis, 1-26. Retrieved from ABI/INFORM database.

Mangan, K. (2012, November 26). President of for-profit university beckons students to walk
through door of opportunity. The Chronicle of Higher Education. Retrieved from
LexisNexis database.

McCormack, R. (2016, November). IBISWorld Industry Report 61131b. For-Profit Universities in

the US. Retrieved from IBISWorld database.

Mitchell, J. (2017, Jan 10). U.S. news: For-profit schools face strict debt rules. Wall Street
Journal Retrieved from ABI/INFORM database.

Riddell, R. (2015, April 08). 3 trends changing the for-profit higher-ed. Education Dive.
Retrieved from http://www.educationdive.com/news/3-trends-changing-the-face-of-f
for-profit-higher-ed/379936/