Students at a Strayer University graduation event.
In 2013 the leadership of the private, for-profit Strayer University knew it had a problem. Enrollment and revenue, which had peaked in 2010, had fallen by roughly 25%. Profit had tumbled by more than half. Something had to change.
There are many disadvantages to being a for-profit educational institution. For one, you have to pay taxes. (Strayer, a company that generated $441 million in revenue in fiscal 2016, paid $32 million in federal state, and municipal taxes.) Another is the necessity of propping up profit margins to please shareholders. Yet another is high percentage of poor and minority students who struggle with tuition (54% black and Hispanic, 41% receiving Pell grants for low-income recipients), and yet another, at least during the previous presidential administration, was the hostility of federal regulators.
But there is one big advantage to being a private for-profit: The ability to implement change quickly. The experience of the Herndon-based company, which operates campuses in Northern Virginia, the Richmond region and Hampton Roads, shows one path higher education institutions can follow to reinvent themselves in an era of backlash against the runaway cost of attending college.
The first thing Strayer did was slash overall tuition by 20%, according to a special advertising feature published in the Wall Street Journal today and the 2016 annual report, both of which I consulted for this blog post. The second thing it did was create the Graduation Fund to encourage students not to drop out but to complete their degrees. Every time a student completes three courses, Strayer awards them one tuition-free course toward the final 10 classes needed for a degree. For students who complete their studies, the program amounts to a 25% reduction in tuition.
Thanks largely to these two measures, plummeting enrollment leveled off, actually ticking back up 2,500, or about 6%. (Revenue inched up about 2%.)
Third, Strayer, which operated 80 brick-and-mortar locations, closed under-performing facilities and followed a shift in student preferences to an increased online presence — 85% by the fall of 2016. Fourth, the company increased funding on academic services, investing its online curriculum to make it more “robust, engaging and interactive.” A new production facility, Strayer Studios, assembled academic instructional designers, producers, and graphic artists to build new online courses. Says the annual report:
The early results from our Strayer Studio courses are very encouraging. The two most important academic metrics we track, credit hours earned and student continuation rate, both increased in our Strayer Studio courses (by 5% and 6.5% respectively) versus a control group of the same online classes in our previous course format. While these improvements may seem small, when compounded over 40,000 students, four terms per year, they will create meaningful increases in both academic achievement for our students, and financial return for our shareholders.
And fifth, in the Foundations of Success program, Strayer used data collection and predictive analytics to identify the behavioral sources of academic success, such as determination and perseverance, and then developed coaching and tutoring techniques to help instill those attributes.
The willingness to tinker, experiment and fail is crucial to improving the university’s performance:
Developments like Strayer Studios and Foundations of Success courses are a result of our commitment to a culture of experimentation and innovation. In any given term we have dozens of pilots underway, testing not just what we teach, but how we teach. With over 40,000 students and a relatively narrow course catalog, we can experiment at a small scale, and when we see promising results, quickly implement the improvements on a large scale. We collect and use data voraciously, and are not shy about making changes.
As a for-profit enterprise that answers to shareholders rather than internal constituencies such as departments, faculty, staff, and alumni, Strayer has far more latitude to implement quick, decisive change than Virginia’s not-for-profit institutions. Strayer’s tight focus on career development also lets it avoid angst-inducing debates over striking the right balance between educating students for the workforce and educating them to become well-rounded citizens.
Let us then credit Strayer with the ability to change. How has all the restructuring worked out?
That’s less clear. According to the U.S. Department of Education’s College Scoreboard, the average annual cost of attendance at Strayer’s Arlington campus — $25,802 — is still above the national average of $16,300. On the other hand, Strayer must absorb roughly $800 per student a year in taxes, it gets no state support — in 2015, the average state support per student for higher ed in Virginia exceeded $4,900 — and it cannot pay for capital improvements with tax-free municipal bonds.
The graduation rate within six years was only 19%, considerably lower than the 42% national average. (How Strayer compared to other schools with comparable demographics is not displayed by the College Scoreboard.) On the positive side, of those who do graduate, the average salary at $47,300 is considerably higher than the national average.
