The pandemic will hasten a transformation of higher education business models, according to a new Moody’s Investors Service report.
The crisis will accelerate many colleges’ plans to grow their online footprints, though not all schools have the resources to invest in digital infrastructure, the report notes. They will also likely expand nondegree and certificate programs.
Analysts predict that once the pandemic subsides, some colleges will struggle if they haven’t established a strong online presence.
At least 1,400 colleges moved to mostly online or hybrid instruction this fall as confirmed coronavirus cases spiked in the U.S, according to data kept by the College Crisis Initiative at Davidson College. The pandemic accelerated a shift toward online learning that predates the health crisis, Moody’s analysts say.
“Some universities previously resistant to change will have to take more expansive steps to adapt to this transformation,” Pranav Sharma, assistant vice president at Moody’s, said in a statement. “Not all universities, however, have the resources or culture to move quickly and the coronavirus will expedite existential threats for some.”
Several recent deals by public universities indicate they will continue investing in online education after the pandemic ends, the report states.
The University of Arizona announced earlier this month that it’s setting up a nonprofit entity to acquire Ashford University, a for-profit online college that enrolls around 35,000 students.
As part of the arrangement, Ashford’s parent company, Zovio, will provide the online college with a range of academic and educational services in exchange for 19.5% of its tuition and fee revenue.
The U of Arizona said it views the acquisition as a way to reach more nontraditional students, which will be key for schools that expect demographic declines in traditional-age students over the next decade. But faculty have pushed back against the deal, saying that it could damage the university’s reputation and hurt Ashford’s students.
The deal is similar to Purdue University’s acquisition of for-profit Kaplan University in 2018 to create its online college, Purdue University Global. Although Purdue Global had nearly $400 million in operating revenue in fiscal year 2019, it posted an operating loss of $40 million during its first full year, Moody’s analysts wrote. Moreover, Purdue is still working to integrate and manage the two entities’ different brands and reputations, they note.
Likewise, the University of Massachusetts revealed plans in June to partner with the private, nonprofit Brandman University to grow its online presence in the state and nationwide. Details about the arrangement are sparse, though UMass officials said neither the state nor the university would make an upfront investment.
Moody’s analysts wrote UMass’ partnership differs from the Purdue-Kaplan and U of Arizona-Ashford deals because of Brandman’s status as a well-established nonprofit and its “stronger” student outcomes.
The U.S. Department of Education’s new regulations governing distance education could encourage more schools to grow their online presence, the analysts note.
For instance, the rules give some online vocational and training programs more freedom to use asynchronous education, such as prerecorded lectures. They also could make it easier for some schools to launch competency-based education programs, which are typically online and allow students to move through coursework as they demonstrate mastery of a concept or skills.