Published on 2013/06/21
AUDIO | Rejecting Federal Funding to Better Serve Adult Students
Low-cost for-profit institutions such as Patten University have implemented strategies — such as not accepting Title IV funding from the federal government — to keep costs low for students and to compete in the commoditized adult education marketplace.

The following interview is with Terry Rawls, president of Patten University. Patten’s main mission is to make higher education accessible for everyone, especially adult students, and to that end, they have developed a self-paced, competency-based online degree program for which students pay a flat rate. Further, with the College Now program, Patten has partnered with a number of local employers to provide employees with flexible tuition levels determined by specific workplace tuition benefits. Rawls has kindly taken some time out to discuss the way Patten approaches the higher education marketplace, and to share his thoughts on why the Patten model has been successful.

1. What would you say is the most critical element an institution must offer when competing in the adult learner marketplace?

The answer to that has been consistent for 15 to 20 years, probably longer than that. But the answer simply is convenience. If you think about it, the for-profit education industry seemingly exploded overnight in this country. And they did that by paying attention to the adult learner market in a way that traditional institutions simply had not been able to do.

Interestingly, that was all led by continuing education units, a handful of units at different institutions around the country — to name a few, Regis University, Central Michigan University — that were accustomed to serving that adult learner market and to making sure that they were offering courses and programs that mattered and doing them in ways that were convenient, that students could actually access them.

It became a whole new population in the sense there was a time of which we were talking about non-traditional students, but today that adult learner market is rapidly becoming the traditional student population in this country.

2. How has Patten differentiated itself from competitors in the adult education field?

We were created, if you will, to offer educational opportunities, expand access to educational opportunities and the focal point of our effort is on price. And that’s really what we’re dialing in on. So, today the average student is leaving school — and that doesn’t necessarily mean graduating — but leaving school with about $25,000 in debt. Our parent company, UniversityNow, and Patten University have decided that’s simply not acceptable, so we have two initiatives that we’ve launched, really, to address this.

The first; we called up the Department of Education and we said, “We want out of Title IV funding. We don’t want to be involved in that because that’s really where that debt amasses.” …

The second thing we did to support that is we put together a course design model — a delivery model — and we built a learning management system around that model to deliver high-quality courses and programs.

All of this has reduced our cost to a point where we’re able to differentiate ourselves in a competitive field based on price. Last fall, tuition on the campus at Patten University was $6,700. This past spring, tuition on the campus was $1,300. We’re taking that price down to being one of the lowest in the nation.

3. What is it about Title IV funding that creates so much debt for students?

It’s the cost associated with them. There are a couple of things, actually, there are a couple of aspects of this, but one of them is simply the cost to the institution to provide access to Title IV funding.

So, for instance, there was a missive from the Western Association … to all the CEOs out here, in the west, talking about state authorization. And for those folks listening to this that are aware of the state authorization regulations, it’s become a bit of a goat rodeo, to be honest with you, in helping institutions understand how do they prove they are authorized to offer programs across the country?

The price tag on that is conservatively — for a reasonably-sized institution offering online programming nationally — in the hundreds of thousands of dollars. Conceivably, considerably more to be in compliance with those state authorization regulations. We don’t have to pay attention to that, frankly, because we are not looking to get Title IV funding from the federal government.

4. What are some impressive strategies you’ve seen offered by other institutions in the adult education sector that directly compete with yours?

The big strategy, the big shifts, that we’re seeing is — going back to that comment about convenience —institutions are figuring out that they need to be convenient, that they need to figure out what the needs are of the learners that they serve and make sure that they address those needs.

You’re seeing that in for-profits and not for-profits, you’re seeing that all across the country. That’s wonderful because that is the way that we can serve that population. There are some individual institutions that I think stand out. Southern New Hampshire University — they’ve certainly been on my radar as an impressive competitor in the adult learner market. Their creative use of competency-based education, some interesting programs and, really, managing a not-for-profit but using a lot of for-profit models in what they’re doing to reach out to adult learners and make sure that their opportunities are noted and being taken advantage of.

5. What are some specific advantages of being a for-profit institution in this marketplace?

The business model of for-profit education companies is the disruptive technology that’s changing education today, certainly in the United States. And it is the biggest advantage that for-profit schools leverage. … A lot of people thought that the Internet was a disruptive technology and was going to change everything. But, honestly, the Internet — particularly the way most online education is delivered today — is really just another medium, another way of delivering pretty conventional educational opportunities. I think Patten, certainly, and there are other schools that are starting to really leverage the power of the Internet.

The real disruptive technology, the thing that’s changing our industry, is that business model. It’s going through and understanding all of the elements of offering education and then prioritizing those to make sure that funding and emphasis are placed on those things that lead to student success and not focusing on those things that don’t directly lead to student success. … The continuing [education] groups were the folks that figured this out back 30 to 40 years and more ago, and you had institutions that were disaggregating the faculty role and focusing on student learning. And so … the for-profit folks learned from the not-for-profits how to run an institution in a way that can be profitable and, frankly, successful.

It’s interesting to note traditional schools increasingly are adopting elements, at least, of this business model. The ratio of tenure-track to adjunct faculty at institutions across the nation has been coming down in the last 10 years, quite notably. As well, as I mentioned before, marketing efforts, there are a lot of aspects of that business model that traditional schools are starting to pick up on.

6. By the same token, are there any specific disadvantages of being a for-profit institution in the adult education sector?

Not as many as you’d think. I alluded to another a little earlier that I do want to talk about and that’s the 90-10 rule. For those that aren’t familiar, Congress passed a rule that essentially says that … for-profit education institutions cannot derive more than 90 percent of their income from federal sources.

What that does is it forces those schools to raise tuition; to raise the prices to a point where students, once they max out the borrowing that they can do, the use of federal funds is still going to have to find another source for that last 10-plus percent. Private loans or other types of things.

That’s one of the biggest culprits in driving up this debt in education today, is that these for-profit schools who serve a lot of students are basically being forced to raise their tuition rates above what they even necessarily would like to have them at so that they can meet that 90-10 rule.

That’s a big disadvantage for the for-profit sector. We’re fortunate at Patten because of the decisions that we’ve made not to be involved with Title IV and to focus on low tuition. And so finding many, many places where we can cut costs out of the model so we can pass that on to students and maintain a very low cost allows us to look on at this whole process. It doesn’t impact us the way it does most schools today.

7. Is there anything you’d like to add about being a for-profit institution geared toward serving adults and competing in the hyper-competitive adult education marketplace?

I would like to just add it’s a very exciting time to be involved in education, and it has been throughout my career as I’ve lived through that recognition of the adult learner and the value of the adult learner and the needs of the adult learner, and where I’ve had the opportunity to work with some very esteemed institutions in understanding and addressing very specifically the needs of adult learners.

I think the next turning point, and we’re coming to it today, is we’re beginning to really leverage the power of the Internet. We’re bringing competency-based education programs online, we’re bringing tools that are inherent in the Internet for helping individuals learn, for using analytics to understand how they learn and to use what we know about brain research — about the mechanisms that produce learning — to create programming that’s just amazingly powerful.

I’ve often said, “You can’t hide in the back of an online classroom. If you want to learn something, study it online.” And that’s just more true as time goes by.

So, it’s a great time to be involved in the industry. It’s a great time for innovation and change, and that can be a little scary. But I think if we can all enjoy it and support each other, we’re all going to have a pretty good time with it.

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Readers Comments

Frank Gowen 2013/06/21 at 11:25 am

Interesting that two of the articles published today look at how recieving government money can be a hamper to success.

Does the freedom from government money make your programming more flexible, or does it force you to focus on cash-cow programs?

    Natalie MIller 2013/06/21 at 1:21 pm

    I think that’s telling. It’s not a Republican/Democrat small government vs big government question, either. It’s about how the strings attached to funding often lead institutions to become slow-moving and unable to innovate.

Tyrese Banner 2013/06/21 at 11:58 am

I’m also interested in Frank’s question. I would think that not having a government income safety net would force an institution to create programs that may not be particularly innovative or forward-thinking, but are in high demand.

D. Terry Rawls 2013/06/28 at 11:07 am

Thanks for the comments. Natalie is spot-on right: it’s about the strings that are attached to the Federal funding sources and how those costs must be passed on to the student. In our experience, without those strings we can focus our attention on student success, and our students benefit from the products of that focus AND lower tuition. Removing the government safety net does certainly invite a re-thinking of the entire institution, but so far it is not driving program development. An institution like Patten, however, is naturally focused on providing programs that lead to improvements in graduates’ lives, which generally speaking are high-demand programs. Could Patten do innovative programming? Of course. But our energy today is on further development of our competency-based program development model, and on building a LMS that incorporates innovation to support student learning. TRawls

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