Published: November 30, 2012
For-Profit University’s Transition to Division I Stokes Debate
By Tim Rohan
College sports fans should soon be able to buy stock in a Division I program.
Grand Canyon University, a for-profit institution in Phoenix, announced this week that it would join the Western Athletic Conference, becoming the first school of its kind to compete at the highest level of N.C.A.A. athletics. The news brought chuckles from some amused by Grand Canyon’s name, bemusement from others unsure of its pedigree and a seeming nod of approval from the stock market. Grand Canyon’s stock — for the entire university, not singularly its athletics program — has risen almost $2 on the Nasdaq since the announcement Tuesday.
It also raised concern in some quarters of the academic world.
For-profit institutions have been criticized for spending more money on recruiting students and marketing their schools — particularly to draw online students — than actually educating them. A recent study found that more than half of the students who enroll in for-profit institutions leave without a degree, that those students are often left with hefty loans and that taxpayers, in a recent year, spent $32 billion on companies that operate such schools.
“I find it alarming that an institution with questionable academic practices is sort of ingratiating itself into the mainstream of American athletics,” said Barmak Nassirian, an independent consultant on higher education policy, adding, “That traditional, bona fide institutions find it not at all problematic, to be members of the same club, I think is a fair question to ask.”
Grand Canyon claims to be different from other for-profit universities, pointing to an expanding campus and its ascendant athletic department.
“Once you get past the fact that, yes, it is a different financial model, we look like the other schools in our conference,” said Brian Mueller, the university’s president and chief executive, who described Grand Canyon as one of the “good players” in the for-profit school sector.
Jeff Hurd, the WAC’s interim commissioner, acknowledged that the circumstances surrounding Grand Canyon’s inclusion in the conference were not ideal. But in the past two years, the prominent WAC members Boise State, Fresno State, Hawaii and Nevada have left. The WAC is set to have six members starting in the 2013-14 academic year, when Grand Canyon will join. (The conference has reportedly extended an invitation to at least one other university.) Without adding universities, the conference will not exist.
“In order to survive, in order to move on, we had to change our entire model, from an F.B.S. division league to a nonfootball league,” said Hurd, adding that the exodus of universities “made us move forward.”
Grand Canyon, which is in Division II and does not have a football team, will begin a four-year transition to becoming a full member of Division I. The university’s athletic teams — nicknamed the Antelopes (the school’s ticker symbol is LOPE) — will compete in the WAC during the transition period. Discussions between the WAC and Grand Canyon began more than a year ago, but university presidents in the conference were wary. In July, Senator Tom Harkin, a Democrat from Iowa and the chairman of the Health, Education, Labor and Pensions Committee, released a report that condemned for-profit colleges, including Grand Canyon.
“My two-year investigation into the for-profit education sector revealed systemic problems in the industry: high tuition, high dropout rates, lack of support services, deceptive marketing and aggressive student recruiting, and billions of taxpayer dollars squandered on advertising and profits instead of a good education,” Harkin said in a statement Wednesday when asked about Grand Canyon.
He added, “It is important that all stakeholders in higher education, from accreditors to sports-governing bodies, make certain they focus on how these colleges serve their students and protect public investments.”
The WAC needed convincing. “The financial model was a concern,” Hurd said, “but the bigger concern was: they needed to be convinced that the academic model was sufficient and that the academic mission of the school was on par with the missions of the other institutions in the WAC.”
Founded in 1949 and located in Phoenix, Grand Canyon existed as a private Christian university for decades. In 2003, facing a $20 million deficit and the possibility of closing, Mueller said, Grand Canyon was purchased and remade into a for-profit institution with the intention of increasing its online capabilities.
In 2008, Mueller, who had been the president of the Apollo Group — which operated the for-profit University of Phoenix — was hired and made Grand Canyon a publicly traded company. In the past three years, Mueller said, more than $200 million has been spent on new classrooms, dormitories and athletic facilities — including a new basketball arena — and an additional $80 million on online technologies. Since the school’s makeover, Grand Canyon has added 10 sports, for a total of 22. Sixteen of those made the N.C.A.A. postseason last year, and Grand Canyon won the Division II Directors’ Cup, a prestigious award for across-the-board athletic success.
There are about 6,500 students who attend the physical campus, with 45,000 other students taking online classes. Mueller expects the university’s WAC membership will increase those enrollments.
“The sector, it’s like the soda industry,” said Nassirian, a former associate executive director of the American Association of Collegiate Registrars and Admissions Officers. “It’s all sugar water, but they compete on brand differentiation.”
According to Harkin’s report, 87.1 percent of Grand Canyon’s revenue in 2010 came from federal education funds. In 2009, the university counted 17.8 percent of total revenue as profit and used 32.6 percent of its revenue for marketing and recruiting students, which was among the higher percentages among the 30 for-profit schools Harkin examined.
Per student, Grand Canyon allotted more than twice as much money to marketing and profit than educating, the report found. From the 2008-09 school year to 2010, nearly 60 percent of online bachelor’s students and nearly 38 percent of traditional bachelor’s students withdrew.
After hearing from Mueller and studying Grand Canyon’s business model over the past year, however, the presidents in the WAC voted unanimously to accept the university as the league’s newest member.
“All of their accreditations are in order, and from an athletic standpoint they are at the top of Division II,” said Jeff Konya, Cal State Bakersfield’s athletic director.
“They meet the geographic footprint in a major city, in the traditional Western Athletic Conference footprint,” Konya added. “From that standpoint, it made a lot of sense.”