Phoenix soars but still dogged by turbulence

April 20, 2007

Profit-making universities are big in the US. However, their spectacular growth has been mirrored by less welcome controversy over tactics. Stephen Phillips reports

Sporting events do not come much bigger than American football's annual Super Bowl. So it is telling that next year's event - a bigger, brasher equivalent of England's FA Cup Final - will be held in a stadium named after a university.

But Phoenix is no ordinary university. America's largest for-profit institution has 300,000 students and counting.

The university reportedly paid more than $150 million (£75,000) to plaster its name across the home ground of the National Football League's Arizona Cardinals in Glendale, Arizona, last September. The move is in keeping with Phoenix's unabashedly mass-market focus, and it ought to pay dividends when the Super Bowl is televised next February.

The university has blazed a trail for other for-profit or proprietary colleges, pioneering a formula of vocational courses taught in small after-work classes at roadside campuses or online by part-time non-tenured "practitioner faculty" who are prized as much for their professional experience as academic qualifications.

Courses are offered on an accelerated schedule, expediting time to completion with multiple points of entry permitting year-round admissions. Such convenient features have driven meteoric growth across America's burgeoning for-profit sector. Enrolment in degree-granting for-profit institutions has ballooned from 44,362 in 1975 to 880,247 in 2004, according to the latest US Education Department figures.

"They're the fastest growing type of institution in the US," said William Tierney, director of the University of Southern California's Center for Higher Education Policy Analysis and co-author of a forthcoming book on for-profits. Courses at such institutions are not cheap. According to a 2006 presentation to a US government panel by Bank of America investment analyst Howard Block, the average $15,539 annual fee was a discount on the $28,000 figure across private non-profit campuses. But this is considerably more than the $7,333 public university average.

Their success has not been lost on observers, who have extolled Phoenix as an exemplar of student-friendly higher education in a competitive market.

"They meet a need from working adults," said Gary Berg, dean of extended education at California State University and author of Lessons from the Edge: For-Profit and Nontraditional Higher Education in America , which featured Phoenix as a case study.

Moreover, although well-funded glossy online ventures such as Columbia University's Fathom.com and NYU Online foundered, Phoenix's online arm, the University of Phoenix Online, with its utilitarian web interface, saw admissions surge from 3,500 to 150,000 between 1998 and 2004.

In the sincerest form of flattery, the University of Illinois' $20 million online Global Campus initiative, to open next January, will emulate some Phoenix practices. "They do a lot of things well," said Chet Gardner, the Illinois professor and administrator spearheading the initiative. "We're trying to incorporate the student-friendly aspects but combine them with Illinois' academic quality."

But despite its success, many look askance at the for-profit model. "There's the perception of a low-quality mass programme," Professor Gardner said.

Recent developments at Phoenix, long heralded as the most reputable among the for-profit cohort, have not helped.

Two former enrolment counsellors alleged that Phoenix flouted a ban on rewarding staff for the number of students they enrolled. The legislation is intended to stop institutions boosting intake simply to make themselves eligible for more government aid.

Last September, a court ruled that the counsellors had enough of a case to proceed with their lawsuit. But Phoenix roundly rejects the allegations. It filed a motion in January asking the Supreme Court to intercede and reverse the "erroneous decision", to forestall "meritless" legal claims. A response from the Supreme Court is expected this spring.

"We don't pay enrolment counsellors solely based on the number of students recruited," said Brian Mueller, president of Apollo Group, which owns the university. "They have semi-annual evaluations on a multitude of factors, one of which is the number of students recruited."

The lawsuit reprised claims first levelled in a 2004 Education Department report in which investigators wrote that Phoenix "provides incentive payments based... on (enrolment) success; provides substantial incentives to... recruit unqualified students (and) operates in a duplicitous manner... (to evade)" detection.

Phoenix reached a $9.8 million settlement with the Education Department but made no admission of wrongdoing. It vigorously contests what Mr Mueller described as the report's "gross misunderstanding and misinterpretation".

Phoenix has also been upset by managerial upheaval, with the resignation last year of Todd Nelson, its chief executive, and Laura Palmer, its president.

In February, it was left smarting by a New York Times article reporting that, when government criteria were applied, only 16 per cent of students graduated. Mr Mueller said the figure was unrepresentative, referring to 7 per cent of students - first-time students. Overall, the graduation rate is 50-60 per cent, comparing favourably with that of community colleges and state universities, Phoenix's closest non-profit peers, he said.

Phoenix is not the only for-profit to face charges of enrolment malpractice. ITT Educational Services, Corinthian Colleges and Career Education have also been the subject of lawsuits and probes.

David Breneman, dean of the Curry School of Education at the University of Virginia and co-editor of Earnings from Learning: The Rise of the For-Profit University , said: "There's a good body of literature on why education is not a good product to sell through the private market. But I had thought reputational issues would be overriding. It now appears there may be a few bad apples."

Dr Tierney said: "The issues are endemic to for-profits. They are aggressive in recruiting students. That's good and bad."

He noted that while non-profit campuses had diversified funding streams from donors for research, and from tuition fees, almost all for-profit funding comes from students and most of that from federal financial aid.

According to Apollo Group's regulatory filings, Phoenix derived 63 per cent of net revenues from students in federal financial aid programmes in 2004-05.

Dr Tierney said: "If for-profit education is best for the student, I have no problem with individuals getting aid. But where you have a problem is if students are just a bounty. Determinations should be made about admitting students that are more than economic decisions."

For-profits also face a mounting challenge from traditional campuses. The failure of previous high-powered online ventures made many wary of jumping in, but there are signs of change.

Cornell, like Illinois, has launched a raft of online professional certification programmes, and the National Association of State Universities and Land-Grant Colleges recently convened a panel charged with stimulating the adoption of online learning courses and degree/certification programmes among member institutions to promote access.

Despite the challenge, those such as Dr Breneman and Dr Tierney believe the for-profit future is bright. "The World Bank estimates there'll be 125 million students worldwide in tertiary education by 2025. There's room for everybody," Dr Tierney said.

10 FACTS ABOUT PHOENIX

  • Phoenix University began life in the early 1970s as a set of adult learning modules developed by John Sperling, a history professor at San Jose State University who is now chair of Phoenix's parent company, Apollo Group
  • Every year the university helps more than 180,000 working adults achieve academic and career goals
  • The teaching model recognises practical experience and knowledge
  • Courses place emphasis on the application of academic theory to real-world situations
  • Only a high-school degree or the equivalent is required to enrol on undergraduate degrees
  • Graduate-degree entry varies, but in most cases a minimum of three years'
  • work experience and a bachelor degrees are needed
  • Students are placed in learning teams, which emulate workplace teamworking and provide a support network
  • Payment plans allow students to finance one course at a time, rather than an entire year
  • All students are assigned a financial adviser
  • Employers pay all or part of the tuition costs of about 59 per cent of students.

WORLD ENCOMPASSED

OFFICIAL ACCUSED OF PROFITING FROM DEAD

An official of the University of California, Los Angeles has been charged with stealing and dismembering bodies donated for medical research and conspiring with an accomplice to sell them for $1 million (£500,000).

Henry Reid, former director of the university's Willed Body Programme, was arrested along with an associate, Ernest Nelson, owner of the Empire Anatomical Company.

Mr Reid allegedly sold hundreds of donated remains to Mr Nelson over a five-year period for $43,000. Mr Nelson is accused of reselling them for more than $1 million. Body parts are used in pharmaceutical research and for other purposes.

It is against US law to sell body parts for profit beyond a "reasonable fee" to cover costs.

This is not the first time UCLA's body donation programme has run into trouble. In the mid-1990s, it was sued by the estates of several people whose donated cadavers, after being used in research, were found cremated and dumped in rubbish containers along with medical waste. One of the waste canisters was discovered floating in the ocean.

Mr Reid was hired at the time to clean up the programme. He is believed to have fabricated some of his credentials.

CREATIONISM DAMAGES STUDENTS' SKILLS

US high-school students who are taught creationism instead of evolutionary theory lack the critical-thinking skills that are necessary for university, according to Donald Kennedy, the president emeritus of Stanford University.

Professor Kennedy, who delivered a lecture on the subject at Stanford this month, said: "If relationships or correlations can be simply allocated to the cleverness of a designer, there's little incentive to think up an experiment or undertake an analysis."

ELITE UNIVERSITY SHRUGS OFF RAPE FURORE

The 13-month furore over allegations of gang rape at Duke University that had transfixed the US came to an end last week when North Carolina's Attorney General declared that three former university lacrosse players accused of assaulting a stripper at a party were innocent of all charges.

The elite university confirmed that the case, which had provoked a bitter row over race and class, had had no impact on its admissions or fundraising efforts.

The university had 19,170 applicants this year - including record numbers of African-Americans (2,190), Asians or Asian-Americans (5,173) and Latinos (1,303), officials confirmed.

ACADEMICS SLATE THESIS FOR RIDICULING DISABLED

A Queensland University PhD student's TV comedy about disabled people has sparked an angry debate in Australia.

Film and television studies student Michael Noonan's thesis, Laughing at the Disabled: Creating Comedy that Confronts, Offends and Entertains, includes a reality TV-style depiction of two disabled men, one with Asperger's syndrome, interviewing locals in a country pub.

Gary MacLennan and John Hookham of Queensland University of Technology's Film and Television School told an Australian newspaper that the work portrayed the disabled characters as objects of ridicule.

The project was given ethical approval by the university and is backed by Spectrum, a non-profit group that helps disabled people in mainstream society.

HARVARD OFFERS MEDICS TEACHING INCENTIVE

Harvard Medical School is to give millions of dollars in collective bonuses to doctors on its faculty. All they have to do to earn the money is to teach students.

The Harvard plan is the latest, if most dramatic, in a series of efforts across the US to encourage faculty at all levels - many of whom prefer to do research - to spend more of their time teaching fee-paying students.

The crunch is being felt particularly at medical schools, whose faculties are largely made up of practising physicians. Those physicians are also being pressured by insurers to see more patients and by their own financial self-interest to do research that could lead to grants or lucrative patents. Such conflicts coincide with an increase in medical school tuition fees that has students demanding more attention.

Harvard's solution is to earmark $16 million (£8 million) a year to compensate instructors who also work in its 18 prestigious affiliated teaching hospitals. That will more than triple the hourly rate they are paid to teach from $30 to $100.

Other universities have taken different steps. Many have required research faculty to teach undergraduate seminars, small classes centred largely on discussion. Some have started programmes to advise PhD candidates how to teach.

PHYSICISTS FIND COMFORT IN COLD

Scientists have created the world's coldest freezer, which can take temperatures down to - 1C, which is colder than in space.

Parts of the Large Hadron Collider at Cern, the European particle physics centre in Switzerland, have been chilled to just above absolute zero, which is -3.15C.

The LHC is designed to smash subatomic particles together to help scientists understand the mysterious realm of subatomic matter. The superchilled zone was achieved by using liquid helium as a refrigerant.

Helium is the only element that can exist in a liquid state at such a low temperature.

RISING TEMPERATURE THREATENS REEF

Australia's Great Barrier Reef is under serious threat from climate change, according to Australian scientists. Rising sea temperatures, which cause mass coral deaths, and the gradual acidification of the oceans from carbon dioxide in the atmosphere, which prevents corals from forming, are the most serious threats.

Terry Hughes and Ove Hoegh-Guldberg of the Australian Research Council Centre for Excellence for Coral Reef Studies provided expert advice to the Intergovernmental Panel on Climate Change, which released its latest report in Brussels this month.

LOAN LENDER AGREES TO MEND ITS WAYS

Education Finance Partners, a student loan company that was found by investigators to have paid at least 60 US colleges and universities to steer students to its loans, has agreed to pay $2.5 million (£1.25 million) to resolve an investigation of its practices by the New York Attorney General, The New York Times reports.

The company, which is based in San Francisco, is the third lender to reach such a deal with Attorney General Andrew Cuomo and to agree to change some of the ways it seeks business from universities.

At a news conference last month, Mr Cuomo singled out the company's practice of "revenue sharing" - or paying back to colleges and universities a percentage of the total volume of private loans borrowed by their students.

As part of the settlement, lawyers said, Education Finance Partners had agreed to adopt a code of conduct developed by Mr Cuomo's office.

The code prohibits revenue-sharing arrangements, as well as giving gifts or trips to university financial aid administrators.

PEKING PLAYS PING-PONG IN VOLUNTEER DRIVE

Peking University, Beijing, is hoping to nurture would-be Olympic champions with a campus-wide table tennis tournament for staff and students ahead of the Olympic Games, which will be held in Beijing next year.

The university will host the Olympic table tennis matches, and it wants to recruit and train eligible volunteers at this year's tournament.

Meanwhile, more than 5,000 students and teachers at Beijing have put themselves forward to work as volunteers to help with the running of the Games.

BELIEVERS MORE THAN PAY THEIR WAY

God and those who follow a religious life are good for the travel industry, according to research from a Florida University masters student.

Harrison Pinckney IV, who carried out the research, said people who go on church trips such as pilgrimages, retreats and conventions usually bring along their families and stretch their visits over three to four days - which benefits the tourism and travel industry.

And there is an added bonus to courting pilgrims and the church dollar, he added. "They're not the kind to show up at bars and then drive home drunk," he said.

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