The Rise of For-Profit Partnerships in Higher Education

Nearly 20 years ago, I wrote about the “disappearing state” in public higher ed in The Chronicle of Higher Education.

Coming out of the 2001 recession, public colleges and universities weren’t seeing the upswing in their taxpayer appropriations that they had after previous economic downturns. Tax cuts as well as new expenses, particularly health care, were eating into the public coffers.

I still recall reporting this particular piece because so many of its sources came of age during a time in higher ed when public colleges didn’t charge tuition or were close to free. These college leaders saw the move to privatization—which at the time meant starting separate private foundations to raise money or spinning off law and business schools as independent entities—as a massive shift in higher ed from a public purpose to a private good.

“University Inc.” was how one of my colleagues described the thesis of the article. Of course, what public colleges were considering then in terms of privitization now seems quaint compared to what has happened since—not only at public institutions but also private universities, too.

Over the next decade, every college and university started to look for new revenue streams. Coming out of the Great Recession of 2008, two of the most appealing options for new dollars were online education and international students. Those two areas also attracted a lot of private capital with companies that promised they could help universities build and market online degree programs and recruit and prepare international students.

The result was that “online program managers” (OPMs) and international “pathways” programs became the working strategy for many higher ed institutions over the last decade. In short, OPMs helped colleges quickly build and market online programs while pathway programs recruited international students and gave them the academic grounding to make the transition to full enrollment.

Without the talent or financial capital—or frankly the risk tolerance—to build the infrastructure themselves, colleges and universities turned to these private partners who agreed to put up money and bring the expertise in exchange for sharing tuition revenue.

Now, a few of these partnerships are drawing the scrutiny of the press and policymakers. Some wonder if the tuition sharing model is driving up already inflated college prices. My take is that neither universities nor private companies have an interest in charging more when growing market share is at stake.

One thing is for certain, however: such public-private partnerships aren’t going away. Indeed, they are likely only to increase in the wake of the pandemic.

The Great Resignation and the end of federal Covid funds means colleges are operating with a thin staff and margins:

  • Just this morning, The Chronicle reported the results of a survey with Huron Consulting Group that colleges are finding “shallow and weak” candidate pools for jobs on campuses.
  • Last week, Bain & Company released an analysis that found only one-fifth of the entire higher education sector is considered to be in a strong financial position—and that’s based on financial data from before the pandemic (see graphic below).

In other words, absent a return to how higher ed was funded by the feds and states in the late 1960s, colleges will need all the outside help they can get to survive and thrive.

With pressure to grow public-private partnerships in the decade ahead, their specific structures are also likely to evolve.

While the tuition-sharing model won’t go away, even with increased regulatory scrutiny, new designs will emerge. One model likely to gain in prominence is where  institutions invest their own dollars in campus functions, such as online programs, but still partner with external companies for expertise.

That’s essentially what both the University of North Carolina System and the City University of New York are doing to accelerate their online education efforts. This model follows what institutions have done for decades with their physical assets: using donations or endowments for construction. Investing a university’s money in building new online programs or for services to grow international student enrollment could over time offer a better return on investment and reduces the regulatory issues around tuition sharing.

The pandemic introduced continued uncertainty into higher ed’s business model. Many leaders seem reluctant to embrace even more of it as they attempt to transform their institutions.

Public-private partnerships in higher ed haven’t been without their problems, but by and large, they have allowed colleges to focus on their core competencies while allowing others to provide the expertise, the capital, and share much of the risk.