University of Phoenix and the Ash Heap of Higher Ed History

 (Updated September 14, 2023)

The University of Phoenix (or at least its name) may soon enter the ash heap of US higher education history--and rise again as a state-run robocollege.  But it shouldn't--at least not yet. Once hailed as the leader in affordable adult education for workers entering middle management, it is a shell of its former self--in an economy less certain for workers and consumers. 

With the school's wreckage are approximately one million people buried alive in an estimated $14B-$35B in student loan debt.  

Pattern of Fraud

As of January 2023, more than 69,000 of these student loan debtors have filed Borrower Defense to Repayment fraud claims with the US Department of Education against the University of Phoenix (UoPX). Many more could file claims when they become aware of their rights to debt relief. In the partial FOIA response below, the US Department of Education reported that 69,180 Borrower Defense claims had been made against the school.

In a recent federal case, Sweet v Cardona, most if not all of the 19,860 "denied" cases were overturned in favor of the student loan debtors.  We estimate the smaller number of fraud claims alone to amount to hundreds of millions of dollars.  

Through a FOIA request, we also discovered 6,265 consumer complaints in the FTC database. In 2019, the FTC and the University of Phoenix settled a claim for $191M for deceptive employment claims.  Based on the consumer complaints, we have no reason to believe that Phoenix has changed its behavior as a bad actor. 

On May 3, 2023, six US Senators (Warren, Brown, Blumenthal, Durbin, Merkley, Hassan) called for the US Department of Education, Department of Veterans Affairs, and Department of Defense to investigate the University of Phoenix for launching a new program suggesting that it was a public university.  The letter stated that the school "has long preyed on veterans, low-income students, and students of color."

Wolves in Sheep's Clothing

University of Phoenix's owners could potentially be liable for refunding the US government for the fraud. But as a state-related organization, it may be more politically difficult to claw back funds, no matter how predatory the school is.  

Purdue University Global and University of Arizona Global set a precedence in state-related organizations acquiring subprime schools (Kaplan University and Ashford University) and rebranding them as something better. Whether they are better for consumers is questionable. Phoenix will have to cut costs, largely by reducing labor. Using Indian labor (like Purdue Global) and AI could be profitable strategies.  It's likely that this deal, even if profitable, will add fuel to the growing skepticism of higher education in the US. 

University of Phoenix's Finances

Apollo Global Management and Vistria Group currently own University of Phoenix but have been trying (unsuccessfully) to unload the subprime college for more than two years. Little is publicly known about the school's finances. What is known is that UoPX gets about $800M every year from the federal government, through federal student loans, Pell Grants, GI Bill funds, and DOD Tuition Assistance.

Despite this government funding, US Department of Education data show the school's equity value for the Arizona segment declined significantly, from $361M in FY 2018 to $187M in FY 2021. 

$347M of the University of Phoenix's $518M in assets are intangible assets. Intangible assets typically include intellectual property and brand reputation. The school has $348M in liabilities.  

The University of Phoenix has been reducing expenses by cutting instructional costs, from $70M in FY 2020 to $60M in FY 2021. UoPX spends about 8 percent of its revenues on instruction.

Marketing and advertising expenses are not available, but Phoenix has been visible on the Discovery Channel's Shark Week, CBS' Big Brother, and other television events. ISpot.tv reports that University of Phoenix spends millions of dollars each year on television ads.  On one ad alone, the ad spend from February 2023 to July 2023 was an estimated $3.5M. 

Attempts to Sell UoPX

There have been two known potential buyers for the University of Phoenix: the University of Arkansas System and the University of Idaho. In both cases, the owners required the potential buyers to keep the deal secret until the sale was imminent.  

Fear of the impending higher education enrollment cliff appears to be an important pitch to potential buyers. 

Arkansas, the first target, was in the process of making the deal, and it might have gone through if nit for the voice of one whistleblower and one outstanding investigative reporter, Debra Hale Shelton of the Arkansas Times.

In the case of Idaho, news of the potential deal was publicly noted just one day before the preliminary agreement was made with the Idaho Board of Education. Two other secret meetings were held before that.  

A number of journalists including Kevin Richert (Idaho EdNews), Laura Guido (The Idaho Press), Troy Oppie (Boise State Public Radio), and Noble Brigham (Idaho Statesman) have exposed some of the problems and potential problems with the deal.  In June, Idaho legislators began questioning the acquisition.  

More recently, the opinion editor at the Idaho Statesman argued that the deal may actually be worthwhile. 

Particulars about the finances are sketchy at best and misleading at worst.  The University of Phoenix is said to include $200M in cash in the deal, but they have not said how much of that sum is required by law as "restricted cash"--money the school needs if the Department of Education needs to claw back funds.  Phoenix also claims to be highly profitable, but without showing any evidence.  

What is known about the deal is that the University of Idaho will have to borrow $685M and put its (bond) credit rating at risk. The school has not identified important information how the bonds would be sold (underwriters, bond raters, date to maturity, interest rate). 

The University of Idaho has created an FAQ to answer questions about the sale, but HEI has identified a number of misleading statements about University of Phoenix's present finances (failure to report the school's equity), potential liability (cost of tens of thousands of Borrower Defense claims), and leadership (lack of background information about Chris Lynne, the President of the University of Phoenix).  These deficiencies have been reported to the University of Idaho and to the Representative Horman. 

On June 20, Idaho Attorney General Raul Labrador filed a lawsuit to halt, or at least slow down the deal. 

The University of Idaho submitted a Pre-Acquisition Review from the US Department of Education, and it may take up to three months before the application is completed. 

As of September 2023, the deal is far from done.  Since this article was first published there have been a number of developments:

On September 11,  US Senators Elizabeth Warren, Dick Durbin, and Richard Blumenthal called on University of Idaho President Green to abandon the sale.  The Senators also asked Green if he had a plan to pay for the Borrower Defense claims, noting that University of Arizona may be on the hook for thousands of claims against Ashford University (aka University of Arizona Global campus).

In November, the Joint Finance-Appropriations Committee of the Idaho Legislature is expected to discuss the issue again.

*The Higher Education Inquirer has made a FOIA request for more up-to-date numbers from the US Department of Education. We have also filed FOIA requests with the FTC. 

Related link: 

How University of Phoenix Failed. It's a Long Story. But It's Important for the Future of Higher Education.

The Growth of "RoboColleges" and "Robostudents"

More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution

Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.

Campus and Learning Site Closings Nearing 20,000

Since 1984, more than 19,000 campus and learning sites have been reported as closed. Over the last generation, night schools and satellite campuses have dwindled as online leaning has replaced them. Universities have also closed campuses in foreign countries. While online education may be more convenient, little is known about the effectiveness of this mode of instruction in terms of learning outcomes, completion rates, and consumer return on investment (ROI). The peak year for closings was 2016, when 1183 campuses and learning sites were reported closed. 

 

(Source: US Department of Education. PEPS Closed School Weekly/Monthly Reports)

 

 

 

A People's History of Higher Education in the US

[Editor's Note: What we saw today at the US Supreme Court--with the end of affirmative action in college enrollment--is horrible but not shocking.  The History of Higher Education in the US over the last four centuries is worse than horrible--from a People's perspective. In many cases it has been horrifying. Some of it has been documented.  Much of it has not. No one has documented the full-length of the terrain, the voyage that got us here, or to what may lie ahead. Looking in the mirror, and at the injustice, what do you see?]  

A People's History of US Higher Education is sorely needed, not as a purely academic work to gather dust on shelves, or as internet click bait, but as a way to assess how our nation moves forward as a democracy--or as something less. To make history, it's helpful to know (real) history: the history of working-class (and middle-class) struggles. 

The college and university industry faces enormous challenges in the coming years, and an elitist perspective that is taught in higher education perpetuates this societal mess: one of monumental (and widely acceptable) selfishness and greed, increasing inequality (see graph below) and reduced social mobility, decreasing life expectancy, lack of transparency and accountability followed by trillions in government bailouts to the rich, and profound environmental destruction. 

A Sketch of the Current Terrain

At the front end of the higher ed pipeline, the US is not producing enough domestic students with the resources or skills to succeed in college and beyond. Much of this is related to "savage inequalities" in the K-12 system (and throughout society) that have never been remedied. And in 2026 we expect an enrollment cliff to occur, a ripple effect of the 2008 Great Recession.

Community colleges and second-tier state universities--once considered the backbone of increasing democracy and social mobility, have faced declining revenues, lower enrollment, and public defunding for more than a decade.   

Adjuncts have become the "new faculty majority"--a trend moving that way for several decades--with little resistance.  Labor has had a few recent victories at elite schools, but it remains to be seen how strong this movement will become and whether it will spread to lower rung institutions.

Drug and alcohol abuse, sexual coercion and assault, bullying, and other forms of violence and brutality are long-standing parts of the US higher ed landscape that have not been fully dealt with.

Millions of folks are learning exclusively online. Subprime robocolleges (like the University of Phoenix, Purdue University Global, and University of Arizona Global Campus) and Online Program Managers (OPMs) have replaced traditional universities with little information about their value or effectiveness.  Those schools flood the internet with targeted ads.  

White supremacy and anti-intellectualism have regained popularity, with the higher education policies of Ron DeSantis in Florida, Greg Abbott in Texas, and Sarah Huckabee-Sanders in Arkansas. The Supreme Court has also spoken recently--ending affirmative action for people of color. Legacies and other meritless preferences for the more rich and powerful remain.   

Mergers, acquisitions, and campus closings are commonplace as schools compete for a smaller number of students and an even smaller number that can pay the full amount for tuition, room and board, fees, and living expenses. 

Elite universities are financial and industrial centers, scooping up (and stealing) land, investing billions overseas and paying few taxes, and hiring foreign workers instead of Americans.  

At the end of the pipeline, US higher education may be educating the world's elites, but higher ed and the larger society are not producing enough skilled workers/good jobs for Americans. There is a growing educated underclass, people who are working but are not working in areas that they had hoped for. There are many bullsh*t jobs out there. And many gig jobs with no benefits. And there are jobs that require long hours and difficult conditions, forcing people to choose between the personal and professional. Some folks are doubling down for career advancement, borrowing (sometimes unwisely) for graduate school. 

Student loan debt makes college graduates captive to the corporations who are willing to hire them--and subject to dismissal whenever they are no longer helping them make a profit. Even at non-profits this is the case. Crushing debt results in people who decide (logically) not to marry, not to have children--at the expense of being labeled as criminals and deviants. The Republican Supreme Court will soon weigh in on the subject and likely determine that debt relief would not be fair to others--presumably the wealthy and powerful that the Justices represent.  

Let's be clear.  Higher education in the United States has always reflected and reinforced a larger (sick) society and its ills. Its beginnings and much of its history are deeply rooted in white supremacy, patriarchy, and classism-- through land theft, genocide, worker oppression, and exclusion. 

There have been many excellent critical accounts of higher education over the last century, from Upton Sinclair's The Goosestep (1923) to Craig Steven Wilder's Ebony and Ivy (2013) to Gary Roth's The Educated Underclass (2019).  Recent books have also examined elite universities, state universities, and for-profit colleges and their predatory practices. But few if any assess the dark landscape from start to finish. 

A Sketch of Where the US Has Been

In the 1600s and 1700s, elite eastern schools like Harvard, Yale, Princeton, Brown, and Georgetown were constructed on stolen land. The leaders of the exclusive white male schools held people captive in order to keep the schools running. All the students were white men or people who had to assimilate into the world of white supremacy. The schools also taught religious ideologies to rationalize their crimes against humanity.  What was it like for an indigenous person, an enslaved person, or a servant at one of these schools? How brutal was college life in those times?  

Government intervention was essential to increasing opportunity. After the Civil War, Historically Black Colleges and Universities enabled some African Americans to get a higher education. State universities and teacher's colleges also emerged with the promise of educating and empowering more citizens. And even then, land for state universities came from land theft of indigenous nations. Financial and industrial robber barons (men who stole wholesale from workers and their families), subsidized and controlled elite higher private higher education. These men included Leland Stanford, John D. Rockefeller, and Andrew Carnegie.  

Government funding through the post-World War II GI Bill increased enrollment (but disproportionate opportunity for white men) during the late 1940s and 1950s. The 1960s reflected a time of rebellion, greater access, and a movement toward equality. The Black Panthers, for example, challenged white supremacy at Merritt College and San Francisco State. But those days seem to be from a bygone era--a moment of opportunity lost. We do have some accounts of students and teachers, but is there one place we can find what life was like in junior colleges and lesser known state universities? 

Were the 1960s an anomaly? In 2023, it certainly appears so. For those activists who remember those times well enough, and remember the progress, it may be disheartening. Many citizens today are too young or not as well informed. Over the decades, even more have been disinformed--lied to--by elitist revisions of history.  

Battling the Business of Higher Education

Since the 1980s, US higher education has increasingly reflected and reinforced a nation of privatization, government austerity and lack of oversight, and social class exclusion. Elite credentials are used to discriminate in career fields (like law) where there is an oversupply; other careers (like nursing) are also hamstrung by hyper-credentialism--creating artificial shortages. 

Progressive organizations have been largely ineffective in battling strengthening corporate forces on campus.  The Fed and other organizations continue to sell the idea of more higher education for all, as millions face a lifetime of debt peonage.  There have been some heroes on the People's side, but they have been largely ignored by the mainstream media--which largely writes from an elitist perspective. 

We are now more than four decades into this neoliberal era. Higher education has changed, yet it still reflects much of what is wrong with America. Working class folks, and even many middle-class consumers are increasingly wary of higher education--whether it's worth buying into.  In some cases, edtech has reduced our Quality of Life. Is there anyone with enough energy, resources, and courage to document it all?  And can it be done from the perspective of the People--for the good of the People?  

Related links: 

HEI Resources

US Higher Education and the Intellectualization of White Supremacy

One Fascism or Two?: The Reemergence of "Fascism(s)" in US Higher Education

"Let's all pretend we couldn't see it coming" (The US Working-Class Depression)

The Tragedy of Human Capital Theory in Higher Education (Glen McGhee)

The College Dream is Over (Gary Roth) 

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting 

I Went on Strike to Cancel My Student Debt and Won. Every Debtor Deserves the Same. (Ann Bowers)

 

 

Robocolleges, Artificial Intelligence, and the Dehumanization of Higher Education

In 2019, the Higher Education Inquirer began writing about the ruthless automation of academic work. We were looking for information on how the ideas of Frederick Taylor and his intellectual progeny (e.g. Harvard Business School's Clayton Christensen) resulted in an academic assembly line for low-grade higher education.  A subprime education for the masses. 

It was obvious that large for-profit colleges had been divesting in academic labor for decades, replacing full-time instructors with adjunct faculty. And they eventually replaced thousands of physical learning sites with exclusively online learning. Over time, content creators and other ghost workers replaced adjuncts. And the remaining adjuncts worked as deskilled labor. Shareholder profits, and branding, advertising, and enrollment numbers were more important than student outcomes. 

Two years later we used the terms "robocollege" and "robostudent" to acknowledge the extent of dehumanization in higher education. We noted that this process was taking place not only at for-profit colleges, but shadow for-profits, mid-rung state-run schools--and even at more elite schools who were looking for increased profits. 

Community colleges continue to dehumanize significant portions of their adjunct workforces with low pay and precarity. Online education makes it more alienating but more convenient for working folks. 

Expensive public and private universities continue to use grad assistants, lecturers, and other adjunct instructors in high-tech lecture halls. Classes almost as alienating and unproductive as online instruction.     

Over the last four decades, thousands of satellite campuses have closed across the US, making local connections less possible. Night schools at the local high school are a thing of the past.

For-profit Online Program Managers (OPMs) like Academic Partnerships and 2U recruit students for regional and elite state universities and private schools--hoping to profit from the growth of online education. But learning outcomes, completion rates, and debt-to-earnings ratios may be riskier bets for consumers choosing to take the more convenient and seemingly cheaper online route.  

Studies indicate that medical school students in face-to-face programs fall short in empathy.  So what can we expect from online instruction in education, nursing, psychology, social work, and other professions where empathy is necessary?   

Where does the process of dehumanization stop in US higher education?  It's difficult to believe that an extension of all this automation, artificial intelligence, will make human existence more humane for the masses--not under our current political economy that values greed and excess.  

It doesn't appear that accreditors, government agencies, labor unions, the media, or higher ed institutions themselves are deeply interested in countering these technological trends--or even in understanding its consequences.  It could be argued that this new wave of education serves US elites well by delivering subprime outcomes: making the "educated underclass" easier to control and less able to compete. 

Academic labor has had a few recent wins at a few brand name public universities but this seems less likely to occur where the labor supply is less valued. 

The numbers of full-time faculty continue to drop at robocolleges.  And where there are already few full-time faculty, US workers at Southern New Hampshire University and Purdue Global are being replaced by cheap academic labor working remotely from India.  This itself may only be a stop gap as artificial intelligence replaces intellectual labor.  

How about other private and state run schools in decline?  Will they follow the same desperate path of dehumanization to stem the bleeding?

What lies ahead for online students?  If student-consumers are merely present to acquire or upgrade credentials, why won't they use AI and other methods to escalate levels of intellectual dishonesty?  For those who are unemployed or underemployed, is returning to online education worth the financial risk and the time away from work, friends, and family?  Will their educational work be obsolete before they can put it to good use?  

Related links: 

The Higher Education Assembly Line

The Growth of "RoboColleges" and "Robostudents"

College Meltdown 2.2: Who’s Minding the Store?

State Universities and the College Meltdown

Sharing a Dataset of Program-Level Debt and Earnings Outcomes (Robert Kelchen) 

OPM Market Landscape And Dynamics: Spring 2023 Updates (Phil Hill)

Cheating Giant Chegg, Shrinks (Derek Newton)

When will US higher ed revenues peak? #collegemania

Despite more than a decade of enrollment losses, US higher education revenues were never higher than in 2021--the latest year for which the US Department of Education has released data.  

This reflects the persistent notion that middle-class families will go into debt, sometimes deep debt, to send their children or themselves to private and public universities--to compete for a declining number of good jobs.  It also reflects the willingness that the US Department of Education has to subsidize this debt.  

While revenues have dropped at many community colleges, for-profit colleges, small private and public colleges, and regional public universities, the demand for an elite or brand name US education has never been higher. It's difficult to imagine things changing in the near future.  

Related links: 

The College Dream is Over (Gary Roth)

Enrollment cliff? What enrollment cliff? 

College Meltdown 2.2: Who’s Minding the Store?

State Universities and the College Meltdown

Community Colleges at the Heart of College Meltdown

Sharing a Dataset of Program-Level Debt and Earnings Outcomes (Robert Kelchen)

[Editor's Note: This article first appeared in the Kelchen on Education blog.]

Within a couple of hours of posting my comments on the Department of Education’s proposal to create a list of programs with low financial value, I received multiple inquiries about whether there was a user-friendly dataset of current debt-to-earnings ratios for programs. Since I work with College Scorecard data on a regular basis and have used the data to write about debt-to-earnings ratios, it only took a few minutes to put something together that I hope will be useful.

To create a debt-to-earnings ratio that covered as many programs as possible, I pulled median student debt accumulated at that institution for the cohorts of students who left college in the 2016-17 or 2017-18 academic years and matched it with earnings for those same cohorts one calendar year later (calendar year 2018 or 2019). The College Scorecard has some earnings data more than one year out at this point, but a much smaller share of programs are covered. I then calculated a debt-to-earnings ratio. And for display purposes, I also pulled median parent debt from that institution.

The resulting dataset covers 45,971 programs at 5,033 institutions with data on both student debt and earnings for those same cohorts. You can download the dataset here in Excel format and use filter/sort functions to your heart’s content.

Robert Kelchen is a professor at the University of Tennessee, Knoxville who studies higher education finance, accountability policies and practices, and student financial aid. All opinions expressed here are his own.

OPM Market Landscape And Dynamics: Spring 2023 Updates (Phil Hill)

Editor's Note:  This article first appeared in Phil Hill's On EdTech Blog. 

Wow. Just wow – the last twelve months have been something.

Was this forwarded to you by a friend? Sign up, and get your own copy of the news that mattered sent to your inbox every week. Sign up for the On EdTech newsletter. Interested in additional analysis? It’s free through May 24, 2023. Upgrade to the On EdTech+ newsletter.

On to the update. [full-page audio link]

---

During several keynotes, podcast interviews, and panel sessions over the past two years, I have described how the Online Program Management (OPM) market was facing enormous pressures and would change dramatically. I took some heat in private conversations for overstating the case, but as the past 12 months have shown, it turns out that I understated the turmoil and change of the market.

With that in mind, it is time to update our two main OPM Market graphics that were last shared in the Summer 2022 update.

OPM Market Landscape

• Market valuations of publicly-traded OPM companies have continued to drop, with 2U/edX, Coursera, and Keypath all down 75% or more from March 2021.

• Pearson tapped out of the market, agreeing to sell its OPM business to private equity firm Regent.

• Zovio is no more. It has ceased to be.

• FutureLearn sold the remnants of its business to a for-profit system, and it now has the most obnoxious website of any OPM provider, past or present.

• Byju’s, which (according to multiple media accounts) had been considering an acquisition of 2U/edX or Coursera, abandoned these plans to go off and deal with its own financial crisis.

• Noodle acquired South Africa-based Hubble Studios.

• The Government Accountability Office (GAO) released a report on the OPM market, triggering (but not causing) official efforts to make massive regulatory changes.

As readers of On EdTech know, this last bullet is now the driver for market dynamics for 2023 and probably 2024.

As always, please note that this view is intended to give a visual overview of the market landscape and is not mean to be comprehensive in terms of vendors represented. This is particularly true in the smaller customer base and fee for service categories.

OPM Market Dynamics

When we first came up with the Mad Max graphic in 2018, it was intended to counter the golly gee, the OPM market is rich, well-funded, and growing like crazy coverage, or the flip side of these companies are all getting rich pulling profits out of the schools coverage that we saw in EdTech and national media through 2022.

This year there are two primary changes with the overall message of the graphic:

• Online enrollments in the largest OPM market (US graduate schools) are no longer growing – they’re dropping and in structural ways. OPMs are still chasing those enrollments and tuition revenue, but the dynamics change when the target has its own problems.

• The small threat from the Department of Education and its activist allies to the OPM market has become a major threat, with an all-out assault.

We still get a picture of a chaotic market that is not for the faint of heart, and one that is seeing consolidations and category changes, and these changes will continue. All of this in a Mad Max-style pursuit of college online course and program revenue (whether rev share or fee-for-service or a blend, and whether degree- or certificate-based).

Note the changes in the program revenue target:

as well as the central market threat from ED regulations, going after both revenue sharing and TPS status, all in the name of protecting the helpless:

with 2U being the chosen target to personify the regulatory actions:

We also see Pearson getting out of the OPM business:

Zovio’s crash:

and Byju’s flying away from the scene.

ASU+GSV Angle

Next week I (along with Glenda Morgan) will be at ASU+GSV, and I will be on a panel with Ryan Craig, Mike Goldstein, Katherine Lee Carey, and Toby Jackson. The session is titled “Decoding the Dear Colleague Letter – What’s a TPS?!”, scheduled for Wednesday at 11am PDT. I am eager to find out at the conference if the investment community is aware of the significance of ED’s targeting of the OPM market, at least for revenue sharing business models, and of the potential impact of TPS guidance.

Update 4/13: Added bullet on Noodle acquiring Hubble Studios.

Cheating Giant Chegg, Shrinks (Derek Newton)

[Editor's Note: This article first appeared in The Cheat Sheet, the free newsletter on academic integrity and cheating.]

Yesterday, academic cheating company Chegg took yet another major hit on its stock value after the market closed, a decline that continues.

Today, Chegg - which is shockingly listed on the New York Stock Exchange - tumbled below $10 a share. In February 2021, Chegg shares were worth more than $113. In just over two years, Chegg shares have lost more than $100 in value - an Alpine decline of more than 91%.

Yikes.

The panic retreat by investors was initiated by Chegg’s quarterly earnings (Q1 - 2023) which were, not good. The bullets, according to news coverage:

Total net revenue down 7% year over year

*Subscription services, which represent 90% of Chegg’s business, were down 3% year over year.

*Total subscribers were down 5.1 million year over year.

*Projected further, continued declines in revenue, subscribers, and profit.

The company and media blamed the decline on AI tools such as ChatGPT - the automated service that can answer academic questions faster than Chegg, and for free.

In the earnings announcement, Chegg’s CEO said:

"since March we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth rate."

Two things.

To start, The Cheat Sheet could have saved Chegg’s investors some serious money. Or, made you some, had you shorted Chegg. Back in Issue 68, I wrote:

Bottom line: Chegg as a business is in trouble.

Yup.

This past February, in Issue 193, I wrote:

… Chegg thinks their earnings will be essentially unchanged for 2023 vs 2022. I think they’re dreaming.

They were.

I’d repeated the wisdom of some smart readers who said early, early on that the likes of ChatGPT was going to be a Chegg killer. I agreed and told EdSurge exactly that, also in February (see Issue 193):

Some instructors have opposed companies like Chegg and Course Hero, as trying to get content related to the courses they teach removed can cause a headache. The chatbots represent a new headache, for teachers and possibly also for homework-help companies.

That whole business could be threatened by free tools like ChatGPT, argues Derek Newton, who runs The Cheat Sheet, a newsletter that covers academic dishonesty.

For Newton, the primary motivation of a student using homework-help services is laziness or a lack of preparedness. And so having a free alternative that can give answers to questions — like ChatGPT — could shrink the number of students who are willing to pay

In that Issue I wrote:

It’s too early to tell if ChatGPT will dent Chegg and its irresponsible ilk - but I can’t really see how it won’t.

And so it came to pass.

It is clear now that Chegg’s recent announcement of a partnership with ChatGPT (see Issue 203) was a desperate Hail Mary. And there’s no reason to think it will work, no reason to think Chegg’s decline won’t continue.

It also answers a question I’d been wrestling with for years - whether Chegg’s investors (see Issue 142) knew its core business was academic misconduct or not. This most recent investment retreat proved to me that they did. They only left when a better, more efficient cheater started eating their profits.

But a wise confidant and reader texted to say my question was academic - Chegg’s investors know now. He’s right.

When a free answer site takes away your customers, it becomes very clear very quickly what you’re actually selling.

Finally, a reminder that a collapsing valuation is not Chegg’s only problem.

As it happens, I checked in last week on the legal challenge by Pearson, against Chegg (see Issue 55). The suit is still active. And if Pearson wins, it could decapitate Chegg’s entire value proposition - selling the answers to questions they do not own. Chegg also continues to face investor legal challenges (see Issue 163). Since this recent stock evaporation essentially confirms that Chegg was a cheating provider all along, it’s hard to see how this recent news hurts investors’ claims.

Related links: 

EdTech Meltdown

College Meltdown 2.0

Higher Education Inquirer Selected Archive (2016-2023)

In order to streamline the Higher Education Inquirer, we have removed the HEI archive from the right panel of the blog; information that could only be seen in the non-mobile format.   

The HEI archive has included a list of important books and other sources, articles on academic labor, worker movements, and labor actions, student loan debt, debt forgiveness, borrower defense to repayment and student loan asset-backed securities, robocolleges, online program managers, lead generators, and the edtech meltdown, enrollment trends at for-profit colleges, community colleges, and small public and private universities, layoffs and closings of public and private institutions, consumer awareness and organizational transparency and accountability, neoliberalism, neo-conservativism, neo-fascism and structural racism in higher education, and strategic corporate research.  

HEI Resources  
Rutgers University Workers Waging Historic Strike For Economic Justice (Hank Kalet)Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.I Went on Strike to Cancel My Student Debt and Won. Every Debtor Deserves the Same. (Ann Bowers)
Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting
An Email of Concern to the People of Arkansas about the University of Phoenix (Tarah Gramza)
University of California Academic Workers Strike for Economic Justice
The Power of Recognizing Higher Ed Faculty as Working-Class (Helena Worthen)
More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution
Is Your Private College Financially Healthy? (Gary Stocker)
The College Dream is Over (Gary Roth)
"Edugrift": Observations of a Subprime College Lead Generator (by J.D. Suenram)
The Tragedy of Human Capital Theory in Higher Education (Glen McGhee)
Let's all pretend we couldn't see it coming (US Working Class Depression)
A preliminary list of private colleges at risk
The Growth of Robocolleges and Robostudents
A Letter to the US Department of Education and Student Loan Servicers on Behalf of Student X (Heidi Weber)
The Higher Education Assembly Line
College Meltdown Expands to Elite Universities
The Slow-Motion Collapse of America’s Largest University
What happens when Big 10 college grads think college is bullsh*t?
Coronavirus and the College Meltdown
Academic Capitalism and the next phase of the College Meltdown
When College Choice is a Fraud
Charlie Kirk's Turning Point Empire Takes Advantage of Failing Federal Agencies As Right-Wing Assault on Division I College Campuses Continues
Navient and the Zombie SLABS Meltdown (Bill Harrington)
College Meltdown at a Turning Point
Charting the College Meltdown
Colleges Are Outsourcing Their Teaching Mission to For-Profit Companies. Is That A Good Thing? (Richard Fossey)
Rebuilding the Purpose of the GI Bill (Garrett Fitzgerald)
Paying the Poorly Educated (Jack Metzger)
Forecasting the US College Meltdown
College Meltdown 2.0
State Universities and the College Meltdown
"20-20": Many US States Have Seen Enrollment Drops of More Than 20 Percent (Glen McGhee and Dahn Shaulis)
Visual Documentation of the College Meltdown Needed

Enrollment cliff? What enrollment cliff?

US higher education enrollment has been declining slowly and consistently since 2011.  The downturn has been significant but small enough for the media and many people outside of higher education to miss this phenomenon. 

Enrollment is down about 5 million students a year from its peak.  

Source: US Department of Education, National Center for Education Statistics

In 2017, the Higher Education Inquirer began reporting on enrollment declines and potential problems related to the US Department of Education's optimistic projections.  We reported on declining numbers of high school graduates and reduced higher education funding in a number of states, including New York, Illinois, Michigan, Pennsylvania, and Virginia.  And we were also particularly concerned about the plummet in community college enrollment. 

In 2022 we reported that at least 18 US states had experienced enrollment drops greater than 20 percent--and five more were close to that threshold.  Losses at regional public universities were also troubling. 

In 2026 and 2027 we expect a more precipitous drop: a result of declining fertility rates during the 2008-2009 recession.   

So where does US higher education enrollment go after 2026?  And will more people notice? 

Overall, it doesn't look good if we take a look at state-by-state projections for high school graduates from the Western Interstate Commission for Higher Education (WICHE).  Florida, Nevada, Idaho, DC, Maryland, Texas, South Dakota, South Carolina, and Utah may see few if any future declines. But 20 states are expected to have additional enrollment loses of 10 percent or more.  Here's a list of the states that may be hardest hit in coming years.  

Source: WICHE

These enrollment declines are in addition to the enrollment declines of 2011-2023 that all of those states experienced.  

Enrollment declines after 2038 may also appear, a ripple effect of the Covid pandemic.  Other future headwinds include climate change, internal and external conflicts, and economic disruption.  Skepticism about the value of higher education has been growing for years.  Crushing student loan debt has also fueled this skepticism. 

With a few notable exceptions, enrollment losses have been restricted to community colleges, for-profit colleges, small private universities and regional public universities.  At the moment, it appears that more elite schools will not be affected, and may actually profit from the decline of other schools.  And as competition for good jobs increases, graduating from elite universities may carry more prestige value--at almost any price.  

*The Higher Education Inquirer would like to thank Nathan Grawe for his assistance in this article. 

Related links:

Many US States Have Seen Enrollment Drops of More Than 20 Percent (Glen McGhee and Dahn Shaulis)

US Department of Education Projects Increasing Higher Ed Enrollment From 2024-2030. Really? (Dahn Shaulis and Glen McGhee)

Projections Data from the 10th Edition of Knocking at the College Door (WICHE)

State Universities and the College Meltdown

Alaska is Leading the College Meltdown. Who's Next? 

College Meltdown: NY, IL, MI, PA, VA hardest hit 

Community Colleges at the Heart of College Meltdown

US Department of Education Fails to Recognize College Meltdown