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Innovation in Higher Education or A Serious Risk for Students?

Kevin Carey of New America explains the “purchase” of for-profit Ashford University by the University of Arizona.

Innovation in higher education or a serious risk for students? 

Kevin Cary, Vice President of Education Policy and Knowledge Management at New America, explains the “purchase” of for-profit Ashford University by the University of Arizona in a Twitter thread we're unrolling here:

You may have read that the University of Arizona "purchased" online for-profit Ashford University. That's not actually what happened. Let me explain why.

Ashford University is technically owned by the publicly-traded company "Zovio," which until last year was known as Bridgepoint Education. Nearly all of Zovio's revenue comes from Ashford. They are essentially the same thing.

If the University of Arizona had actually bought Zovio, it wouldn't exist anymore, right? And yet, it does! Right there on the NASDAQ. Indeed the stock price is up a healthy 28% as of yesterday.

The second clue that this was not a "purchase," in the commonly used sense of that word, comes from this Wall Street Journal article which states UofA will be receiving $37.5 million upfront payment from Zovio.

That's weird, right? Normally if you buy something, you pay money to whoever owns what you're buying. But here, Zovio is making a big cash payment to the University of Arizona, not the other way around.

That's because the whole deal is not really a purchase at all. Instead, The University of Arizona is creating a new, profit-making "non-profit" called "The University of Arizona Global Campus" which will not be the University of Arizona, but which will be, presumably, be controlled by the University of Arizona.

That entity will "purchase" Ashford from Zovio in exchange for $1 and a 15-year contract that pays Zovio 19.5% of revenues from UofA Global Campus Ashford, plus reimbursement for costs.

What will Zovio, which, remember, is Ashford, do in exchange for costs-plus-19.5%? All the same things it does now--except the for-profit college will have been magically transformed into a wholly-owned nonprofit subsidiary of a public university.

Perhaps not coincidentally, Bridgepoint — sorry, "Zovio" — has spent the last few years trying and failing to get approval from its accreditor to become a non-profit university on its own. Why would it want to do that?

Probably to remove the taint of various scandals and lawsuits related to ripping off students and the federal student loan system.

This is in many ways the natural next step in a journey of status laundering that began in 2005 when Bridgepoint purchased the small, faltering Franciscan University of the Prairies in Iowa and used its accreditation to stand up a giant online college based in San Diego.

Now all of that has been safely hidden beneath the umbrella of The University of Arizona's reputation, brand, and legal status. Just don't call it a purchase.

Interested in learning more about these sorts of transactions? Read Kevin Carey’s article on the history of online education.

And read more from Carey about why the so-called "purchase" of for-profit Ashford University by the University of Arizona is exactly the opposite of what it appears to be.