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'The Reputation Is At Risk': University Of Arizona Faces Backlash After Purchasing For-Profit University

STEVE GOLDSTEIN: The University of Arizona made a huge purchase earlier this month of for-profit Ashford University, and it's going to build a new nonprofit from that called University of Arizona Global Campus. On its face, the transaction seems relatively simple. More students are learning online — and Ashford has approximately 35,000 of them — and traditional funding of state universities has seen dramatic shifts since the Great Recession. But what is the true impact of the transaction, and is there more to it than what's on the surface? Kevin Carey is vice president for education policy and knowledge management at New America. He wrote a series of tweets about the U of A move, and had some concerns. Kevin, the transaction has been described as the University of Arizona buying a for-profit, Ashford University. But you believe there's a lot more to it than that.


KEVIN CAREY: What they are really proposing is to create a separate, independent nonprofit organization called the University of Arizona Global Campus, which would be governed by people appointed initially by the university, but would not be the university. It would be a separate nonprofit. That nonprofit would acquire some of the assets of Ashford University. Essentially the intellectual property, some of their degree programs and contracts with some of the professors there. But the company that owns Ashford, which is called Zovio, will stay in business, will enter into a long-term service contract with the nonprofit to provide a whole series of recruitments, I.T. and management activities over time and will continue to get a large stream of revenue from the tuition that students pay to attend what will it be called University of Arizona Global Campus. So in some ways, it's more of a partnership than an acquisition, or a rebranding of Ashford University as the University of Arizona Global Campus — as opposed to just the university buying it outright.

GOLDSTEIN: So what does the University of Arizona get out of this? What's the true benefit to them?

CAREY: Well, there are, you know, right now about 35,000 students enrolled in Ashford University bringing in, I think more than $100 million in tuition revenue. The university is, interestingly enough — although, again, it was characterized as the university is buying Ashford from Zovio. In fact, all of the money is going in the other direction. The university is guaranteed in this contract — or I should say, to be clear, the nonprofit is guaranteed $25 million a year in revenue for the first five years and the $10 million a year 10 years  after that — it's a 15-year contract, and the company prepaid the first $37.5 million of that revenue. So there's a big bump in revenue. The nonprofit can then turn around and transfer that money back to the University of Arizona proper through what would amount to a licensing agreement. The nonprofit will essentially pay the University of Arizona to be called the University of Arizona Global Campus. So there'll be a cash payment from this for-profit corporation to the university, which the university can use however it likes.

GOLDSTEIN: Even with all the factors we've discussed, is this something that could hurt the reputation of a university like this that at least for a number of years has been [a] fairly well-respected research university?

CAREY: I think the reputation is at risk. You know, the, the contract is structured so there's almost no financial downside to the university. It's just a financial upside. But there's never a free lunch in anything. So why is that? And I think the reason is that Zovio, which again was called Bridgepoint until last year, has a very checkered history. And in terms of its conduct, when it comes to recruitment violations, it was sued by the attorney general of California, it was for a while in this status where it wasn't allowed to get money from the GI Bill, there have been multiple lawsuits and investigations all around a set of frankly predatory or exploitative practices involving the recruitment of students that often results in students dropping out of college with debt that they can't repay. That's been associated with the larger for-profit college industry. That's what the university is like. It will be rebranded as the University of Arizona, but the underlying organization that will be doing the recruiting and that set up all those classes is what it is now. You know, it won't just change overnight. So the university is engaging in a 15-year contract for recruiting services with an organization whose recruiting services have been widely criticized and in some ways found to be illegal or even fraudulent. They say that that, that that kind of behavior is behind them and that the university won't be on the hook for any of the ongoing litigation. But that doesn't go to this larger question of reputation, which can be fragile in its own way.

GOLDSTEIN: Kevin, what sort of relationship for you, in a general sense, makes sense when it comes to nonprofit and for-profit universities? Is there a way to do that that makes sense and that looks above board and will benefit students?

CAREY: Public universities, particularly public research universities, have the public trust them. There's a real foundation of goodwill. If someone goes online and sees something that says "University of Arizona Global Campus," their assumption — and nothing about the marketing will change this — their assumption is that that's not any different than if you enrolled in the University of Arizona and took classes, other than it's online. And so there's an awful lot of trust there. I think it's important that that trust be real and that the distinction between for-profit and nonprofit or for-profit and public not be clouded. And these kind of arrangements really do scramble things up, where you have, again, a for-profit college that is being in some ways rebranded as a public university. That kind of transformation will not be obvious to consumers. And that concerns me. Because, frankly, that trust is there for a reason, or the lack of trust that people have in for-profit colleges is there for a reason.

GOLDSTEIN: That is Kevin Carey. He's vice president of education policy and knowledge management at New America. We've been talking about this new acquisition by the University of Arizona of Ashford University. Kevin, thanks so much for your expertise. I appreciate the time.

CAREY: Thanks for having me.

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Steve Goldstein was a host at KJZZ from 1997 to 2022.