Phoenix grew by serving a niche that traditional higher education usually ignored. And its business model was based on three major factors: the availability of financial aid, charging more than the marginal cost of production, and feeding investor expectations. The last two are different enough from what non-profits do that they’re often misunderstood.Yes, unless we are talking about the few private universities that are hedge funds with a teaching division. But Phoenix didn't envision competing with them.
Phoenix hit the limits of its niche in the early 2000’s. Historically, it had required students to be at least 21 or 25, and to be employed. By being relatively selective, it was able to ensure at least some level of quality control.Excess capacity in access-assessment-remediation-retention? There might not be much open-admission community colleges can do about that, although as Dean Dad will note, they have competitive advantages. State-supported regional comprehensives are another matter.
But by the early 2000’s, the 90’s tech boom had subsided, and the publics were starting to make their presence felt with online and weekend programs. In other words, UoP’s niche was getting crowded. Because it only makes sense when it’s growing -- “stability” reads as “stagnation” in the capital markets -- it decided to throw the doors open to keep the growth moving. That “worked,” for a while, in the narrow sense that it allowed enrollments to keep growing for a few more years and keep investors happy. But it eviscerated what quality control the institution had. Over time, higher attrition and unhappy graduates (and employers of graduates) chipped away at the reputation. Add an administration with a bone to pick, and suddenly the underpinnings of the business model started to fail.
[Phoenix] tried to compete with community colleges, which have significant cost advantages. (At a basic level, they’re subsidized and untaxed. It’s hard to compete with that.) Instead, it could have used the boom times to focus on getting more selective and improving both retention and reputation. During the boom, they wouldn’t have had to choose between growth and improvement; they could have had both. Then, when the boom ended, they would have been in a very different market position.That makes for some interesting political economy (on the one hand, Ken Galbraith bemoaned public squalor amid private opulence, while P. J. O'Rourke suggested that was the logical outcome.) But Phoenix is not, as far as I know, resurrecting the talking points of the regulated railroads of the 1950s, whose passenger services had to compete with subsidized or tax-preferred airlines and bus operators.
In most other sectors of the economy in which for-profit and public entities compete, the for-profits take the high end and the publics take the low end. Most for-profit higher ed has focused on the low end, and now, they’re watching community colleges eat their lunch. They missed a chance to legitimize themselves.
On the other hand, moving upscale isn't as easy as it looks.
The much-maligned statement that they’re expecting enrollment declines actually gives me hope; it suggests that they’re in touch with reality. Getting selective will likely cut short-term enrollment even more than otherwise, but over the long term, it’s the best chance for survival. And frankly, if for-profits were to compete on quality and force everyone else to raise their game, there wouldn’t be much reason to object to them.The reason U. S. News sells those rating guides is to cater to the fears of ambitious students (or perhaps of fretful parents) that what looks like a promising place to enroll is just another sub-prime party school. Phoenix competing on quality? While not offering prospective faculty the opportunities to work with high-achieving undergraduates, doctoral students, and to perform research? Let me know how that works out.