Fain, P. (2012) New college, new model, Inside Higher Education, May 7

This is a nugget for those interested in new business models for universities.

Ameritas, launched last week, blends for-profit and nonprofit elements and has a singular focus on Latinos who are working adults. It is part of Brandman University, a private, nonprofit institution with 26 campuses in California and Washington. Co-located at four campuses in Southern California’s Inland Empire, Ameritas will offer relatively low-cost, accelerated associate and bachelor degree tracks. Its curriculum is designed to “crack the code” of helping Latinos get to graduation, administrators said.

The fees are pitched slightly higher than state universities, but the aim is to improve the graduation rates for Latino students in the USA: the goal is for two-thirds or more to graduate from a four-year program within 6 years. The collegewide standard will be a three-hour, in-person class each week, with roughly 2.5 hours of additional online classwork.

What makes it particularly interesting though is the business model. You will need to read the article in full to understand what is in reality a complex funding arrangement. Ameritas is a subsidiary of a not-for-profit private university (Brandman) but the start-up costs are coming mainly from venture capitalists who will expect a return on investment. (How is it possible for a not-for-profit college to own a for-profit subsidiary? Did I hear you say: Only in the USA?!).

Why am I interested in this? Well, just south of the USA border, some state universities in Mexico, such as UNAM, are turning away 90% or more of applicants. There is a huge gap in Mexico between supply and demand. Mexico in fact has a high proportion of private universities, some of them excellent, such as Tec de Monterrey, but their fees are at the high end. The new emerging lower middle class, the sons and daughters of the new automobile and manufacturing companies in Mexico, are demanding post-secondary education, but the Mexican states aren’t building new universities fast enough, and this lower middle class cannot afford the high fees of top private universities. In any case there is a shortage of qualified academic staff to fill such positions (many state university professors in Mexico do not have a Ph.D.).

Mexico is not alone – other BRIC countries such as India, China and Brazil, and other countries such as Indonesia, are facing similar problems. If some entrepreneurs can find a way to provide quality post-secondary education at a cost this emerging lower middle class can afford, this will ease the pressure somewhat, especially in countries where tax revenues follow rather than lead economic growth.

However, a business model that will provide fully cost-recoverable quality education from ‘affordable’ fees alone, will also need new models of teaching that maximise the use of the scarce resource of qualified professors. If we are to see reform in higher education, it is likely to come through this kind of initiative rather than from the MITs and Stanford’s use of OERs, or from MOOCs, which don’t deal with the demand for full degrees. This is not an argument for the privatization of higher education (or a criticism of MOOCs or edX), but for new models of teaching and learning for the formal post-secondary education sector.

I think these new models are increasingly likely to come from the private sector, because the rewards for innovation are greater there than in the public sector. Or maybe the public sector will respond and innovate faster – what do you think?


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