Sunday, January 30, 2022

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

The failure of University of Phoenix (UoPX) is more than a dark moment in higher education history.  It should act as a lesson learned in the higher ed business. Executives at 2U, Guild Education, Coursera, Liberty University and Purdue University GlobalChegg, Academic Partnerships, Pearson PLCNavientMaximus and other for-profit and non-profit entities must take heed of the mistakes and the hubris of Phoenix, the wisdom of its cofounder John D. Murphy, and the silencing of important worker voices.  

For several decades of the 20th century, hundreds of University of Phoenix campuses dotted the American landscape, conveniently located in cities and growing suburbs, off major highways. Founded in 1973, America's largest university became a for-profit darling of Wall Street in the 1980s and 1990s, and the provider of career education for mid-level managers in corporate America and public service. A Phoenix degree was the ticket to promotions and salary increases.  

During its zenith, the school was backed by dozens of lawyers and DC lobbyists and a number of politicians and celebrities--including Nancy Pelosi, John McCain, Shaquille O'Neil, Al Sharpton, and Suze Orman. UoPX bought the naming rights to the Arizona Cardinals' pro football stadium in 2006. And in 2010, enrollment at the University of Phoenix stood at nearly a half million students.  The school even had an enormous presence at US military installations across the globe. University of Phoenix's presence was everywhere.* 

Phoenix's stock rose for many reasons. It was a leader in educational innovation. It was convenient and affordable for upwardly social mobile workers.  Its profits were large, and its labor costs were relatively low because UoPX hired business leaders and experts in the field, not tenured scholars, to teach part-time.  

But something went horribly wrong along the way.

In the 2010s, University faced government and media scrutiny for its questionable business practices, its declining graduation rates, and its part in creating billions in student loan debt. And when workers voiced their concerns, they were silenced in a variety of ways, from threats and intimidation to firings. 

This enrollment collapse has now lasted a dozen years and counting.  

Today, as a miniscule portion of Apollo Global Management's portfolio, UoPX's enrollment numbers are less than 100,000--and few of its physical campuses remain open during the Covid pandemic. It's not known how many campuses, if any, are financially viable.  

University of Phoenix enrollment, 2009-2016 (Source: US Department of Education) 

There are a several reasons why University of Phoenix is just a shadow of what it was. Businesspeople and lobbyists blame government regulation and oversight; others blame the relentless pursuit of quarterly profits and corrupt Apollo Group CEOs, including Todd Nelson.

Having talked to co-founder John D. Murphy and read his book Mission Forsaken, what I found out was that University of Phoenix began failing three decades earlier, during the Ronald Reagan era, when US companies chose to invest less in in their workforces.  When this post-Fordist shift happened, US companies reduced benefits for workers, and divested in the education and training of mid-level executives.

In order to keep the company growing in the face of this retrenchment, UoPX shifted its mission, from educating America's upwardly mobile workers to enrolling anyone--at any cost. The company could only decline as it preyed upon consumers and silenced its workers.   After 2010, enrollment counselors were signing up people who were woefully unprepared academically and financially for college work.  

By 2014, about 1 million University of Phoenix's alumni were saddled with more than $35 billion in student loan debt    

US Student Loan Debt by Institution (Source: Brookings, Looney and Yannelis, 2015)

In 2017, Apollo Group sold the company to Apollo Global Management, an investment behemoth, along with Vistria Group and the Najafi Companies.   As part of its holdings, the school was a tiny portion of its portfolio. Barak Obama's close friend, Anthony Miller, was paid to be Board president.  

Among national universities, UoPX is now ranked near the bottom in social mobility according to the Washington Monthly.

In January 2022, as a sign of its continued unraveling, Apollo Education appointed George Burnett, a former executive of three failed or predatory companies, including Alta College and Academic Partnerships, to be Phoenix's newest President. 

UoPX's problems are a symptom of an economic system that despite the hype cares little about workers: a system that today looks at labor costs as something to be reduced--rather than an investment. With few exceptions, America's most powerful corporations: Amazon, Walmart, Target, Yum Brands, McDonalds--rely on low-wage labor and automation to make a huge profit. Companies in medicine, finance, and tech have smaller labor numbers--and while work may be lucrative at the moment, it's becoming more precarious.

*In the early 2010s, Apollo Group, Phoenix's former parent company, spent between $376 million and $655 million a year on ads and marketing.  









Related link: Guild Education 

Sunday, January 23, 2022

Maximus, Student Loan Debt, and the Poverty Industrial Complex

The Higher Education Inquirer is taking a close look at who's invested in Maximus, the enormous social welfare profiteer. Maximus has been servicing student loan defaulters for years and has now taken over Navient's federal student loan business, branding it Aidvantage

Since 1995, Maximus (MMS) has grown from $50 million in annual revenues to more than $4 billion in 2021. 

Maximus (MMS) Share Price 1995-2022
(Source: Seeking Alpha) 

With an army of more than 35,000 workers, Maximus' clients include 28 US agencies: the Internal Revenue Service, Department of Commerce, National Oceanic and Atmospheric Administration, Bureau of the Census, Patent and Trademark Office, Federal Student Aid, Department of Defense and US Army, Department of Veterans Affairs, Homeland Security, Health and Human Services, Medicare and Medicaid, Department of Labor, Office of Personnel Management, Securities and Exchange Commission and many more. 

As a contractor to Federal Student Aid (FSA), Maximus has more than 13 million student loans to service.  Its four contracts with the US Department of Education total almost $1 Billion.  

While CEO Bruce Caswell made more than $6 million in total compensation last year, Maximus' customer service representatives, the people who have to make the calls to the growing number of student loan defaulters, make less money than workers at Walmart. 

Maximus has recently posted federally contracted jobs on Indeed for $13.15 an hour in Texas and South Carolina, even though the federal minimum wage has been raised to $15 an hour. Wages for Maximus workers in other states are reportedly even lower, as little as $10 an hour in Kentucky and other states with regressive economies.   

Maximus' largest institutional investors include BlackRockVanguard Group, and State Street Corp--three financial behemoths.  BlackRock has $10 trillion in Assets Under Management (AUM), Vanguard Group has about $7 Trillion in Assets Under Management, and State Street has almost $4 Trillion in AUM. 

Bank of New York Mellon, Wells Fargo, and Bank of America each own 900,000 shares or more. 

Public retirement funds, including public school teachers retirement funds (see table below), are directly and indirectly invested in the Poverty Industrial Complex and the student loan mess through Maximus and other large corporations. 


Maximus' strategic partners include AWS, Microsoft, Oracle, and Cisco.  

Social justice advocates have to wonder, how can the student loan system be fixed if the US establishment has a vested interested in the mess?  
 
Maximus (MMS) Top Institutional Investors 



List of Public Funds Directly Invested in Maximus

Alaska Department of Revenue 
California PERS
California State Teachers Retirement System
Colorado PERS
Florida Retirement System
Pennsylvania Public School Retirement System
Teachers Retirement System of Kentucky
Louisiana State Employees Retirement System
Ohio PERS 
New Mexico Educational Retirement Board
New York State Retirement System
New York State Teachers Retirement System
Ontario Teachers Retirement System
Oregon PERS
State of Tennessee Treasury
Teachers Retirement System of Texas
State of Wisconsin Investment Board