Why the University of Phoenix May Be Going Down For Good

Source: iStock
Source: iStock

The University of Phoenix, a much-maligned, yet incredibly popular online education platform, is floundering. The online school’s student enrollment has been on the steady decline, and is currently sitting at levels that are half of what they were only five years ago. What has followed is sharply decreasing revenues and unhappy shareholders, despite the rather upbeat attitude from the company and school’s leadership.

The university itself, which is a part of Apollo Education Group, had been making a killing as a provider of higher education online, before, well, the rest of the world caught up. But, with its most recent earnings data having been released by Apollo recently, it’s clear the platform may be passed its prime.

“While we faced challenges in the second quarter, we believe Apollo Education Group has the right long-term strategy in place,” said Greg Cappelli, CEO of Apollo Education Group in a press release. “In a time of unprecedented change in the higher education industry, we are focused on enhancing outcomes through a deep understanding of student and employer needs. This includes differentiating University of Phoenix through its program-based colleges and diversifying our organization with the expansion of Apollo Global and other targeted growth initiatives.”

Despite Cappelli’s enthusiasm, the numbers aren’t pretty. Both revenues and enrollment are down around 14% from this time last year, and according to CNN, Apollo’s stock dropped by 30% after data was released.

True, things are bleak. But the fact is, University of Phoenix, and others like it, have been marked for death for some time now. For-profit colleges and online educators like U of P at one time had an effective monopoly on online education, but that is simply no longer the case. For a company offering an inferior product at an inflated price, it’s quite clear that the reign of these types of companies is likely at an end.

Source: University of Phoenix Official Facebook Page
Source: University of Phoenix Official Facebook Page

The most obvious issue for Apollo and its competitors is that traditional public and private universities are catching up to them. When the University of Phoenix first went online and became a new option for prospective students all across the country, they had a new and in-demand product that could be accessed from anywhere by nearly anyone, knocking down the two biggest barriers to a college education for most people.

That, in turn, allowed them to charge highly inflated prices for tuition. Through some fancy footwork and manipulation, U of P and its ilk had been able to convince millions of students to take on enormous loans through the government to pay for their schooling, and use taxpayer dollars to bolster their profits.

Those practices led to a tarnishing in the public eye, several less-than flattering investigative documentaries, and a general consensus among many employers that the school’s degrees were inherently worth less than those from a traditional school. Essentially, these schools would give out degrees to anyone who is willing to pay for it, rather than through achievement and merit-based programs employed by traditional colleges.

But just simply comparing the numbers from a standard public four-year university to a University of Phoenix program shows the true problem. According to the College Affordability and Transparency Center, part of the Department of Education, the University of Phoenix costs $14,550 per year to attend, and has a dismal 19% graduation rate. While public universities aren’t much cheaper these days, on average around the same price, they do have a much better track record of graduating their students, around 57%, and placing them in jobs afterward.

Now that most major colleges have their own online programs, there’s not much incentive for a prospective student to choose a University of Phoenix program over one from a public, or even more expensive but prestigious private university. After all, the Apollo Group evidently found it more important to invest in naming an NFL football stadium after its organization, rather than reinvesting in improving its platform.

With all of that in mind, it’s time to be concerned if you’re a stakeholder in Apollo’s system. In order to compete, some big changes will need to be made, and it’s unclear if the business model can handle those changes. Other similar companies are already shutting down, and the recent numbers may be the first sign that University of Phoenix is going belly-up.

And once this Phoenix bites the dust, there’s probably no hope for resurrection.

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