Grand Canyon Education Inc.’s spinoff and conversion of Grand Canyon University into a nonprofit institution, which became official on Monday, hasn’t received nearly as much national attention as Purdue University’s purchase of Kaplan University, But there’s a lot about this $875-million deal that could be game-changing for higher education, not just for the institution.
The transaction creates an example of a new business model for managing administrative and marketing operations in a way that could be far more expansive than the outsourcing arrangements many institutions now rely on through companies known as online-program managers.
In the meantime, it has created a windfall for the company’s executives and investors and opened new doors for the institution. The deal all but guarantees that Grand Canyon University will very soon join the ranks of nonprofit institutions that enroll more than 100,000 students online. That’s because the university, which now has 91,000 students, will need enrollment to grow by at least 7 percent annually for the next several years to have enough money on hand to pay down the $875-million debt it is assuming to finance the purchase of its 275-acre Phoenix campus and facilities.
The financial pressure is especially strong because the university will now be giving 60 percent of its revenue from tuition and fees to Grand Canyon Education, the for-profit company, which will manage most of the institution’s nonacademic operations for at least the next seven to 15 years.
Grand Canyon Education has said it plans to expand its on-campus enrollment to 30,000 from 21,000 over the next five to seven years, while building its online enrollment to 100,000 from the current 70,000.
The deal is also noteworthy as a marker of the changing face of investor interest in higher education. Many companies that have owned colleges have been shedding them (as Graham Holdings did with Kaplan University) or selling them for little or no cost (as Adtalem Global Education is doing with DeVry University and Carrington College). But Grand Canyon’s move shows that investors continue to see appeal in companies that sell services to colleges rather than run them. With the election of Donald Trump, it became apparent that Grand Canyon’s chances for getting the spinoff through would be better than in 2014, when the institution made its first try at doing so. Since November 2016, the company’s value on the stock market has doubled to more than $5 billion.
Read more at The Chronicle of Higher Education: https://www.chronicle.com/article/Grand-Canyon-U-Isn-t-Just/243826