Dive Brief: The CEO of Grand Canyon Education, an education services company whose biggest client is Grand Canyon University, offered a defense of tuition sharing during a call with analysts Thursday, saying the practice protects universities from financial risk. “Critics point out that the revenue share model is bad for universities,” GCE CEO Brian Mueller said during the conference call. “The last two years have proved them wrong, and we expect that next year will prove it even more.” GCE receives approximately 60% of Grand Canyon University’s tuition and tuition income in exchange for a variety of services, such as: . B. Help with financial support and marketing. Mueller’s defense of tuition sharing comes a day after the US Department of Education announced it would review 2011 guidelines that allow colleges to enter into these types of contracts with companies that provide recruiting services. Dive insight:
Democratic lawmakers and political advocates have for years criticized tuition-sharing arrangements, arguing that they encourage corporations to aggressively recruit students and drive up the cost of higher education.
They have also questioned whether these deals are consistent with federal law. The Higher Education Act prohibits colleges that receive federal funding from giving employees or corporations an incentive payment for recruiting students into their programs.
Although tuition-sharing falls under incentive pay, the Department of Education released guidelines in 2011 that provide an exception for colleges that contract with companies that provide recruitment along with a bundle of other services.
Often cited as an exception to bundled services, this spin-off is credited by some with launching the massive online program management, or OPM, industry. According to one count, at least 550 colleges contract with OPMs to help launch and run their online programs, although the actual number is likely much higher.
OPM firms have been on the defensive, often arguing that colleges rely on these arrangements because they shift financial risk to private companies that provide the upfront capital needed to get programs off the ground.
Mueller sang a similar tune in his comments to analysts.
“In times of inflation like we are currently experiencing, or when demand is falling as it has been, GCE as a service provider bears most of the financial risk,” he said. “Our expertise, technology and processes have enabled our university partners to continue to benefit during these challenging times.”
GCE could be severely impacted by the Department of Education’s review of the 2011 guidelines.
In a filing with the Securities and Exchange Commission on Thursday, the company said its business model is based on the spin-off, which the 2011 guidance calls for. Also, because the bundled services exemption was created by guidance — not government regulations — it could be lifted without warning, the company said.
“The revision, repeal, or invalidation of the bundled services rule by Congress (the Department of Education) or a court could require us to change our business model,” the SEC filing reads.
Despite possible storm clouds, the publicly traded company’s share price opened at $119.58 on Friday, up 4.5% from the previous day.
GCE reported that revenue reached $911.3 million in 2022, up 1.6% year-on-year. The gains were driven by an increase in on-campus enrollment at Grand Canyon University, although these gains were partially offset by a decline in the institution’s online student population.
Net income fell to $184.7 million for 2022, down 29.1% year over year.
