In case you haven’t heard, last Thursday Purdue President Mitch Daniels entered Purdue, an Indiana public land-grant university with a great reputation, into a merger deal with Kaplan University, a for-profit online university  that was on the edge of disaster. It’s not a sale but a complicated 30-year contract that turns the “academic assets” of the unsuccessful part of Kaplan University (its parent company, Graham Holdings Co., is keeping the successful test-preparation and professional education arms of the business) into a new university (called “New University” as a placeholder designation in the SEC filing), and both Purdue and Kaplan have certain obligations to and expected benefits from New University. The tripartite structure of the deal leads me to my first point . . .

The Purdue-Kaplan deal is bad for users of the English language, because it contributes to the alternate-reality world our Republican politicians are attempting to create in which words don’t actually have stable meanings. Many have noted the strangeness of calling New University a “public university,” when Daniels says that no state funds will be used to support the university. But the meaning of the word “nonprofit” is the real loser in this game. The SEC filing states that the institutional assets of Kaplan University will become “a new, nonprofit, public-benefit corporation.” But the devil is in the details. No, really, Satan himself is actually in the details, because although New University presumably will meet the legal definition of a nonprofit entity (despite receiving a $10 million “priority payment” for each of the first five years out of revenues after costs [known to most of us as “profits”]), Kaplan, the party making the deal with Purdue, is still very much a for-profit company, and after New University meets its costs and pays itself the $10 million “priority payment” (plus perhaps a 20% “efficiency payment” if they can save money from their budgeted costs, which has the whiff of Mitch Daniels’s pheromones all over it), New University will pay Kaplan “a fee equal to 12.5 percent of New University’s revenue.” Kaplan, a for-profit company, will receive regular payments from New University, a nonprofit company, and Kaplan will continue to provide support for New University (and receive a percentage of revenue) until such time as the agreement terminates on its own after 30 years or until New University buys out Kaplan’s part of the contract (presumably under direction from Purdue). So the new entity will legally be nonprofit, but there will be profits, and they will flow to a currently existing for-profit company.

The Purdue-Kaplan deal is bad for America! And of course those profits—a significant proportion of which comes from tuition paid by federal financial aid—flowing gently to Kaplan for up to 30 years are money that is not flowing to nonprofit institutions that focus on the core activities of discovering and transmitting knowledge. Whatever the stated mission of Kaplan might be, and whatever nice things Mitch Daniels says about increasing access to higher education in Indiana, the activities of Kaplan up to now, along with the activities of other online for-profit universities, suggest an actual mission of providing credentials at the lowest cost to themselves they can get away with while maintaining accreditation for their programs. Daniels diverts attention from this flow of federal tax dollars to a for-profit company by protesting that no Indiana state money will go to support New University. So OK, Indiana is not the sucker, the federal government is (and we can safely assume that Betsy DeVos’s Department of Education will be breathless with excitement to bless this deal).

But isn’t this already happening? you ask. Aren’t federal dollars already going to for-profit online degree mills as financial aid? Yes, this is happening already, but this leads to the reason why the Purdue-Kaplan deal is bad for Purdue. Kaplan University does not offer high-quality degrees, and everyone knows it—state attorneys-general in Illinois, Delaware, North Carolina, Massachusetts, and Texas have launched investigations into the credentialing of Kaplan’s instructors and allegations of misleading statements about job placement rates, and Kaplan has settled with two of the states.

But I assume that “New University” will end up offering degrees that have the name “Purdue” on them, as happens currently at branch campuses of Purdue like my own, and thus the Purdue name and reputation will be shoring up and legitimizing what will remain a cost-cutting for-profit educational enterprise that has a history of deceiving students. The effect will be to inflate the value of what New University offers and to deflate the value of Purdue degrees.

But here we come full circle, because the way this becomes not especially bad for Purdue is if this is only the first step in a massive privatization of public higher education—as other failing for-profit institutions, seeing this deal succeed under the new leniency of Trump’s Department of Education, will seek their own angels in public universities run, like Purdue, by Republican politicians who want to starve public institutions of the resources they need to succeed. At that point we are back to bad for America . . .

. . . but remember, I said it wasn’t bad for everyone. Former Indiana Governor Mitchel Daniels, whose appointees on the Purdue Board of Trustees created a soft landing place for him after he ended his work as governor, surely isn’t done with politics. He stayed out of the fray in 2016 and thus wasn’t tainted by the stench of Trump. When he is ready to seek the Republican presidential nomination, it will be with several years of gravitas added by virtue of having served as a president of a major university. So if he can single-handedly claim to bring DeVosification to higher education, sucking more and more federal financial aid dollars from nonprofit educational institutions that aim to discover and transmit new knowledge, he’ll be a shoo-in. So yeah, this deal is good for someone.

Rachel E. Hile

Also see The Purdue-Kaplan Deal Is Bad for Indiana

If the Purdue-Kaplan Deal Is So Bad, How Can We Stop It? Part 1

If the Purdue-Kaplan Deal Is So Bad, How Can We Stop It? Part 2

7 thoughts on “The Purdue-Kaplan Deal Is Bad for Everyone (Spoiler: It’s Not Bad for Absolutely Everyone!)

  1. This is easily the smartest analysis of the deal I’ve seen yet. Kudos.

    Here are a few additional thoughts:

    (1) The idea that this arrangement won’t cost the State of Indiana anything seems wholly implausible. Unless Purdue is planning to cede complete operational control of the “New University to its administrators and faculty, there will almost certainly have to be some Purdue employees responsible for managing the business and educational relationship between the two entities — first and foremost, Daniels himself. If Purdue isn’t going to be playing some sort of supervisory role, than what the hell is the purpose of the acquisition in the first place? To let Kaplan joyride on Purdue’s brand, reputation, and goodwill? And if the people exercising that supervisory role aren’t going to be paid by the State, who will be paying them? Kaplan? If so, they’re loyalties, both professional, financial, and legal, will be to Kaplan, not Purdue. Which, again, makes the whole thing look like a joyride arranged solely for Kaplan’s benefit.

    (2) Daniels has been abusing the English language since his appointment to his comfy little sinecure. Most laughable were the absurd lengths to which he and the Trustees went to avoid using the term “bonus” to describe the extra compensation to which he’d be contractually entitled if he met certain performance “metrics” (which he and the toadies he appointed to the Board of Trustees would design). Instead, they insisted on referring to this extra compensation as “at-risk pay,” to make it seem as if they were doing something wildly innovative by linking his compensation to performance. Completely Orwellian.

    (3) I’m not sure Daniels is interested any longer in being President (of the USA, that is). His wife made it clear that she wouldn’t permit it, and I don’t think that’s what he’s aiming for. I could, however, see him trying to position himself for appointment as, say, the federal Secretary of Education in the administration of any neo-liberal Democrat who might succeed Trump. But, really, I think ultimately this deal may simply be about Daniels trying to manage his own “brand” — to burnish his (ersatz) reputation as a bold innovator in the field of higher education. This seems to be an obsession, and one which, for him, might just be its own reward.

    Anyway: Thanks again for a job well done. (Part 2 is excellent, also).

    Like

    1. Thanks, Jamie. You’re absolutely right about the labor costs of supervision and management. Also, since I wrote this, someone else pointed out to me that Indiana taxpayer money would also be going to the New U in the form of state scholarships such as money from the 21st-Century Scholars program.

      Thanks for your insights into Daniels — out here in Fort Wayne, I’m just speculating, because I don’t know him. I’m interested in your suggestion that he may be more of a narcissist–or at the least ego-driven–than an ideologue.

      Like

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