The reason I started blogging about the Purdue-Kaplan deal is that it’s so confusing. When I first learned about it, it’s like my brain just said, “Huh? . . . Better think about something else now.” So when I took the time to understand the contradictions that had initially fogged my brain—public but not state? for-profit but not? what?—I wanted to help other people who share my interests and values understand what makes this deal such a massive blunder.
Along the way, I made mistakes—hey, I said it was confusing. I initially believed that Graham Holdings, the parent company of Kaplan University, wanted to unload an unprofitable part of their business. And though I corrected that error in the blog, it is immortalized here in a newspaper column based on the blog. But no. The online university that peddles worthless degrees is highly profitable: a U.S. Senate investigation determined that Kaplan allocated 13.5 percent of its total revenue ($212.1 million) to profit. If the merger goes through, the remaining for-profit entity that will retain the name “Kaplan” will receive 12.5 percent of revenue after costs, a much smaller amount of money, because it will be calculated after subtracting costs. The remaining profit (because that’s the correct English language word for the money that remains from revenue after costs have been subtracted, despite Mitch Daniels’s efforts to create entirely new meanings for words) will go to “New University” and its parent, Purdue University. This is the “very substantial revenue stream” that Daniels has been talking about.
So when I learned that Kaplan is actually highly profitable, I found out more about the regulatory mechanisms in place for for-profit universities that do not apply to non-profit institutions, and here I made another mistake. The 90/10 rule for for-profit institutions caps at 90 percent the amount of federal money from Title IV aid that such a school can receive. The remaining 10 percent must come from other sources. So I looked at the data and wrote:
If we look specifically at the percentage of revenue that Kaplan receives from federal sources, they were within the 90/10 rule for the most recent year for which data are available (81% of revenues from federal sources).
But I was wrong there, too. For that year (2014-2015), Kaplan received 81 percent of its revenues from Title IV aid. But because of the “90-10 loophole,” a significant proportion of the remaining 19 percent of revenues also came from federal sources in the form of GI Bill benefits. In brief, because veterans’ benefits such as the GI Bill are not specifically mentioned in the 90-10 law, for-profit universities classify that money as “other” and count it in the 10 percent of non–Title IV funds. What this means, in the words of Carrie Wofford, president of Veterans Education Success, is that “for every dollar of GI Bill they pull in, they can pull in $9 more dollars of Title IV funds from the Education Dept.”
So they target veterans aggressively, using “pain-based” recruiting techniques and dogged persistence. Veteran Daniel Elkins told NPR that he registered with a veterans’ education site and was deluged by recruiters: “Within three to four days, I got in the excess of 70 phone calls and … well over 300 emails.”
How do they do this? Well, they pay for it. The U.S. Senate investigation found that Kaplan University
- Allocated . . . 23.7% ($372.7 million) [of its revenue] to marketing and recruiting in 2009
- Spent more per student on recruiting ($2,144) than on instruction ($1,550) in 2009 and $1,220 per student on proﬁt; spending on instruction was less than half the maximum expenditure ($3,969) of the publicly-traded companies examined
They don’t stop calling until the veteran signs up.
So OK, if only 81 percent of their revenues comes from Title IV federal funds, how much of the rest also comes from the federal government in the form of GI Bill benefits? Mother Jones reported in 2011 that Kaplan’s military revenues were $48.9 million in 2010. This means, according to that same Senate report, that 87.9 percent of revenues ($1.5 billion) in 2010 came from the federal government in the form of federal student aid plus military/veterans benefits. Federal dollars are taxpayer dollars; Mitch Daniels knows this, and he also knows that saying that the New University will be supported by “tuition and fundraising,” not state funds, obfuscates the fact that Kaplan fleeced the federal government of $1.5 billion in 2010 and a similar proportion of its revenues up to the present.
So here I am, a person with a PhD whose livelihood depends upon reading and analyzing stories and texts, teaching others to do the same, and having a stellar grasp of the English language. I wanted to write about how damned confusing this thing has been for me to make the point that something this confusing is actually designed to deceive. Mitch Daniels has said a lot of pretty things about expanding educational access and the land-grant mission of Purdue University, but this is about money.